Target Healthcare REIT (THRL) H1 2024 earnings summary

Executive summary

• Portfolio of 98 modern, purpose-built care homes with 6,460 beds valued at £911m, focused on high-quality, ESG-compliant assets; 99% of rooms have wet-room provision and 99% of portfolio EPC A or B rated.

• Achieved 4th consecutive quarter of EPRA NTA growth and a 4.9% accounting total return for the six months ended 31 December 2023, driven by portfolio valuation growth and robust rent collection.

• Portfolio remains fully let with 99% rent collection and 99% of leases inflation-linked, supporting stable income and sector-leading total returns.

• Demographic trends and market shift to quality support long-term demand and resilience; over-85 population expected to nearly double in 25 years.

• Share price total return was 24.4% over the period despite trading at a discount to EPRA NTA.

Financial highlights

• EPRA NTA per share rose 2.1% to 106.7p compared to 30 June 2023; adjusted EPRA EPS increased 1.3% year-over-year to 3.05p; EPRA EPS was 3.78p.

• Dividend per share declared at 2.856p, up 2% from previous six months with 7.1% yield and 107% cover on adjusted EPRA earnings; dividend cover improved from 89% year-over-year.

• Adjusted EPRA earnings were £18.9m, up 1.1% year-over-year; rental income (excluding guaranteed uplifts) grew 1.8% to £28.6m; contractual rent increased 2.4% to £57.9m with like-for-like growth of 1.9%.

• IFRS profit for the period was £30.8m, up from a loss of £34.2m in the prior year period.

• Portfolio valuation increased 4.9% to £911m; like-for-like valuation growth of 1.4%.

Outlook and guidance

• Market outlook remains positive, supported by strong demographic tailwinds, a shift to higher-quality care homes, and embedded rental uplifts.

• Inflation easing, wage inflation offset by fee increases, and energy costs managed; near-term growth expected from completion of ongoing developments.

• Continued focus on modern, ESG-compliant assets to capture demand and maintain resilience.

• LTV projected to rise to ~28% post-completion of current capex and developments, with £41m capital remaining; board confident in strategy but growth ambition limited by market conditions.