REG - Impact Healthcare - HALF YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 24
08/08/2024 07:00
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RNS Number : 6100Z Impact Healthcare REIT PLC 08 August 2024
8 August 2024
Impact Healthcare REIT plc
("Impact" or the "Company" or, together with its subsidiaries, the "Group")
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2024
Strong financial and operational performance
The Board of Directors of Impact Healthcare REIT plc (ticker: IHR), the real
estate investment trust which gives investors exposure to a diversified
portfolio of UK healthcare real estate assets, in particular care homes, today
announces the Company's half year results for the six months ended 30 June
2024.
Summary
The business continues to perform in line with our expectations. In the first
half of the year, inflation-linked rent increases and stable yields drove a
2.9% increase in like-for-like investment property value. As a result, Net
Asset Value grew by 2.5% to £490.2 million. Total accounting return for the
period was 5.5%. This performance is underpinned by a strong balance sheet,
with a loan-to-value of 27.8%. Drawn debt was £189.8 million from £250
million of committed debt facilities, of which the weighted average term is
5.8 years¹. No debt falls due until 2026.
Simon Laffin, Chair, commented:
"We very much welcome the independent inquiry into the National Health
Service, led by Lord Darzi, and welcome any opportunity to participate. Care
homes for the elderly are a critical and growing part of our health
infrastructure, particularly with an ageing population. Care homes provide a
better environment than hospital wards for frail, elderly people, not needing
intensive medical care. Moreover, care homes can play a key role in helping to
free up hospital beds by taking patients awaiting discharge. This would reduce
NHS waiting lists and support more efficiency in hospitals. At present it is
estimated that 13,000(2) patients are still in hospital only because they are
not being offered care in the community such as step-down, nursing or
residential care beds.
We aim to provide residential care homes which are both high-quality and
affordable, in order to deliver long-term sustainable returns to our
shareholders. All our lease rentals are inflation-linked, and the vast
majority are capped at 4%, with a minimum of 2%, per annum. The spike in
inflation to double digits in 2023 therefore did not flow fully into rent
increases, but strengthened the financial viability of our tenants. Strong
performances from our tenants are a key factor in reducing risk to our income
stream and improving our risk-adjusted returns and valuations. We were able to
increase our fully covered dividend this year, whilst keeping rents affordable
for our tenants. The latest tenants' average annual rent cover is 2.19x(3)
which is the highest it has been since the Company's inception. The
affordability of our rent to tenants, and consequently the affordability of
care home fees to residents, are moreover crucial to the continued successful
provision of residential and nursing care."
Financial highlights
· 2.7% increase in second quarter dividend of 1.7375p, in line with
the 2.7% increase targeted for the whole year of 6.95 pence per share(4).
Dividends for the first half of the year are 122% covered by our EPRA EPS and
106% by adjusted EPS.
· 3.8% increase in rent for 102 homes following rent reviews in the
first half of 2024. 4.7% increase to £51.1 million in annual contracted rent
roll(5) (at 31 December 2023: £48.8 million).
· At 30 June 2024, 2.6% increase in EPRA NTA to £488.9 million
(117.98 pence per share) and 2.9% increase in property investments
independently valued at £670.1 million. 5.5% total accounting return for the
six month period to 30 June 2024 (not annualised).
· At 30 June 2024, 27.8% EPRA (net) LTV (31 December 2023: 27.8%),
£250.0 million committed bank facilities of which £189.8 million was drawn;
weighted average term of debt facilities (excluding options to extend) was 5.8
years(1). 92% of our drawn debt facilities are fixed or hedged against
interest rate rises for the remainder of this financial year, with an average
cost of drawn debt of 4.63%. At 30 June 2024, the Group had £60.2 million of
undrawn debt facilities and £9.6 million cash.
· Post period end exchange or disposal of five non-core assets at
book value of £8.8 million.
Six months ended Six months ended Change to H1'23 Year ended Change to FY23
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Dividends declared per share 3.475p 3.385p +2.7% 6.77
Profit before tax £26.33m £27.59m -4.6% £48.83m
Earnings per share ("EPS") 6.35p 6.66p -4.7% 11.79p
EPRA EPS 4.25p 4.15p +2.4% 8.33p
Adjusted earnings per share 3.69p 3.69p - 7.28p
Adjusted earnings dividend cover 106% 109% 108%
Contracted annual rent roll(5) £51.1m £48.1m £48.8m +4.7%
Property Investments £670.1m £638.2m £651.3m +2.9%
EPRA Net tangible assets ("EPRA NTA") per share 117.98p 113.08p 114.96p +2.6%
Net loan to value (EPRA LTV) 27.8% 27.6% 27.8%
Total accounting return 5.51% 6.17% -66 bps 10.82%
Cash £9.6m £22.1m £9.4m +2.1%
Operational highlights
· 2.19 times average annual rent cover(3), the highest it has been
since the Company's inception.
· 100% collection of the rent due in the period with no voids.
There was no rent due in the period on the ex-Silverline homes, three of these
seven homes were recently transferred to a new long-term tenant, We Care. The
ex-Silverline homes continue to recover in line with our expectations.
· 88.9% underlying resident occupancy at the end of June 2024, up
from 88.2% at the start of the period(6).
· £11.6 million of asset management projects committed to in the
first half of 2024 with an expected effective yield of 8%. 16 projects in the
pipeline, with anticipated capital funding of £26.8 million over the next two
to three years.
At 30 June 2024 At 30 June 2023 At 31 December 2023 Change to FY23
Topped-up net initial yield 6.98% 6.95% 6.92% +6 bps
Rents containing inflation-linked uplifts 100% 100% 100% -
WAULT to first tenant break 20.5 years 21.2 years 20.8 years (0.3) years
Portfolio let 100% 100% 100% -
Average annual rent cover(3) 2.19 1.82 2.00 9.5%
Rent Collection 100% 98% 99% +1.0%
Properties 140 140 140 -
Beds 7,721 7,725 7,721 -
Tenants(7) 15 14 14 +1
Developing plans to improve the social impact and environmental sustainability
of our portfolio
· We set a target that at least 50% of our homes would be rated EPC
B by 2025 and 100% by 2030. We have achieved the interim target with 57% at
EPC B or better based on English equivalent ratings as at 30 June 2024. Our
longer term target is net zero status by 2045 with interim targets to reduce
like-for-like carbon emissions by 15% by 2025 and 50% by 2030. We have
committed to £11.6 million in capital projects in the half year of which
£1.2 million is on sustainability improvements, all of which is being
rentalised, growing the income of the Company.
· We are improving our access to underlying tenant energy
performance data through regular direct data capture, enabling us to more
accurately identify homes where sustainability improvements are most needed.
Name change
· In May 2024, the Financial Conduct Authority updated its
Sustainability Disclosure Requirements ("SDR"). The new regulations will
restrict the use of certain sustainable terms in products available to retail
investors from December 2024. The word "Impact" is specifically proscribed
unless the primary aim of the business is social impact, as measured by a high
threshold of reporting requirements. To avoid confusion and to comply with
these new requirements, the Company will change its name in the coming months
and will provide further details in due course.
Post period end disposal at latest book value of five non-core cares for £8.8
million
· As previously announced, we exchanged on the sale of three care
homes in East Yorkshire for a total consideration of £4.3 million, and also
exchanged and simultaneously completed on the sale of two care homes for a
total consideration of £4.5 million, which is in line with latest valuation
of these homes. This is part of our ongoing active portfolio management
programme.
