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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Impact Healthcare Reit Plc | LSE:IHR | London | Ordinary Share | GB00BYXVMJ03 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.30 | 1.55% | 85.10 | 84.60 | 85.10 | 85.10 | 83.30 | 83.30 | 911,452 | 16:29:55 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 42.95M | 16.89M | 0.0408 | 20.86 | 352.63M |
From May 2019 to May 2024
TIDMIHR
RNS Number : 5018R
Impact Healthcare REIT PLC
22 September 2017
22 September 2017
Impact Healthcare REIT plc
("Impact" or the "Company")
INTERIM RESULTS FOR THE PERIOD TO 30 JUNE 2017
The Board of Directors of Impact Healthcare REIT Plc (ticker: IHR) today announced the Company's unaudited results for the period from 7 November 2016 to 30 June 2017.
Financial Highlights
-- Fully covered dividend against adjusted earnings, declared for the quarter ending 30 June 2017 of 1.50p per share, putting the Company on track to hit its target of 4.50p for the three quarters ending 31 December 2017*
-- Net asset value of 100.03p per share as at 30 June 2017
-- Profit before taxation in the period between inception and 30 June 2017 was GBP2.98 million, 1.95p per share
-- Initial contracted rent of GBP11.34 million p.a. calculated from Admission on 7 March 2017 increased to GBP11.60 million p.a. following acquisition of Saffron Court
-- Portfolio independently valued at GBP153.4 million as at 30 June 2017
-- The majority of the equity raised has been fully invested, with the balance to be utilised on income-producing capital improvements
-- Total return for the period since 7 March 2017 (IPO) was 4.00% compared to the FTSE EPRA/NAREIT UK REITs Index total return of 2.18%
-- The Company had no debt as at 30 June 2017 -- GBP166.6 million market capitalisation as at 30 June 2017
* 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.
Operational Highlights
-- Since IPO the Company has acquired 57 care homes, offering 2,527 beds, with an aggregate net purchase price of GBP152.20 million
Hot Features
Premium
-- Average net initial yield of the portfolio at acquisition is 7.6%
-- The portfolio was 100% let and income producing during the period
-- At 30 June 2017, the weighted average unexpired lease term ("WAULT") was 19.85 years
-- As at 30 June 2017, the Group had two tenants (both part of the Minster Group), who were in full compliance with all covenants of the leases
-- Raised GBP160.2 million of equity through a fully subscribed initial public offering and vendor issue
Post Period End Highlights
-- The Company has board approval, in principle, subject to financing, to invest GBP7.94 million to fund the construction of 92 new beds at three homes within the current portfolio
Rupert Barclay, non-executive Chairman of Impact Healthcare REIT plc, commented:
"The acquisitions of the seed portfolio and Saffron Court have given us stable and secure cash flows that support our dividend policy. In the second half of 2017, we will begin the first of our asset management projects and pursue acquisition opportunities that will add complementary operators and locations to the portfolio. We are also putting in place the funding structures that will allow us to implement these plans.
Looking further ahead, the fundamentals of our market are strong, with growing demand for beds and limited supply. Care is an essential service and the government needs to relieve the pressure on adult social care and hospitals. Residential care homes will be an important part of the solution over the coming years and we see good prospects for the Group.
Our strategy is to identify new properties and tenants which will further diversify our investment base and continue to deliver strong economies of scale, with efficient operations alongside a good quality of care. We remain confident we will identify investments that, under our ownership, will provide value for money to our tenants' customers and residents, while delivering attractive and stable returns to our investors."
FOR FURTHER INFORMATION, PLEASE CONTACT:
Impact Health Partners via Newgate Communications LLP Mahesh Patel Andrew Cowley Winterflood Securities Tel: 020 3100 0000 Limited Joe Winkley Neil Langford Newgate Communications Tel: 020 7680 6550 (PR Adviser) Email: impact@newgatecomms.com James Benjamin Anna Geffert Lydia Thompson
Further information on Impact Healthcare REIT is available at www.impactreit.uk.
A Company presentation to analysts and will be held at 9:30am today at:
Newgate
Sky Light City Tower
50 Basinghall Street
London, EC2V 5DE
NOTES:
The Company 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 healthcare real estate opportunities, in particular residential care homes. The Company'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 is targeting a fully covered aggregate dividend of 6.0p per share for the first 12 months from Admission which equates to a yield of 6 per cent. per annum on the Issue Price, on an ungeared basis and payable in quarterly instalments(1) . A fully covered dividend of 1.50p per share for the period from 7 March 2017 to 30 June 2017 was paid on 31 August 2017.
The Company's property portfolio comprises 57 residential care homes (2,527 beds), with leases of 20 years (with no tenant break right), subject to annual upward only, Retail Price Index-linked rent reviews (with a floor and cap at 2% p.a. and 4% p.a., respectively). The portfolio has an annualised rent roll of GBP11.6 million.
The Company and its Investment Adviser believe that residential healthcare is a significant investment opportunity in the UK, owing to both increasing demand for various forms of care from a growing and ageing population and the current reduction in the supply of suitable assets for providing that care. A well-capitalised landlord like the Company, with an experienced investment adviser, should be well positioned to deliver attractive returns to investors, while also providing stability and a commitment to enhance homes wherever possible to their residents.
The Company's IPO in March 2017 raised gross proceeds of GBP160 million. The Company's Ordinary Shares were admitted to trading on the main market of the London Stock Exchange, in the Specialist Fund Segment on 7 March 2017.
(1) This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.
CHAIRMAN'S STATEMENT
This was a successful first period for the Company. Our IPO on 7 March 2017 was fully subscribed and we raised gross proceeds of GBP160 million from a high-quality shareholder base.
At the period end, we had invested the majority of the net equity proceeds, having acquired the seed portfolio and two of the option assets (in total, 56 assets with 2,479 beds) for a net purchase price GBP148.75 million on 4 May and a further asset called Saffron Court (48 beds) for a net purchase price GBP3.4 million on 29 June. The net initial yields on the acquisitions were 7.6% and 7.7% respectively. The portfolio has an annualised rent roll of GBP11.6 million and was independently valued at GBP153.4 million as at 30 June, compared with the net purchase price of GBP152.2 million. We are on track to deliver our fully covered dividend target.
Since the period end, the board has approved the first phase of our asset management programme, which will add 92 beds. We are also advancing plans to add a further 310 beds over the next three years. Asset management is a key element of our value creation strategy, allowing us to increase rental income and capital values.
