LONDON: Impact Healthcare REIT plc (LON: IHR) has announced its annual results for the year ended 31 December 2023. The real estate investment trust, known for its diversified portfolio of UK healthcare real estate assets, primarily care homes, has reported a significant increase in statutory profit before tax by 189% compared to the previous year.

Despite the economic headwinds, the company’s tenants have shown commendable performance with increased care home occupancy and escalated fees to residents, aligning with the peak inflation rates of the year. The rent increases, capped at 4%, have contributed to the tenants’ rent cover, thereby securing a more stable income for the trust. This stability is further evidenced by the total rent roll’s robust growth, positively impacting both earnings and dividend growth.

The trust’s adjusted earnings per share, considered a more accurate reflection of underlying performance, saw a growth of 2.4%, meeting the dividend target while maintaining a 108% coverage by adjusted earnings. The inflation-linked rental growth has also led to a 4.1% like-for-like increase in the value of property investments, resulting in a 4.7% growth in NAV per share to 115.38 pence. The total accounting return for the year stood at an impressive 10.8%, inclusive of dividend benefits.

Looking ahead, Impact Healthcare REIT has set a dividend target for 2024 at 6.95 pence, marking a 2.7% increase from 2023.

The strategic priorities for 2023 have been met with success, including the expansion of the business with a net increase of five homes, bringing the total to 140 properties with over 7,700 completed beds. The contracted rent surged by 13.2% to £48.8 million, although further growth was tempered by the broader economic climate and share price considerations.

Tenant collaborations have yielded positive outcomes, with fee increases and occupancy rates rising in tandem with inflation, alongside a reduction in reliance on costly agency staff. The weighted average unexpired lease term has extended to 20.8 years, and the trust has adeptly managed the transfer of a failing tenant as part of a recovery program, achieving a 99% rent collection across the portfolio.

In terms of portfolio quality, Impact Healthcare REIT has approved £11.7 million in new asset management projects aimed at increasing bed availability and improving EPC ratings. The portfolio’s growing strength has firmed up the EPRA topped-up net initial yield to 6.9%.

The trust has also made strides in environmental sustainability, increasing the percentage of homes rated EPC B or higher to 57% and setting ambitious targets for achieving net zero status by 2045, with an interim goal of a 15% reduction in absolute carbon emissions by 2025.

Supported by a strong balance sheet with low gearing, Impact Healthcare REIT holds £250 million in committed debt facilities, with a weighted average term of 6.3 years. The drawn debt stands at £184.8 million at an average cost of 4.56%, with 95% of the debt facilities safeguarded against interest rate rises. The year-end EPRA (net) LTV was reported at 27.8%, underscoring the trust’s financial stability and prudent management.

This news story encapsulates the company’s performance and strategic initiatives throughout the year, highlighting its ability to navigate the complexities of the market while ensuring growth and sustainability.

Simon Laffin, Chair, commented; “Our aim is to work with our tenants to provide quality, affordable and sustainable care homes. The country needs a thriving and growing care home sector. The private sector can play an even more significant role in providing care for elderly people and helping the NHS, deploying capital and resources to enhance and grow affordable care home provision. By offering more step-down, nursing and residential care for elderly people, the sector has the medium-term potential to take tens of thousands of patients out of hospital beds: freeing up NHS resources and reducing costs.

As the economy recovers from 2023’s high inflation and interest rate rises, and as government begins to recognise the larger role that this sector can play in the health infrastructure we believe that there will be opportunities for Impact. We are well positioned to play a larger role in helping both residents and the NHS, whilst delivering long-term sustainable returns to shareholders.”

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