HALF YEAR RESULTS PRESENTATION
The Company presentation for investors and analysts will take place at 9.00am
(BST) today via a live webcast and conference call.
To access the live webcast, please register in advance here:
https://stream.brrmedia.co.uk/broadcast/6695223836704318d5bcf290
(https://stream.brrmedia.co.uk/broadcast/6695223836704318d5bcf290)
The live conference call dial-in is available using the below details:
Dial in numbers UK Toll Free: 0808 109 0700
UK & International: +44 (0) 33 0551 0200
Password to quote: Impact Healthcare REIT Half Year Results
Participants can type questions into the webcast question box or ask questions
verbally via the conference call.
The recording of the results presentation will be available later in the day
via the Company's website:
https://www.impactreit.uk/investors/reporting-centre/presentations/
(https://www.impactreit.uk/investors/reporting-centre/presentations/)
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP Via H/Advisors Maitland
Andrew Cowley
Mahesh Patel
David Yaldron
Jefferies International Limited 020 7029 8000
Tom Yeadon tyeadon@jefferies.com
Ollie Nott onott@jefferies.com
Winterflood Securities Limited 020 3100 0000
Neil Langford neil.langford@winterflood.com
Joe Winkley joe.winkley@winterflood.com
H/Advisors Maitland (Communications advisor) impacthealth-maitland@h-advisors.global
James Benjamin 07747 113 930
Rachel Cohen 020 7379 5151
Billy Moran 020 7379 5151
The Company's LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT plc is available at
www.impactreit.uk (http://www.impactreit.uk/) .
NOTES
Impact Healthcare REIT plc acquires, renovates, extends and redevelops high
quality healthcare real estate assets in the UK and lets these assets on
long-term full repairing and insuring leases to high-quality established
healthcare operators which offer good quality care, under leases which provide
the Company with attractive levels of rent cover.
The Company aims to provide shareholders with an attractive sustainable
return, principally in the form of quarterly income distributions and with the
potential for capital and income growth, through exposure to a diversified and
resilient portfolio of UK healthcare real estate assets, in particular care
homes for the elderly.
The Company's dividend policy is to seek to maintain a progressive dividend
that is covered by adjusted earnings.
On this basis, the target total dividend for the year ending 31 December 2024
is 6.95 pence per share(3), a 0.18 pence increase over the 6.77 pence in
dividends paid per ordinary share for the year ended 31 December 2023.
The Group's Ordinary Shares were admitted to trading on the main market of the
London Stock Exchange, premium segment, on 8 February 2019. The Company is a
constituent of the FTSE EPRA/NAREIT index.
Notes
(1) This assumes the extensions of the NatWest facility have not been
exercised, including these the weighted average term of debt facilities would
be 6.2 years.
(2) Estimated figure from NHS England article:
https://commonslibrary.parliament.uk/delayed-hospital-discharges-and-adult-social-care/.
(3) Average annual rent cover is a defined term in the Glossary.
(4) This is a target only and not a profit forecast. There can be no
assurance that the target will be met and it should not be taken as an
indicator of the Company's expected or actual results.
(5) Contracted rent is a defined term in the Glossary.
(6) Excludes three turn-around assets transferred to We Care that are
part of an operational turnaround plan.
(7) Including Croftwood and Minster, which are both part of the
Minster Care Group, and Melrose Holdings Limited which is an affiliate.
2024 half year report
We are a real estate company that's deeply immersed in the social
infrastructure of this country. Care for vulnerable adults, especially older
people, is a vital social service. Our business model works by ensuring that
our rent levels are affordable to care home operators, and hence the fees they
charge to the residents in the homes are also affordable. Around 70% of
residents in our homes are funded by local authorities or the NHS, so rent
must be affordable within their constraints as well. We take pride in
providing accommodation to so many residents who rely on state funding.
Responsibility for the quality of care and maintenance of homes lies with the
care home operators. However, we set standards and monitor both carefully as a
responsible landlord in the care sector.
Our purpose is to work with tenants to provide quality, affordable and
sustainable care homes in order to deliver an attractive risk adjusted return.
Our core values are to:
· focus on the long-term sustainability of our business;
· act openly and transparently with our stakeholders;
· be a dependable partner who's trusted to deliver; and
· combine the strengths of a listed company with entrepreneurship.
Consistent with our 2023 Annual Report, we have outlined below how we are
putting our purpose into practice in the six months to 30 June 2024:
1. Growing our business so we can invest in much needed care home beds
Financial performance
We own 140 buildings, independently valued at £670.1 million as at 30 June
2024, a 2.9% increase from £651.3 million at last year-end. This is on a
like-for-like basis increase with no acquisitions or disposals in the period,
driven mainly by inflation-linked rental uplifts. Our 140 buildings offer
7,721 beds, with an average size of 55 beds per home. There are an estimated
465,000 beds for elderly care in the UK, so we now own 1.7% of a highly
fragmented market.
Our EPRA NTA grew by 2.6% to £488.9 million or 117.98 pence per share, up
from £476.4 million and 114.96p. Growth in net assets was primarily driven by
the increase in portfolio value from rent reviews in the period, with the
average topped-up net initial yield marginally higher at 6.98% compared to
6.92% at the last year end. This was supported by retained earnings, with
dividends paid in the period, fully covered.
Profit before tax was £26.3 million (6.35 pence per share), down against the
same period in the prior year of £27.6 million (6.66 pence per share). The
difference is largely due to an uplift of £1.2m from acquisitions in the same
period last year that has not been replicated. Excluding valuation
movements, EPRA earnings were up £0.4 million to £17.6 million (4.25p per
share) and adjusted earnings were flat at £15.3 million (3.69p per share).
Net rental income grew by £4.1 million to £26.8 million. In the prior
period, certain recently acquired properties were being held temporarily
through an interest-bearing loan generating interest income rather than rental
income. We converted these into freehold ownership at the end of June 2023
(£3.7 million). A further £0.4 million of the increase was from rent reviews
and rent increases from capital improvements. Costs are being tightly
controlled despite inflationary pressures and were marginally lower at £3.6
million versus £3.7 million in the prior year. Interest costs increased by
£0.9 million. Bank of England base rates grew from 3.5% to 5% in the six
months to June last year but were consistently 5.25% over the six months to
June 2024. Our weighted average cost of drawn debt including fixed rate debt
and hedging was 4.63% at the period end.
The Company has set a dividend target for this year of 6.95 pence per
share(1), up 2.7% on 2023. We have already declared two dividends for the
first two quarters of the year of 1.7375 pence each, in line with that target.
We aim to deliver a covered dividend (i.e. not paying out more in dividends
than the Company's adjusted earnings). In the first half of 2024, dividends
declared were 122% covered by our EPRA EPS and 106% by adjusted EPS.
Our total accounting return for the six months to 30 June 2024 was 5.51% (not
annualised).
As illustrated below, the Group's operating costs and dividends remain fully
funded from operational cashflows.
Financing growth
The business generated £20.2 million cash in the first half, paid £4.3
million in financing costs leaving £16.0 million net operational cash flow,
of which £14.2 million was paid out in dividends to shareholders, with a
further £6.3 million was invested back into capital improvements. As a
result, with a number of other small items, net debt rose by £4.7 million.