In addition, we have a pipeline of attractive acquisition opportunities, drawing on the Investment Adviser's excellent industry knowledge and network of contacts. These opportunities would further diversify the portfolio by geography and tenant, while satisfying our criteria for delivering the target return to shareholders.
Financial performance
At 30 June 2017, the unaudited Net Asset Value (NAV) and EPRA NAV was GBP160.2 million or 100.03p per share. The NAV benefited from our right to receive the rent due from these assets as if they had been acquired on the day our shares were admitted to trading on the London Stock Exchange (7 March 2017).
Unaudited earnings per share (EPS) was 1.95p (basic diluted) and adjusted EPS was 1.88p, which is supported by cash receipts. Our focus during the period has been on bedding down the portfolio and advancing our asset management and acquisition plans. Looking forward, our priorities will include being as efficient as possible, as an important part of generating enhanced returns for shareholders.
More information about our financial performance in the period can be found in the Investment Adviser's report.
Dividends
Our adjusted earnings fully covered the dividend of 1.50p per share in relation to the period, which we declared on 31 July. For the 12 months following admission, we are targeting a fully covered aggregate dividend of 6.0p per share, equating to a yield of 6% on the 100p issue price, on an ungeared basis. For the period from admission to our year end on 31 December 2017, our target dividend is therefore 4.5p per share.
Dividends will be paid in quarterly instalments.
Financing
The Group had no debt at the period end. While gearing can enhance returns, our approach is to ensure that we are prudently and sustainably financed, recognising our obligation to provide stability and security for the people who occupy our homes. With this in mind, the Group's investment policy limits borrowing to 35% of its gross asset value at the time of drawdown. The Group has engaged with finance providers, to arrange a facility to finance acquisitions and capital enhancements.
Working with our tenants
We want our tenants to provide high-quality care in our homes. As well as being the responsible thing to do, this safeguards our reputation and helps our tenants to attract residents, so they maintain their rent cover at robust levels. Ratings from the Care Quality Commission show that our initial tenants offer care that is above the national average.
Our assets need to support our tenants' ability to deliver great service. Our leases therefore commit our tenants to spending at least GBP1,500 per bed each year on repairs and maintenance, to keep our assets at a high standard. The planned programme of capital enhancements will also further increase not only our rent, but also our tenants' rent cover.
Corporate governance
The Company has a strong and independent board, comprising me as chairman and four other non-executive directors. Between us, we have a broad range of experience, including real estate, healthcare, financial markets and corporate finance. We further strengthened the board on 30 June, appointing Paul Craig as a non-executive director. His significant investment experience, particularly within closed-end funds, will be invaluable to the Company.
We recognise the importance of good governance and have committed to complying with the AIC Code of Corporate Governance, except that as an externally managed company we will not have remuneration or nomination committees. We also voluntarily comply with the provisions of a number of the Listing Rules, which are not compulsory for shares admitted to the Specialist Fund Segment of the Main Market.
The Investment Adviser
Impact Health Partners LLP is our Investment Adviser. Its role includes sourcing investments for us, reviewing all opportunities and making recommendations to the board, carrying out transactions that the board approves, and monitoring the progress of our assets. It is also responsible for devising and implementing our asset management strategy.
The board recognises the achievements of the Investment Adviser in ensuring we are already 96% invested enabling the Company to pay a dividend for the first period since IPO of 1.50p which is fully covered . The appointment of David Yaldron as the Investment Adviser's Finance Director in June has further strengthened its senior team.
Carne Global AIFM Solutions (C.I.) Limited is the Company's Alternative Investment Fund Manager.
Outlook
The acquisitions of the seed portfolio and Saffron Court have given us stable and secure cash flows that support our dividend policy. In the second half of 2017, we will begin the first of our asset management projects and pursue acquisition opportunities that will add complementary operators and locations to the portfolio. We are also continuing to look to put in place the funding structures that will allow us to implement these plans.
Looking further ahead, the fundamentals of our market are strong, with growing demand for beds and limited supply. Care is an essential service and the government needs to relieve the pressure on adult social care and hospitals. Residential care homes will be an important part of the solution over the coming years and we see good prospects for the Group.
Our strategy is to identify new properties and tenants who will diversify our investment base and continue to deliver strong economies of scale, with efficient operations alongside a good quality of care. We remain confident we will identify investments that, under our ownership, will provide value for money to our tenants' customers and residents, while delivering attractive and stable returns to our investors.
Rupert Barclay
Chairman
22 September 2017
INVESTMENT ADVISER'S REPORT
Following the IPO in March 2017, we have successfully implemented the Group's investment policy, acquiring a good-quality portfolio with strong tenants, who provide a high standard of care. The Group is well positioned to add to this portfolio, both through further acquisitions and through capital enhancements to existing properties, with the aim of generating attractive and stable returns for shareholders.
THE MARKET DRIVERS
Five drivers influence the demand for, and provision of, care for the elderly, making it a potentially attractive market for well-capitalised asset owners and well-managed operators. In particular:
People are living longer. The number of people more than 85 years old in the UK is forecast to increase from 1.6 million in 2016 to 3.6 million by 2036. This age group is in particular need of residential care, with 15.7% either in a care home or long-stay hospital bed.
Supply has shrunk. The number of beds available has fallen, from 574,000 in 1996 to 460,000 in 2016 - a decline of 20%. More than 2,400 care homes shut in the five years to December 2015.
The market is highly fragmented, with 69% of the market held by operators with fewer than 15 homes. The Group now owns 0.6% of the of the private care beds in the market. This offers scope for stronger asset owners and operators to grow through consolidation, and for asset owners to broaden the range of tenants in their portfolios.
Severe pressure on the NHS. In the 12 months to June 2017, the NHS in England lost cumulatively 2,274,300 bed days through delayed transfers, an increase of 66% on 2010. 25% of the patients occupying these beds were waiting for a bed to become available in a care home. The average hospital bed costs four times more than the average care home bed.
Government funding is increasing. In response to these pressures, there is recognition across the political spectrum that adult social care needs more funding. The government announced a series of initiatives during the past two years. These were:
-- a social care precept, allowing councils to increase council tax by 2% each year from 2016/17 to 2019/20. This was subsequently raised to 3% for 2017/18 and 2018/19, with the potential to raise GBP2 billion more a year by 2019/20;
-- an improved Better Care Fund, providing an additional GBP4.4 billion between 2017/18 and 2019/20; and
-- a new Adult Social Care Support Grant, providing GBP240 million to councils in 2017/18.
