TIDMIHR
RNS Number : 1469B
Impact Healthcare REIT PLC
05 October 2020
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is not for publication, release or distribution in the United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
(other than the Republic of Ireland or the Netherlands), Canada,
Australia, Japan or the Republic of South Africa.
The following amendments have been made to the 'HALF YEAR RESULT
FOR THE PERIODED 30 JUNE 2020' announcement released on 12 August
2020 at 7 am (RNS number 8476V).
The EPRA 'topped-up' Net Initial Yield as at 30 June 2020 is
6.78% not 7.71% as previously announced.
The updated announcement, which includes the amendment on page
15, Key performance indicators, can be found at the following link
https://www.impactreit.uk/investors/reporting-centre/reports/
All other information remains unchanged.
The full updated announcement is shown below.
5 October 2020
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 2020
ROBUST AND DEFENSIVE BUSINESS MODEL AND PORTFOLIO PROVIDING
RESILIENT INCOME AND GROWTH
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 its half year results for the six months
ended 30 June 2020 and its Q2 2020 dividend.
Rupert Barclay, Chairman of Impact Healthcare REIT PLC,
commented:
" The Group works closely with all its tenants as they continue
to provide an essential service to the communities in which they
operate. We remain a long-term business and the Company's
healthcare portfolio continues to provide crucial social care
infrastructure supporting vulnerable elderly people across the UK.
We are confident that, despite the short-term uncertainty produced
by the pandemic, the fundamental drivers of our industry and
business remain strong.
The Company's business model remains robust and resilient as
demonstrated by the Group's 100% collection of rent due for the
year to date and we continue to be well positioned for the short
and longer term. We remain well capitalised, with a strong balance
sheet and have significant liquidity and headroom, which together
leave us well placed to continue to deliver value responsibly for
all our stakeholders: our tenants, residents in the care homes we
own, our tenants' care professionals and our shareholders."
Financial highlights
At At Year ended
30 June 2020 30 June 2019 31 December 2019
(unaudited) (unaudited) (audited)
Dividends declared
per share 3.15p 3.09p 6.17p
-------------- -------------- ------------------
Profit before GBP11.05m GBP10.94m GBP26.33m
tax
-------------- -------------- ------------------
Earnings per
share ("EPS") 3.46p 5.05p 10.37p
-------------- -------------- ------------------
EPRA EPS 3.62p 3.62p 6.95p
-------------- -------------- ------------------
Adjusted earnings
per share (1) 2.77p 2.58p 5.10p
-------------- -------------- ------------------
Contracted rent GBP29.5m GBP21.6m GBP23.1m
roll
-------------- -------------- ------------------
Portfolio valuation GBP346.0m GBP271.6m GBP318.8m
-------------- -------------- ------------------
Net asset value
("NAV") per share 107.17p 104.67p 106.81p
-------------- -------------- ------------------
Share price (2) 95.80p 110.00p 108.00p
-------------- -------------- ------------------
Loan to value
("LTV") ratio 18.1% 7.7% 6.8%
-------------- -------------- ------------------
NAV total return 3.25% 4.39% 9.46%
-------------- -------------- ------------------
Cash GBP71.0m GBP52.1m GBP47.8m
-------------- -------------- ------------------
Operational highlights
-- 100% collection of rent due for the year to date, underlining
the resilience of the Group's defensive business model.
-- In the period to 30 June 2020, we acquired eight properties
with 545 beds, committed to forward fund a further property with 94
beds and exchanged on a further nine properties with 649 beds. On
completion this will bring our total properties to 104 with 5,601
beds.
-- Adding one new tenant increasing the total number of tenants
to 10(4) in the period and exchanged contracts with leases to a
further new tenant, our 11(th 4) . All leases continue to be
inflation-linked with upwards only rent reviews.
-- Weighted average unexpired lease term ("WAULT") of 19.5 years
at 30 June 2020 (30 June 2019: 19.6 years).
-- Rent reviews for the period ended 30 June added GBP0.46
million to contracted rent, representing a 2.0% increase on the
associated portfolio.
-- Grew the contracted rent roll by 36.6% to GBP29.5 million (30 June 2019: GBP21.6 million).
-- GBP50m RCF secured with HSBC on 6 April 2020.
COVID-19
As levels of uncertainty created by the pandemic peaked at the
beginning of the second quarter, we knew we had built in a number
of buffers from earlier strategic decisions that had been taken.
These included:
-- a focus on careful tenant selection;
-- negotiating lease terms which are sustainable as they were
based on solid levels of initial rent cover; and
-- maintaining a conservative balance sheet with modest levels of debt.
We also knew that our tenants provide an essential service,
demand for which is not directly correlated with the strength or
weakness of the economy.
The key tests were whether our tenants were able to continue to
provide good quality care during an exceptionally challenging
period; and whether we continued to collect 100% of the rent due,
without putting undue stress on our tenants. There may be a second
wave, or other challenges which lie ahead, but we are confident
that lessons have been learned and pleased with how well the Group
and its tenants rose to these two tests.
Post balance sheet highlights
-- As a result of the Group's uninterrupted collection of
advance rent due for the year to date, the Board today declared the
Company's second-quarter interim dividend of 1.5725 pence per
share, for the period from 1 April 2020 to 30 June 2020. This is in
line with the aggregate total dividend target of 6.29 pence per
share (3) for the year ending 31 December 2020, which was
reaffirmed by the Board on 10 July 2020.
-- Following the acquisition of Red Hill in January 2020,
Minster transferred residents and staff to this home from The
Shrubbery, a 36-bed home nearby. The Shrubbery has now been sold at
a 24% uplift to its carrying value.
Appointment of Joint Corporate Broker
The Company is pleased to announce the appointment of RBC
Capital Markets as its Joint Corporate Broker alongside Winterflood
Securities Limited with immediate effect.
Results presentation
The Company presentation for investors and analysts will take
place via a webcast and conference call at 9.30am today.
For those who wish to access the live webcast, please register
here:
https://www.investis-live.com/impact-reit/5f1fe575a6d0961200125f51/sfse
For those who wish to access the live conference call, please
contact Maitland/AMO at impacthealth-maitland@maitland.co.uk or by
telephone on +44 (0) 20 7379 5151.
The recording of the webcast/conference call will also be made
available later in the day via the Company
website: https://www.impactreit.uk/investors/reporting-centre/presentations/
Notes
1 Adjusted earnings per share reflects underlying cash earnings
per share in the period. The adjustments made to EPS in arriving at
EPRA and Adjusted EPS are set out in note 7 of the Interim
Financial Statements.
2 As at 30 June 2020, 28 June 2019 and 31 December 2019 respectively.
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 Including Minster and Croftwood which are both part of the Minster Care Group.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners LLP via Maitland/AMO
Mahesh Patel
Andrew Cowley
Winterflood Securities Limited Tel: 020 3100 0000
Joe Winkley
Neil Langford
RBC Capital Markets Tel: 020 7653 4000
Rupert Walford
Matthew Coakes
Maitland/AMO (Communications Adviser) Tel: 020 7379 5151
James Benjamin Email: impacthealth-maitland@maitland.co.uk
The Company's LEI is 213800AX3FHPMJL4IJ53.
Further information on Impact Healthcare REIT is available at
www.impactreit.uk .
NOTES:
Impact Healthcare REIT plc is a real estate investment trust
("REIT") which aims to provide shareholders with an attractive
return, principally in the form of quarterly income distributions
and with the potential for capital and income growth, through
exposure to a diversified portfolio of UK healthcare real estate
opportunities, in particular care homes for the elderly. The
Group's investment policy is to acquire, renovate, extend and
redevelop high quality healthcare real estate assets in the UK and
lease those assets primarily to healthcare operators providing
residential healthcare services under full repairing and insuring
leases.
The Company has a progressive dividend policy with a target to
grow its annual aggregate dividend in line with the
inflation-linked rental uplifts received by the Group under the
terms of the rent review provisions contained in the Group's leases
in the prior financial year.
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.
CHAIRMAN'S STATEMENT
Our aim is to deliver a resilient and robust business model over
the long-term in partnership with our tenants, enabling them in
turn to concentrate on delivering good quality care in the homes we
own. The first half of 2020 put all business models to the test,
and we are pleased with how resilient ours has proven. There will
be further challenges ahead, but we continue to be well positioned
to deal with them responsibly.
We work closely with all our tenants as they continue to provide
an essential service to the communities in which they operate. We
are a long-term business and the Company's responsibly managed
healthcare portfolio continues to provide critical infrastructure
supporting vulnerable elderly people across the UK. We are
confident that the fundamental drivers of our industry and business
remain strong.
COVID-19
The impact of COVID-19 on the care sector and the Group's
tenants is discussed in the Covid-19 Overview and in the Investment
Manager's report.
In summary, as levels of uncertainty created by the pandemic
peaked at the beginning of the second quarter, we knew we had built
in a number of buffers from earlier strategic decisions that had
been taken. These included: a focus on careful tenant selection;
negotiating lease terms which are sustainable as they were based on
solid levels of initial rent cover; and maintaining a conservative
balance sheet with modest levels of debt. We also knew that our
tenants provide an essential service, demand for which is not
directly correlated with the strength or weakness of the
economy.