We continue to take a conservative approach to managing the Group's balance
sheet in the current economic situation. At 30 June 2024, the Group had four
debt facilities totalling £250.0 million, of which £189.8 million was drawn
(31 December 2023: £184.8 million), giving a EPRA (net) LTV of 27.8% (31
December 2023: 27.8%).
Our net debt (debt drawn plus net payables, less cash) increased to £186.1
million compared to £181.4 million at 31 December 2023. We invested £5.4
million of capital expenditure on existing assets in the period that will be
rentalised at above 8% upon completion of the individual projects.
The average monthly interest cost of our drawn debt, after hedging, was £0.66
million in the first half, when Bank of England base rates remained stable at
5.25%. Subject to disposals and further capital expenditure, we would
anticipate a similar interest cost in the second half of 2024. Our average
cost of drawn debt at 30 June 2024 was 4.63% and increases/decreases by 4 bps
for every further 50 bps movement in SONIA with our current level of hedging.
The Group has £69.8 million of available funding, of which £20.2 million has
been reserved against committed capital projects. The Group continues to
actively manage the portfolio for non-core disposals and, shortly after the
period end, the Group announced the disposal of five homes for £8.8 million
in line with book value. Proceeds will be used initially to repay the RCF
facilities and reduce interest costs. With base rates now at 5% and debt
margins of 2%, we are exploring capital expenditure projects and investment
opportunities that are accretive, over the long term, whether delivered from
incremental drawn debt or disposals through active portfolio management.
As at 30 June 2024, the weighted average term of debt facilities (excluding
options to extend) was 5.8 years(2). 92% of our drawn debt was fixed or capped
against interest rate rises. The Group has no immediate refinancing activities
with the earliest refinancing being in April 2026. Interest rate caps were put
in place in 2023 which expire in January 2025 (SONIA cap at 3% for £50
million) and August 2025 (SONIA cap at 4% for £50 million). In advance of
their expiry, we are currently appraising alternative hedging options.
Engaging with shareholders
We announced our annual results for the year to 31 December 2023 in the period
with an annual results presentation. We conducted a roadshow for analysts and
shareholders in February 2024 which was well attended. The AGM in May 2024
included a vote on the continuation of the Company, and we were delighted to
receive 100% vote in favour of this resolution and thank shareholders for
their continued support.
2. Working with our tenants and focus on affordability
Adding tenants and growing with them
We reported extensively in our annual report on the replacement of one tenant,
Silverline, with an affiliate of Minster, Melrose to manage seven of our
homes. We have been actively working with Melrose on the long term strategy
for these seven homes and we welcomed our 15(th) tenant(3) to the Group, We
Care, who have taken on the operations of the three homes in Bradford with
leases extended up to 35 years. The Company has granted a rent-free period to
We Care and lease incentives of £1.46 million of which £0.25 million is
additional cash to invest directly in the homes. These incentives will enable
We Care to complete the refurbishment of the homes and they are expected to be
fully recovered over the life of the leases. It is anticipated that the
Bradford portfolio under We Care's operation will resume paying rent in the
first quarter of 2025. We Care is an experienced operator with over 30 homes
located throughout the North of England. As an operator, it has significant
experience with turnaround homes, including in the Bradford submarket. The
four remaining ex-Silverline homes in Scotland, which have historically been
stronger performers than those in Bradford, are cashflow positive. They
continue to be operated by Melrose, while alternative longer-term solutions
are being explored.
WAULT across our portfolio reduced from 20.8 years to 20.5 years across the
half year with the restructure of the leases with We Care partially offsetting
the 0.5 year reduction due to the passage of time.
Monitoring our tenant performance
We continue to be proactive in our engagement with tenants, from whom we
received detailed monthly performance data. We monitor the key drivers of
tenant performance: occupancy; average weekly fees charged by tenants for the
care they provide; staff costs; agency staff usage; and utility costs. Our
tenants are continuing to perform well with average annual rent cover of
2.19x(4). This includes the costs of wage increases including the 10% increase
in minimum wage that came into effect in April 2024 but doesn't yet have the
full benefit of increases in average weekly fees from local authorities, which
are currently averaging around 7%. The continued focus on efficiency in care
home operations by our tenants, with the improvement in certain costs such as
utility costs and inflationary capped increases in our underlying rent, mean
that our tenants are well placed to continue to deliver strong rent cover in
2024.
* This is quarterly data which is used in the calculation of
average annual rent cover and excludes seven turnaround homes.
102 homes had rent reviews in the first half of 2024 with an average rent
increase of 3.8% contributing £0.3 million to rental income in the period and
£1.3 million to contracted rent.
3. Our focus on quality
Everyone gains from successful asset management: the residents who live in our
homes; our tenants who operate the homes and their staff who work there; and
us as its owner. When we invest to improve our homes, the lease terms
typically allow us to rentalise the investment, which we target at greater
than 8%, with potential for valuation uplift on the capital invested, giving a
rate of return above just the yield alone.
During the six months to 30 June 2024, we have invested £5.4 million across
12 homes, enhancing both the quality of the environment and energy efficiency.
The main projects active in the period are summarised below:
Asset and tenant Amount committed Project Benefits
Elm House £3m Extension with 21-high specification bedrooms, new ensuites and improved EPC
(C to B).
Croftwood
Amberley £2.5m Extension to create 16 new bedrooms and updating existing resident lounges.
Improved EPC (C to B).
Minster
Leycester House £1.2m Extension to create four additional bedrooms and adding 19 ensuites and
improved EPC (C to B).
Croftwood
Turnpike Court £1.1m Extension to create eight additional bedrooms and day spaces and improved EPC
(C to B).
Croftwood
Kingston Court £1m Upgrading of 24 bedrooms to include wetrooms. Refurbishment of communal spaces
with dementia-orientated design.
Careport
Wombwell Hall £2.5m First phase of upgrading of existing units to include wetrooms and refurbished
resident day spaces.
Belmont
The quality of care, provided by our tenants to their residents, is monitored
by regulators including the Care Quality Commission ("CQC") in England and
Care Inspectorate ("CI") in Scotland. We review these inspection reports
closely and, where appropriate, discuss the outcomes with our tenants and
their plans to respond to any recommendations. We will closely monitor the new
government plans to overhaul the CQC regime.
4. Increasing our sustainability
We published our sustainability report for 2023 on 28 June 2024, which is
available on our website, and we are aiming to retain our EPRA sBPR gold award
for the fifth year running.
As outlined in this report, we are making positive progress on the EPC rating
of our homes with 57% rated EPC B (English equivalent) or higher against a
target of 50% and we remain in line to deliver against our target of 100% EPC
B or higher by 2030.
Alongside this we have set ourselves a target of helping our tenants reduce
their CO(2) emissions by 15% (Scope 3 emissions for the Group against the
benchmark of 2022) by 2025. In 2023 these CO(2) emissions increased on a per
m(2) per annum basis from 50kg to 54kg. Our asset management activities,
outlined above, are part of the solution to help reduce this and we are
continuing to work with our tenants to improve the quality and timeliness of
data being reported on emissions so we can focus our near-term efforts on
reducing these in line with the target.
(1 ) This is a target only and not a profit forecast. There
can be no assurance that the target will be met and it should not be taken as
an indicator of the Company's expected or actual results.