While major structural changes to adult social care are unlikely in the short term, further increases in government funding can be expected, given the political imperative to do so.
One consequence of these pressures - increasing demand, shrinking supply, the need to reduce pressure on the NHS and increased government funding - has been above-inflation fee increases. According to research by Christie & Co, national average fee increases for elderly care in 2017 (compared to 2016) were 6.3% in the private market and 5.2% in the local authority-funded market.
More information about the residential care home market can be found in the Company's prospectus published in January 2017, which is available from its website: www.impactreit.uk.
Investment Policy And Objectives
The Group's investment policy is to acquire, renovate, extend and redevelop high-quality healthcare real estate assets in the UK, and to lease those assets, under full repairing and insuring leases, primarily to operators providing residential healthcare services. The Group fully complied with this policy during the period and met its investment objectives as set out opposite.
In addition, the Group has not generated any income from non-rental revenue or sought alternative investments permitted by the investment policy set out in the prospectus.
Initial public offering and vendor issue
The Company raised total gross proceeds of GBP160.2 million through its IPO and vendor issue.
The Company's shares were admitted to the Specialist Fund Segment of the London Stock Exchange's Main Market on 7 March 2017, with an issue of 146,172,360 ordinary shares at 100p each. On 5 May 2017, the Company issued a further 14 million ordinary shares at 100p each, as a vendor issue in connection with its acquisition of the seed portfolio.
At the period end, the Group had invested the majority of the net equity proceeds, having made the acquisitions described below.
Investment activity
During the period, the Group successfully acquired 57 properties with 2,527 beds.
The acquisition of the seed portfolio completed on 4 May 2017, for a total consideration of GBP148.75 million and at a net initial yield of 7.6%. The 56 care homes are leased to the initial tenants for 20 years with no tenant break rights, and with an option to extend for two further 10-year periods. All outstanding debt facilities were repaid in full and the Group acquired the seed portfolio debt free.
On 29 June 2017, the Group acquired Saffron Court for GBP3.4 million, at a net initial yield of 7.7%. Saffron Court has 48 beds. The terms of the lease are substantially the same as for the seed portfolio.
Details of the individual assets are further on.
More information about the portfolio can be found further on.
Valuation
The Group's properties were independently valued by Cushman & Wakefield as at 30 June 2017, in accordance with the RICS Valuation - Professional Standards (the Red Book). The portfolio's valuation was GBP153.4 million, an increase of GBP0.1 million over the aggregate purchase price of the assets.
Our portfolio
At 30 June 2017, we owned 57 residential care homes with 2,527 beds. The properties are all standing assets with a track record of successful operation, and are diversified by geography, customer base and home size.
At the period end, the portfolio had a weighted average unexpired lease term of 19.85 years, with the option for two 10-year extensions. Annual rental uplifts are based on the Retail Prices Index, with a floor of 2% and a cap of 4% per annum. The majority of the assets are owned freehold, with six on 999-year leases.
Our initial tenants - Minster Care and Croftwood Care (both part of the Minster Group) - are established providers, offering quality of care that exceeds the national average. Both are free of third-party debt and earn fees from more than 80 public sector customers and in excess of 700 private residents between them.
Minster Care - portfolio Valuation at 30 GBP100.5 million June 2017 Rent payable (FY18)* GBP7.0 million Total homes 30 Total beds 1,471 Average weekly GBP650 fee (June 2017) Private/LA fee Private fees: 33.0% Local split (June 2017) authority fees: 67.0% Forecast revenue GBP44.4 million (FY18)* Croftwood Care - portfolio Valuation at 30 June GBP52.9 million 2017 Rent payable (FY18)* GBP4.6 million Total homes 27 Total beds 1,056 Average weekly fee GBP532 (June 2017) Private/LA fee split Private fees: 42.5% Local (June 2017) authority fees: 57.5% Forecast revenue GBP29.3 million (FY18)*
* FY18 is the operator's financial year to 31 March 2018
Financial results
Rent from the seed portfolio was received as if it had been acquired on admission on 7 March 2017. As a result, the rent received in the period was GBP3.6 million. Under IFRS this upfront initial lease rental payment from admission and the minimum annual rental increase of 2.0% are reflected over the lease term on a straight-line basis and the total net rental income recognised for the period was GBP2.2 million.
Profit before tax was GBP3.0 million. As a REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business. All its profits qualified for this exemption, so there was no tax charge for the period. This resulted in EPS of 1.95p and adjusted EPS of 1.88p which is supported by cash receipts. These are both on a basic and diluted basis.
Investment objective Performance
-------------------------------------- ----------------------------------
Target dividend for the first Initial dividend of 1.5p
12 months from admission equating per share for quarter ended
to a yield of 6% per annum 30 June 2017 declared and
on the issue price, on an paid, with no use of leverage.
ungeared basis.
-------------------------------------- ----------------------------------
Dividends covered by ordinary First dividend fully covered.
earnings.
-------------------------------------- ----------------------------------
Conservative gearing policy. LTV at 30 June 2017 0%.
Borrowings as a percentage
of the Group's gross assets Gearing opportunities are
may not exceed 35% at the being explored, but will
time of drawdown. remain within the investment
policy parameters.
-------------------------------------- ----------------------------------
Following completion of the Current annual rent roll
acquisition of the seed portfolio is GBP11.6 million.
and some of the option assets,
annual rent receivable from
initial tenants will be between
GBP11.0 million and GBP11.6
million.
-------------------------------------- ----------------------------------
Minimise cash drag. 93% of capital raised in
IPO invested within two months
of admission, with cash rent
calculated from admission
date. 96% invested as at
30 June 2017.
-------------------------------------- ----------------------------------
Diversified portfolio with Largest asset holding is
no single asset exceeding valued at GBP11.7 million
15% of the Group's total gross (Freeland), equating to 7.3%
asset value. of the Group's gross assets.
-------------------------------------- ----------------------------------
No single customer who is Largest single customer paying
paying for care provided in for care represents only
the Group's assets will account 6.6% of the aggregate revenues
for more than 15% of the aggregate of the tenant to whom the
revenues of the Group's tenants. assets are leased.