The key tests were whether our tenants were able to continue to
provide good quality care during an exceptionally challenging
period; and whether we continued to collect 100% of the rent due,
without putting undue stress on our tenants. There may be a second
wave, or other challenges which lie ahead, but we are confident
that lessons have been learned and pleased with how well our
tenants and the Group rose to these two tests.
Operational performance
Before the pandemic struck, we had exchanged contracts on a
number of acquisitions, which, once all have completed, will add 17
homes with 1,194 beds to the portfolio and increase our number of
tenants from nine to 11. We completed the acquisition of eight of
those homes in the first quarter; the completion of the acquisition
of nine homes from the Holmes Care Group ("Holmes") is subject to
Scottish regulatory approvals.
Our investment portfolio was independently valued at GBP346.0
million as at 30 June 2020, up from GBP271.6 million on 30 June
2019, a 27.4% increase. Over the same time period our contracted
rent roll grew by 36.6%, from GBP21.6 million on 30 June 2019, to
GBP29.5 million.
Asset management is one of our key value creation tools and is
starting to bear fruit. During the period, we delivered two new
units specifically designed to provide high quality care for people
suffering from dementia: a 30-bed unit in the grounds of Diamond
House in Leicester; and a 46-bed unit attached to Freeland House
outside Oxford. We also committed GBP6.1 million to forward fund
the development of a new 94-bed care home in Hartlepool in
partnership with Prestige, an existing tenant of the Group.
Our tenants
We have continued to diversify selectively the Group's tenant
base. Having started the year with nine tenants, we added one
during the period, Silverline, and Holmes will become our eleventh
tenant once that transaction completes.
This tenant diversification is an important part of our growth
strategy, enabling us to expand the business while spreading risk.
We choose financially resilient tenants who prioritise a positive
and safe environment for their residents, focusing on providing
good quality care and share in our vision of continued asset
improvement. The Board places a high priority on maintaining the
Group's assets to a high standard and pays close attention to our
tenants' programmes of repair and maintenance.
Financial performance
The unaudited NAV at 30 June 2020 was GBP341.8 million or
107.17p per share (30 June 2019 NAV GBP299.9 million or GBP104.67p
per share).
Unaudited earnings per share (EPS) for the period was 3.46p
(basic and diluted), down from 5.05p in the same period in 2019.
EPRA EPS was 3.62p (2019: 3.62p) and Adjusted EPS was 2.77p (2019:
2.58p).
Looking forward, our priorities continue to be to take a
disciplined approach to allocating capital as we responsibly and
sustainably grow the business and income, delivering attractive
risk adjusted returns, while being as efficient as possible in the
way we manage the business.
More information about our financial performance in the period
can be found below in the Investment Manager's Report.
Dividends and total return
At the beginning of 2019, the Company introduced a progressive
dividend policy. It seeks to grow its target dividend in line with
the inflation-linked rental uplifts received by the Group under the
terms of the rent review provisions contained in the Group's leases
in the prior financial year. 100% of the Group's leases are
inflation linked. During the year to 31 December 2019, the Group
received a total rent increase from RPI uplifts of GBP412,185.
Consequently, the Board set a target total dividend for the year
ending 31 December 2020 of 6.29 pence per share, a 1.94% increase
over the 6.17 pence per share paid for the year ending 31 December
2019.
So far in 2020 we have declared two dividends in relation to the
first two quarters of the year of 1.5725p each, delivering on our
target. This dividend continues to be well covered by our EPRA EPS
of 3.62p.
The NAV total return for the period was 3.3%, beneath the NAV
total return target we also introduced at the beginning of last
year of 9.0% per annum.
Financing
The Group had an active first half putting in place an
additional revolving credit facility with HSBC, which was signed in
April, and represented a vote of confidence at a challenging time.
It makes available a further GBP50 million on attractive terms at a
margin of 195 basis points over three-month LIBOR.
The Group now has GBP125 million of committed debt facilities.
Our drawn debt at 30 June 2020 was GBP76.1 million, giving us an
LTV of 18.1%. Our cash position on 30 June 2020 was GBP71.0 million
as we had drawn down sufficient funds to complete on the Holmes
acquisition, completion of which is expected soon. The financing
costs are offset by the fact that rent is due from Holmes backdated
to 1 May 2020. It is the Group's intention to continue to maintain
a conservative balance sheet.
Corporate governance
The Company has a strong and independent board, comprising me as
Chairman and four other non-executive directors. The Board is
committed to achieving high standards of corporate governance.
Investment Manager
Impact Health Partners LLP is our Investment Manager. The
Manager is working hard on the Group's behalf and brought
acquisitions to the Board which have continued to diversify the
Group successfully during the first half of 2020.
During the pandemic, the strength of the relationship the
Investment Manager has developed with the Group's tenants came to
the fore. The flow of detailed and current information these
relationships produced gave us comfort we knew where we stood
during the darkest period of the pandemic and continues to produce
some constructive ideas on how we can help our tenants.
Outlook and summary
The Group works closely with all its tenants as they continue to
provide an essential service to the communities in which they
operate. We remain a long-term business and the Company's
sustainable healthcare portfolio continues to provide crucial
infrastructure supporting vulnerable elderly people across the UK.
We are confident that, despite the short-term uncertainty produced
by the pandemic, the fundamental drivers of our industry and
business remain strong.
The Company's business model remains robust and resilient as
demonstrated by the Group's 100% collection of rent due for the
year to date and we continue to be well positioned for the short
and longer term. We remain well capitalised, with a strong balance
sheet, and significant liquidity and headroom, which will leave us
well placed to continue to responsibly deliver value to our
tenants, residents in the care homes we own, our tenants'
healthcare professionals and shareholders, that is sustainable over
the long term.
Rupert Barclay
Chairman
12 August 2020
COVID-19 OVERVIEW
Over the six-month period being reported on, COVID-19 evolved
from a localised outbreak into a global pandemic declared by the
World Health Organisation on 11 March 2020. The Group has
demonstrated its resilience during the exceptionally high levels of
uncertainty created by the pandemic and remains well and
defensively positioned.
What happened?
The first death in the UK attributed to COVID-19 happened in an
English hospital on 2 March. Hospital deaths in England and Wales
peaked 37 days later on 8 April at 1,002. The first care home death
from COVID-19 happened on 13 March, and daily care home deaths from
COVID-19 peaked 35 days later at 434. The death rate then began to
fall, with deaths in care homes attributed to COVID-19 in England
and Wales decreasing from a daily average of 292 in April, to 158
in May, 37 in June, and 10 during the first 24 days of July.
Notifications about deaths in care homes in England must be sent
to the Care Quality Commission without delay, which means it has
been able to build the most timely picture of care home deaths.
According to CQC data, up to 17 July 14,003 residents had died in
English care homes from COVID-19. In parallel Public Health England
is responsible for tracking outbreaks of infectious diseases, with
an outbreak defined as two or more people in the same location
having the disease. By early July, PHE data show that 43% of care
homes in England had an outbreak of COVID-19.
The other constituent parts of the United Kingdom record their
data on different bases. The Scottish government estimates that in
the year to 13 July, 4,193 people had died of COVID-19 in Scotland
and that 1,950 of those deaths occurred in care homes, 47% of the
total. This is significantly higher than in England and Wales,
where 30% of total deaths occurred in care homes. Northern Ireland,
where the Group does not currently have any homes, had suffered 844
COVID-19 deaths in the year to 10 July.
COVID-19 has affected the elderly far more than the young. Of
the 50,505 people recorded by the ONS as dying from COVID-19 in
England and Wales in the year to 10 July, 84% were over 70 and 22%
were over 90. COVID-19 sadly accelerated many of these deaths,
which might explain why since the end of May deaths from other
causes have been below the five-year average.
How our tenants responded
Our tenants have been through three phases of the pandemic.
Phase one , in early March, they began preparing for what was to
come. They put in place protocols to halt visits to the homes,
typically before government guidance was published, increased
stockpiles of PPE and looked at measures to ensure they would have
sufficient staff available to continue to provide care, such as
regular temperature screenings, emotional support and resilience
training, food deliveries to carers' homes and providing
accommodation in or nearby the homes. It is in this phase that the
NHS was most active in seeking to block beds to create hospital
capacity. Several tenants were quick to raise concerns on whether
it was wise to accept these contracts, as the people being
discharged from hospital had not been tested for the virus. In
practice, most tenants had limited capacity to offer block
contracts on the scale the NHS was seeking, because 62% of the
Group's homes had occupancy substantially better than 90% in late
March.
Building stockpiles of PPE was expensive. Tenants' expenditure
on medical supplies and cleaning almost doubled between March and
April, but has since reduced reflecting normalised pricing for PPE
as it becomes more readily available. Staffing pressures peaked in
the week of lockdown (23 March), when many staff were forced to
self-isolate for one or two weeks. This led to a spike in the use
of agency staff to ensure enough staff were available to provide
care, but this was soon brought under control as permanent staff
returned to work.