(2 ) This assumes the extensions of the NatWest facility have
not been exercised, including these the weighted average term of debt
facilities would be 6.2 years.
(3 ) Including Croftwood and Minster, which are both part of
the Minster Care Group, and Melrose Holdings Limited which is an affiliate.
(4 ) Average annual rent cover is a defined term in the
Glossary.
KEY PERFORMANCE INDICATORS
The Group uses the following measures to assess its strategic progress.
1. Total Accounting Return ("TAR")
5.51% for the period to 30 June 2024 (-66 bps on H1 2023)
Definition: The change in the net asset value ("NAV") over the period, plus
dividends paid in the period, as a percentage of NAV at the start of the
period.
2. Dividends
3.48p per share for the period to 30 June 2024 (+2.7% on H1 2023)
Definition: Dividends declared in relation to the period.
3. EPRA earnings per share
4.25p per share for the period to 30 June 2024 (+2.4% on H1 2023)
Definition: Earnings from operational activities. The EPRA calculation removes
revaluation movements in the investment portfolio and interest rate
derivatives but includes rent smoothing.
4. EPRA 'topped-up' Net Initial Yield ("NIY")
6.98% at 30 June 2024 (+6 bps on 2023)
Definition: Annualised rental income based on the cash rents passing on the
balance sheet date, less non-recoverable property operating expenses, divided
by the market value of the property portfolio, increased by 6.3% to reflect a
buyer's costs and adjusted for the expiration of rent-free periods or other
unexpired lease incentives.
5. NAV per share
118.31p per share at 30 June 2024 (+2.5% on 2023)
Definition: Net asset value based on the properties and other investment
interests at fair value.
6. Net Loan to Value ("EPRA LTV")
27.8% as at 30 June 2024 (No change on 2023)
Definition: The proportion of our investment portfolio's value that is funded
by net debt.
7. Weighted Average Unexpired Lease Term ("WAULT")
20.5 years as at 30 June 2024 (-0.3 years on 2023)
Definition: The average unexpired lease term of the property portfolio,
weighted by annual passing rents.
8. Total Expense Ratio ("TER")
1.47% as at 30 June 2024 (-8 bps on 2023)
Definition: Total recurring administration costs as a percentage of average
net asset value throughout the period. EPRA cost ratio was 13.3% (2023:
14.4%).
9. Average annual rent cover
2.19(1) times as at 30 June 2024 (+9.5% on 2023)
Definition: Rent cover is the measure of EBITDARM divided by rent for the
year. EBITDARM is a measure of care home level EBITDA before rent and tenants'
central management costs.
(1 ) Annual average rent cover is a defined term in the
Glossary.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board regularly evaluates the performance of and risks to the business a.
The principal risks and uncertainties continue to be those outlined on pages
39-42 of our 2023 Annual report dated 22 March 2024 and the Board expects that
these will remain valid for the remainder of the year.
The principal risks are summarised below and include updates since the Annual
report from our evaluation in the period.
Infectious diseases - An outbreak of a significant new infectious disease
would clearly place care home residents, who are naturally vulnerable, at
significant danger. It may result in lower care home occupancy, reduced tenant
profitability and higher costs. All of these would impact on the ability of
our tenants to pay us rent, the value our portfolio and our ability to work
with tenants successfully.
Significant tenant default - This is the risk that either a single large
tenant (more than 10% of rent roll) defaults or several smaller tenants
default. Any tenant failure is likely to cost us money (as the Silverline
situation shows), but some tenants are larger than others. Failure of most
tenants would have a moderate impact on us, but a Minster Group failure, as by
far the largest group (37% of rent, including affiliates), would be critical
and is why the risk is outside of our risk tolerance. This could reduce our
revenues and asset values.
Interim update - The re-tenanting of the ex-Silverline homes in Bradford to We
Care in May 2024 highlights the risk of tenant failure, but also the Group's
ability to respond and mitigate the risk.
Underinvestment in care homes - Underinvestment could occur if: tenants don't
invest in maintaining the properties, which could reduce the quality of care
they can provide; the market or regulation may demand enhanced or different
facilities (such as limiting the size of a care home); or, failure to consider
the effects of climate change which could accelerate obsolescence of our care
homes (both physical and low carbon transition risks) including minimum
requirements for EPCs and to meet our net zero target by 2045.
Economic disruption - An economic downturn could have a moderate to
significant impact on the business, but we believe that our mitigations are
sufficient to bring it within our risk tolerance. Difficult economic
conditions could put further pressure on local authority funding, affecting
our tenants' fees and their ability to pay our rent. High inflation has led to
sharp increases in interest rates, hitting property valuations across all
sectors and placing pressure on the financial covenants of our debt facilities
which if breached, could result in the banks taking security over our assets.
While inflation has come down, interest rates are not expected to return to
the previous very low levels.
Interim update -The most recent inflation data is positive, with inflation
falling to 2%, in line with government targets, and indications that interest
rates may have peaked now that the Bank of England has reduced the base rate
to 5%.
Political events - Changes to government in the next 12 months are likely to
heighten the risk of changes in policy and funding that affect our market.
Increased regulation, changes to immigration or changes to care worker pay
levels alongside the risk of alternative ways of providing care could make it
harder for our tenants to pay their rent, reducing the value of our
properties.
Interim update - We welcome the opportunity to engage with the new government,
looking forward to a period of relative stability.
Reputational damage - Circumstances that could damage our reputation include
our tenants providing poor care or breaching standards around matters like
minimum wage or modern slavery. In addition, Minster Group is a related party
to the IM. If there is a breakdown in trust on related party disclosures, this
could damage our reputation. We have also set targets to deliver net zero by
2045, failure to deliver against our carbon reduction strategy could damage
our reputation with investors and the community within which our care homes
operate.
Investment Manager fails - We rely on the IM's capabilities to execute our
strategy and support our day-to-day relationships. If the IM fails to retain
the key staff, this could result in poor relationships with stakeholders and,
ultimately, failure to collect rent and a reduction in value of our portfolio.
DIRECTORS' RESPONSIBILITIES
The directors confirm that to the best of their knowledge, this condensed set
of financial statements has been prepared in accordance with IAS 34 in
conformity with the requirements of the Companies Act 2006 and that the
operating and financial review contained within the Investment Manager's
report includes a fair review of the information required by DTR 4.2.7 and DTR
4.2.8 of the Disclosure Guidance and Transparency rules of the United
Kingdom's Financial Conduct Authority, namely:
· an indication of important events that have occurred during the
first period of the financial year and their impact on the condensed financial
statements and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
· material related party transactions in the first period of the
financial year and any material changes in the related party transactions
disclosed in the 2023 annual report as disclosed in note 22.
During the half-year, Philip Hall stepped down from the Board at the AGM on 21
May 2024 and Cedi Frederick was appointed as a new non-executive director with
effect from 1 April 2024. Biographies of each of the current directors are
shown on page 49-50 in the 2023 Annual report.
Shareholder information is as disclosed on the Impact Healthcare REIT plc
website.
