TIDMTHRL
RNS Number : 8088R
Target Healthcare REIT Limited
05 March 2019
To: RNS Company Announcements
Date: 5 March 2019
Company: Target Healthcare REIT Limited
LEI: 2138008VQQ5Y9QXMX749
Subject: Interim Report and Financial Statements for the six months ended
31 December 2018
Significant investment activity delivering further portfolio
diversification in the structurally compelling care home sector
Target Healthcare REIT Limited (the "Company" or the "Group"),
the listed specialist investor in modern, purpose-built UK care
homes, is pleased to announce its results for the six months to 31
December 2018.
Financial Highlights
-- EPRA NAV per share up 1.1% to 106.9 pence (2018: 105.7 pence)
-- 4.2% EPRA NAV total return (2017: 5.7%)
-- 22.1% increase in Group specific adjusted EPRA earnings(1) to
GBP9.5 million (2017: GBP7.8 million)
-- Dividend increased by 2.0% to 3.2895 pence in respect of the
period (2017: 3.225 pence), underpinned by investment programme and
portfolio rental uplift
-- Group loan-to-value (LTV), based on gross debt, of 15.3% (2018: 17.1%)
-- Group loan-to-value (LTV), based on net debt, of 9.1% (2018: 6.4%)
-- GBP50 million of equity raised in November 2018 and GBP40
million increase to debt facilities secured after the period
end
Portfolio Highlights
-- Total portfolio value of GBP464 million (2018: GBP386
million), comprising 61 assets, including 2.8% increase in
like-for-like value of operational portfolio
-- Agreements during the period to acquire seven assets, a mix
of operational homes and forward fund developments, for a total
commitment of GBP81.8 million (including costs), acquired at yields
representative of assets of similar standard and location within
the Group's existing portfolio
-- 7.9% increase in contractual rent to GBP28.0 million (2018: GBP26.0 million)
-- 1.3% like-for-like increase in portfolio passing rent (2017: 1.3%)
-- 21 current tenants, which will increase to 26 upon completion
of developments and commitments to acquire properties
-- Weighted average unexpired lease term ('WAULT') steady at 28.5 years (2018: 28.5 years)
Market Outlook
-- Favourable demand supply dynamics supporting both investor
and operator activity in the sector, with the number of people aged
65 or over in England forecast to increase by 65 per cent in the
next 25 years
-- Company's acute focus on best in class, purpose-built homes
with full ensuite wetrooms, remains an attractive differentiator.
Sector wide, over 75% of UK care home rooms do not currently offer
ensuite wetrooms
Unless otherwise stated in the above, references to 2017 mean
the comparative six month period to 31 December 2017 and references
to 2018 mean 30 June 2018, being the start of the period under
review.
(1) For the details of adjusted earnings refer to note 4 to the
Condensed Consolidated Financial Statements.
Malcolm Naish, Chairman of the Company, said:
"Consistent with our belief in the medium to long-term future
undersupply of the type of home we invest in, we agreed during the
period to acquire four new development assets, two operating assets
and signed an agreement to acquire a home at construction
completion. These further complement our existing diversification
by tenant, geography and end-user payment profile. The long-term,
stable nature of the returns anticipated from our portfolio, when
allied with the Group's revised fee arrangements and flexible
capital structure, should enhance earnings and allow the Group to
fully cover the progressive dividend it anticipates delivering to
shareholders."
Enquiries:
Target Fund Managers Limited
Kenneth MacKenzie, Gordon Bland 01786 845 912
Stifel Nicolaus Europe Limited
Mark Young, Neil Winward, Tom Yeadon 020 7710 7600
----------------
FTI Consulting
Dido Laurimore, Claire Turvey, Richard
Gotla 020 3727 1000
----------------
Chairman's Statement
During the first half of the year we have continued to grow the
portfolio while delivering strong financial performance and without
compromising on our quality criteria and care ethos. The November
2018 equity issuance and March 2019's doubling of one of our
existing debt facilities strengthen the Group's balance sheet and
provide further headroom for acquisitions; we are currently very
active on potential transactions with a number of deals in the late
stages of our investment process. We remain grateful to
shareholders and lenders for their ongoing support.
Group performance & dividend
Underlying profits, measured by adjusted EPRA earnings, have
increased by 22.1% to GBP9.5 million (2017: GBP7.8 million), being
2.69 pence (2017: 3.08 pence) on an Earnings per Share basis. EPRA
NAV per share has increased by 1.1% to 106.9 pence (30 June 2018:
105.7 pence per share), contributing to a NAV total return of 4.2%
(2017: 5.7%).
We have increased quarterly dividends by 2.0% to 1.64475 pence
per share, with the first interim dividend for the year having been
paid in November 2018, in respect of the quarter to September 2018.
Dividend cover(1) for the six months was 80%, with November's
equity issuance yet to be fully reflected in earnings. The Company
continues to be fully focused on investing all its available
capital and has a strong pipeline of near-term opportunities
expected to facilitate this.
Financing & Portfolio growth
Share price total return for the period was (0.3%) with a
current dividend yield of 5.7% based on the 4 March 2019 price. The
Board was pleased and encouraged by the support from both existing
shareholders and new investors for the GBP50 million equity
issuance completed in November 2018.
Subsequent to the period end, a further GBP40 million of
flexible debt has been secured by doubling the size of the Group's
revolving credit facility with HSBC, taking the Group's total debt
facilities available from its three lenders to GBP170 million. The
funds will be drawn as required and, alongside remaining equity,
are allocated to portfolio commitments and further pipeline
acquisitions which are in due diligence.
Group LTV at the period end stood at 9.1% and 15.3% on a net and
gross basis respectively. Full drawdown and deployment of the
Group's available debt would see LTV increase to c.28% on a net and
gross basis. The Group's weighted average cost on its drawn debt,
inclusive of amortisation of arrangement costs, is 3.09% with a
weighted average term to expiry of 2.8 years. The Group continues
to closely monitor its debt profile and is exploring opportunities
to broaden its lender relationships whilst ensuring facilities
remain competitively priced.