Phase two was the hardest period for our tenants with the death
rate peaking, homes in lockdown to visitors and new admissions, and
limited testing available to confirm suspected cases of COVID-19.
The Investment Manager stayed in very close contact with the
Group's tenants during this period and was impressed by tenants'
success in maintaining staff morale during such a challenging
period.
Phase three started as it became clear the death rate was
returning to more normal levels. During the course of June, the
Group's tenants began focussing on measures required to reopen
carefully homes to new admissions, whilst ensuring the safety of
existing residents and staff. In this period, testing did become
widely available in care homes for both residents and staff. We are
pleased to confirm that as at the end of July there are no
residents with COVID-19 in any of the Group's homes.
Our tenants' number of occupied beds (not including Holmes) at
the end of June were down 8% from their level at the beginning of
March, but have since started to recover.
How the Group has assisted its tenants
From the beginning of March, the Investment Manager has been in
constant communication with all the tenants. In addition to the
detailed monthly operating and financial data the Investment
Manager receives from all tenants at the end of each quarter, the
Group asked its tenants to provide weekly occupancy data for the
duration of the pandemic, along with a situation report on how the
pandemic is affecting their operations. Where appropriate, the
Investment Manager has shared information amongst the tenants and
ideas on how to best manage challenges caused by the pandemic and
measures being put in place as the UK starts to recover from
it.
In April, as pressures on PPE supplies mounted and wholesalers
were only responsive to large orders focussed on the NHS, the
Investment Manager placed a large order for masks and then
allocated to tenants as required.
In June, as thoughts turned to measures to enable the careful
reopening of homes to new admissions and visitors, the Group agreed
to fund the purchase and installation of thermal scanners at all
its homes. The scanners will support tenants' existing infection
control procedures through enabling the remote reading of the body
temperature of all staff and visitors who are entering the
building.
INVESTMENT MANAGER'S REPORT
A great deal of thought has been put into developing and
implementing the Group's strategy and business model. One of the
main aims of that strategy is to have a resilient and defensive
business, which can deliver in good times as well as bad. The first
two months of the year were a good time and the next four months
were challenging. Notwithstanding the challenges, the Group
continued to receive 100% of its rent due and to deliver on its
dividend target, demonstrating its resilience.
Investment activity
During the first quarter of the year, the Group committed
GBP68.5 million into new acquisitions, all of which comply with the
Group's strict investment criteria and have risk/return profiles
which are consistent with the Group's existing portfolio. During
March, further acquisitions were put on hold until the level of
uncertainty caused by the pandemic had decreased.
In aggregate, the Group exchanged contracts to acquire a further
17 properties with 1,194 beds, a 27.9% increase on the number of
beds at 31 December 2019 (4,274). The average yield on these
transactions is 7.5%. These investments, combined with rent
increases received during the period, helped to grow our contracted
rent roll from GBP23.1 million on 31 December 2019, to GBP29.5
million on 30 June 2020, a 27.7% increase.
The acquisitions further diversified the portfolio
geographically and will add two new tenants to the Group:
Silverline and Holmes. All our new leases have minimum fixed terms
of 25 years, no tenant break rights, options to extend and annual
rent adjustments at RPI, with either a floor of 2% and a cap of 4%
or a floor of 1% and a cap of 5%.
At 30 June, contracts to acquire nine homes operated by Holmes
which exchanged in March, remain outstanding with completion
subject to regulatory approvals by the Care Inspectorate in
Scotland. Rent on that acquisition is due from 1 May 2020,
regardless of when completion does take place.
Asset management
Carefully considered and well delivered asset management has the
potential to create value for our shareholders and tenants, while
also offering a high quality environment for new and existing
residents at our homes. In all our asset management opportunities
we are adding beds and improving existing homes. We already own the
land and our tenants have central services (kitchens, laundry,
staff offices) on site so the marginal cost of adding beds is lower
than with a new build and the risks easier to assess and
mitigate.
In the first half of the year we completed two large new units
attached to existing homes, which will be used to deliver high
quality care for people with dementia. A 30-bed unit at Diamond
House in Leicester opened in February and has already achieved 43%
occupancy. A 46-bed unit at Freeland House near Oxford received
regulatory approval to open at the end of the half-year. In
addition, we have committed to forward fund a new, 94-bed care home
in Hartlepool at a total cost of GBP6.1 million. The home is being
built and will be operated by Prestige, one of the Group's existing
tenants, and will deliver a yield of 7.8% on completion.
Construction work was interrupted for nine weeks during the
pandemic, but has now resumed.
In addition to this capital investment aimed at increasing
capacity and repositioning homes, under the terms of the leases our
tenants are fully responsible for keeping the Group's buildings in
good repair through regular repair and maintenance programmes. We
monitor these programmes carefully, to ensure they are being
effectively implemented.
The portfolio
As a result of the acquisitions and asset management activity
described above, at 30 June 2020 the portfolio comprised 94
properties, with just over 4,800 beds (approximately 1% of the beds
available in the UK), and will grow to 104 properties with over
5,600 beds on completion of the Holmes transaction and the forward
funded development of Hartlepool.
On average, occupancy across the portfolio fell by 8% between
the first week of March, when the first deaths from COVID-19 were
recorded in the UK, to the end of June. Occupancy has since
stabilised and is starting to recover. The portfolio's rent cover
has reduced from 1.8 times in the 12 months to 31 December 2019, to
a still healthy 1.7 times in the six months to 30 June 2020.
One reason why rent cover has held up well, despite falls in
occupancy, are substantial fee increases across the portfolio: the
average weekly fee charged by our tenants for providing care in
April 2020 was 12.5% higher than in April 2019. This is partly
driven by good-quality new acquisitions but also by strong level of
underlying fees growth.
Solid levels of rent cover have enabled our tenants to pay the
rent due in full without undue stress. 79% of our rent is payable
quarterly in advance and 21% monthly in advance. For the year to
date we have collected 100% of the rent due.
Valuation
The portfolio is independently valued by Cushman & Wakefield
each quarter, in accordance with the RICS Valuation - Professional
Standard (the "Red Book").
As at 30 June 2020, the portfolio was valued at GBP346.0
million, an increase of GBP27.2 million from the valuation of
GBP318.8 million at 31 December 2019. The components of this
valuation increase were as follows:
-- acquisitions: GBP22.6 million;
-- acquisition costs capitalised: GBP0.8 million
-- capital improvements: GBP1.0 million; and
-- valuation uplift: GBP2.8 million.
The valuation uplift was largely driven by rent increases
received during the period.
Financial results
Total net rental income recognised for the period was GBP14.8
million (H1 2019: GBP10.8 million). Under IFRS, the Group must
recognise some rent in advance of receipt, reflecting the minimum
2% uplift in rents over the term of the leases, on a straight line
basis. Cash rental income received in the period was GBP11.6
million (H1 2019: GBP8.6 million).
Administrative and other expenses totalled GBP2.4 million (H1
2019: GBP2.1 million). Net finance costs were GBP0.9 million (H1
2019: GBP1.2 million). The change in fair value of investment
properties was (GBP0.4) million (H1 2019: GBP3.4 million),
contributing to profit before tax of GBP11.1 million (H1 2019: GBP
10.9 million).
Earnings per share ("EPS") for the period was 3.46p (H1 2019:
5.05p) and EPRA EPS was 3.62p (H1 2019: 3.62p).
All the EPS figures listed above are on both a basic and diluted
basis. More information on the calculation of EPS can be found in
Note 7 to the financial statements.
Dividends
To ensure the Company benefits from the full exemption from tax
on rental income afforded by the UK REIT regime, it must distribute
at least 90% of the qualifying profits each year from the Group's
qualifying rental business.
The Company has declared two quarterly dividends of 1.5725p each
in respect of the period in line with our target. Both dividends
were Property Income Distributions. The details of these dividends
were as follows:
Quarter to Declared Paid Cash cost GBPm
31 March 2020 7 May 2020 12 June 2020 5.0
---------------- -------------- ---------------
30 June 2020 12 August 2020 To be paid 5.0
---------------- -------------- ---------------
Total 10.0
---------------
Earnings per share cover for the total dividend is discussed in
the Chairman's statement.
Financing
We continued to put in place the building blocks to help support
the Group's continued development. A key milestone was achieved on
6 April 2020, when we announced a new GBP50 million revolving
credit facility signed with HSBC at a margin of 195 basis points
over three-month LIBOR. GBP34.5 million can be immediately drawn
down under the HSBC facility, and GBP15.5 million is conditional on
security registration of Scottish assets and the completion of
transactions which have exchanged.
We continue to take a conservative approach to managing the
Group's balance sheet. At 30 June 2020 drawn debt was GBP76.1
million, giving an LTV of 18.1%. However, this debt is largely
offset by our cash position at 30 June of GBP71.0 million. Prior to
the end of the period we drew down the money required to complete
Holmes acquisition (GBP47.5 million), as completion could take
place at short notice and interest charges on the drawn debt are
significantly less than the rent due from Holmes since 1 May
2020.