For and on behalf of the board
Simon Laffin
Chair
7 August 2024
Condensed consolidated statement of comprehensive income
Six months ended Six months ended
30 June 2024 30 June 2023 Year ended
(unaudited) (unaudited) 31 December 2023
(audited)
Notes £'000 £'000 £'000
Gross rental income 5 26,803 23,063 49,659
Bad debts written off 5 - (350) (236)
Insurance/service charge income 5 345 421 871
Insurance/service charge expense 5 (345) (421) (871)
Net rental Income 26,803 22,713 49,423
Administrative and other expenses (3,558) (3,681) (7,137)
Loss on disposal of investment properties - (16) (16)
Operating profit before changes in fair value 23,245 19,016 42,270
Changes in fair value of investment properties 8,260 9,340 14,788
9
Operating profit 31,505 28,356 57,058
Finance income 119 3,656 3,761
Finance expense (5,291) (4,423) (11,988)
Profit before tax 26,333 27,589 48,831
Tax charge on profit for the period/year 6 - - -
Profit and total comprehensive income (attributable to shareholders) 26,333 27,589 48,831
Earnings per share - basic and diluted (pence) 7 6.35p 6.66p 11.79p
The results are derived from continuing operations during the period/year.
Condensed consolidated statement of financial position
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Non-current assets
Investment property 9 629,701 606,719 616,006
Interest rate derivatives 11 1,356 2,304 1,750
Trade and other receivables 12 43,168 34,810 39,237
Total non-current assets 674,225 643,833 656,993
Current assets
Trade and other receivables 465 2,350 907
Cash and cash equivalents 9,583 22,053 9,389
Total current assets 10,048 24,403 10,296
Total assets 684,273 668,236 667,289
Current liabilities
Trade and other payables (6,356) (9,616) (6,915)
Total current liabilities (6,356) (9,616) (6,915)
Non-current liabilities
Borrowings 10 (185,430) (185,329) (179,937)
Trade and other payables (2,260) (2,400) (2,330)
Total non-current liabilities (187,690) (187,729) (182,267)
Total liabilities (194,046) (197,345) (189,182)
Total net assets 490,227 470,891 478,107
Equity
Share capital 13 4,144 4,144 4,144
Share premium reserve 14 376,716 376,716 376,716
Capital reduction reserve 24,077 24,077 24,077
Retained earnings 85,290 65,954 73,170
Total equity 490,227 470,891 478,107
Net Asset Value per ordinary share (pence) 16 118.31p 113.64p 115.38p
Condensed consolidated statement of cash flows
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Cash flows from operating activities
Profit for the period/year (attributable to equity shareholders) 26,333 27,589 48,831
Finance income (119) (3,656) (3,761)
Finance expense 5,291 4,423 11,988
Loss on disposal of investment properties - 16 16
Changes in fair value of investment properties 9 (8,260) (9,340) (14,788)
Net cash flow before working capital changes 23,245 19,032 42,286
Working capital changes
Increase in trade and other receivables (3,184) (3,086) (6,308)
(Decrease)/increase in trade and other payables 127 927 (2,618)
Net cash flow from operating activities 20,188 16,873 33,360
Investing activities
Purchase of investment properties 9 - (44,800) (44,799)
Proceeds on sale of investment property 9 - 1,234 1,234
Acquisition costs paid in period - (1,555) (1,765)
Capital improvements paid in period (6,299) (857) (3,375)
Loan advanced to operator - (971) (1,600)
Interest received 67 1,872 3,695
Net cash flow used in investing activities (6,232) (45,077) (46,610)
Financing activities
Issue costs of ordinary share capital 14 - (30) (30)
Bank borrowings drawn 10 28,000 68,500 82,500
Bank borrowings repaid 10 (23,000) (20,000) (40,000)
Loan arrangement fees paid (292) (1,596) (2,827)
Loan commitment fees paid (300) (220) (528)
Interest paid on bank borrowings (4,815) (4,108) (8,990)
Interest payments received on interest rate derivatives 858 449 1,035
Interest rate derivative purchased 11 - (1,481) (3,238)
Dividends paid to equity holders 8 (14,213) (13,788) (27,814)
Net cash flow (used in)/from financing activities (13,762) 27,726 108
Net increase/(decrease) in cash and cash equivalents for the period 194 (478) (13,142)
Cash and cash equivalents at the start of the period 9,389 22,531 22,531
Cash and cash equivalents at the end of the period 9,583 22,053 9,389
Condensed consolidated statement of changes in equity
Six months ended 30 June 2024 (unaudited)
Share capital Share premium Capital reduction reserve Retained earnings Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes £'000 £'000 £'000 £'000 £'000
1 January 2024 4,144 376,716 24,077 73,170 478,107
Total comprehensive income - - - 26,333 26,333
Transactions with owners
Dividends paid 8 - - - (14,213) (14,213)
30 June 2024 4,144 376,716 24,077 85,290 490,227
Six months ended 30 June 2023 (unaudited)
Share capital Share premium Capital reduction reserve Retained earnings Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Notes £'000 £'000 £'000 £'000 £'000
1 January 2023 4,048 365,642 24,077 52,153 445,920
Total comprehensive income - - - 27,589 27,589
Transactions with owners 8 - - - (13,788) (13,788)
Dividends paid
Share issues 13,14 96 11,104 - - 11,200
Share issue costs 14 - (30) - - (30)
30 June 2023 4,144 376,716 24,077 65,954 470,891
For the year ended 31 December 2023 (audited)
Share capital Share premium Capital reduction reserve Retained earnings Total
Notes £'000 £'000 £'000 £'000 £'000
1 January 2023 4,048 365,642 24,077 52,153 445,920
Total comprehensive income - - - 48,831 48,831
Transactions with owners
Dividends paid 8 - - - (27,814) (27,814)
Share issue 13,14 96 11,104 - - 11,200
Share issue costs 14 - (30) - - (30)
31 December 2023 4,144 376,716 24,077 73,170 478,107
Notes to the condensed consolidated financial statements
1. Basis of preparation
General information
These unaudited condensed consolidated financial statements for the six-month
period ended 30 June 2024, are prepared in accordance with UK adopted
International accounting standards and IAS 34 "Interim Financial Reporting",
including the comparative information for the six-month period ended 30 June
2023 and for the year ended 31 December 2023. They do not include all of the
information required for full annual financial statements and do not
constitute full statutory accounts within the meaning of section 434 of the
Companies Act 2006. As such these should be read in conjunction with the
Group's annual report and accounts for the year to 31 December 2023, which
have been delivered to the Registrar of Companies. The Group's Independent
Auditor's report on those accounts was unqualified, did not include references
to any matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain a statement under section 498(2)
or 498(3) of the Companies Act 2016.
The condensed consolidated financial statements have been prepared on a
historical cost basis, except for investment properties and derivative
financial instruments which have been measured at fair value.
The Group has chosen to adopt EPRA best practice guidelines for calculating
key metrics such as earnings per share.
The Company is a public listed company incorporated and domiciled in England
and Wales. The Company's ordinary shares are listed on the Premium Listing
Segment of the Official List and trade on the premium segment of the main
market of the London Stock Exchange. The registered address of the Company is
disclosed in the corporate information.
Convention
The condensed consolidated financial statements are presented in Sterling,
which is also the Group's functional currency, and all values are rounded to
the nearest thousand (£'000), except when otherwise indicated.
Going concern
After making enquiries and bearing in mind the nature of the Company's
business and assets, the directors consider that the Company has adequate
resources to continue in operational existence for the next 12 months from the
date of approval of these financial statements. For this reason, they continue
to adopt the going concern basis in preparing the financial statements.