-------------------------------------- ----------------------------------
The Group will grant leases Initial portfolio is leased
that are linked to the Retail on 20-year terms, with no
Prices Index, have an unexpired break clauses and annual
term of at least 20 years upwards-only rent increases
and are not subject to break at RPI, with a floor and
clauses. The Group will seek cap of 2% and 4% respectively.
to amend any leases it acquires Additional opportunities
to obtain similar terms. are being sought on similar
terms.
-------------------------------------- ----------------------------------
The Group will not speculatively No speculative development
develop assets (that is, develop undertaken in the period.
a property which has not been
leased or pre-leased).
-------------------------------------- ----------------------------------
The Group may invest in forward No development undertaken
funding agreements or forward in the period.
commitments to pre-let developments,
where it will own the completed 92 beds approved post period
asset. end, for development at existing
assets that will enhance
rental income under a forward
funding agreement.
-------------------------------------- ----------------------------------
Name County1 Address Acquisition Net purchase Beds % of
of home date2 price portfolio
income
--------------- ------------------ --------------------- ------------- ---------------- ------ -----------
Minster Care
----------------------------------------------------------------------------------------------------------------
Dragon Square,
Abbeywell Staffordshire Chesterton GBP4,946,000 45 3.18
--------------- ------------------ ------------------------------------ --------------- ------ -----------
The Crescent,
Amberley Cornwall Truro GBP677,000 27 0.49
--------------- ------------------ ------------------------------------ --------------- ------ -----------
North Sea
Ashgrove Lincolnshire Lane, Cleethorpes GBP2,145,000 56 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Attlee Street,
Attlee West Yorkshire Normanton GBP3,109,000 68 2.07
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Broadgate,
Broadgate Nottinghamshire Beeston GBP3,447,000 40 2.22
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Glasgow, Croftcroighn
Craigend Scotland Road, Ruchazie GBP1,332,000 48 0.37
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Bewcastle
Diamond Leicestershire Grove, Leicester GBP2,685,000 44 1.72
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Duncote Northamptonshire Towcester GBP3,367,000 38 2.16
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Duncote
The Lakes Northamptonshire Towcester GBP5,457,000 45 3.20
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Southfield,
Emmanuel Humberside Hessle GBP1,397,000 37 0.86
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Eryl Conwy, Bodafon Road,
Fryn Wales Craigside GBP1,535,000 29 0.98
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Middle Street,
Falcon Nottinghamshire Beeston GBP4,365,000 46 2.71
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Wroslyn Road,
Freeland Oxfordshire Freeland GBP11,180,000 62 5.91
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Grays Church Street,
Court Essex Grays GBP5,772,000 87 3.45
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Wellsted Street,
Hamshaw Humberside Hull GBP1,482,000 45 0.98
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Knowsley Drive,
Ideal Shropshire Bicton Heath GBP1,970,000 44 1.35
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Mallin Street,
Karam West Midlands Smethwick GBP3,712,000 47 2.22
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Grange Lane,
Littleport Cambridgeshire Littleport GBP5,772,000 54 3.45
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Meadows Brybank Road,
& Haywain Suffolk Hanchett Village GBP4,951,000 65 2.96
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Victoria Road,
Mowbray Worcestershire Malvern GBP3,329,000 37 2.22
--------------- ------------------ ------------------------------------ --------------- ------ -----------
South Wortley Avenue,
Mulberry Yorkshire Swinton GBP1,795,000 60 1.23
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Rydal Road,
Rydal Durham Darlington GBP2,685,000 57 1.72
--------------- ------------------ ------------------------------------ --------------- ------ -----------
High Street, June
Saffron Leicestershire Barwell 2017 GBP3,400,000 48 2.26
--------------- ------------------ --------------------- ------------- ---------------- ------ -----------
Shrubbery
Shrubbery Worcestershire Avenue, Worcester GBP721,000 29 0.49
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Chelmarsh,
Sovereign West Midlands Daimler Green GBP3,309,000 60 1.97
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Clwyd, Stansty Road,
Stansty Wales Wrexham GBP3,352,000 74 2.00
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Three Station Road,
Elms Lancashire Penketh GBP3,019,000 56 2.01
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Leigh Sinton,
Waterside Worcestershire Malvern GBP4,070,000 47 2.34
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater Ash Lane,
Woodlands Manchester Aspull GBP1,976,000 40 1.27
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Mill Street,
Brierley Hill,
Wordsley West Midlands Wordsley GBP2,297,000 41 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Croftwood Care
----------------------------------------------------------------------------------------------------------------
Greater Warrington
Ancliffe Manchester Road, Wigan GBP1,827,000 40 1.42
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Astbury Randle Meadow,
Lodge Cheshire Great Sutton GBP1,585,000 41 1.23
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Whitchurch
Croftwood Cheshire Way, Runcorn GBP1,583,000 44 1.09
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Station Road,
Lostock Gralam,
Crossways Cheshire Northwich GBP1,019,000 39 0.84
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Pillory Street,
Elm House Cheshire Nantwich GBP2,609,000 39 1.97
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Florence Shelley Road,
Grogan Cheshire Blacon, Chester GBP1,519,000 40 1.18
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater Wentworth
Garswood Manchester Road, Wigan GBP1,651,000 40 1.28
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Farm Road,
Weaverham,
Gleavewood Cheshire Northwich GBP1,012,000 30 0.78
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Derby Road,
Golborne Cheshire Golborne GBP1,673,000 40 1.30
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater Green Lane,
Greenacres Manchester Standish GBP1,585,000 40 1.23
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater Myrtle Avenue,
Hourigan Manchester Leigh GBP1,894,000 40 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Ingersley Lowther Court,
Court Cheshire Bollington GBP1,882,000 33 1.42
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Grizedale
Greater Drive, Higher
Lakelands Manchester Ince GBP1,894,000 40 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Edenfield
Leycester Road, Mobberley,
House Cheshire Knutsford GBP2,532,000 40 1.97
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Lower Robin
Hood Lane,
Loxley Cheshire Helsby GBP2,567,000 36 1.71
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater College Street,
Lyndhurst Manchester Leigh GBP1,442,000 40 1.12
--------------- ------------------ ------------------------------------ --------------- ------ -----------
New Milton Station Road,
House Staffordshire Alsager GBP1,794,000 39 1.40
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Poynton Civic
Centre, Park
Parklands Cheshire Lane, Poynton GBP1,643,000 40 1.35
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Brookfield
Drive, Holmes
The Cedars Cheshire Chapel GBP875,000 27 0.64
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Elm Drive,
The Elms Cheshire Crewe GBP2,081,000 41 1.62
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Hawthorne
The Hawthorns Cheshire Street, Wilmslow GBP1,951,000 39 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Walnut Drive,
The Laurels Cheshire Winsford GBP1,224,000 40 0.92
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Greater Hazelmere
Thorley Manchester Gardens, Hindley GBP1,960,000 40 1.53
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Middlewich
Turnpike Road, Elworth,
Court Cheshire Sandbach GBP2,690,000 28 1.97
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Wealstone
Wealstone Cheshire Lane, Upton GBP3,094,000 42 2.41
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Queen's Road,
Westhaven Merseyside Wirral GBP5,363,000 52 2.96
--------------- ------------------ ------------------------------------ --------------- ------ -----------
Old Chester
Whetstone Road, Great
Hey Cheshire Sutton GBP1,951,000 41 1.47
--------------- ------------------ ------------------------------------ --------------- ------ -----------
GBP152,154,
TOTAL 000 2,527
------------------------------------------------------------------------- ------------- ------ -----------
Note 1: County of England unless stated
Note 2: May 2017 unless stated
On 31 July, the board declared a fully covered dividend against adjusted earnings of 1.50p per share in respect of the period from 7 March to 30 June 2017.
