REG - Target H'care REIT - Final Results
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RNS Number : 1863D Target Healthcare REIT PLC 14 October 2025
14 October 2025
Target Healthcare REIT plc and its subsidiaries
("Target Healthcare" or "the Group")
ANNUAL RESULTS FOR THE YEAR ENDED 30 JUNE 2025
Strong total accounting return underpinned by a sector-leading real estate
portfolio
Target Healthcare REIT plc (the "Company" or the "Group"), the listed
specialist investor in modern, purpose-built UK care homes, is pleased to
announce its annual results for the year ended 30 June 2025.
Total accounting return of 9.3%; NTA growth of 3.7%; increase of 3% in fully
covered dividend.
· Total accounting return((1)) of 9.3% (2024: 11.8%)
· Outperformed the MSCI UK Annual Healthcare Property Index,
ranking in the top quartile for the year and maintaining record of
outperforming the Index in every year since IPO
· EPRA NTA per share increased 3.7% to 114.8 pence (2024: 110.7
pence)
· Adjusted EPRA earnings per share of 6.08 pence per share (2024:
6.13 pence)
· Fully covered annual dividend of 5.884 pence, an increase of 3.0%
(2024: 5.712 pence) and 103% covered by adjusted EPRA earnings
· FY26 annual dividend target of 6.032 pence per share,
representing an increase of 2.5%
· Net loan-to-value ("LTV") of 21.8% as at 30 June 2025 (2024:
22.5%)
Continued strong performance from sector-leading real estate portfolio
underpinned by supportive demographic tailwinds, with record rent covers and
like-for-like rental growth of 3.3%.
· Portfolio of 93 properties, consisting of 92 modern operational
care homes and one pre-let site, let to 34 tenants
· Portfolio value increased by £21.4 million, or 2.4%, to £929.9
million, including a like-for-like increase of 2.6% (2024: increase of 3.7%).
· Contractual rent increased by 4.0% to £61.2 million per annum
(2024: £58.8 million), including a like-for-like increase of 3.3% (2024:
3.8%) predominantly driven by rent reviews
· Strong underlying trading performance at the homes with mature
homes rent cover of 1.9x (2024: 1.9x) and mature homes spot occupancy
remaining steady at c.86%
· One of the longest weighted average unexpired lease terms in the
listed UK real estate sector of 25.9 years (2024: 26.4 years)
· Rent collection of 97% for the year (2024: 99%). Successful
resolution subsequent to the year end of two tenant matters which had resulted
in the reduction of rent collection and the increase in costs in the year
Post-year end landmark disposal at a premium of 11.6% and attractive debt
refinancing.
· As previously announced, £85.9 million disposal of nine care
homes, representing a premium of 11.6% to carrying value at 30 June 2025 and
an implied net initial yield of 5.2%
· £130 million debt refinance resulting in an average cost of
drawn debt, inclusive of the amortisation of loan arrangement costs, of 4.3%
as at September 2025 (30 June 2025: 3.8%) and weighted average term to
maturity of 5.9 years (30 June 2025: 4.2 years). 81% of the drawn debt is
fully hedged against further interest rate increases until at least September
2030
· Strong pipeline of attractive, high-quality care home investment
opportunities with a blended net initial yield of c.6%
Responsible investment strategy focused on quality continues to improve the
UK's care home real estate with a future-proofed portfolio.
· Long-term demand from ageing population supporting both investor and
operator activity in the sector
· Strong alignment of ESG principles, with continued social purpose and
advocacy of minimum real estate standards across the sector, and portfolio
improvements throughout the year
o Modern, purpose-built care homes; full en suite wet-rooms now account for
100% (2024: 99%) of the portfolio compared to just 34% for all UK care homes
o 100% of the portfolio is A or B EPC rated (2024: 99%)
o 84% of the portfolio is purpose-built from 2010 onwards (2024: 84%)
o Sector-leading average 48m(2) of space per resident (2024: 48m(2))
((1)) Based on EPRA NTA movement and dividends paid
Alison Fyfe, Chair of the Company, said:
"The Group has delivered solid portfolio and financial performance against
what has remained a challenging backdrop. This shows the resilience of our
business model.
"The Group has recently disposed of nine care homes, representing an
opportunity to crystallise an attractive return for shareholders, evidence the
realisable value of a representative cross-section of the portfolio and reduce
the Group's exposure to its largest tenant. The intention is to re-invest the
proceeds from the disposal into earnings-enhancing acquisitions to further
improve the quality of our portfolio and maintain its best-in-class
credentials.