The ongoing effect of the high interest rate environment has been considered
by the directors. The directors have reviewed the forecasts for the Group
taking into account the impact of heightened interest rates and rising costs
on trading over the 12 months from the date of signing this report. The
forecasts have been assessed against a range of possible downside outcomes
incorporating significantly lower levels of income and higher costs, the Group
and the Company have adequate resources to continue to operate in all of these
scenarios.
The directors believe that there are currently no material uncertainties in
relation to the Company's and Group's ability to continue for a period of at
least 12 months from the date of approval of the Company and Group interim
statements. The board is, therefore, of the opinion that the going concern
basis adopted in the preparation of the interim report is appropriate.
2. Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires management to
make judgements, estimates and assumptions that affect the reported amounts
recognised in the financial statements and disclosures. However, uncertainty
about these assumptions and estimates could result in outcomes that could
require material adjustment to the carrying amount of the assets or
liabilities in future periods.
Information about significant areas of estimation, uncertainty and critical
judgements in applying accounting policies that have the most significant
effect on the amount recognised in the financial statements are disclosed
below:
2.1 Judgements
Operating lease contracts - the Group as lessor
The Group has acquired investment properties that are subject to commercial
property leases with tenants. The Group has determined, based on an evaluation
of the terms and conditions of the arrangements, particularly the duration of
the lease terms and minimum lease payments, that it retains all the
significant risks and rewards of ownership of these properties and so accounts
for the leases as operating leases.
The leases, when signed, are for between 20 and 30 years typically with a
tenant-only option to extend for one or two periods of ten years. At the
inception of the lease, unless there is a landlord option to extend, the
directors do not judge any extension of the leases to be reasonably certain
and, as such, do not factor any lease extensions into their considerations of
lease incentives and their treatment.
2.2 Estimates
Fair valuation of investment property
The valuations have been prepared in accordance with the RICS Valuation -
current edition of the global and UK standards as at the valuation date or the
RICS 'Red Book' as it has become widely known.
The basis of value adopted is that of fair value being "the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date" in accordance
with IFRS 13. The concept of fair value is considered to be consistent with
that of market value.
The significant methods and assumptions used by the valuers in estimating the
fair value of the investment properties are set out in note 9.
Gains or losses arising from changes in the fair values are included in the
Condensed consolidated statement of comprehensive income in the period in
which they arise. In order to avoid double counting, the assessed fair value
may be increased or reduced by the carrying amount of any accrued income
resulting from the spreading of lease incentives and/or guaranteed minimum
rent uplifts at the inception of the lease.
3. Summary of significant accounting policies
The accounting policies adopted in this report are consistent with those
applied in the Group's statutory accounts for the year ended 31 December 2023
and are expected to be consistently applied during the year ending 31 December
2024.
4. New standards issued
4.1 New standards issued with effect from 1 January 2024
No new standards have been applied that have had a material effect on the
financial position or performance of the Group.
4.2 New standards issued but not yet effective
There are no new standards issued but not yet effective that are expected to
have a material effect on the Group.
5. Property income
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rental income cash received in the period/year 23,165 19,785 42,513
Rent received in advance of recognition(1) 69 70 141
Rent recognised in advance of receipt(2) 3,648 3,278 7,145
Rental lease incentive amortisation(3) (79) (70) (140)
Gross rental income 26,803 23,063 49,659
Bad debts written off(4) - (350) (236)
Insurance/service charge income 345 421 871
Insurance/service charge expense (345) (421) (871)
Net rental income 26,803 22,713 49,423
(1) This relates to movement in rent premiums received in prior periods as
well as any rent premiums received during the period/year, deemed to be a
premium over the term of the leases.
(2) Relates to both rent-free periods being recognised on a straight-line
basis over the term of the lease and rent recognised in the period to reflect
the minimum uplifts in rents over the term of the lease on a straight-line
basis.
(3) Lease incentives relate to the amortisation of payments made to tenants
that are not part of any acquisition contractual obligations. These payments
are made in return for an increase in rent or a revision of the lease terms or
lease length.
(4) Bad debts written off relates to rental arrears due from one tenant who
leased seven of the Group's properties, these properties were re-tenanted in
June 2023.
6. Taxation
As a REIT, the Group is exempt from corporation tax on the profits and gains
from its property investment business, provided it continues to meet certain
conditions as per REIT regulations. For the period ended 30 June 2024 and year
ended 31 December 2023, the Group did not have any non-qualifying profits
except interest income.
7. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the Company by the
time-weighted average number of ordinary shares outstanding during the period.
As there are no dilutive instruments outstanding, basic and diluted earnings
per share are identical.
Six months ended Six months ended Year ended 31 December 2023
30 June 2024 30 June 2023 (audited)
(unaudited) (unaudited)
£'000 £'000 £'000
Total comprehensive income (attributable to shareholders) 26,333 27,589 48,831
Adjusted for:
- Revaluation movement (13,360) (12,618) (21,934)
- Movement in lease incentive debtor 1,383 (70) (140)
3,717 3,348 7,286
- Rental income arising from recognising rental premiums and future guaranteed
rent uplifts
Change in fair value of investment properties (8,260) (9,340) (14,788)
(Profit) / Loss on disposal of investment property - 16 16
Change in fair value of interest rate derivative (467) (1,088) 458
EPRA earnings 17,606 17,177 34,517
Adjusted for:
(3,717) (3,348) (7,287)
Rental income arising from recognising rental premiums and future guaranteed
rent uplifts
Profit / (Loss) on disposal of investment property - (16) (16)
Interest received on interest rate cap 861 628 1,393
Amortisation of lease incentive(1) 79 70 141
Amortisation of loan arrangement fees 478 757 1,418
Adjusted earnings 15,307 15,268 30,166
414,368,169 413,943,690 414,157,674
Average number of ordinary shares
Earnings per share (pence)(2) 6.35p 6.66p 11.79p
EPRA basic and diluted earnings per share (pence)(2) 4.25p 4.15p 8.33p
Adjusted basic and diluted earnings per share (pence)(2) 3.69p 3.69p 7.28p
(1) Lease incentives relate to the amortisation of payments made to tenants
that are not part of any contractual acquisition obligations. These payments
are made in return for an increase in rent or a revision of the lease terms or
length.
(2) There is no difference between basic and diluted earnings per share.
The European Public Real Estate Association ("EPRA") publishes guidelines for
calculating adjusted earnings designed to represent core operational
activities.
The EPRA earnings are arrived at by adjusting for the changes in fair value of
on investment properties, options to acquire investment properties and
interest rate derivatives, and removal of profit or loss on disposal of
investment properties.
Adjusted Earnings:
Adjusted earnings is used by the board to help assess the Group's ability to
deliver a cash covered dividend from net income. The metric reduces EPRA
earnings by other non‑cash items credited or charged to the Group statement
of comprehensive income including the effect of straight‑lining of rental
income from fixed rental uplift adjustments and amortisation of lease
incentives and loan arrangement fees. The metric also adjusts for any
one‑off items that are not expected to be recurring and for cash items which
are excluded from the EPRA earnings calculation such as interest income on
hedging arrangements.
Fixed rental uplift adjustments relate to adjustments to net rental income on
leases with minimum uplifts embedded within their review profiles. The total
minimum income recognised over the lease term is recognised on a
straight‑line basis and therefore not supported by cash flows during the
early term of the lease, but this reverses towards the end of the lease.
The board uses the adjusted earnings alongside the available distributable
reserves in its consideration and approval of dividends.