In addition to the cash on the balance sheet we have GBP48.9
million of undrawn debt facilities, leaving headroom of GBP58.1
million once all committed capital for completion of exchanged
acquisitions, deferred payments and capital expenditure have been
financed.
Post Balance sheet event
We have divided our portfolio into core, non-core and value add
assets. After the end of the first half of 2020 we successfully
sold the Shrubbery, a non-core asset. In January 2020 we had bought
Red Hill, a 90-bed home in Worcester, near the Shrubbery, with the
aim of moving the residents and staff from the Shrubbery to Red
Hill. Once this was smoothly accomplished by Minster, our tenant,
the Shrubbery was put up for sale. In August we sold the Shrubbery
for a 24% uplift to its most recent investment valuation, and a 29%
increase on its purchase price.
Acquisition pipeline
When we paused new acquisitions in March, we had a strong
pipeline of potential acquisitions. As the level of uncertainty
created by the pandemic starts to reduce, we will review when and
how to re-engage with potential acquisitions, while at all times
exercising robust capital discipline in order to deliver value at
the point of acquisition or investment.
Impact Health Partners LLP
Investment Manager
12 August 2020
MARKET DRIVERS
A number of drivers influence demand for the care of older
people. Taken together, they make it an attractive opportunity for
well-capitalised asset owners working in partnership with
well-managed operators, who are committed to providing high
standards of care.
1. Growing demand
People aged over 85 are the fastest growing part of the UK
population and make up the core client group for care homes.
According to the Office for National Statistics, the number of
people over 85 years old in the UK is forecast almost to double by
2043. While the impact of the COVID-19 pandemic has reduced care
home occupancy in the short term, demand for elderly care is
forecast to grow over the longer term.
2. Capacity is not rising in line with demand
Over the past 10 years, the number of available beds has not
increased. Underlying this apparent stability there have been a
number of changes in the structure of the market. Independent
operators, both for profit and not for profit, have continued to
take market share from homes owned and operated by the public
sector. At the same time, the number of independent sector homes
has shrunk by 10% over the past 10 years as older and smaller
buildings are withdrawn from the market to be replaced by more
modern, larger homes. The average size of an independent care home
has grown from 35 beds to 42 beds in that period.
3. An increasingly fragmented market
Over recent years the market has seen deconsolidation at its top
end. The market share of the 10 largest independent operators has
declined from a peak of 27% in 2006 to 21% in 2019. This reflects
diseconomies of scale in the care business. For the larger
operators, the potential benefits of access to capital at lower
cost and purchasing power for consumables such as utilities and
food tend to be more than cancelled out by higher group overheads
and the lack of economies of scale in pay rates for care staff,
which are operators' largest expenditure.
4. Dementia
The Alzheimer's Society estimates that in 2019 there were
883,100 people in the UK with dementia, of whom 510,600 were
suffering from a severe form of the condition. Projections by the
Care Policy and Evaluation Centre at the London School of Economics
suggest that the number of people with dementia could increase by
80% by 2040.
5. Funding
In 2019 LaingBuisson estimates that GBP16.5 billion was spent on
long-term care for elderly people in care homes. Approximately
equal numbers of residents are now paid for either purely privately
or by a combination of local authorities and the NHS. During the
pandemic, the government made an additional GBP3.2 billion
available to local authorities to fund adult social care, and made
a grant of GBP600 million to fund infection control measures,
primarily in care homes. As a result of the pandemic, the
government considering structural reforms of the elderly care
sector which may result in substantial increases in funding.
6. Fees rising faster than inflation
As a result of increasing demand, limited new capacity and a
shift from government provision to independent providers, the
independent sector has seen sustained and above-inflation growth.
Over the past two decades average weekly fees charged by operators
have grown on average by 3.7% per annum. Over the same time period,
RPI has averaged 2.8% per annum. This gives us confidence that the
RPI linkage in our leases is sustainable.
KEY PERFORMANCE INDICATORS
The Group uses the following measures to assess its strategic
progress.
1. Net Asset Total Return ("NATR")
3.25% for the period to 30 June 2020 (-26.0% on 2019: 4.39%)
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
3.145p per share for the period to 30 June 2020 (+1.8% on 2019:
3.09p)
Definition: Dividends declared in relation to the period.
3. EPRA earnings per share
3.62p per share for the period to 30 June 2020 (0.0% on 2019:
3.62p)
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")
6.78% at 30 June 2020 (+1.8% on 2019: 6.66%)
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 6.5% to reflect a buyer's costs and
adjusted for the expiration of rent-free periods or other unexpired
lease incentives.
5. NAV per share
107.17p per share at 30 June 2020 (+0.3% on 2019: 106.81p)
Definition: Net asset value based on the properties and other
investment interests at fair value.
6. Gross Loan to Value ("LTV")
18.1% per share as at 30 June 2020 (+166.2% on 2019: 6.8%)
Definition: The proportion of our gross asset value that is
funded by borrowings.
7. Weighted Average Unexpired Lease Term ("WAULT")
19.5yrs as at 30 June 2020 (-1.0% on 2019: 19.7yrs)
Definition: The average unexpired lease term of the property
portfolio, weighted by annual passing rents.
8. Total Expense Ratio ("TER")
1.42% as at 30 June 2020 (-6.0% on 2019: 1.51%)
Definition: Total recurring administration costs as a percentage
of average net asset value throughout the period. EPRA cost ratio
was 16.4% (down from 19.0% in H1'19).
PORTFOLIO MANAGEMENT
Our aim is to continue carefully building a portfolio of
attractive UK healthcare assets, principally residential care
properties, with an appropriate balance of high-quality core assets
that generate attractive, secure, long-term income; and value add
assets with potential to create further value for shareholders and
our wider stakeholders. We continuously assess the overall balance
of our portfolio, identify the right asset management and capital
recycling opportunities. We categorise each of our assets as
follows:
Core
These assets are the primary contributors to our long-term,
stable income.
-- Good quality buildings with a useful life greater than the duration of the lease
-- Invested to an appropriate standard
-- Stable trading, underpinning a sustainable level of rent cover
Value add
Value add assets are candidates for asset management
initiatives.
-- Present opportunities to deploy capital to enhance the asset and its performance
-- May be a smaller home, have a low level of en-suite bathrooms
or have other elements of functional obsolescence
-- Value uplift through enabling the tenant to offer a new
service, such as dementia and/or targeting private residents
Non-core
Non-core assets may be candidates for sale and are likely to
have been acquired as part of larger portfolios.