Market opportunity & Outlook
We continue to invest in modern, purpose-built properties,
offering residents en suite wet-rooms as well as well-designed
public areas in which to dine, socialise and welcome guests. We
remain selective in our investment choices, only placing
shareholder capital in good quality homes, which we believe are
significantly under-supplied in the market, with few signs that
this will change in the immediate future.
Consistent with our belief on undersupply of the type of home we
invest in, we are currently supporting construction of eight homes,
having seen one such project complete during the period. These
brand-new homes will, when complete during 2019, provide an
additional GBP5.3 million of annual rent, five new tenants and will
be spread across five IPD regions. This will also increase the
number of appropriate standard beds available to residents in their
local markets.
We acquired four new development assets and two operational
homes, and signed an agreement to acquire a home at construction
completion, during the period. Purchase yields are representative
of assets of similar standard and location within the Group's
existing portfolio. The portfolio currently comprises 61 assets,
inclusive of 54 operational homes which are let to 21 tenants at a
contractual annualised rent of GBP28.0 million. The WAULT remains
long duration at 28.5 years, one of the longest available in the
REIT sector.
We design our portfolio to provide long-term sustainable income
for shareholders. Diversification by tenant, geography and end-user
payment profile is fundamental to this, as is our role as an
engaged landlord in managing the portfolio. Our experience and
specialist sector knowledge, including a proprietary in-house
research function which is critical to this asset class, provide
the insight that allows us to support our tenants and make the
right investment decisions.
The long-term, stable nature of the returns anticipated from
these assets, when allied with the Group's revised fee arrangements
and flexible capital structure, should enhance earnings and allow
the Group to fully cover the progressive dividend it anticipates
delivering to shareholders.
Malcolm Naish
Chairman
4 March 2019
(1) Based on adjusted earnings, please refer to note 4 of the
Condensed Consolidated Financial Statements
Investment Manager's Report
Portfolio Review
The Group's portfolio of 61 assets was valued at GBP463.9
million at 31 December 2018. The 54 operational homes were let to
21 tenants, providing 3,725 beds for residents, and generating a
contractual rent of GBP28.0 million per annum. The EPRA topped-up
net initial yield was 6.32% and the EPRA net initial yield was
5.64%.
The portfolio market value has increased by 20.3% in the period.
Of this 17.5% is due to new acquisitions and further investment
into developments, with a positive like-for-like movement in the
operational portfolio of 2.8% which reflects both the impact of
inflation-linked rent reviews and market yield shift.
The contractual rent roll has increased by 7.9% in the period,
comprising a 6.6% increase from acquisitions and completed
development sites as well as a 1.3% like-for-like increase from the
Group's upwards-only annual rent reviews.
The WAULT has remained steady at 28.5 years as the effect of
some existing lease extensions and new assets subject to the
Group's typical lease term of 30/35 years counteracts the passage
of time on the existing portfolio.
The portfolio total return(2) for the period was 6.3% (12.8% for
the 2018 calendar year), maintaining its stable performance since
IPO.
In the six months to 31 December 2018, two new trading assets
and four new development sites were acquired as well as an exchange
of contracts to acquire a further pre-let care home for a combined
total consideration of GBP81.8 million, including transaction costs
and future development works. One of the development sites acquired
in the period reached practical completion, with the lease
commencing in December 2018 and the home opening in early January
2019.
In line with the Group's ethos of being an engaged landlord, the
Manager has continued to work closely with individual tenants,
maintaining our bi-annual inspections of each property, in order to
maintain oversight and shape our pro-active asset management
activities. By way of examples, since the start of the period the
Manager has:
-- Re-tenanted a challenging home to a new, regional operator
(previously an SPV tenant), with the lease length significantly
extended and now supported by a parent company guarantee;
-- Extended the lease at a home which is performing well by a further 8 years;
-- Transferred the pre-agreement for lease at one of the
development sites to a new operator, following potential cash flow
challenges facing the initially intended tenant; and
-- Engaged with one of our tenants who took the decision to
close a home following compliance challenges, whilst they consider
how best to reposition the home (rent has continued to be paid in
full since closing).
Overall, the vast majority of assets in the portfolio continue
to perform well with all properties having maintained or increased
in value during the period. As reported previously, with any
portfolio of scale there is the potential for trading challenges to
arise on individual assets. The Manager continues to address such
instances with due care and sensitivity.
UK Care home investment market
Appetite for Healthcare property remains buoyant, with continued
interest in what is perceived to be a defensive, 'needs-led' asset
class, particularly in the type of modern real estate in which we
invest and one that we believe is less vulnerable to any short-term
macro uncertainty than many more traditional asset classes. Yields
remain lower than historical averages, with institutional investors
attracted by the typical long lease term and the supportive
demand/supply imbalances. However, this sector is slowly changing,
with progressive operators sensing that families are becoming more
discerning when it comes to choosing a place for themselves or
their loved one. This is why we focus on best in class operators,
benefitting from purpose-built homes with full en suite wet-rooms,
which are surprisingly missing in over 75% of UK carehomes.
Health and social care
Recent discussions and analysis in the sector have focused
around the triumvirate of demand for care beds from an ageing
population, the question of who pays for care, and the politics
surrounding strategic planning for health and social care provision
and regulation thereof.
Demand: This continues to increase. Population studies indicate
projections of most coastal local authorities across the UK having
a population aged 65+ of more than 30% by 2025 and virtually all
having this proportion by 2037. West Somerset has already reached
the 30% mark and also expects to have the highest number of over
85s in the UK by 2036, a record currently held by Christchurch in
Dorset with 5.6% of its population. Significantly the Local
Government Association has stated that 'The number of people aged
65 or over in England will increase by 65 per cent in the next 25
years'.
Politics: As the Social Care Sector awaits the ever-delayed
Green Paper, demand for care continues to grow. There were a
reported 5,100 requests for care related help in England every day
over the last year, nearly three quarters of these were from
pensioners. Four million are said to be 'failed' by the system.
There is talk of growing injustice, not least by the English Care
Regulator (CQC), and it comes as no surprise that the number of
self-funders is on the increase, with people forced to 'buy' their
own care as Local Authorities are rationed by budget
constraints.