Capital restructure
On 12 April 2017, an application to the High Court was successfully made for the reduction of GBP0.30 per share of the share premium account plus GBP3,000,000, which allowed the transfer of GBP46,851,708 to the capital reduction reserve (refer to note 8). This is a distributable reserve.
Asset management
Since the period end, the board has approved in principle, subject to financing, the first phase of the Group's asset management programme. This will see 92 beds added across three homes, which currently have 144 beds between them. The total cost is expected to be GBP7.9 million, with the projects targeted for completion between January 2018 and January 2019. The extra rooms are expected to increase rent on these three assets by GBP0.75 million or approximately 54%.
The Group has also identified opportunities to add a further 310 beds and is progressing its plans to do so. The programme is expected to take around three years to complete.
Impact Health Partners LLP
Investment Adviser
22 September 2017
PRINCIPAL RISKS
The prospectus issued in January 2017 set out the principal risks facing the business, which are summarised below. However, as we have a limited operating history, some risks may not yet be known and some that are currently deemed immaterial could later turn out to be material.
Property market risks
Investments in property are relatively illiquid. This may affect our ability to vary, dispose of or liquidate part of our portfolio in a timely fashion and at satisfactory prices, in response to changes in economic, real estate market or other conditions. This could have an adverse effect on our financial condition and results of operations, by reducing the profits and proceeds we realise.
Market conditions
Our investment objective allows us to invest in further assets, which may not be available on the terms required to generate our target returns (including the target dividend), or at all. Market conditions may also restrict the availability of investments and reduce our ability to identify and acquire suitable assets that would generate acceptable returns. Any delay in making investments will reduce our returns.
Several factors may affect our cash flows. These include:
-- adverse market conditions in the health care sector; -- our tenants' local authority clients insisting on more generous payment terms; and -- increased regulatory responsibility and associated costs to tenants.
These may all materially affect our tenants' covenant strength and their ability to pay rent, resulting in a higher risk of default.
Financial risks
We expect to borrow to fund our investment activities, which may expose us to interest rate risk (if left unhedged) and additional losses if the value of our investments falls.
We may be required to grant security in respect of any borrowings. This security may be over particular properties or over the portfolio as a whole, and will rank ahead of shareholders' entitlements. This means that if the Group were wound up, shareholders might not recover their initial investment.
If debt is not available on acceptable terms, we may be unable to progress investment opportunities as they arise or continue to grow in line with our strategy.
Corporate risk
As an externally managed company, we rely on the Investment Adviser's services and reputation to execute our strategy and support our day-to-day relationships. As a result, our performance will depend to some extent on the Investment Adviser's ability and the retention of its key staff.
Taxation risk
If we breach any of the REIT regulations, we could lose our REIT status and become subject to UK corporation tax.
Political and economic risk
The vote to leave the EU in June 2016 has resulted in political and economic uncertainty, which could have a negative effect on our performance.
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 as disclosed in note 9.
Shareholder information is as disclosed on the Impact Healthcare REIT plc website.
For and on behalf of the board
Rupert Barclay
Chairman
21 September 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period from 7 November 2016 to 30 June 2017
30 June
2017
(unaudited)
--------------------------- ------ -----------------------
Total
--------------------------- ------ -----------------------
Notes GBP'000
--------------------------- ------ -----------------------
Net rental income 7 2,247
--------------------------- ------ -----------------------
Administrative and
other expenses (736)
--------------------------- ------ -----------------------
Operating profit before
changes in fair value
of investment properties 1,511 --------------------------- ------ ----------------------- Changes in fair value of investment properties 7 1,471 --------------------------- ------ ----------------------- Operating profit 2,982 --------------------------- ------ ----------------------- Net finance costs - --------------------------- ------ ----------------------- Profit before tax 2,982 --------------------------- ------ ----------------------- Tax charge on profit 4 for the period - --------------------------- ------ ----------------------- Profit and comprehensive income (attributable to shareholders) 2,982 --------------------------- ------ ----------------------- Earnings per share - basic and diluted (pence) 6 1.95p
No operations were discontinued in the period.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
30 June
2017
(unaudited)
----------------------------- ------ --------------------
Notes GBP'000
----------------------------- ------ --------------------
Non-current assets
----------------------------- ------ --------------------
Investment property 7 154,767
----------------------------- ------ --------------------
Total non-current assets 154,767
----------------------------- ------ --------------------
Current assets
----------------------------- ------ --------------------
Trade and other receivables 17
----------------------------- ------ --------------------
Cash and cash equivalents 7,154
----------------------------- ------ --------------------
Total current assets 7,171
----------------------------- ------ --------------------
Total assets 161,938
----------------------------- ------ --------------------
Current liabilities
----------------------------- ------ --------------------
Trade and other payables (1,725)
----------------------------- ------ --------------------
Total liabilities (1,725)
----------------------------- ------ --------------------
Total net assets 160,213
----------------------------- ------ --------------------
Equity
----------------------------- ------ --------------------
Share capital 8 1,602
----------------------------- ------ --------------------
Share premium reserve 8 108,777
----------------------------- ------ --------------------
Capital reduction reserve 8 46,852
----------------------------- ------ --------------------
Retained earnings 2,982
----------------------------- ------ --------------------
Total equity 160,213
----------------------------- ------ --------------------
Net Asset Value per
ordinary share (pence) 10 100.03p
The unaudited condensed consolidated financial statements was approved and authorised for issue by the board of directors on 21 September 2017 and are signed on its behalf by:
Director
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period from 7 November 2016 to 30 June 2017
30 June
2017
(unaudited)
---------------------------- ------ -----------------------
for the period from
7 November 2016 to Notes GBP'000
---------------------------- ------ -----------------------
Cash flows from operating
activities
---------------------------- ------ -----------------------
Profit for the period
(attributable to equity
shareholders) 2,982
---------------------------- ------ -----------------------
Taxation -
---------------------------- ------ -----------------------
Less changes in fair
value of investment
properties 7 (1,471)