"We remain confident in the Group's investment strategy; investing in
high-quality care home assets with sustainable rental streams. Our portfolio
continues to consist of future-proofed, best-in-class real estate in a
defensive asset class supported by compelling long-term demographic tailwinds.
This leaves the portfolio well-positioned, with the Group ready to act nimbly
to take advantage of any opportunities that the uncertain market conditions
may present."
Results presentation
A webcast presentation for analysts will take place at 9.00am BST this
morning, for which registration can be accessed at:
https://brrmedia.news/THRL_FY25 (https://brrmedia.news/THRL_FY25)
LEI: 213800RXPY9WULUSBC04
Enquiries:
Target Fund Managers Limited Tel: 01786 845 912
Kenneth MacKenzie
Alastair Murray
James MacKenzie
Stifel Nicolaus Europe Limited Tel: 020 7710 7600
Mark Young
Rajpal Padam
Catriona Neville
Panmure Liberum Limited Tel: 020 3100 2000
Jamie Richards
David Watkins
Shalin Bhamra
FTI Consulting Tel: 020 3727 1000
Dido Laurimore TargetHealthcare@fticonsulting.com
Richard Gotla
Notes to editors:
UK listed Target Healthcare REIT plc (THRL) is an externally managed Real
Estate Investment Trust which provides shareholders with an attractive level
of income, together with the potential for capital and income growth, from
investing in a diversified portfolio of modern, purpose-built care homes.
The Group's portfolio at 30 June 2025 comprised 93 assets let to 34 tenants
with a total value of £930 million.
The Group invests in modern, purpose-built care homes that are let to high
quality tenants who demonstrate strong operational capabilities and a strong
care ethos. The Group builds collaborative, supportive relationships with each
of its tenants as it believes working in this way helps raise standards of
care and helps its tenants build sustainable businesses. In turn, that helps
the Group deliver stable returns to its investors.
Chair's Statement
I am pleased to deliver this update following a successful year of active
asset management, during which the Company has delivered solid portfolio and
financial performance. The Group has delivered a total accounting return of
9.3% against what has remained a challenging backdrop. This shows the
resilience of our business model based on best-in-class real estate assets
operating in a specialist sector that has demographics on its side.
The Group has continued to focus on its regular asset management activities to
enhance returns, to improve the quality of its real estate and to maintain its
long-duration income stream. We do this through curating a high-quality
property portfolio which generates inflation-linked rental income and capital
value growth. We invest in care homes with strong ESG credentials minimising
any additional capital expenditure needed to meet increasing environmental
standards.
Our approach of active portfolio management has continued post-year end, with
the significant disposal of nine care homes for £85.9 million, representing a
premium of 11.6% to their carrying value, delivering shareholder returns and
providing capital for redeployment into best-in-class assets over the course
of the coming year. With the disposal price representing a net initial yield
of 5.2%, and the Investment Manager having identified a strong pipeline of
high-quality near-term assets at a net initial yield of c.6%, the transaction
is expected to be earnings-enhancing. I discuss this transaction further later
in this statement.
1. Market overview
The share prices of listed real estate companies remained volatile throughout
the year due primarily to the impact of wider macroeconomic and geopolitical
factors, which have also resulted in interest rates not falling as fast as had
been anticipated. With share prices having remained depressed and the current
market preference for scale, the quantum of M&A activity across the
property sector as a whole has been significant. This was also reflected in
the healthcare sector, with demand for both care home real estate and
operators remaining high, primarily driven by overseas demand. This level of
investment demand, particularly for prime care home real estate such as ours,
is expected to continue. The M&A activity has reinforced the Company's
unique investment proposition as the sole UK-listed specialist in the care
home sector.
Further consideration of the market from the care home operators' perspective
is provided in the Investment Manager's Report.
2. Portfolio performance
The Group's property portfolio continues to perform well, driven by the strong
level of inflation-linked rental income growth. At a property level, the
portfolio has once again outperformed the MSCI UK Annual Healthcare Property
Index, with a calendar year standing assets total return for 2024 of 10.5%
relative to the Index's 5.4%, ranking the portfolio in the top quartile for
the year and maintaining its record of outperforming the Index in every year
since our IPO. The strength of this long-term performance is illustrated by
the portfolio recently winning both the MSCI UK Property Investment Award for
the highest ten-year risk-adjusted total return, a measure which compares the
portfolio against the entire MSCI universe, and the highest relative total
return annualised over three years in the listed funds category.