Money makes the world go around of course, and the dilemma for
the state is how to fund an ever-growing stream of pensioners
requiring various forms of care, and how far to go in persuading
this (voting) cohort to perhaps consider funding themselves. (No
doubt a headache delaying the Green Paper.)
Operation: Carehome operators watch and plan with interest. It
is no longer a simple business to be in. Regulation is rightly
tougher and more robust than a decade ago, new entrants to the
sector require deep resources and good advisers. Even the best
operators will have hiccups; reputational damage is a constant
concern. But it remains a sector which will require extensive
ongoing investment, smaller homes (often family run) are slipping
in increasing numbers from the market, and quality modern
successors are desperately required. Progressive operators and
their experienced investors such as Target will navigate through
the furore of funding woes, Brexit, and not least, 'lost' Green
Papers.
Target Fund Managers Limited
Investment Manager
4 March 2019
(2) Accounting basis, operational assets held over the relevant
calculation period.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2018
Six months ended Six months ended
31 December 2018 31 December 2017
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Revenue
Rental income 13,277 2,903 16,180 10,682 3,200 13,882
Total revenue 13,277 2,903 16,180 10,682 3,200 13,882
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Gains on revaluation
of investment properties 6 - 3,346 3,346 - 3,829 3,829
Total income 13,277 6,249 19,526 10,682 7,029 17,711
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Expenditure
Investment management
fee 2 (2,396) - (2,396) (1,427) - (1,427)
Performance fee 2 - - - (396) - (396)
Other expenses (770) - (770) (749) - (749)
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Total expenditure (3,166) - (3,166) (2,572) - (2,572)
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Profit before finance
costs and taxation 10,111 6,249 16,360 8,110 7,029 15,139
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Net finance costs
Interest receivable 55 - 55 34 - 34
Interest payable
and similar charges (1,471) - (1,471) (781) - (781)
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Profit before taxation 8,695 6,249 14,944 7,363 7,029 14,392
Taxation 3 - - - (1) (1) (2)
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Profit for the period 8,695 6,249 14,944 7,362 7,028 14,390
Other comprehensive
income:
Items that are or
may be reclassified
subsequently to profit
or loss
Movement in valuation
of interest rate
swaps - 1 1 - 75 75
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Total comprehensive
income for the period 8,695 6,250 14,945 7,362 7,103 14,465
--------------------------- ------ --------- -------- --------- -------- -------- ---------
Earnings per share
(pence) 4 2.47 1.77 4.24 2.92 2.79 5.71
--------------------------- ------ --------- -------- --------- -------- -------- ---------
The total column of this statement represents the Group's
Condensed Consolidated Statement of Comprehensive Income, prepared
in accordance with IFRS as adopted by the European Union. The
supplementary revenue return and capital return columns are both
prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in the above statement are derived
from continuing operations.
No operations were discontinued in the period.
Condensed Consolidated Statement of Financial Position
As at 31 December 2018
As at As at
31 December 30 June
2018 2018
(unaudited) (audited)
Notes GBP'000 GBP'000
Non-current assets
Investment properties 6 438,420 362,918
Trade and other receivables 30,500 27,139
------------------------------------ ------ ------------- -----------
468,920 390,057
------------------------------------ ------ ------------- -----------
Current assets
Trade and other receivables 6,093 3,365
Cash and cash equivalents 28,814 41,400
------------------------------------ ------ ------------- -----------
34,907 44,765
------------------------------------ ------ ------------- -----------
Total assets 503,827 434,822
------------------------------------ ------ ------------- -----------
Non-current liabilities
Bank loans 8 (69,466) (64,182)
Interest rate swaps 8 (114) (115)
Trade and other payables (5,017) (4,558)
------------------------------------ ------ ------------- -----------
(74,597) (68,855)
------------------------------------ ------ ------------- -----------
Current liabilities
Trade and other payables (17,808) (7,360)
------------------------------------ ------ ------------- -----------
Total liabilities (92,405) (76,215)
------------------------------------ ------ ------------- -----------
Net assets 411,422 358,607
------------------------------------ ------ ------------- -----------
Stated capital and reserves
Stated capital account 9 376,627 330,436
Hedging reserve (114) (115)
Capital reserve 30,632 24,383
Revenue reserve 4,277 3,903
------------------------------------ ------ ------------- -----------
Equity shareholders' funds 411,422 358,607
------------------------------------ ------ ------------- -----------
Net asset value per ordinary share
(pence) 4 106.8 105.7
------------------------------------ ------ ------------- -----------
Condensed Consolidated Statement of Changes in Equity
For the six months ended 31 December 2018 (unaudited)
Stated
capital Hedging Capital Revenue
account Reserve Reserve Reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 30 June 2018 330,436 (115) 24,383 3,903 358,607
Total comprehensive income
for the period: - 1 6,249 8,695 14,945
Transactions with owners
recognised in equity:
Dividends paid 5 (2,728) - - (8,321) (11,049)
Issue of ordinary shares 9 50,000 - - - 50,000
Expenses of issue 9 (1,081) - - - (1,081)
---------------------------- ----- --------- ---------- ---------- ---------- ---------
As at 31 December 2018 376,627 (114) 30,632 4,277 411,422
---------------------------- ----- --------- ---------- ---------- ---------- ---------
For the six months ended 31 December 2017 (unaudited)
Stated
capital Hedging Capital Revenue
account Reserve Reserve Reserve Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 30 June 2017 241,664 (9) 11,616 3,666 256,937
Total comprehensive
income for the period: - 75 7,028 7,362 14,465
Transactions with owners
recognised in equity:
Dividends paid 5 (769) - - (7,257) (8,026)
As at 31 December 2017 240,895 66 18,644 3,771 263,376
-------------------------- ----- --------- ---------- ---------- ---------- ---------
Condensed Consolidated Cash Flow Statement
For the six months ended 31 December 2018
Six months Six months
ended ended
31 December 31 December
2018 2017
(unaudited) (unaudited)
Notes GBP'000 GBP'000
------------------------------------------- ------- ------------- -------------
Cash flows from operating activities
Profit before tax 14,944 14,392
Adjustments for:
Interest receivable (55) (34)
Interest payable 1,471 781
Revaluation gains on property portfolio
and movements in lease incentives,