-- Limited lifespan homes with a high degree of functional obsolescence
-- Potential for higher alternative use value
-- Could be geographically isolated
Portfolio
At 30 June 2020, the Group owned the homes listed in the table
below:
Acquisition Capital
Tenant & Home Region Date(1) Beds(2) Projects(3)
Careport
Briardene North East Aug 2018 60
------------------ -------------- --------- --------------
Derwent North East Aug 2019 45
------------------ -------------- --------- --------------
Holly Lodge North East Nov 2018 41
------------------ -------------- --------- --------------
Kingston Court North West Jun 2019 75
------------------ -------------- --------- --------------
Old Prebendal House and
Court South East Jun 2019 39
------------------ -------------- --------- --------------
Sovereign Lodge and Court(4) North East Aug 2018 60
------------------ -------------- --------- --------------
Yorkshire
The Grove & The Humber Sept 2018 55
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP26.85m
Croftwood Care*
Ancliffe North West 40
---------------------------------- --------- --------------
Astbury Lodge North West 41
---------------------------------- --------- --------------
Croftwood North West 47
---------------------------------- --------- --------------
Crossways North West 39
---------------------------------- --------- --------------
Elm House North West 40
---------------------------------- --------- --------------
Florence Grogan North West 40
---------------------------------- --------- --------------
Garswood North West 53
---------------------------------- --------- --------------
Gleavewood North West 30
---------------------------------- --------- --------------
Golborne House North West 40
---------------------------------- --------- --------------
Greenacres North West 40
---------------------------------- --------- --------------
Hourigan North West 40
---------------------------------- --------- --------------
Ingersley Court North West 46
---------------------------------- --------- --------------
Lakelands North West 40
---------------------------------- --------- --------------
Leycester House North West 40
---------------------------------- --------- --------------
Loxley Hall North West 40 +5
---------------------------------- --------- --------------
Lyndhurst North West 40
---------------------------------- --------- --------------
New Milton House North West 39
---------------------------------- --------- --------------
Parklands North West 40
---------------------------------- --------- --------------
The Cedars North West 27
---------------------------------- --------- --------------
The Elms North West 41
---------------------------------- --------- --------------
The Hawthorns North West 39
---------------------------------- --------- --------------
The Laurels North West 40
---------------------------------- --------- --------------
Thorley North West 40
---------------------------------- --------- --------------
Turnpike Court North West 53
---------------------------------- --------- --------------
Wealstone North West 42
---------------------------------- --------- --------------
West Haven North West 52
---------------------------------- --------- --------------
Whetstone Hey North West 42
---------------------------------- --------- --------------
Value at 30 June 2020: GBP65.91m
Maria Mallaband and Countrywide Group (MMCG)
Yorkshire
Belmont House & The Humber May 2019 106
------------------ -------------- --------- --------------
Yorkshire
Croft House & The Humber Mar 2020 75
------------------ -------------- --------- --------------
Yorkshire
Heeley Bank & The Humber Mar 2020 68
------------------ -------------- --------- --------------
Yorkshire
Howgate House & The Humber Mar 2020 67
------------------ -------------- --------- --------------
Yorkshire
Manor Park & The Humber Mar 2020 63
------------------ -------------- --------- --------------
Park springs Scotland May 2019 96
------------------ -------------- --------- --------------
Thorntree Mews Scotland May 2019 40
------------------ -------------- --------- --------------
Wallace View Scotland May 2019 60
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP35.05m
Holmes Care Group(5)
Almond Court Scotland Mar 2020 42
------------------ -------------- --------- --------------
Almond View Scotland Mar 2020 78
------------------ -------------- --------- --------------
Bankview (&BDCC) Scotland Mar 2020 65
------------------ -------------- --------- --------------
Beechwood Scotland Mar 2020 90
------------------ -------------- --------- --------------
Craigielea Scotland Mar 2020 85
------------------ -------------- --------- --------------
Grandholm Scotland Mar 2020 79
------------------ -------------- --------- --------------
Heatherfield Scotland Mar 2020 60
------------------ -------------- --------- --------------
Larkfield View Scotland Mar 2020 90
------------------ -------------- --------- --------------
Three Towns Scotland Mar 2020 60
------------------ -------------- --------- --------------
Minster Care*
------------------ -------------- --------- --------------
Abbeywell West Midlands 45
---------------------------------- --------- --------------
Amberley South West 30
---------------------------------- --------- --------------
Yorkshire
Ashgrove & The Humber 56
---------------------------------- --------- --------------
Yorkshire
Attlee Court & The Humber 68
---------------------------------- --------- --------------
Broadgate East Midlands 40
---------------------------------- --------- --------------
Carnbroe Scotland May 2018 74
------------------ -------------- --------- --------------
Craigend Scotland 48
---------------------------------- --------- --------------
Diamond House East Midlands 44
---------------------------------- --------- --------------
Duncote Hall East Midlands 40
---------------------------------- --------- --------------
Duncote The Lakes East Midlands 47
---------------------------------- --------- --------------
Yorkshire
Emmanuel & The Humber 44
---------------------------------- --------- --------------
Eryl Fryn Wales 31
---------------------------------- --------- --------------
Falcon East Midlands 46
---------------------------------- --------- --------------
Freeland South East 65
---------------------------------- --------- --------------
Gray's Court East of England 87
---------------------------------- --------- --------------
Grenville East of England May 2018 64
------------------ -------------- --------- --------------
Yorkshire
Hamshaw Court & The Humber 45
---------------------------------- --------- --------------
Ideal West Midlands 50
---------------------------------- --------- --------------
Karam Court West Midlands 47
---------------------------------- --------- --------------
Littleport Grange East of England 80
---------------------------------- --------- --------------
Meadows & Haywain East of England 65
---------------------------------- --------- --------------
Mowbray West Midlands 39
---------------------------------- --------- --------------
Yorkshire
Mulberry Manor & The Humber 49
---------------------------------- --------- --------------
Rydal North East 60
---------------------------------- --------- --------------
Saffron East Midlands June 2017 48
------------------ -------------- --------- --------------
Shrubbery West Midlands 36
---------------------------------- --------- --------------
Sovereign West Midlands Sept 2018 60
------------------ -------------- --------- --------------
Stansty House Wales 74
---------------------------------- --------- --------------
Three Elms North West 60
---------------------------------- --------- --------------
Waterside West Midlands 47
---------------------------------- --------- --------------
Woodlands North West 40
---------------------------------- --------- --------------
Wordsley West Midlands 41
---------------------------------- --------- --------------
Value at 30 June 2020: GBP130.29m
-------------- --------- --------------
NCUH NHS Trust
Riever House North West Jun 2019 -
------------------ -------------- --------- --------------
Surgical Unit North West Jun 2019 -
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP4.41m
Optima
Barham East of England Aug 2019 45
------------------ -------------- --------- --------------
Baylham East of England Aug 2019 55
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP13.95m
Prestige Group
------------------ -------------- --------- --------------
Hartlepool(6) North East Mar 2020 - +94
------------------ -------------- --------- --------------
Parkville 1 &2 North East Mar 2018 94
------------------ -------------- --------- --------------
Roseville North East Mar 2018 103
------------------ -------------- --------- --------------
Sand Banks North East Oct 2018 77
------------------ -------------- --------- --------------
Yew Tree North East Jan 2019 76
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP31.42m
-------------- --------- --------------
Renaissance Care
Croftbank Scotland Nov 2018 68
------------------ -------------- --------- --------------
Rosepark Scotland Nov 2018 60
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP12.47m
-------------- --------- --------------
Silverline
Yorkshire
Laurel Bank & The Humber Mar 2020 63
------------------ -------------- --------- --------------
Yorkshire
The Beeches & The Humber Mar 2020 60
------------------ -------------- --------- --------------
Yorkshire
Willow Bank & The Humber Mar 2020 59
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP7.96m
Welford
------------------ -------------- --------- --------------
Argentum Lodge South West Sept 2019 56
------------------ -------------- --------- --------------
Yorkshire
Birchlands & The Humber Jun 2019 54
------------------ -------------- --------- --------------
Fairview Court & House(4) South West Mar 2018 73
------------------ -------------- --------- --------------
Holmesley South West Jun 2019 55
------------------ -------------- --------- --------------
Value at 30 June 2020: GBP23.79m
-------------- --------- --------------
1 May 2017 unless stated
2 Number of registered beds
3 Capital improvement bed additions under development
4 Treated as two properties
5 At the period end these properties had exchanged but not yet
completed
6 This property is a forward-funded development that is
currently under construction
7 This property was closed during the period and sold
subsequently
* Minster and Croftwood are both part of Minster Care Group
PRINCIPAL RISKS AND UNCERTAINTIES
The board has been regularly evaluating the performance of and
risks to the business arising from the ongoing effects of the
COVID-19 pandemic and the wider operating environment. The pandemic
is not over and its outcome remains uncertain. The principal risks
and uncertainties as outlined on pages 24-28 of our 2019 Annual
report are reconfirmed with the following updates from our
evaluation in the period.
A key element of the board's operational processes is effective
risk management. The Group reviews the level of risk and the
Group's risk appetite annually with reporting against this
framework assessed quarterly. Risk is inherent in any business, and
the board seeks to ensure that risks are minimised while delivering
progressive returns for shareholders.
The risks as outlined in the 2019 Annual report are reconfirmed
with the following updates from our evaluation in the period.
-- Pandemics: The effects of COVID-19 have been included in our
COVID-19 overview and in the Investment Manager's report. While the
number of cases has reduced from its peak in April 2020 and testing
has become more widely available, there remains a risk of a second
wave. Our care homes have enhanced their infection control measures
to prevent infection in homes and identify and contain cases should
they arise.
-- Changes to government policy (including Brexit): The
heightened focus on adult social care, and in particular care
homes, as a result of COVID-19, has increased the probability of
changes to future government policy and a demand for increased
funding. It remains too early to assess the incremental risk and
opportunity that this may bring. The outcome of Brexit continues to
remain unclear and the manager continues to engage with tenants on
staff planning in the event of a hard Brexit.
-- Adverse change in investment opportunities: Investment
activity largely ceased in the care home market during the early
stages of COVID-19. Investment activity returned from the second
half of Q2 onwards as confidence was restored in the long-term
outlook based on an understanding of how individual homes and
tenants have performed over this period.
-- General economic conditions: There is continued uncertainty
about the scale and duration of the economic downturn caused by the
pandemic. Care for older people remains an important and increasing
focus, and the market remains relatively uncorrelated to broader
economic conditions.
-- Weakening care market: Whilst the pandemic has resulted in a
reduction in occupancy in the short term, the need for well run and
safe environments for older people to be cared for has been
highlighted. The opportunity for properly funded care that aligns
with this need may improve as a result of this focus.
-- Default of one or more tenants and Ability to meet our debt
financing obligations: Our tenants have shown themselves to be
resilient in their ability to operate in the challenging
environment this year. Their rent cover was set at a level to help
them sustain fluctuations in income and maintain their own business
operations and access to testing and PPE has increased their
ability to identify and protect their residents and contain any
outbreaks as they arise. However, there remains a heightened risk
that a continuation and/or second wave of infections could lead to
default of one or more tenants. This in turn would result in a
financing default.
-- Underinvestment by tenants in repair and maintenance of our
assets: There is a heightened risk that repair and maintenance
programmes fall behind as our tenants are closely managing their
cash flow and avoiding non-essential contractors on site. We will
continue to mitigate this risk by working closely with our tenants
to schedule work on a three-year cycle.
The approach taken by the board is rigorous and thorough. It
ensures that the assessment of risk remains appropriate and
relevant.
