Impact Healthcare upbeat on first-half performance

(Sharecast News) - Impact Healthcare REIT reported a robust set of first-half results on Thursday, reflecting solid growth in its UK healthcare real estate portfolio, particularly care homes.

The London-listed company reported a 2.9% increase in the value of its investment properties, bringing the total to £670.1m.

That growth contributed to a 2.5% rise in its net asset value to £490.2m, alongside a total accounting return of 5.5% for the period.

Financial highlights included a 3.8% increase in rent across 102 homes following reviews, pushing the annual contracted rent roll to £51.1m, up from £48.8m at the end of 2023.

The company also declared a 2.7% increase in its second-quarter dividend, aligning with its full-year target of 6.95p per share.

Notably, the dividends for the first half were 122% covered by EPRA earnings per share and 106% by adjusted earnings per share.

Impact maintained a strong balance sheet, with a loan-to-value ratio of 27.8% and £250m in committed debt facilities, of which £189.8m was drawn.

The company said it had a weighted average debt term of 5.8 years, with 92% of its drawn debt hedged against interest rate increases.

At the end of June, the group had £60.2m in undrawn debt facilities and £9.6m in cash.

Operationally, the company achieved a 100% rent collection rate with no voids, and resident occupancy improved to 88.9% from 88.2% at the start of the year.

The company committed £11.6m to asset management projects, expecting an effective yield of 8%, with further projects in the pipeline requiring £26.8m in capital over the next two to three years.

In line with its sustainability goals, Impact Healthcare said it reached its interim target of having 57% of its homes rated EPC B or better, ahead of its 2025 goal.

The company had committed £1.2m to sustainability improvements within the £11.6m in capital projects, all of which were being incorporated into rental income, boosting overall returns.

It said it was also enhancing its data capture for tenant energy performance to better target sustainability efforts.

Additionally, the company announced plans to change its name in response to new regulations from the Financial Conduct Authority, which would restrict the use of certain sustainable terms such as 'impact'.

Since the end of the period, Impact Healthcare said it completed the disposal of five non-core care homes at their latest book value, totaling £8.8m, as part of its ongoing portfolio management strategy.

"We aim to provide residential care homes which are both high-quality and affordable, in order to deliver long-term sustainable returns to our shareholders," said chair Simon Laffin.

"All our lease rentals are inflation-linked, and the vast majority are capped at 4%, with a minimum of 2%, per annum.

"The spike in inflation to double digits in 2023 therefore did not flow fully into rent increases, but strengthened the financial viability of our tenants."

Laffin said strong performances from the company's tenants were a key factor in reducing risk to its income stream, and improving its risk-adjusted returns and valuations.

"We were able to increase our fully covered dividend this year, whilst keeping rents affordable for our tenants.

"The latest tenants' average annual rent cover is 2.19x3 which is the highest it has been since the company's inception.

"The affordability of our rent to tenants, and consequently the affordability of care home fees to residents, are moreover crucial to the continued successful provision of residential and nursing care."

At 1126 BST, shares in Impact Healthcare REIT were down 0.98% at 87.14p.

Reporting by Josh White for Sharecast.com.