net of acquisition costs written
off 6 (6,249) (7,029)
(Increase)/decrease in trade and
other receivables (1,963) 8,809
Increase in trade and other payables 200 1,252
-------------------------------------------- ------ ------------- -------------
8,348 18,171
-------------------------------------------- ------ ------------- -------------
Interest paid (1,073) (463)
Interest received 55 34
Tax refunded/(paid) 14 (201)
-------------------------------------------- ------ ------------- -------------
(1,004) (630)
-------------------------------------------- ------ ------------- -------------
Net cash inflow from operating activities 7,344 17,541
-------------------------------------------- ------ ------------- -------------
Cash flows from investing activities
Purchase of investment properties,
including acquisition costs (62,938) (45,391)
Net cash outflow from investing
activities (62,938) (45,391)
-------------------------------------------- ------ ------------- -------------
Cash flows from financing activities
Issue of ordinary share capital 9 50,000 -
Expenses of issue paid (951) -
Bank loans drawn down 8 38,500 41,000
Costs of arranging bank loan facility - (810)
Bank loans repaid 8 (33,500) -
Dividends paid (11,041) (7,902)
-------------------------------------------- ------ ------------- -------------
Net cash inflow from financing activities 43,008 32,288
-------------------------------------------- ------ ------------- -------------
Net (decrease)/increase in cash
and cash equivalents (12,586) 4,438
Opening cash and cash equivalents 41,400 10,410
-------------------------------------------- ------ ------------- -------------
Closing cash and cash equivalents 28,814 14,848
-------------------------------------------- ------ ------------- -------------
Transactions which do not require the
use of cash
Movement in fixed or guaranteed rent
reviews and lease incentives 2,881 3,769
--------------------------------------- ------ ------
Notes to the Condensed Consolidated Financial Statements
1. Basis of Preparation
The condensed consolidated financial statements have been
prepared in accordance with IAS 34 'Interim Financial Reporting'
and the accounting policies set out in the statutory financial
statements of the Group for the year ended 30 June 2018, except for
the adoption of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue
from Contracts with Customers' which have not had a material impact
on these condensed consolidated financial statements for the
reasons explained in the consolidated financial statements of the
Group for the year ended 30 June 2018. The condensed consolidated
financial statements do not include all of the information required
for a complete set of IFRS financial statements and should be read
in conjunction with the consolidated financial statements of the
Group for the year ended 30 June 2018, which were prepared under
full IFRS requirements.
Going concern
The condensed consolidated financial statements have been
prepared on the going concern basis. 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. Investment Management Fee
For the six month For the six month
period ended period ended
31 December 2018 31 December 2017
GBP'000 GBP'000
--------------------- ------------------ ------------------
Base management fee 2,396 1,427
Performance fee - 396
--------------------- ------------------ ------------------
Total 2,396 1,823
--------------------- ------------------ ------------------
All amounts are inclusive of irrecoverable VAT.
The Group's Investment Manager and Alternative Investment Fund
Manager ('AIFM') is Target Fund Managers Limited (the 'Investment
Manager' or 'Target'). The Investment Manager was entitled to an
annual base management fee of 0.90 per cent. of the net assets of
the Group and an annual performance fee calculated by reference to
10 per cent. of the outperformance of the Group's portfolio total
return relative to the IPD UK Annual Healthcare Index ('the
Index'). The maximum amount of total fees payable by the Group to
the Investment Manager was limited to 1.25 per cent. of the average
net assets of the Group over a financial year.
With effect from 1 July 2018, the Investment Manager was
entitled to an annual base management fee on a tiered basis based
on the net assets of the Group as set out below. No performance fee
is payable for any period commencing after 1 January 2018.
Net assets of the Group Management fee percentage
Up to and including GBP500 million 1.05
Above GBP500 million and up to and including
GBP750 million 0.95
Above GBP750 million and up to and including
GBP1 billion 0.85
Above GBP1 billion and up to and including
GBP1.5 billion 0.75
Above GBP1.5 billion 0.65
----------------------------------------------- --------------------------
The Investment Management Agreement can be terminated by either
party on twelve months' written notice. Should the Company
terminate the Investment Management Agreement earlier then
compensation in lieu of notice will be payable to the Investment
Manager. The Investment Management Agreement may be terminated
immediately without compensation if: the Investment Manager is in
material breach of the agreement; guilty of negligence, wilful
default or fraud; is the subject of insolvency proceedings; or
there occurs a change of Key Managers to which the Board has not
given its prior consent.
3. Taxation
The Directors intend to conduct the Company's affairs such that
management and control is exercised in the United Kingdom and so
that the Company carries on any trade in the United Kingdom.
The Company has entered the REIT regime for the purposes of UK
taxation. Subject to continuing relevant UK-REIT criteria being
met, the profits from the Group's property rental business, arising
from both income and capital gains, are exempt from corporation
tax.
4. Earnings per Share and Net Asset Value per share
The European Public Real Estate Association ('EPRA') is an
industry body which issues best practice reporting guidelines and
the Group reports an EPRA NAV quarterly. EPRA has issued best
practice recommendations for the calculation of certain figures
which are included below.
Earnings per share
For the six month For the six month
period ended period ended
31 December 2018 31 December 2017
Pence per Pence per
GBP'000 share GBP'000 share
-------------------------- ---------- ------------ ---------- ------------
Revenue earnings 8,695 2.47 7,362 2.92
Capital earnings 6,249 1.77 7,028 2.79
Total earnings 14,944 4.24 14,390 5.71
-------------------------- ---------- ------------ ---------- ------------
Average number of shares
in issue 352,680,194 252,180,851
-------------------------- ---------- ------------ ---------- ------------
The EPRA earnings are arrived at by adjusting for the
revaluation movements on investment properties and other items of a
capital nature and represents the revenue earned by the Group. The
Group's specific adjusted EPRA earnings adjusts the EPRA earnings
for the performance fee, where applicable, and for development
interest in respect of forward fund agreements.