As regards the six months to 31 December 2020, the course of the
pandemic may cause further changes to the probability and impact of
these principal risks. These have all been considered as part of
our going concern assessment.
Rupert Barclay Chairman
12 August 2020
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 as adopted by the European Union and that
the operating and financial review includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure
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 2019 Annual report as disclosed in
note 21.
Shareholder information is as disclosed on the Impact Healthcare
REIT plc website.
For and on behalf of the board
Rupert Barclay Chairman
12 August 2020
Condensed consolidated statement of comprehensive income
Six months Six months
ended ended Year ended
30 June 31 December
2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
---------------------------- ------ ------------- -------------- --------------
Gross rental income 5 14,846 10,816 23,980
Insurance/service charge
income 5 164 111 252
Insurance/service charge
expense 5 (166) (113) (254)
Net rental Income 14,844 10,814 23,978
Administrative and other
expenses (2,429) (2,051) (4,589)
---------------------------- ------ ------------- -------------- --------------
Operating profit before
changes in fair value
of investment properties 12,415 8,763 19,389
Changes in fair value
of investment properties 9 (430) 3,416 9,070
---------------------------- ------ ------------- -------------- --------------
Operating profit 11,985 12,179 28,459
Finance income 47 35 110
Finance expense (981) (1,268) (2,237)
---------------------------- ------ ------------- -------------- --------------
Profit before tax 11,051 10,946 26,332
Tax charge on profit
for the period/year 6 - - -
---------------------------- ------ ------------- -------------- --------------
Profit and comprehensive
income (attributable
to shareholders) 11,051 10,946 26,332
Earnings per share -
basic and diluted (pence) 7 3.46p 5.05p 10.37p
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 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ -------------------- ------------ -------------
Non-current assets
Investment property 9 334,541 265,976 310,542
Interest rate derivatives 11 21 157 94
Trade and other receivables 13,171 7,459 10,017
------------------------------- ------ -------------------- ------------ -------------
Total non-current assets 347,733 273,592 320,653
Current assets
Trade and other receivables 1,112 1,536 554
Cash and cash equivalents 71,037 52,147 47,790
------------------------------- ------ -------------------- ------------ -------------
Total current assets 72,149 53,683 48,344
Total assets 419,882 327,275 368,997
------------------------------- ------ -------------------- ------------ -------------
Current liabilities
Trade and other payables (2,436) (2,255) (3,086)
Total current liabilities (2,436) (2,255) (3,086)
Non-current liabilities
Bank borrowings 10 (73,908) (23,272) (23,461)
Trade and other payables (1,719) (1,818) (1,768)
------------------------------- ------ -------------------- ------------ -------------
Total non-current liabilities (75,627) (25,090) (25,229)
Total liabilities (78,063) (27,345) (28,315)
------------------------------- ------ -------------------- ------------ -------------
Total net assets 341,819 299,930 340,682
------------------------------- ------ -------------------- ------------ -------------
Equity
Share capital 12 3,189 2,865 3,189
Share premium reserve 13 271,362 237,459 271,341
Capital reduction reserve 24,077 35,800 24,077
Retained earnings 43,191 23,806 42,075
------------------------------- ------ -------------------- ------------ -------------
Total equity 341,819 299,930 340,682
------------------------------- ------ -------------------- ------------ -------------
Net Asset Value per
ordinary share (pence) 15 107.17p 104.67p 106.81p
Condensed consolidated statement of cash flows
Six months
ended Six months Year ended
30 June ended 31 December
2020 30 June 2019 2019
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ------------ -------------- -------------
Cash flows from operating
activities
Profit for the period/year
(attributable to equity
shareholders) 11,051 10,946 26,332
Finance income (47) (35) (110)
Finance expense 981 1,268 2,237
Changes in fair value
of investment properties 9 430 (3,416) (9,070)
Net cash flow before
working capital changes 12,415 8,763 19,389
Working capital changes
Increase in trade and
other receivables (3,712) (3,160) (4,736)
Increase in trade and
other payables (554) (810) 288
------------------------------- ------ ------------ -------------- -------------
Net cash flow from operating
activities 8,149 4,793 14,941
------------------------------- ------ ------------ -------------- -------------
Investing activities
Purchase of investment
properties 9 (22,556) (36,899) (69,969)
Acquisition costs capitalised 9 (807) (2,724) (3,447)
Capital improvements 9 (1,266) (3,131) (8,226)
Interest received 47 35 110
------------------------------- ------ ------------ -------------- -------------
Net cash flow from investing
activities (24,582) (42,719) (81,532)
------------------------------- ------ ------------ -------------- -------------
Financing activities
Proceeds from issue of
ordinary share capital 12 - 100,000 135,000
Issue costs of ordinary
Share Capital 13 21 (2,050) (2,844)
Bank borrowings drawn 10 51,002 35,969 35,971
Bank borrowings repaid 10 - (36,844) (36,844)
Loan arrangement fees
paid (828) (751) (791)
Loan commitment fees
paid (147) - (395)
Interest paid bank borrowings (433) (578) (1,043)
Dividends paid to equity
holders 8 (9,935) (7,143) (16,143)
------------------------------- ------ ------------ -------------- -------------
Net cash flow from financing
activities 39,680 88,603 112,911
------------------------------- ------ ------------ -------------- -------------
Net increase in cash
and cash equivalents
for the period 23,247 50,677 46,320
Cash and cash equivalents
at the start of the period 47,790 1,470 1,470
------------------------------- ------ ------------ -------------- -------------
Cash and cash equivalents
at the end of the period 71,037 52,147 47,790
------------------------------- ------ ------------ -------------- -------------
Condensed consolidated statement of changes in equity
Six months ended 30 June 2020 (unaudited)
Notes Share Share Capital Retained Total
capital premium reduction earnings (unaudited)
(unaudited) (unaudited) reserve (unaudited)
(unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ ------------- ------------- ------------- ------------- -------------
1 January 2020 3,189 271,341 24,077 42,075 340,682
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive
income - - - 11,051 11,051
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Transactions
with owners
Dividends paid 8 - - - (9,935) (9,935)
Share issue
costs 13 - 21 - - 21
--------------------- ------ ------------- ------------- ------------- ------------- -------------
30 June 2020 3,189 271,362 24,077 43,191 341,819
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Six months ended 30 June 2019 (unaudited)
Notes Share Share Capital Retained Total
capital premium reduction earnings (unaudited)
(unaudited) (unaudited) reserve (unaudited)
(unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ ------------- ------------- ------------- ------------- -------------
1 January 2019 1,922 140,452 35,800 20,163 198,337
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Total comprehensive
income - - - 10,946 10,946
--------------------- ------ ------------- ------------- ------------- ------------- -------------
Transactions
with owners
Dividends paid 8 - - - (7,303) (7,303)
Shares issued 12,13 943 99,057 - - 100,000
Share issue
costs 13 - (2,050) - - (2,050)
--------------------- ------ ------------- ------------- ------------- ------------- -------------
30 June 2019 2,865 237,459 35,800 23,806 299,930
--------------------- ------ ------------- ------------- ------------- ------------- -------------
For the year ended 31 December 2019 (audited)
Capital
Share Share reduction Retained
Notes capital premium reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ----------- ---------- ---------
1 January 2019 1,922 140,452 35,800 20,163 198,337
--------------------- ------ --------- --------- ----------- ---------- ---------
Total comprehensive
income - - - 26,332 26,322
--------------------- ------ --------- --------- ----------- ---------- ---------
Transactions
with owners
Dividends paid 18 - - (11,723) (4,420) (16,143)
12,
Shares issued 13 1,267 133,733 - - 135,000
Share issue
costs 13 - (2,844) - - (2,844)
--------------------- ------ --------- --------- ----------- ---------- ---------
31 December
2019 3,189 271,341 24,077 42,075 340,682
--------------------- ------ --------- --------- ----------- ---------- ---------
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 2020, are prepared in accordance
with International Financial Reporting Standards ("IFRS") and
interpretations issued by the International Accounting Standards
Board ("IASB") and IAS34 "Interim Financial Reporting" as adopted
by the European Union, including the comparative information for
the six months period ended 30 June 2019 and for the year ended 31
December 2019.
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. The registered address of
the Company is disclosed in the Corporate Information.
The condensed consolidated financial statements presented herein
for the year to 30 June 2020 does not constitute full statutory
accounts within the meaning of Section 434 of the Companies Act
2006. The Group's annual report and accounts for the year to 31
December 2019 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.
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 (GBP'000), except when
otherwise indicated.
Going concern
At 31 July 2020 the Group had cash of GBP74.3 million. Of this,
GBP71.0 million is held in the parent company current and deposit
accounts. There are GBP48.9 million of undrawn debt facilities, of
which GBP33.4 million is drawable immediately, and GBP15.5 million
is conditional on security registration of Scottish assets and
completion of acquisitions that are exchanged.
At 31 July 2020 GBP54.6 million is committed to acquisitions and
asset management and a further GBP7.2 million to financial
performance based deferred payments, all of which are expected to
deliver incremental rental returns.