---------------------------- ------ -----------------------
Increase in trade and
other receivables (17)
---------------------------- ------ -----------------------
Increase in trade and
other payables 1,725
---------------------------- ------ -----------------------
Net cash flow from
operating activities 3,219
---------------------------- ------ -----------------------
Investing activities
---------------------------- ------ -----------------------
Purchase of investment
properties 7 (153,296)
---------------------------- ------ -----------------------
Net cash flow from
investing activities (153,296)
---------------------------- ------ -----------------------
Financing activities
---------------------------- ------ -----------------------
Proceeds from issue
of ordinary share capital 8 160,172
---------------------------- ------ -----------------------
Issue costs of ordinary
share capital 8 (2,941)
---------------------------- ------ -----------------------
Net cash flow from
financing activities 157,231
---------------------------- ------ -----------------------
Net increase in cash
and cash equivalents
for the period 7,154
---------------------------- ------ -----------------------
Cash and cash equivalents
at the start of the
period -
---------------------------- ------ -----------------------
Cash and cash equivalents
at the end of the period 7,154
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Capital
Share Share reduction Retained
capital premium reserve earnings Total
Notes (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
7 November
2016 - - - - -
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
Total
comprehensive
income - - - 2,982 2 ,982
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
Transactions
with owners
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
Issue of
management
shares 8 50 - - - 50
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
Cancellation
of management
shares 8 (50) - - - (50)
--------------- ------ ------------ ---------------- ------------------ ------------------- -----------------
Issue of
ordinary
shares 8 1,602 158,570 - - 160,172
--------------- ------ ------------ ---------------- ------------------ ------------------- ----------------- Share issue costs 8 - (2,941) - - (2,941) --------------- ------ ------------ ---------------- ------------------ ------------------- ----------------- Transfer to capital reduction reserve 8 - ( 46,852) 46,852 - - --------------- ------ ------------ ---------------- ------------------ ------------------- ----------------- 30 June 2017 1,602 108,777 46,852 2,982 160,213
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of Preparation
General information
These unaudited condensed consolidated financial statements for the period from incorporation on 7 November 2016 to 30 June 2017, 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, except for the requirement to include prior period comparatives as this is the Company's first financial period since incorporation.
The condensed consolidated financial statements have been prepared on a historical cost basis, except for investment properties which have been measured at fair value.
Convention
The consolidated condensed financial statements are presented in Sterling and all values are rounded to the nearest thousand (GBP'000), except when otherwise indicated.
Going concern
In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Group's business and assets, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
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.
a. Judgments
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.
Fair valuation of investment property
The value of investment property is determined by independent real estate valuation experts, to be the estimated amount for which a property should exchange on the date of the valuation in an arm's length transaction. Each property has been valued on an individual basis. The valuation experts use recognised valuation techniques in accordance with those recommended by the International Valuation Standard Committee and are compliant with IFRS 13.
The valuations have been prepared in accordance with the RICS Valuation - Professional Standards ("the Red Book"). Factors reflected include current market conditions, annual rentals, lease lengths, and location. The significant methods and assumptions used by the valuers in estimating the fair value of investment property are set out in note 7.
Gains or losses arising from changes in the fair values are included in the consolidated statement of comprehensive income in the year in which they arise. In order to avoid double accounting, 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 lease straight-lining assets or liabilities.
Business combinations
The Group acquires subsidiaries that own property. 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. 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.
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.
3. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these unaudited condensed consolidated financial statements are set out below.
Basis of consolidation
The Company holds 100% of the issued share capital in Impact Property 1 Limited ("Propco 1") and Impact Property 2 Limited ("Propco 2"). The Company and its subsidiaries, Propco 1 and Propco 2 (together "the Group") is a closed ended property investment group.
The condensed consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries drawn up to 30 June 2017. Subsidiaries are those entities, including special purpose entities, controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its investment with the investee and has the ability to affect those returns through its power over the investee. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Segmental information
The management are of the opinion that the Group is engaged in a single segment business, being the investment in the United Kingdom in healthcare assets.
Rental income
Rental income arising on investment properties is included in gross rental income in the Statement of Comprehensive Income and is accounted for on a straight line basis over the lease term. The resulting asset is reflected as a receivable or payable in the consolidated statement of financial position.
The valuation of investment properties is increased or reduced by the total of the unamortised lease incentive and straight line receivable or payable balances, where relevant. Any remaining balances in respect of properties disposed of are included in the calculation of the profit or loss arising at disposal.
The initial lease rental payments and guaranteed rental uplifts are spread evenly over the lease term, even if payments are not made on such a basis. The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.
Income and expenses
Income and expenses are accounted for on an accruals basis. The Group's income and expenses are charged through the condensed consolidated statement of comprehensive income.
Taxation
The Group is a REIT and is therefore exempt from tax, subject to the Group maintaining its REIT status.
Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and deferred tax. Taxation is recognised in the unaudited condensed consolidated statement of comprehensive income, except to the extent that it relates to items recognised as direct movements in equity, in which case it is also recognised as a direct movement in equity.
Current tax is the expected tax payable on any non-REIT taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date.
Investment properties
Investment properties consist of land and buildings (principally care homes) which are held to earn rental income and for its capital growth potential.
Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property.
After initial recognition, investment properties are measured at fair value, with gains and losses recognised in the statement of comprehensive.