The reconciliations are provided in the table below:
For the six For the six
month period month period
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------ -------------- --------------
Earnings per IFRS Consolidated Statement
of Comprehensive Income 14,944 14,390
Adjusted for rental income arising
from recognising guaranteed rent
review uplifts and lease incentives (2,903) (3,200)
Adjusted for revaluations of investment
properties (3,346) (3,829)
Adjusted for tax of a capital nature - 1
EPRA earnings 8,695 7,362
Adjusted for development interest
under forward fund agreements 777 -
Adjusted for performance fee - 396
------------------------------------------ -------------- --------------
Group specific adjusted EPRA earnings 9,472 7,758
Earnings per share ('EPS') pence
per share
EPS per IFRS Consolidated Statement
of Comprehensive Income 4.24 5.71
EPRA EPS 2.47 2.92
Group specific adjusted EPRA EPS 2.69 3.08
------------------------------------------ -------------- --------------
Earnings for the period ended 31 December 2018 should not be
taken as a guide to the results for the year to 30 June 2019.
4. Earnings per Share and Net Asset Value per share (continued)
Net Asset Value per share
The Group's net asset value per ordinary share of 106.8 pence
(30 June 2018: 105.7 pence) is based on equity shareholders' funds
of GBP411,422,000 (30 June 2018: GBP358,607,000) and on 385,089,448
(30 June 2018: 339,217,889) ordinary shares, being the number of
shares in issue at the period end.
The EPRA Net Asset Value ('EPRA NAV') per share is arrived at by
adjusting the net asset value ('NAV') calculated under
International Financial Reporting Standards ('IFRS'). The EPRA NAV
provides a measure of the fair value of a company on a long-term
basis. The only adjustment required to the NAV is that the EPRA NAV
excludes the fair value of the Group's interest rate swaps which
were, in aggregate, recognised as a liability of GBP114,000 under
IFRS as at 31 December 2018 (30 June 2018: liability of
GBP115,000).
As at As at
31 December 30 June
2018 2018
Pence per share Pence per
share
------------------------------------- ---------------- ----------
NAV per financial statements (pence
per share) 106.8 105.7
Valuation of interest rate swaps 0.1 -
------------------------------------- ---------------- ----------
EPRA NAV (pence per share) 106.9 105.7
------------------------------------- ---------------- ----------
5. Dividends
Dividends paid as distributions to equity shareholders during
the period.
For the six For the six
month period month period
ended ended
31 December 31 December
2018 2017
Pence GBP'000 Pence GBP'000
----------------------------------- -------- -------- ------- --------
Fourth interim dividend for prior
year 1.61250 5,470 1.5700 3,959
First interim dividend 1.64475 5,579 1.6125 4,067
Total 3.25725 11,049 3.1825 8,026
----------------------------------- -------- -------- ------- --------
A second interim dividend for the year to 30 June 2019, of
1.64475 pence per share, was paid on 22 February 2019 to
shareholders on the register on 8 February 2019.
The Company is able to pay a dividend out of the Stated Capital
Account in accordance with the requirements of the Companies
(Jersey) Law 1991.
6. Investments
As at As at
31 December 30 June
2018 2018
Freehold and Leasehold Properties GBP'000 GBP'000
---------------------------------------------- ------------- ---------
Opening market value 385,542 281,951
Opening fixed or guaranteed rent reviews
and lease incentives (22,624) (15,732)
---------------------------------------------- ------------- ---------
Opening carrying value 362,918 266,219
---------------------------------------------- ------------- ---------
Purchases 70,174 87,515
Acquisition costs capitalised 1,982 2,750
Acquisition costs written off (1,982) (2,750)
Revaluation movement - gains 12,415 21,852
Revaluation movement - losses (4,206) (5,776)
---------------------------------------------- ------------- ---------
Movement in market value 78,383 103,591
Movement in fixed or guaranteed rent reviews
and lease incentives (2,881) (6,892)
---------------------------------------------- ------------- ---------
Movement in carrying value 75,502 96,699
Closing market value 463,925 385,542
Closing fixed or guaranteed rent reviews
and lease incentives (25,505) (22,624)
---------------------------------------------- ------------- ---------
Closing carrying value 438,420 362,918
The investment properties can be analysed as follows:
Standing assets 415,193 378,062
Developments under forward fund agreements 48,732 7,480
-------------------------------------------- -------- --------
Closing market value 463,925 385,542
-------------------------------------------- -------- --------
Changes in the valuation of investment properties
For the six For the six
month period month period
ended 31 ended 31
December December
2018 2017
GBP'000 GBP'000
----------------------------------------------- -------------- --------------
Revaluation movement 8,209 9,482
Acquisition costs written off (1,982) (1,884)
Movement in lease incentives 22 (569)
----------------------------------------------- -------------- --------------
6,249 7,029
Movement in fixed or guaranteed rent reviews (2,903) (3,200)
----------------------------------------------- -------------- --------------
Gains on revaluation of investment properties 3,346 3,829
----------------------------------------------- -------------- --------------
The properties were valued at GBP463,925,000 (30 June 2018:
GBP385,542,000) by Colliers International Healthcare Property
Consultants Limited ('Colliers'), in their capacity as external
valuers. The valuation was undertaken in accordance with the RICS
Valuation - Professional Standards, incorporating the International
Valuation Standards, June 2017 ('the Red Book') issued by the Royal
Institution of Chartered Surveyors ('RICS') on the basis of Market
Value, supported by reference to market evidence of transaction
prices for similar properties. Market Value represents 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 each acted knowledgeably, prudently and without compulsion. The
fair value of the properties after adjusting for the movement in
the fixed or guaranteed rent reviews and lease incentives was
GBP438,420,000 (30 June 2018: GBP362,918,000). The adjustment
consisted of GBP24,084,000 (30 June 2018: GBP21,181,000) relating
to fixed or guaranteed rent reviews and GBP1,421,000 (30 June 2018:
GBP1,443,000) of accrued income relating to the recognition of
rental income over rent free periods subsequently amortised over
the life of the lease, which are both separately recorded in the
financial statements as non-current and current assets within
'trade and other receivables'.
6. Investments (continued)
The Group is required to classify fair value measurements of its
investment properties using a fair value hierarchy, in accordance
with IFRS 13 'Fair Value Measurement'. This hierarchy reflects the
subjectivity of the inputs used, and has the following levels:
-- Level 1: unadjusted quoted prices in active markets;
-- Level 2: observable inputs other than quoted prices included
within level 1;
-- Level 3: unobservable inputs.
