The information contained in this
announcement is restricted and is not for publication, release or
distribution in the United States of America, any member state of
the European Economic Area, Canada, Australia, Japan or the
Republic of South Africa.
30 January 2024
Impact Healthcare REIT
plc
("Impact" or the "Company" or, together with its
subsidiaries, the "Group")
2023 UPDATE, DIVIDEND
DECLARATION AND 2024 DIVIDEND TARGET
HIGHLIGHTS
Our tenants continue to improve
their performance with higher care home occupancy and increased
fees to residents as inflation peaked in the year. Our rent
increases are largely capped at 4%, so this helps tenants' rent
cover, and makes our income more secure. Boosted by an acquisition,
our total rent roll grew strongly and this has flowed through to
both earnings and dividend growth.
· 13.2%
increase in contracted rent to £48.8
million for the 2023 year (+£5.7 million). Rental growth was driven
by inflation-linked rent reviews (capped at 4%) plus a significant
acquisition.
· 2.2x
tenant rent cover(1) in Q3, up from 1.9x in the same
quarter the previous year. This is the
strongest quarterly tenant performance since the Company's
inception in 2017.
· 20.8
years weighted average unexpired lease, up from 19.7 years the
previous year.
· Delivered a 3.5% increase in dividends per share in 2023 with
a Q4 dividend of 1.6925 pence in line with our target of 6.77 pence per share for the year to 31 December
2023.
· 2.7% increase in dividend target to
6.95p for the 2024 year(3).
PORTFOLIO TRADING UPDATE
· Stronger tenant rent cover is driven by several factors:
improving room occupancy; growth in average weekly fees charged by
tenants; and rent increases largely being capped at 4%.
· The
Group has received 100% of rent payments due (excluding the ex-Silverline homes) for the
quarter to 31 December 2023 (4).
· Tenants maintained their profit recovery in Q4 and, based on
the 88% of the Company's portfolio(2) that has reported
so far, we estimate that the full year 2023 rent cover rose to
2.0x(1), up 0.2x compared to the full year 2022 of
1.8x.
· Occupancy at 31 December 2023 was 88.2%, up from 87.4% at 31
December 2022.
· The
average weekly fees the Group's tenants charge for the care they
provide grew by c.12%(2) in the 12 months to 31 December
2023.
· The
£5.7 million growth in contracted rent was due to;
o £3.9
million from the acquisition of a portfolio of six homes near
Shrewsbury leased to Welford, in January 2023.
o £1.6
million from 119 rent reviews in the year at an average increase of
4.1%.
o £0.3
million from rentalised capital expenditure with the largest
projects being at Mavern and Yew Tree.
o Less
£0.2 million from the disposal of one home.
· The
former Silverline portfolio of seven homes continues to show
improved performance under the management of Melrose, an affiliate
of the Minster Group
o Melrose has undertaken a significant amount of work in a
relatively short space of time including: measures to stabilise
staff teams and to reduce use of agency staff; settling outstanding
invoices with suppliers; renegotiating utility contracts; and
focusing on improving processes and the care environment for both
staff and residents.
o The
portfolio of four homes in Scotland has an average occupancy of 88%
and is now cashflow positive. Negotiations are well advanced to
transfer these homes back to rent generating operational
leases.
o The
portfolio of three homes in Bradford is expected to be cashflow
positive by the end of first quarter of 2024 with discussions
underway on a new management proposal.
· At 31
December 2023, our portfolio comprised 140 healthcare
properties(5), of which:
o 138
are care homes managed by 13 tenants(6) on fixed-term
leases with an average WAULT of 20.8 years (no break clauses),
subject to annual upward-only Retail Price Index-linked rent
reviews (with a floor and cap at 2% p.a. and 4% p.a., respectively
on 117 leases, and 1% p.a. and 5% p.a. on 21 leases).
o In
addition, the Group owns two healthcare facilities leased to the
NHS with an annual CPI uplift (uncapped).
o In
total, the Group had 14 tenants(6) across its
Portfolio.
FINANCING
· As
at 31 December 2023
the Group's drawn debt was £184.8 million:
o 95%
hedged through a combination of fixed debt (£75 million at 3.0%)
and SONIA interest rate caps (£50 million at 3% and £50 million at
4%).
o EPRA
LTV of 27.7% based on 30 September 2023 balance sheet
information.
o The
current average cost of drawn debt, including hedging and fixed
rate borrowings, is 4.56%.
DIVIDEND DECLARATION AND 2024
DIVIDEND TARGET
· The
Board has today declared the Company's fourth interim dividend for
the year ended 31 December 2023 of 1.6925 pence per ordinary share,
payable on 23rd February 2024 to shareholders on the
register on 9th February 2024. The ex-dividend date will
be 8th February 2024. This dividend will be paid as a
Property Income Distribution ("PID").
o This
is consistent with the prior three quarters dividends and delivers
on the Company's annual dividend target of 6.77 pence per
share for the year ended 31 December 2023.
This is in line with the Company's dividend
policy, which seeks to maintain a progressive dividend that is covered by its adjusted earnings.
· The target dividend for the year to 31
December 2024 is 6.95 pence per share(3), a 0.18 pence
increase from the prior period.
·
The Company expects to report its full accounts
for the year to 31 December 2023, which will include an updated
valuation of the portfolio, in late March 2024.
Notes:
(1)
Rent cover is our tenants' EBITDARM for either the
quarter or the 12 months divided by the rent for the same
period. It excludes "turnaround" and "immature" homes.
Immature homes being defined as homes that are newly opened or
undergoing major capital improvement requiring partial closure. The
rent cover calculation excludes eight properties that are defined
as turnaround or immature.
(2)
Tenant reporting is due within six weeks following
the quarter end, at the date of preparing this announcement 88% of
the operator reporting (as a percentage of the Group's contracted
income) had been received for the period to 31 December
2023.
(3) 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.
(4) Upon transferring the
operations of the seven homes previously leased to Silverline the
lease existing lease was temporarily amended to replace the fixed
rent with a variable rent, payable once the loan facility to
Melrose has been repaid.
(5)
Includes under
construction assets.
(6) Belmont, Careport,
Carlton Hall, Electus Healthcare, Holmes
Care, Maria Mallaband Countrywide Group, Minster and Croftwood
(both subsidiaries of Minster Care Group), Melrose (an affiliate of
Minster Care Group), NHS Cumbria, Optima, Prestige, Renaissance and
Welford.
FOR
FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP
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Via H/Advisors Maitland
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Andrew Cowley
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Mahesh Patel
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David Yaldron
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Jefferies International Limited
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+44 20 7029 8000
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Tom Yeadon
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tyeadon@jefferies.com
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Ollie Nott
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onott@jefferies.com
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Winterflood Securities Limited
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+44 20 3100 0000
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Neil Langford
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neil.langford@winterflood.com
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Joe Winkley
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joe.winkley@winterflood.com
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H/Advisors Maitland (Communications advisor)
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+44 7747 113 930
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James Benjamin
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impacthealth-maitland@h-advisors.global
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Rachel Cohen
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The Company's LEI is
213800AX3FHPMJL4IJ53.
Further information on Impact
Healthcare REIT is available at 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
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 or declared 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.