Gains and losses on disposals of investment properties are determined as the difference between net disposal proceeds and the carrying value of the asset. These are recognised in the statement of comprehensive income in the year in which they arise.
Cash and cash equivalents
Cash and cash equivalents include cash at bank.
Share premium
The surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are deducted from this account. The reserve is non-distributable.
Capital reduction reserve
On 12 April 2017, an application to the High Court was successfully made for the reduction of GBP0.30 per share of the share premium account plus GBP3,000,000 which allowed the transfer of GBP46,851,708 to the capital reduction reserve (refer to note 8). This is a distributable reserve.
4. 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 2017, the Group did not have any non-qualifying profits and accordingly there is no tax charge in the period. Any non-qualifying profits and gains however will continue to be subject to corporation tax.
5. Dividends
No dividends were declared and paid as distribution to equity shareholders during the period.
On 31 July 2017, the Company declared a fully covered dividend of 1.50 p per ordinary share (GBP2.4 million in total) for the period to 30 June 2017. This dividend was a Property Income Distribution ("PID") and paid on 31 August 2017.
6. 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.
The Number of ordinary shares is based on the time weighted average number of ordinary shares in issue from the date of the Initial Public Offering (IPO) to 30 June 2017. This excludes the period from 7 November 2016 to 7 March 2017 when the Group was dormant. The IPO took place on 7 March 2017 and included the issue of 146,172,360 shares. Subsequently an issue of 14,000,000 shares took place on 5 May 2017 as part of the acquisition of the seed portfolio. The Weighted average number of shares for the period has been calculated as 152,989,751.
30 June 2017
for the period from 7 November
2016 to (unaudited)
-------------------------------- --- --- --- --------------------
Total
-------------------------------- --- --- --- --------------------
Net attributable to ordinary
shareholders
-------------------------------- --- --- --- --------------------
Total comprehensive income
(GBP'000) 2,982
----------------------------------------------- --------------------
Average number of ordinary
shares 152,989,751
----------------------------------------------- --------------------
Basic and diluted earnings
per share (pence)(1) 1.95p
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 revaluation movements on investment properties.
EPRA earnings have been adjusted to exclude the effect of straight lining of rental income in order for the board to consider the level of cash covered dividend. The upfront initial lease rental payment received for the period between incorporation and the portfolio acquisition results in an uplift in the current period.
The reconciliations are provided in the table below:
30 June
2017
for the period from 7 November
2016 to (unaudited)
------------------------------------------- --- --- --------------------------
Total
------------------------------------------- --- --- --------------------------
GBP'000
------------------------------------------- --- --- --------------------------
Net attributable to ordinary shareholders
------------------------------------------- --- --- --------------------------
Total comprehensive income 2,982
----------------------------------------------------- --------------------------
Adjusted for:
------------------------------------------- --- --- --------------------------
Change in fair value of investment
property during the period (113)
----------------------------------------------------- --------------------------
Rental income arising from recognising
guaranteed rent uplifts and initial
lease rental payment (1,358)
----------------------------------------------------- --------------------------
EPRA earnings 1,511
----------------------------------------------------- --------------------------
Adjusted for:
------------------------------------------- --- --- --------------------------
Rental income arising from recognising
guaranteed rent uplifts and initial
lease rental payment 1,358
----------------------------------------------------- --------------------------
Adjusted EPRA earnings 2,869
----------------------------------------------------- --------------------------
Average number of Ordinary shares 152,989,751
----------------------------------------------------- --------------------------
Earnings per share (pence)(1) 1.95p
----------------------------------------------------- --------------------------
EPRA basic and diluted earnings
per share (pence)(1) 0.99p
----------------------------------------------------- --------------------------
Adjusted EPRA basic and diluted
earnings per share (pence)(1) 1.88p
1 There is no difference between basic and diluted earnings per share
7. Investment property
In accordance with IAS 40: Investment Property, the properties have been independently fair valued by Cushman & Wakefield, an accredited independent valuer with a recognised and relevant professional qualification and with recent experience in the locations and categories of the investment property being valued. The valuations have been prepared in accordance with the RICS Valuation - Professional Standards ("the Red Book"). The valuers have sufficient current local and national knowledge of the particular property markets involved, and have the skills and understanding to undertake the valuations competently.
The valuation models prepared in accordance with those recommended by the International Valuation Standards Committee have been applied and are consistent with the principles in IFRS 13.
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 have been treated as asset purchases rather than business combinations because they are considered to be acquisitions of properties rather than businesses.
Total(1)
(unaudited)
---------------------------------- --- --- --- --------------------------
GBP'000
---------------------------------- --- --- --- --------------------------
Opening value -
---------------------------------- --- --- --- --------------------------
Property additions 152,154
------------------------------------------------- --------------------------
Acquisition costs capitalised 1,142
------------------------------------------------- --------------------------
Revaluation movement 113
------------------------------------------------- --------------------------
Closing value per independent
valuation report 153,409
------------------------------------------------- --------------------------
Guaranteed rent reviews and
initial lease rental payment
movement 1,358
------------------------------------------------- --------------------------
Closing fair value per condensed
consolidation statement of
financial position 154,767
1 Investment properties include freehold and long leasehold properties
During the period, the Group successfully acquired 57 properties with 2,527 beds. The acquisition of the seed portfolio of 56 care homes completed on 4 May 2017, for total consideration of GBP148.75 million. On 29 June the Group acquired Saffron Court for GBP3.4 million.
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:
30 June
2017
(unaudited)
------------------------------------ --- --- --- -------------
GBP'000
------------------------------------ --- --- --- -------------
Revaluation movement 113
--------------------------------------------------- -------------
Guaranteed rent reviews and
initial lease rental payment
movement 1,358
--------------------------------------------------- -------------
Change in fair value of investment
properties 1,471
The guaranteed rent review and initial lease rental payment, is the adjustment to rental receipts for the period to reflect the total minimum income recognised over the expected lease terms on a straight line basis. During the period, the Group benefited from an upfront premium to reflect a rent calculation from the date of admission. For accounting purposes, this premium is being reflected over the term of the lease. In addition, the Group benefits from a minimum annual rental uplift of 2% on all leases. For accounting purposes these uplifts are also incorporated to recognise income on a straight line basis. The elements are reporting in the table below.