The Group's investment properties are valued by Colliers on a
quarterly basis. The valuation methodology used is the yield model,
which is a consistent basis for the valuation of investment
properties within the healthcare industry. This model has regard to
the current investment market and evidence of investor interest in
properties with income streams secured on healthcare businesses. On
an asset-specific basis, the valuer makes an assessment of: the
quality of the asset; recent and current performance of the asset;
and the financial position and performance of the tenant operator.
This asset specific information is used alongside a review of
comparable transactions in the market and an investment yield is
applied to the asset which, along with the contracted rental level,
is used to derive a market value.
In determining what level of the fair value hierarchy to
classify the Group's investments within, the Directors have
considered the content and conclusion of the position paper on IFRS
13 prepared by the European Public Real Estate Association
('EPRA'), the representative body of the publicly listed real
estate industry in Europe. This paper concludes that, even in the
most transparent and liquid markets, it is likely that valuers of
investment property will use one or more significant unobservable
inputs or make at least one significant adjustment to an observable
input, resulting in the vast majority of investment properties
being classified as level 3.
Observable market data is considered to be that which is readily
available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources
that are actively involved in the relevant market. In arriving at
the valuation Colliers make adjustments to observable data of
similar properties and transactions to determine the fair value of
a property and this involves the use of considerable judgement.
Considering the Group's specific valuation process, industry
guidance, and the level of judgement required in the valuation
process, the Directors believe it appropriate to classify the
Group's investment properties within level 3 of the fair value
hierarchy.
The Group's investment properties, which are all care homes, are
considered to be a single class of assets. The weighted average net
initial yield ('NIY') on these assets, as measured by the EPRA
topped-up net initial yield, is 6.3%. The yield on the majority of
the individual assets ranges from 5.0 per cent to 7.7 per cent.
There have been no changes to the valuation technique used through
the period, nor have there been any transfers between levels.
The key unobservable inputs made in determining the fair values
are:
-- Estimated rental value ('ERV'): The rent at which space could
be let in the market conditions prevailing at the date of
valuation; and
-- Yield: The net initial yield is defined as the initial net
income from a property at the date of purchase, expressed as a
percentage of the gross purchase price including the costs of
purchase.
A decrease in the ERV applied to an asset will decrease the fair
value of the asset, and consequently decrease the Group's reported
income from unrealised gains on investments. An increase in the ERV
will increase the fair value of an asset and increase the Group's
income.
A decrease of 0.25 per cent in the net initial yield applied to
the portfolio will increase the fair value of the portfolio by
GBP19.2 million (30 June 2018: GBP15.4 million), and consequently
increase the Group's reported income from unrealised gains on
investments. An increase of 0.25 per cent in the net initial yield
will decrease the fair value of the portfolio by GBP17.7 million
(30 June 2018: GBP14.3 million) and reduce the Group's income.
7. Investment in subsidiary undertakings
The Group included 28 subsidiary companies as at 31 December
2018. All subsidiary companies were wholly owned, either directly
or indirectly, by the Company and, from the date of acquisition
onwards, the principal activity of each company within the Group
was to act as an investment and property company. Other than two
subsidiaries which are incorporated in Gibraltar and two
subsidiaries which are incorporated in Luxembourg, all subsidiaries
are incorporated within the United Kingdom.
The Group acquired THR Number 25 S.a.r.l. and THR Number 26
S.a.r.l. on 6 November 2018 and Parris Lawn Limited on 16 November
2018. These acquisitions were accounted for as Investment Property
acquisitions.
In addition, the Group established three newly incorporated
companies during the period to 31 December 2018: THR Number 22
Limited, THR Number 23 Limited and THR Number 24 Limited.
8. Bank Loans
As at As at
31 December 30 June
2018 2018
GBP'000 GBP'000
------------------------------- ------------- ---------
Principal amounts outstanding 71,000 66,000
Set-up costs (2,644) (2,644)
Amortisation of set-up costs 1,110 826
------------------------------- ------------- ---------
Total 69,466 64,182
------------------------------- ------------- ---------
The Group has a GBP50.0 million committed term loan and
revolving credit facility with the Royal Bank of Scotland plc
('RBS') which is repayable on 1 September 2021, with the option of
two further one year extensions thereafter subject to the consent
of RBS. Interest accrues on the bank loan at a variable rate, based
on 3 month LIBOR plus margin and mandatory lending costs, and is
payable quarterly. The margin is 1.5 per cent per annum for the
duration of the loan. A non-utilisation fee of 0.75 per cent per
annum is payable on any undrawn element of the facility. As at 31
December 2018, the Group had drawn GBP35.0 million under this
facility (30 June 2018: GBP30.0 million).
The Group has a five-year GBP40.0 million committed term loan
facility with First Commercial Bank, Limited ('FCB') which is
repayable on 30 August 2022. Interest accrues on the bank loan at a
variable rate, based on 3 month LIBOR plus margin and mandatory
lending costs, and is payable quarterly. The margin is 1.65 per
cent per annum for the duration of the loan. The undrawn element of
the facility does not incur a non-utilisation fee. As at 31
December 2018, the Group had drawn GBP36.0 million under this
facility (30 June 2018: GBP36.0 million).
The Group has a GBP40.0 million revolving credit facility with
HSBC Bank plc ('HSBC') which is repayable on 29 January 2021, with
the option of two further one year extensions thereafter subject to
the consent of HSBC. Interest accrues on the bank loan at a
variable rate, based on 3 month LIBOR plus margin and mandatory
lending costs, and is payable quarterly. The margin is 1.70 per
cent per annum for the duration of the loan and a non-utilisation
fee of 0.75 per cent per annum is payable on any undrawn element of
the facility. As at 31 December 2018, this facility was undrawn (30
June 2018: GBPnil).
