Target Healthcare REIT (THRL) H2 2023 earnings summary

Executive summary

• Portfolio of 97 modern care homes with 6,442 beds, 98% en suite wet rooms, and £869m value; 99% of rent is inflation-linked.

• Dividend reduced to align with earnings and protect capital amid higher interest rates and market uncertainty.

• Portfolio performance improved with rent collection at 98% and mature home occupancy stabilizing at 85%.

• Strategic disposal of four assets in Northern Ireland at a price above carrying value, marking a full exit from that market.

Financial highlights

• Rental income (excluding guaranteed uplifts) rose 13% to £56.4m; adjusted EPRA earnings up 23% to £37.2m.

• Adjusted EPRA EPS increased 19% to 6.00p; EPRA cost ratio improved to 15.8% from 21.5%.

• Portfolio market value declined 4.7% to £868.7m; EPRA NTA per share fell 7.8p to 104.5p.

• Net LTV at 24.7% with £90m undrawn debt; 100% of drawn debt fixed or hedged at 3.70% average cost.

• Net property loss of £43.8m and IFRS loss of £6.6m, mainly due to property revaluations.

Outlook and guidance

• Portfolio well-placed for long-term returns with annual rental growth and stable valuations.

• Dividend increase planned for FY24, supported by covered dividend and conservative leverage.

• Sector fundamentals remain strong, with demographic trends and private-pay bias supporting demand.