30 June
2017
(unaudited)
------------------------------------------ --- --- --- -------------
for the period from 7 November
2016 to GBP'000
------------------------------------------ --- --- --- -------------
Net rental income cash received
in the period 3,605
--------------------------------------------------------- -------------
Rent received in advance of
recognition(1) (1,756)
--------------------------------------------------------- -------------
Rent recognised in advance
of receipt(2) 398
--------------------------------------------------------- -------------
Guaranteed rent reviews and
initial lease rental payment (1,358)
--------------------------------------------------------- -------------
Net rental income per condensed
consolidated statement of comprehensive
income 2,247
--------------------------------------------------------- -------------
1 Rent received in relation to the period from admission to acquisition, deemed to be a premium over the term of the leases of the seed acquisition portfolio
2 Rent recognised in the period to reflect the minimum 2% uplift in rents over the term of the lease on a straight line basis
Descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining fair values are as follows:
Valuation techniques used to derive fair values
The valuations have been prepared on the basis of Market value which is defined in the RICS Valuation Standards as "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion." Market value as defined by RICS Valuation Standards is the equivalent of fair value under IFRS.
Unobservable inputs
These include: estimated rental value ("ERV") based on market conditions prevailing at the valuation date; estimated average increase in rent based on both market estimations and contractual situations; equivalent yield (defined as the weighted average of the net initial yield and reversionary yield); and the physical condition of the property determined by inspections on a rotational basis. A decrease in the ERV would decrease fair value. A decrease in the equivalent yield would increase the fair value. An increase in the remaining lease term would increase the fair value.
Sensitivity of measurement of significant unobservable inputs
Initial yields range from 5.50% to 9.00% across the portfolio.
A 0.25% shift of the valuation yield would have approximately a GBP5.2 million impact on the investment property valuation. A 1% movement in the rental income would have approximately a GBP1.5 million impact on the investment property valuation.
8. Share capital, Share premium and Capital reduction reserve
Capital
Shares Share Share reduction
in issue capital premium reserve Total
-------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Number GBP'000 GBP'000 GBP'000 GBP'000
-------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
As at 7
November
2016 - - - - -
-------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Issue of
management
shares 50,002 50 - - 50
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Cancellation
of management
shares (50,000) (50) - - (50)
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Shares issued
7 March 2017 146,172,358 1,462 144,710 - 146,172
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Shares issued
5 May 2017 14,000,000 140 13,860 - 14,000
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Share issue
costs - - (2,941) - (2,941)
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
160,172,360 1,602 155,629 - 157,231
-------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
Transfer to
capital
reduction
reserve - - (46,852) 46,852 -
--------------- ------------------------- ----------------------- ----------------------- ----------------------- --------------------------
As at 30 June
2017
(unaudited) 160,172,360 1,602 108,777 46,852 157,231
On 7 March 2017 Impact Healthcare REIT PLC raised GBP143.2 million net of share issue costs through its IPO and the ordinary shares issued had been admitted to trading on the specialist fund segment of the main market of the London Stock Exchange. The company's ticker symbol is (IHR). The initial raising by the company involved the issue of 146,172,360 ordinary shares to the relevant subscriber at a price of 100p per ordinary share.
The consideration received in excess of the par value of shares issued (net of total expenses of issue) of GBP141,793,095, was credited to the share premium account.
On 12 April 2017, an application to the High Court by Special Resolution was successfully made for the capital of the Company to be reduced by the reduction of the share premium account by an amount equal to 30p multiplied by the number of ordinary shares in issue immediately following Admission plus GBP3,000,000. This was affected by a transfer to the Capital Reduction Reserve.
On 5 May 2017, the Company issued a further 14,000,000 Ordinary Shares at a price of 100p per ordinary share raising gross proceeds of GBP14 million. This increased the total number of ordinary shares in the Company in issue to 160,172,360. The consideration received in excess of the par value of shares issued of GBP13,860,000, was credited to the share premium account.
9. Transactions with related parties
Investment adviser
The fees calculated and paid for the period to the Investment adviser were as follows:
30 June
2017
(unaudited)
-------------------------------- --- --- -------------
for the period from 7 November
2016 to GBP'000
-------------------------------- --- --- -------------
Impact Health Partners LLP 547
Mr Patel and Mr Cowley are principals of Impact Health Partners LLP, the investment adviser, and own 6.25% and 0.37% respectively (either directly or through a wholly-owned company) of the total issued ordinary share capital of the Company. Mr Patel also (directly and indirectly) holds a majority 72.5% stake in Minster Care Group Limited (MCGL), the company which was established to be the holding company of each of the initial tenants to which the Company leased the seed portfolio upon completion of the acquisition of the seed portfolio. Mr Cowley also holds a 20% interest in MCGL. 100% of the rental income is received from MCGL. There were no trade receivables or payables outstanding at the period end.
In addition, prior to the acquisition of the seed portfolio, Mr Patel was a beneficial owner of the seed portfolio so he became entitled to a share of the total consideration payable by the Company on the acquisition of the seed portfolio.
Directors' interest
Paul Craig is a director of the Company. He is also the portfolio manager at Old Mutual Global Investors, which has an interest in 34,500,000 ordinary shares of the Company through funds under management. The remaining directors do not hold significant interest in the ordinary share capital of the Company.
10. Net Asset Value (NAV) per share
Basic NAV per share is calculated by dividing net assets in the statement of financial position attributable to ordinary equity holders of the parent by the number of Ordinary Shares outstanding at the end of the period. As there are no dilutive instruments outstanding, basic and diluted NAV per share are identical.
EPRA has issued guidelines aimed at providing a measure of net asset value on the basis of long term fair values. There are no adjustments between basic and EPRA NAV.
30 June
2017
(unaudited)
-------------------------------------- --- --- -------------
GBP'000
-------------------------------------- --- --- -------------
Net assets per unaudited condensed
consolidated statement of financial
position 160,213
------------------------------------------------ -------------
Adjustments -
-------------------------------------- --- --- -------------
EPRA NAV 160,213
------------------------------------------------ -------------
Issued share capital (number) 160,172,360
------------------------------------------------ -------------
Basic and EPRA NAV per share 100.03p
The NAV per share after the post balance sheet dividend, for the period (1.5 pence per share) is 98.53p
11. Subsequent events
On 31 July 2017, the Company declared a fully covered dividend of 1.50p per ordinary share for the period to 30 June 2017. This dividend was a Property Income Distribution ("PID") and paid on 31 August 2017.
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 interim financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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September 22, 2017 02:00 ET (06:00 GMT)
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