The Group has entered into the following interest rate
swaps:
Notional Starting Ending Date Interest Interest Counterparty
Value Date paid received
21,000,000 07 July 2016 23 June 2019 0.85% 3-month LIBOR RBS
1 September
21,000,000 24 June 2019 2021 0.70% 3-month LIBOR RBS
1 September
9,000,000 7 April 2017 2021 0.86% 3-month LIBOR RBS
36,000,000 9 July 2018 30 August 2022 1.43% 3-month LIBOR FCB
------------- --------------- --------- -------------- -------------
8. Bank Loans (continued)
Inclusive of all interest rate swaps, the interest rate on
GBP66.0 million of the Group's borrowings is fixed inclusive of the
amortisation of arrangement costs at an all-in rate of 3.12 per
cent per annum until 23 June 2019 and 3.07 per cent per annum from
24 June 2019 to 1 September 2021. The remaining GBP64.0m of debt,
if drawn, would carry interest at a variable rate equal to three
month LIBOR plus a weighted average lending margin, inclusive of
the amortisation of arrangement costs, of 2.12 per cent per
annum.
The fair value of the interest rate swaps at 31 December 2018
was an aggregate liability of GBP114,000 (30 June 2018: liability
of GBP115,000) and all interest rate swaps are categorised as level
2 in the fair value hierarchy (see note 6).
The RBS loan is secured by way of a fixed and floating charge
over the majority of the assets of the THR Number One plc Group
('THR1 Group') which consists of THR1 and its three subsidiaries:
THR Number Two Limited, THR Number 3 Limited and THR Number 9
Limited. The FCB loan is secured by way of a fixed and floating
charge over the majority of the assets of the THR Number 12 plc
Group ('THR12 Group') which consists of THR12 and its three
subsidiaries: THR Number 5 Limited, THR Number 6 Limited and THR
Number 7 Limited. The HSBC loan is secured by way of a fixed and
floating charge over the majority of the assets of the THR Number
15 plc Group ('THR15 Group') which consists of THR15 and three of
its subsidiaries: THR Number 8 Limited, THR Number 10 Limited and
THR Number 17 Limited.
Under the bank covenants related to the loans, the Group is to
ensure that:
- the loan to value percentage for THR1 Group and THR15 Group
does not exceed 50 per cent;
- the loan to value percentage for THR12 Group does not exceed
60 per cent; and
- the interest cover for each of THR 1 Group, THR 12 Group and
THR 15 Group is greater than 300 per cent on any calculation
date.
All bank loan covenants have been complied with during the
period.
Subsequent to the period end, the Group entered into a further
debt facility with HSBC. For further details refer to note 14.
9. Stated Capital Movements
Allotted, called-up and fully
paid ordinary shares of no Number of shares GBP'000
par value
------------------------------- ------------------- ----------
Opening balance 339,217,889 330,436
Issued on 12 November 2018 45,871,559 50,000
Expenses of issue (1,081)
Dividend allocated to capital (2,728)
------------------------------- ------------------- ----------
Balance as at 31 December
2018 385,089,448 376,627
------------------------------- ------------------- ----------
During the period to 31 December 2018, the Company issued
45,871,559 ordinary shares raising gross proceeds of GBP50,000,000
(period to 31 December 2017: nil). The Company did not buyback or
resell any ordinary shares (period to 31 December 2017: nil).
At 31 December 2018, the Company did not hold any shares in
treasury (30 June 2018: nil).
10. Commitments
The Group had capital commitments as follows:
As at As at
31 December 30 June
2018 2018
GBP'000 GBP'000
--------------------------------------------------- ------------- ---------
Amounts due to complete forward fund developments 20,423 19,982
Other capital expenditure commitments 1,900 2,443
--------------------------------------------------- ------------- ---------
Total 22,323 22,425
--------------------------------------------------- ------------- ---------
11. Contingent Assets and Liabilities
As at 31 December 2018, ten properties (30 June 2018: nine
properties) within the Group's investment property portfolio
contained deferred consideration clauses meaning that, subject to
contracted performance conditions being met, deferred payments
totalling GBP18.5 million (30 June 2018: GBP16.0 million) may be
payable by the Group to the vendors/tenants of these
properties.
Having assessed each clause on an individual basis, the Company
has determined that none of these deferred consideration clauses
are more likely than not to become payable in the future and
therefore an amount of GBPnil has been recognised as a liability at
31 December 2018 (30 June 2018: GBPnil).
It is highlighted that the potential deferred consideration
would, if paid, result in an increase in the rental income due from
the tenant of the relevant property. As the net initial yield used
to calculate the additional rental which would be payable is not
significantly different from the investment yield used to arrive at
the valuation of the properties, any deferred consideration paid
would be expected to result in a commensurate increase in the value
of the Group's investment property portfolio.
12. Related Party Transactions
The Directors are considered to be related parties to the
Company. No Director has an interest in any transactions which are,
or were, unusual in their nature or significant to the nature of
the Company.
Craig Stewart and Hilary Jones are directors of the Company
Secretary, R&H Fund Services (Jersey) Limited. For the period
to 31 December 2018, Mr Stewart was a partner of Rawlinson &
Hunter's Jersey Partnership, which in turn wholly owns R&H Fund
Services (Jersey) Limited, but stood down from the partnership at
the end of 2018. Secretarial fees for the period were GBP3,000 (six
months ended 31 December 2017: GBP3,000).
The Directors of the Company received fees for their services.
Total fees for the period were GBP89,000 (six months ended 31
December 2017: GBP83,000) of which GBP21,000 (31 December 2017:
GBP18,000) remained payable at the period end.
The Investment Manager received GBP2,396,000 (six months ended
31 December 2017: GBP1,823,000) during the period. Of these amounts
GBP1,241,000 (inclusive of estimated irrecoverable VAT) remained
payable at the period end (31 December 2017: GBP1,509,000).
13. Operating Segments
The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Group is engaged in a
single segment of business, being property investment, and in one
geographical area, the United Kingdom, and that therefore the Group
has only a single operating segment. The Board of Directors, as a
whole, has been identified as constituting the chief operating
decision maker of the Group. The key measure of performance used by
the Board is the EPRA NAV. The reconciliation between the NAV, as
calculated under IFRS, and the EPRA NAV is detailed in note 4.
The view that the Group is engaged in a single segment of
business is based on the following considerations:
-- One of the key financial indicators received and reviewed by
the Board is the total return from the property portfolio taken as
a whole;
-- There is no active allocation of resources to particular
types or groups of properties in order to try to match the asset
allocation of the benchmark; and
-- The management of the portfolio is ultimately delegated to a
single property manager, Target.