As part of the directors' consideration of the appropriateness
of adopting the going concern basis in preparing the interim report
and financial statements, we have modelled downside scenarios for a
period of 18 months including single and multiple tenant defaults
or rent payment holidays for periods of up to 12 months. Interest
cover and LTV covenants are in place on all of the Group's banking
facilities. Analysis of the impact of tenants not paying rent on
banking covenants indicates potential breaches of interest cover
covenants. Latest PRA guidance to banks is that waivers should be
provided in these COVID-19 related circumstances, however, we have
also considered the scenario where banks do not provide these
waivers. Mitigating actions which could be taken at the Group's
discretion include use of central funds to reduce debt in
particular charging pools, to avoid covenant breaches and reduction
or suspension of dividends. We have assumed no significant
structural changes to the business will be needed in any of the
scenarios modelled.
Further, whilst we are confident of our liquidity position even
under our most extreme downside modelling scenarios, during June
2020 we have drawn down the GBP50 million incremental funding,
which is required for the completion of our exchanged acquisition,
to ensure funds are readily available and held at Group level. The
Group and the Company have adequate cash 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 25 years with a
tenant-only option to extend for one or two periods of 10 years. At
the inception of the lease, 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.
Business combinations
The Group acquires subsidiaries that own property and other
property interests. At the time of acquisition, the Group considers
whether each acquisition represents the acquisition of a business
or the acquisition of an asset. The Group accounts for an
acquisition as a business combination where an integrated set of
activities is acquired in addition to the property that are capable
of being conducted and managed for the purpose of providing a
return in the form of dividends, lower costs or other economic
benefits directly to investors or other owners, members or
participants. Where such acquisitions are not judged to be the
acquisition of a business, they are not treated as business
combinations. Rather, the cost to acquire the corporate entity is
allocated between the identifiable assets and liabilities of the
entity based upon their relative fair values at the acquisition
date. Accordingly, no goodwill or deferred tax arises. The fair
value of assets and liabilities are established using
industry-leading third-party professionals, instructed by the
Company.
During the year ended 31 December 2019, the Group completed the
acquisition of a number of assets and SPV's. The assets held by the
SPV's have been incorporated into the existing subsidiaries of the
Group without maintaining any of the underlying activities of the
purchased SPV. The directors have reviewed the terms of the
acquisition and determined that a business, as defined by IFRS 3,
was not acquired. In the context of the acquisitions during the
year, the principal consideration was whether an integrated set of
activities were acquired. As part of the acquisition, new
agreements were entered into between the Group and the operators of
the assets, with the management of the assets going forward being
independent of the SPV's purchased and their previous activities.
No significant functions were acquired as part of the purchases
and, as such the acquisitions are not determined by directors to be
business combinations under IFRS 3.
For acquisitions occurring from 1 January 2020 onwards we have
considered the IFRS 3 amendments to the definition of a business to
determine if a business combination has occurred. All acquisitions
in the current period were deemed asset acquisitions as none
included acquisition of an integrated set of activities that
combine an input and a substantive process to produce goods or
services.
2.2 Estimates
Fair valuation of investment property
The Valuations have been prepared in accordance with the RICS
Valuation - Global Standards 2017 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 to the Condensed consolidated statement of comprehensive
income.
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 2019 and are expected to be consistently applied
during the year ended 31 December 2020.
In addition, the following accounting policy will apply for the
year ended 31 December 2020 and therefore the current six month
period ended 30 June 2020:
IFRS 3 'Business Combinations'
On 22 October 2018, the IASB issued 'Definition of a Business
(Amendments to IFRS 3)' aimed at resolving the difficulties that
arise when an entity determines whether it has acquired a business
or a group of assets.
The amendments are effective for business combinations for which
the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after 1 January 2020.
The standard is not expected to have material impact on the
Group and the Group already performs this assessment. Refer to note
2 where this assessment is considered.
4. Standards issued but not yet effective
The Group does not consider the adoption of any new standards or
amendments to be applicable to the Group.
5. Property income
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ---------------- ------------ -------------
Rental income cash received
in the period/year 11,643 8,556 19,113
--------------------------------- ---------------- ------------ -------------
Rent received in advance
of recognition(1) 49 49 98
Rent recognised in advance
of receipt(2) 3,154 2,211 4,769
--------------------------------- ---------------- ------------ -------------
Gross rental income 14,846 10,816 23,980
--------------------------------- ---------------- ------------ -------------
Insurance/service charge
income 164 111 252
Insurance/service charge
expense (166) (113) (254)
--------------------------------- ---------------- ------------ -------------
Net rental income 14,844 10,814 23,978
1 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 2% uplift in rents over the term
of the lease on a straight-line basis.
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 ending 30 June 2020 and 30 June 2019, the Group did
not have any non-qualifying profits except interest income on bank
deposits.
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
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------------------------ -------------- ------------ -------------
Total comprehensive income
(attributable to shareholders) 11,051 10,946 26,332
Adjusted for:
- Revaluation movement (2,773) (5,677) (13,937)
* Rental income arising from recognising rental
premiums and future guaranteed rent uplifts 3,203 2,260 4,867
------------------------------------------------------------- -------------- ------------ -------------
Change in fair value of
investment properties 430 (3,417) (9,070)
Change in fair value of
interest rate derivative 73 320 383
------------------------------------------------------------- -------------- ------------ -------------
EPRA earnings 11,554 7,849 17,645
Adjusted for:
* Rental income arising from recognising rental
premiums and future guaranteed rent uplifts (3,203) (2,260) (4,867)
* Non-recurring costs - - 171
* Rent premium due from exchanged contracts 488 - -
------------------------------------------------------------ -------------- ------------ -------------
Adjusted earnings 8,839 5,589 12,949
------------------------------------------------------------- -------------- ------------ -------------
Average number of ordinary
shares 318,953,861 216,703,860 253,954,592
------------------------------------------------------------- -------------- ------------ -------------
Earnings per share (pence)(1) 3.46p 5.05p 10.37p
EPRA basic and diluted earnings
per share (pence)(1) 3.62p 3.62p 6.95p
Adjusted basic and diluted
earnings per share (pence)(1) 2.77p 2.58p 5.10p
------------------------------------------------------------- -------------- ------------ -------------
1 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 and interest rate
derivatives.
Adjusted Earnings:
EPRA earnings have been adjusted to exclude the effect of
straight-lining of rental income and one-off costs.
In the prior year, these include non-recurring listing fees
incurred. These have been adjusted to enable the board to consider
the level of ongoing cash earnings.
8. Dividends
Six months Six months
ended ended
Dividend 30 June 30 June 31 December
rate 2020 2019 2019
per share (unaudited) (unaudited) (audited)
pence GBP'000 GBP'000 GBP'000
-------------------------------- ---------- ------------ ------------ ------------
Forth interim dividend
for the period ended
31 December 2018 (ex-dividend
- 7 February 2019) 1.5p - 2,883 2,883
First interim dividend
for the period ended
31 December 2019 (ex-dividend
- 16 May 2019) 1.5425p - 4,420 4,420
Second interim dividend
for the period ended
31 December 2019 (ex-dividend
- 8 August 2019) 1.5425p - - 4,420
Third interim dividend
for the period ended
31 December 2019 (ex-dividend
- 31 October 2019)(1) 1.5425p - - 4,420
Forth interim dividend
for the period ended
31 December 2019 (ex-dividend
- 6 February 2020) 1.5425p 4,920 - -
First interim dividend
for the period ended
31 December 2020 (
ex-dividend - 21 May
2020) 1.5725p 5,015 - -
Total dividends paid 9,935 7,303 16,143
-------------------------------- ---------- ------------ ------------ ------------
Total dividends paid
in respect of the period/year 1.5725p 1.5425p 4.6275p
Total dividends unpaid
but declared in respect
of the period/year 1.5725p 1.5425p 1.5425p
-------------------------------- ---------- ------------ ------------ ------------
Total dividends declared
in respect of the period/year
- per share 3.1450p 3.0850p 6.1700p
-------------------------------- ---------- ------------ ------------ ------------
1 This was a non-Property Income Distribution dividend, all
other dividends recorded above are Property Income Distribution
dividends.
On 31 January 2020, the Company declared an interim dividend of
1.5425 pence per share for the period from 1 October 2019 to 31
December 2019 payable on 21 February 2020.
On 21 May 2020, the Company declared an interim dividend of
1.5725 pence per ordinary share for the period from 1 January 2020
to 31 March 2020 and was paid in June 2020.
On 12 August 2020, the Company declared an interim dividend of
1.5725 pence per share for the period from 1 April 2020 to 30 June
2020 payable in September 2020.
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 IFRS13. 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 valuation, in accordance with
industry practice for this asset class, was subject to a material
uncertainty clause consistent with that reported in the prior
quarter. Following the period end the material uncertainty clause
has been removed for this asset class and will not apply to future
valuations unless reinstated.