8. Dividends
Dividend rate Six months ended Six months ended Year ended 31 December 2023
per share 30 June 2024 30 June 2023 (audited)
pence (unaudited) (unaudited)
£'000 £'000 £'000
Fourth interim dividend for the period ended 31 December 2022 (ex-dividend - 9 1.6350p - 6,775 6,775
February 2023)
First interim dividend for the period ended 31 December 2023 (ex-dividend - 4 1.6925p - 7,013 7,013
May 2023)
Second interim dividend for the period ended 31 December 2023 (ex‑dividend - 1.6925p - - 7,013
17 August 2023)
Third interim dividend for the period ended 31 December 2023 (ex‑dividend - 1.6925p - - 7,013
2 November 2023)
Fourth interim dividend for the period ended 31 December 2023 (ex-dividend - 8 1.6925p 7,013 - -
February 2024)
First interim dividend for the period ended 31 December 2024 (ex-dividend - 2 1.7375p 7,200 - -
May 2024)
Total dividends paid 14,213 13,788 27,814
Total dividends paid in respect of the period/year 1.7375p 1.6925p 5.0775p
Total dividends unpaid but declared in respect of the period/year 1.7375p 1.6925p 1.6925p
Total dividends declared in respect of the period/year - per share 3.475p 3.385p 6.77p
On 30 January 2024 the Company declared an interim dividend of 1.6925 pence
per share for the period from 1 October 2023 to 31 December 2023 and was paid
in February 2024.
On 25 April 2024 the Company declared an interim dividend of 1.7375 pence per
ordinary share for the period from 1 January 2024 to 31 March 2024 and was
paid in May 2024.
On 24 July 2024, the Company declared an interim dividend of 1.7375 pence per
share for the period from 1 April 2024 to 30 June 2024 payable in August 2024.
9. Investment property
In accordance with the RICS 'Red Book' the properties have been independently
valued on the basis of fair value by Cushman & Wakefield, an accredited
independent valuer with a recognised professional qualification. They have
recent and relevant experience in the locations and categories of investment
property being valued and skills and understanding to undertake the valuations
competently. The properties have been valued on an individual basis and their
values aggregated rather than the portfolio valued as a single entity. The
valuers have used recognised valuation techniques in accordance with those
recommended by the International Valuation Standards Committee and are
compliant with IFRS 13. Factors reflected include current market conditions,
annual rentals, lease lengths, property condition including improvements
affected during the period, rent coverage, location and comparable evidence.
The valuations are the ultimate responsibility of the directors. Accordingly,
the critical assumptions used in establishing the independent valuation are
reviewed by the board.
All corporate acquisitions have been treated as asset purchases rather than
business combinations because they are considered to be acquisitions of
properties rather than businesses.
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Opening value 651,313 532,479 532,479
Property additions - 91,688 91,688
Property disposals(1) - (1,250) (1,250)
Acquisition costs capitalised - 1,765 1,765
Capital improvements 5,435 857 4,697
Revaluation movement 13,360 12,618 21,934
Closing value per independent valuation report 670,108 638,157 651,313
Lease incentive debtor (3,761) (2,449) (2,379)
Guaranteed rent reviews debtor (38,906) (31,390) (35,258)
Rent premium creditor 2,260 2,401 2,330
Closing fair value per Condensed consolidation statement of financial position 629,701 606,719 616,006
(1) In the period to 30 June 2024 the carrying value of disposals was £nil
(2023: £1,250,000), this combined with the loss in 2023 on disposal of
£16,000 makes up the total net proceeds shown in the Condensed consolidated
statement of cash flows.
Change in fair value of investment properties
The following elements are included in the change in fair value of investment
properties reported in the condensed consolidated statements:
Six months ended Six months ended Year ended 31 December 2023
30 June 2024 30 June 2023 (audited)
(unaudited) (unaudited)
£'000 £'000 £'000
Revaluation movement 13,360 12,618 21,934
Movement in lease incentive debtor(1) (1,383) 70 140
Rental income arising from recognising rental premiums and future guaranteed (3,717) (3,348) (7,286)
rent uplifts
Change in fair value of investment properties 8,260 9,340 14,788
(1) Lease incentives relate to the amortisation of payments made to tenants
that are not part of any acquisition contractual obligations. These payments
are made in return for an increase in rent or a revision of the lease terms or
length.
10. Borrowings
A summary of the borrowings drawn in the period are shown below:
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the period/year 184,760 142,260 142,260
Borrowings drawn in the period/year 28,000 68,500 82,500
Borrowings repaid in the period/year (23,000) (20,000) (40,000)
Total borrowings drawn(1) 189,760 190,760 184,760
Total borrowings undrawn 60,240 59,240 65,240
Total borrowings available 250,000 250,000 250,000
(1) Total borrowings drawn are equal to its fair value.
The Group drew down £28 million and repaid £23 million under its existing
loan facilities with HSBC UK Bank Plc, Clydesdale Bank Plc and National
Westminster Bank Plc.
Any fees associated with arranging the borrowings unamortised as at the period
end are offset against amounts drawn on the facilities as shown in the table
below:
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Borrowings drawn: 189,760 190,760 184,760
Arrangements fees - brought forward (4,823) (5,064) (5,064)
Arrangement fees incurred during the period/year 15 (1,124) (1,177)
Amortisation of loan arrangement fees 478 757 1,418
Borrowings at amortised cost 185,430 185,329 179,937
Borrowings at amortised cost due after one year 185,430 185,329 179,937
As an additional performance measure the Group uses EPRA (net) LTV to assess
the gearing of shareholder equity, in line with other real estate companies:
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Gross debt 189,760 190,760 184,760
Include:
Net payables 5,891 7,266 6,009
Less:
Cash and cash equivalents (9,583) (22,053) (9,389)
Net debt 186,068 175,973 181,380
670,108 638,157 651,313
Property portfolio
27.77% 27.58% 27.85%
EPRA (net) LTV
11. Interest rate derivatives
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the year/period 1,750 363 363
Change in fair value of interest rate derivative 467 1,088 (458)
Payments received on interest rate derivative (861) (628) (1,393)
Purchase of derivatives - 1,481 3,238
1,356 2,304 1,750
To mitigate the interest rate risk that arises as a result of entering into
variable rate linked loans in January 2023, the Group purchased a two-year
interest rate cap for £1.5 million, which caps SONIA at 3% for a notional
amount of £50 million.
In August 2023, the Group purchased a two-year interest rate cap for £1.8m,
which caps SONIA at 4% for a notional amount of £50m.
12. Other non-current assets
As at As at As at
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Rent recognised in advance of receipt 38,906 31,390 35,258
Rental lease incentive 3,761 2,449 2,379
Loans receivable 501 971 1,600
Trade and other receivables 43,168 34,810 39,237
The loans receivable relate to a £0.3 million loan facility that the Group
agreed to provide to Melrose Holdings Limited, of which £0.3 million was
drawn at June 2024 and a £0.2 million loan facility the Group agreed to
provide to We Care, of which £0.2 million was drawn at June 2024. The
facilities are for up to two years with an interest rate of 8.0% per annum on
drawn funds.
No impairment losses have been recognised during the period/year.