14. Post Balance Sheet Events
On 1 March 2019, the Group entered into an agreement to increase
the revolving credit facility with HSBC by a further GBP40.0
million. The significant terms, including the repayment date, are
the same as the existing HSBC facility as set out in note 8.
In order to draw the increased HSBC facility in its entirety, it
will require to be secured by way of a fixed and floating charge
over the majority of the assets of the THR15 Group, which consists
of THR15 and six of its subsidiaries: THR Number 8 Limited, THR
Number 10 Limited, THR Number 17 Limited, THR Number 20 Limited,
THR Number 21 Limited and Parris Lawn Limited.
15. Interim Report and Financial Statements
The interim report and financial statements for the six months
ended 31 December 2018 will be posted to shareholders and made
available on the website: www.targethealthcare.co.uk. Copies may
also be obtained from the Company Secretary, R&H Fund Services
(Jersey) Limited, Ordnance House, 31 Pier Road, Jersey JE4 8PW.
Directors' Statement of Principal Risks and Uncertainties
The risks, and the way in which they are managed, are described
in more detail in the Strategic Report within the Annual Report and
Financial Statements for the year to 30 June 2018. The Group's
principal risks and uncertainties have not changed materially since
the date of the report and are not expected to change materially
for the remainder of the Group's financial year.
Statement of Directors' Responsibilities in Respect of the
Interim Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' and gives a
true and fair view of the assets, liabilities, financial position
and profit of the Group;
-- the Chairman's Statement and Investment Manager's Review
(together constituting the Interim Management Report) include a
fair review of the information required by the Disclosure Guidance
and Transparency Rules ('DTR') 4.2.7R, being an indication of
important events that have occurred during the period and their
impact on the financial statements;
-- the Statement of Principal Risks and Uncertainties referred
to above is a fair review of the information required by DTR
4.2.7R; and
-- the condensed set of financial statements includes a fair
review of the information required by DTR 4.2.8R, being related
party transactions that have taken place in the period and that
have materially affected the financial position or performance of
the Group during the period.
On behalf of the Board
Malcolm Naish
Chairman
4 March 2019
Independent Review Report to Target Healthcare REIT Limited
Introduction
We have been engaged by the Target Healthcare REIT Limited ('the
Group') to review the condensed consolidated set of financial
statements in the Interim Report and Financial Statements for the
six months ended 31 December 2018 which comprises the Condensed
Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Financial Position, the Condensed
Consolidated Statement of Changes in Equity, the Condensed
Consolidated Cash Flow Statement and the related explanatory notes
to the Condensed Consolidated Financial Statements. We have read
the other information contained in the Interim Report and Financial
Statements and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated set of financial statements.
This report is made solely to the Group in accordance with
guidance contained in International Standard on Review Engagements
(UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Group, for our work, for this report, or for the conclusions we
have formed.
Directors' Responsibilities
The Interim Report and Financial Statements are the
responsibility of, and have been approved by, the Directors. The
Directors are responsible for preparing the Interim Report and
Financial Statements in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, the annual consolidated financial
statements of the Group are prepared in accordance with IFRSs as
adopted by the European Union. The condensed consolidated set of
financial statements included in this Interim Report and Financial
Statements has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Group a conclusion on
the condensed consolidated set of financial statements in the
Interim Report and Financial Statements based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed consolidated set of
financial statements in the Interim Report and Financial Statements
for the six months ended 31 December 2018 is not prepared, in all
material respects, in accordance with International Accounting
Standard 34 as adopted by the European Union and the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
Ernst & Young LLP,
Edinburgh
4 March 2019
Alternative Performance Measures
The Company uses Alternative Performance Measures ('APMs'). APMs
do not have a standard meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other entities.
The APMs used by the Company are highlighted below.
Discount/ The amount by which the market price per share of
Premium a Closed-end Investment Company is lower or higher
than the net asset value per share. The discount
or premium is expressed as a percentage of the net
asset value per share.
Dividend Cover EPRA Earnings per Share divided by Dividends per
share expressed as a ratio.
Dividend Yield The annual Dividend expressed as a percentage of
the share price at the date of calculation.
EPRA Earnings Recurring earnings from core operational activities.
per Share A key measure of a company's underlying operating
results from its property rental business and an
indication of the extent to which current dividend
payments are supported by earnings. A reconciliation
of the earnings per IFRS and the EPRA earnings is
contained in note 4.
EPRA NAV Net Asset Value adjusted to include properties and
other investment interests at fair value and to
exclude certain items not expected to crystallise
in a long-term investment property business model.
Makes adjustments to the IFRS NAV to provide stakeholders
with the most relevant information on the fair value
of the assets and liabilities within a true real
estate investment company with a long-term investment
strategy. A reconciliation of the NAV per IFRS and
the EPRA NAV is contained in note 4.
EPRA Net Initial Annualised rental income based on the cash rents
Yield passing at the balance sheet date, less non-recoverable
property operating expenses, divided by the market
value of the property, increased with (estimated)
purchasers' costs. EPRA's purpose is to provide
a comparable measure around Europe for portfolio
valuations.
EPRA Topped-up Incorporates an adjustment to the EPRA Net Initial
Net Initial Yield in respect of the expiration of rent-free
Yield periods (or other unexpired lease incentives).
Loan-to-Value A measure of the Group's Gearing level. The Gross
('LTV') LTV is calculated as total gross debt as a proportion
of gross property value. The Net LTV is calculated
using net debt (total gross debt less cash) as a
proportion of gross property value.
Passing Rent The annual rental income currently receivable on
a property as at the balance sheet date, excluding
rental income where a rent free period is in operation.
The gross rent payable by a tenant at a point in
time.
Total Return The return to shareholders calculated on a per share
basis by adding dividends paid in the period to
the increase or decrease in the Share Price or NAV.
The dividends are assumed to have been reinvested
in the form of Ordinary Shares or Net Assets.
WAULT Weighted average unexpired lease term. The average
lease term remaining to expiry across the portfolio
weighted by contracted rental income.
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.
END
IR SSMFULFUSELD
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