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 during the year/period 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 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ -------------
Opening value 318,791 223,845 223,845
Property additions 22,556 36,899 69,969
Acquisition costs capitalised 856 2,065 3,857
Capital improvements 1,017 3,131 7,183
Revaluation movement 2,773 5,677 13,937
----------------------------------- ------------ ------------ -------------
Closing value per independent
valuation report 345,993 271,617 318,791
Guaranteed rent reviews
and initial lease rental
payment net (debtor) / creditor (11,452) (5,641) (8,249)
----------------------------------- ------------ ------------ -------------
Closing fair value per condensed
consolidation statement
of financial position 334,541 265,976 310,542
----------------------------------- ------------ ------------ -------------
1 Investment properties include freehold and long leasehold
properties
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
Six months ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------ -------------- ------------ ------------
Revaluation movement 2,773 5,677 13,937
Rental income arising from
recognising rental premiums
and future guaranteed rent
uplifts (3,203) (2,260) (4,867)
------------------------------- -------------- ------------ ------------
Change in fair value of
investment properties (430) 3,417 9,070
------------------------------- -------------- ------------ ------------
10. Bank borrowings
A summary of the bank borrowings drawn in the period are shown
below:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ -------------
At the beginning of the
period/year 25,127 26,000 26,000
Bank borrowings drawn in
the period/year 51,002 35,969 35,971
Bank borrowings repaid in
the period/year - (36,844) (36,844)
Total bank borrowings drawn 76,129 25,125 25,127
-------------------------------- ------------ ------------ -------------
Total bank borrowings undrawn 48,871 49,875 49,873
-------------------------------- ------------ ------------ -------------
New facility - HSBC UK Bank Plc
On 6 April 2020, the Group agreed a new revolving credit
facility of GBP50 million (the "HSBC Facility") with HSBC UK Bank
Plc ("HSBC"). The Group drew down GBP21 million from the HSBC
Facility for the period.
The three-year HSBC Facility has a margin of 195 or 205 basis
points over one-month LIBOR, depending on the loan-to value ratio
of the 16 properties over which the Group has granted security to
HSBC as security for the loan.
The Group drew down GBP50 million under its existing loan
facilities with Metro Bank PLC and Clydesdale Bank PLC during the
period.
Any fees associated with arranging the bank 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 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------- ------------ ------------ -------------
Bank borrowings drawn: due
after more than one year 76,129 25,125 25,127
----------------------------------- ------------ ------------ -------------
Arrangements fees - carried
forward (1,666) (1,291) (1,291)
Arrangement fees paid during
the year (1) (828) (751) (791)
Amortisation of loan arrangement
fees 273 189 416
Non-current liabilities:
Bank borrowings 73,908 23,272 23,461
----------------------------------- ------------ ------------ -------------
1 Represents cash flow arising from financing activities.
11. Interest rate derivatives
As at As at As at
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -------------
At the beginning of the
period 94 477 477
Changes in fair value of
interest rate derivatives (73) (320) (383)
----------------------------- ------------ ------------ -------------
21 157 94
---------------------------- ------------ ------------ -------------
To mitigate the interest rate risk that arises as a result of
entering into variable rate loans, the Group entered into an
interest rate cap with the notional value of GBP25 million and a
strike rate of 1% effective from 21 June 2018 with a termination
date of 15 June 2023. The fair value of the interest rate cap is
based on a floating reference of one month LIBOR.
The fair value of the derivative interest rate cap contract is
estimated by discounting expected future cash flows using market
interest rates.
12. Share capital
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
Shares in
issue GBP'000 GBP'000 GBP'000
--------------------- ------------- -------------- ------------ -------------
At the beginning
of the period/year 192,206,831 3,189 1,922 1,922
Shares issued
- 15 May 2019 94,339,623 - 943 943
Shares issued
- 9 December
2019 32,407,407 - - 324
318,953,861 3,189 2,865 3,189
--------------------- ------------- -------------- ------------ -------------
No shares were issued during the period ended 30 June 2020.
13. Share premium
Share premium comprises share capital subscribed for in excess
of nominal value less costs directly attributed to share
issuances.
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------- -------------- ------------ -------------
At the beginning of the
period 271,341 140,452 140,452
Shares issued 15 May 2019 - 99,057 99,057
Shares issued 9 December
2019 - - 34,676
Share issue costs 21 (2,050) (2,844)
271,362 237,459 271,341
--------------------------- -------------- ------------ -------------
14. Transactions with related parties
Investment Manager
The fees calculated and paid for the period to the Investment
Manager were as follows:
Six months
Six months ended Year ended
ended 30 June 31 December
30 June 2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- -------------- ------------ -------------
Impact Health Partners LLP 1,760 1,212 2,756
----------------------------- -------------- ------------ -------------
For the six month period ended 30 June 2020 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 3.49%, 0.22% and 0.02%
respectively (either directly or through a wholly-owned company) of
the total issued ordinary share capital of Impact Healthcare REIT
Plc. In addition, Impact Health Partners LLP held 0.11% directly.
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. 61% of the Group's rental income was received
from MCGL or its subsidiaries during the period. A deferred payment
agreement has been entered into with MCGL on one property that is
contingent upon enhanced trading performance. The maximum amount of
this deferred payment is GBP2 million which is payable in return
for incremental rent that is accretive to the Group. There were no
trade receivables or payables outstanding at the period end.
During the year the key management of Impact Health Partners LLP
received the following dividends from Impact Healthcare REIT Plc:
Mahesh Patel GBP339,476; Andrew Cowley GBP27,897 and David Yaldron
GBP1,713.
Directors' interests
Paul Craig is a director of the Company. He is also the
portfolio manager at Quilter Investors (formerly Old Mutual Global
Investors), which has an interest in 54,091,678 ordinary shares of
the Company through funds under management. The remaining 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: Rupert Barclay GBP5,709; Rosemary Boot GBP935, and Philip
Hall GBP935. In addition, funds managed by Paul Craig received
dividends from the Company of GBP1,684,395.
These transactions were fully compliant with the Company's
related party policy.
15. 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 year. As there are no dilutive
instruments outstanding, basic and diluted NAV per share are
identical.
EPRA has issued guidelines aimed at providing a measure of net
asset value on the basis of long term fair values. The adjustments
between basic and EPRA NAV are reflected in the following
table:
As at As at As at
30 June 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ -------------
Net assets per Condensed
consolidated statement of
financial position 341,819 299,930 340,682
Fair value of derivatives (21) (157) (94)
-------------------------------- ------------ ------------ -------------
EPRA NAV 341,798 299,773 340,588
-------------------------------- ------------ ------------ -------------
Issued share capital (number) 318,953,861 286,546,454 318,953,861
-------------------------------- ------------ ------------ -------------
Basic NAV per share 107.17p 104.67p 106.81p
-------------------------------- ------------ ------------ -------------
EPRA NAV per share 107.16p 104.62p 106.78p
-------------------------------- ------------ ------------ -------------
16. Capital commitments
At 30 June 2020 the Group had committed capital expenditure on a
forward funded development of a new property and on capital
improvements to four existing properties, this amounted to GBP6.3
million.
The Group has committed to deferred payment agreements on three
acquisitions in return for increased rent based on trading
performance. As at 30 June 2020 the total capital commitment for
these deferred payments was are estimated at GBP7.2 million.
The Group had a further GBP47.5 million committed to the
acquisition of nine properties which were exchanged during the
period and expected to complete after the balance sheet date.
17. Contingent liabilities
Full relief for Stamp Duty Land Tax (SDLT) has been granted in
relation to the transfer of properties between companies which are
members of the Group. Should there be a change in control of the
Company within three years of completion, or a single shareholder
acquires a substantial stake in the Company a liability in the
subsidiary companies could arise. This is equal to approximately 5%
of the aggregate value of the properties and is estimated as GBP3.2
million (31 December 2019: GBP9.4 million) on the net purchase
price of the assets acquired in corporate acquisitions since
incorporation. The bulk of the contingent liability at the 2019
year end related to the SDLT on the seed portfolio, as at 30 June
2020 these properties had been owned for in excess of three years
and hence this portion of the contingent liability is no longer
recognised.
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
No other significant events have occurred between the statement
of financial position date and the date when the financial
statements have been authorised by the directors, which would
require adjustments to, or disclosure in the financial
statements.
Corporate information
Directors Rupert Barclay - non-executive Chairman
Amanda Aldridge non -- executive director
Rosemary Boot - senior independent non-executive director
Paul Craig - non-executive director
Philip Hall - 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 Financial Limited
54 Fenchurch Street
London
EC3M 3JY
Registrar Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Legal Advisers Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Financial adviser and Joint Corporate Broker Winterflood Securities Limited
The Atrium Building
Cannon Bridge
25 Dowgate Hill
London EC4R 2GA
Joint Corporate Broker RBC Europe Limited
100 Bishopsgate
London
EC2N 4AA
Communications Adviser Maitland/AMO
3 Pancras Square
London N1C 4AG
Company Registration Number 10464966
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FZMGGKKDGGZM
(END) Dow Jones Newswires
October 05, 2020 11:38 ET (15:38 GMT)
Grafico Azioni Impact Healthcare Reit (LSE:IHR)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Impact Healthcare Reit (LSE:IHR)
Storico
Da Apr 2023 a Apr 2024