13. Share capital
Six months ended Six months ended Six months ended Year ended 31 December 2023
30 June 2024 30 June 2024 30 June 2023 (audited)
(unaudited) (unaudited)
Number of shares £'000 £'000 £'000
At the beginning of the period/year 414,368,169 4,144 4,048 4,048
Shares issued - - 96 96
414,368,169 4,144 4,144 4,144
On 13 January 2023, the Company issued 9,603,841 ordinary shares priced at
116.62 pence per share. The Company had 414,368,169 shares of nominal value of
1 pence each in issue at the end of the period.
14. Share premium
Share premium comprises share capital subscribed for in excess of nominal
value less costs directly attributed to share issuances.
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
At the beginning of the year/period 376,716 365,642 365,642
Surplus of net proceeds on shares issued above their par value - 11,104 11,104
Share issue costs - (30) (30)
376,716 376,716 376,716
15. Transactions with related parties
Investment Manager
The fees calculated and paid for the period to the Investment Manager were as
follows:
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Impact Health Partners LLP 2,498 2,381 4,810
For the six-month period ended 30 June 2024 the principals and finance
director of Impact Health Partners LLP, the Investment Manager, are considered
key management personnel. Mr Patel and Mr Cowley are the principals and Mr
Yaldron is the finance director of Impact Health Partners LLP and they own
2.60%, 0.39% and 0.04% respectively (either directly or through a wholly-owned
company) of the total issued ordinary share capital of Impact Healthcare REIT
plc. In addition, Mr Patel also (directly and/or indirectly) holds a majority
72.5% stake in Minster Care Group Limited "MCGL". Mr Cowley also holds a 20%
interest in MCGL. 35% of the Group's rental income was received from MCGL or
its subsidiaries and affiliated during the period. There were no trade
receivables or payables outstanding at the period end.
During the period the key management of Impact Health Partners LLP received
the following dividends from Impact Healthcare REIT plc: Mahesh Patel
£369,244; Andrew Cowley £55,925 and David Yaldron £5,691.
Directors' interests
The directors who are shareholders in the Company do not hold significant
interest in the ordinary share capital of the Company.
During the period the directors, who are considered key management personnel,
received the following dividends from the Company: Simon Laffin £3,430;
Rosemary Boot £1,029; Philip Hall £1,029; Cedi Frederick £204; Amanda
Aldridge £686 and Christopher Santer £485.
These transactions were fully compliant with the Company's related party
policy.
Minster Care Group Limited ("MCGL")
MCGL, a tenant of the Group, is considered a related party as it is majority
owned by the principals of the Investment Manager. As at 30 June 2024, the
Group leased 62 properties to MCGL and its affiliates, all properties owned
for over one year underwent an inflation-linked rent review in line with their
lease provisions. In the period to 30 June 2024, the Group entered into no new
leases with MGCL and facilitated the transfer of operations of three care
homes from Melrose Holdings Limited (an affiliate of MCGL) to a third-party
operator.
These transactions were fully compliant with the Company's related party
policy.
16. Net Asset Value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the consolidated
statement of financial position attributable to ordinary equity holders of the
Company by the number of ordinary shares outstanding at the end of the period.
As there are no dilutive instruments outstanding, basic and diluted NAV per
share are identical.
The Group has chosen to adopt EPRA net tangible assets ("EPRA NTA") as its
primary EPRA NAV measure as it most closely aligns with the business practices
of the Group. The adjustments between NAV and EPRA NTA are reflected in the
following table:
As at As at As at
30 June 30 June 31 December 2023
2024 2023 (audited)
(unaudited) (unaudited)
£'000 £'000 £'000
Net assets per Condensed consolidated statement of financial position 490,227 470,891 478,107
Fair value of derivatives (1,356) (2,304) (1,750)
EPRA NTA 488,871 468,587 476,357
Issued share capital (number) 414,368,169 414,368,169 414,368,169
Basic NAV per share 118.31p 113.64p 115.38p
EPRA NTA per share 117.98p 113.08p 114.96p
17. Capital commitments
At 30 June 2024 the Group had committed capital expenditure on one
forward-funded development of a new property and on capital improvements to
existing properties, this amounted to £15.6 million. The Group has committed
to deferred payment agreements on two acquisitions in return for increased
rent based on trading performance. As at 30 June 2024 the total capital
commitment for these deferred payments is estimated at £4.6 million.
18. Controlling parties
The Company is not aware of any person who, directly or indirectly owns or
controls the Company. The Company is not aware of any arrangements the
operations of which may give rise to a change in control of the Company.
19. Subsequent events
The Group exchanged and completed on the sale of two care homes for a total
consideration of £4.5 million, which is in line with the latest valuation of
the homes. A further three homes have exchanged for sale for total
consideration of £4.3 million with completion expected during the third
quarter of this year.
No other significant events have occurred between the statement of financial
position date and the date at which these financial statements were authorised
by the directors, which require adjustments to, or disclosure in the financial
statements.
Glossary
Average annual rent cover: Average annual rent cover is the annual average of
our tenants' EBITDARM divided by total annual rent. EBITDARM is a useful
approximation for our tenants' cash earnings, which they can use to pay their
rent. This has been adjusted to exclude seven turnaround homes
Capex: Capital Expenditure
Contracted rent: The annualised rent adjusting for: rent due following
rent-free periods; underlying contractual rent on temporarily varied leases
(including rent due from Melrose); rent due on capex projects or
profit-related deferred payments where the Group recognises a capital
commitment; and post-tax income from interest received from property
investments made via loans to operators for the acquisition of property
portfolios
CQC: Care Quality Commission
EBITDARM: Earnings Before Interest Tax Depreciation Amortisation Rent and
Management charges
EPC: Energy Performance Certificate
EPRA: European Public Real Estate Association
EPS: Earnings per Share
ESG: Environmental, Social and Governance
Investment Manager: Impact Health Partners LLP
LTV: Loan-to-value
NAV: Net Asset Value
NIY: Net Initial Yield
RCF: Revolving Credit Facility
REIT: Real Estate Investment Trust
RPI: Retail Price Index
SONIA: Sterling Over Night Index Average
Total accounting return: The growth in NAV per share plus dividends paid
expressed as a percentage of NAV per share at the beginning of the period
WAULT: Weighted Average Unexpired Lease Term
Corporate information
Directors
Amanda Aldridge - Non‑executive Director
Rosemary Boot - Senior Independent Non-executive Director
Cedi Frederick - Non-executive Director (with effect from 1 April 2024)
Philip Hall - Non-executive Director (resigned 21 May 2024)
Simon Laffin - Non-executive Chair
Christopher Santer - Non-executive Director
Registered
office
The Scalpel
18(th) Floor
52 Lime Street
London
EC3M 7AF
Telephone: +44 (0)207 409 0181
Investment
Manager
Impact Health Partners LLP
149-151 Regent Street
London
W1B 4JD
Independent
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Administrator &
Secretary
JTC (UK) Limited
The Scalpel
18(th) Floor
52 Lime Street
London
EC3M 7AF
Depositary
Indos
The Scalpel
18(th) Floor
52 Lime Street
London
EC3M 7AF
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Legal
Advisers
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Joint Financial Adviser and Corporate Broker Jefferies International
Limited
100 Bishopsgate
London
EC2N 4JL
Joint Financial Adviser and Corporate Broker Winterflood Securities
Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Communications
Adviser
H/Advisors Maitland
3 Pancras Square
London N1C 4AG
Company Registration
Number 10464966
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