While rent collection fell marginally to 97% for the reporting year, this was
primarily the result of matters which have subsequently been resolved. This
rental shortfall, and the temporary reduction in EPRA earnings in the final
six months of the Group's financial year, was driven primarily by the
following two factors:
• One tenant at a single property (representing 1.4% of the annual
rent roll) was not paying rent. The Group took the difficult decision to place
the tenant into administration, resulting in the Group funding administration
costs of c.£0.9 million. These additional costs reduced the adjusted EPRA
earnings per share by c.0.14 pence and increased the reported adjusted EPRA
cost ratio by c.146 basis points. However, this decisive action protected the
capital value of the property, as well as the home's staff and the continuity
of care for the residents, by ensuring that the care home remained operational
throughout the period of administration. Following strong demand from
alternative operators, the home was successfully re-tenanted on 2 July 2025 at
an increased rental level, and an uplift in the property valuation is
anticipated in the next quarterly valuation.
• One tenant at three properties (representing 3.2% of the annual
rent roll) did not pay rent in full for the final quarter of the year. All
three of these properties were re-tenanted to alternative operators during
September 2025 on similar lease terms without any tenant incentives being
required. The Group has secured a parent company guarantee from the previous
tenant which should support the collection of the rent arrears outstanding.
The likelihood and financial impact of such matters on the Group are mitigated
through proactive ongoing monitoring of the tenants' financial and operating
position and the maintenance of strong tenant relationships; supporting our
Investment Manager's engaged landlord approach and well-resourced, specialist
asset management team. The Group's investment approach of curating a
diversified portfolio of high-quality real estate located in the right
geographic locations, underpinned by this sector specialism, ensures strong
demand from alternative operators should a re-tenanting represent the most
appropriate course of action.
Looking forward, in relation to the sustainability of rents for the portfolio
as a whole, the Group's average rent cover for the last twelve months, at over
1.9 times, represents the highest achieved since IPO and provides a strong
foundation for the Group.
It is to be expected that in any portfolio of scale, particularly in this
asset class and with the Company's preferred smaller operator demographic,
there will always be ongoing asset management initiatives required to maintain
the quality of the portfolio and/ or adapt to the changes in operator tenant
circumstances that could arise over a 35-year lease term. As well as the
downside protection discussed above, these may also present opportunities to
enhance shareholder value. More detail on the asset management initiatives
undertaken during the year is contained in the Investment Manager's Report.
3. Financial performance
As noted above, we delivered a total accounting return of 9.3% for the year,
driven by an EPRA NTA increase of 3.7% (114.8 pence from 110.7 pence) and
dividends paid in the year.
Adjusted EPRA earnings per share decreased marginally by 0.8% to 6.08 pence,
translating to 103% dividend cover for the year. The quarterly dividend paid
in respect of the year increased 3.0% versus the previous year, marking the
Company's return to a progressive dividend.
The positive portfolio like-for-like valuation movement was 2.6%, driven
primarily by rent uplifts of 3.3% offset by 0.7% from yield shift. Contracted
rent increased by 4.0% to £61.2 million, including 3.3% on a like-for-like
basis.
4. Debt facilities and post year-end refinancing
Subsequent to the year end, the Group has refinanced its shortest dated loan
facilities replacing £170 million of facilities due to expire in November
2025 with £130 million of committed facilities from the incumbent lenders.
£50 million are term loans on which the interest rate has been fixed through
interest rate swaps and £80 million are revolving credit facilities. These
loan facilities carry a minimum term of three years, with the option to extend
each term by two additional one-year periods, subject to the consent of the
lending banks. The loan facilities also include uncommitted accordion
facilities of up to a further £70 million, minimising commitment fees in the
short-term.
These facilities increase the average term to maturity on the Group's total
committed debt facilities to 5.9 years as at 30 September 2025, and result in
an average cost of drawn debt of 4.3% of which 81% is fixed for a minimum of
5.0 years. This compares to an average cost of drawn debt of 3.9% immediately
prior to the refinancing.
Overall, these facilities are intended to provide the Group with certainty
over the availability and cost of its core financing requirements, whilst
retaining sufficient flexibility to ensure effective cash management in the
short term.
5. Post year-end disposal
As referred to earlier in this statement, the Group has recently disposed of
nine care homes. This represents the most significant disposal undertaken by
the Group since IPO, with the sales price representing a significant premium
of 11.6% to the carrying value at the balance sheet date. Whilst representing
an opportunity to crystallise an attractive return for shareholders and
evidencing the realisable value of a representative cross-section of the
portfolio, this disposal was primarily an asset allocation decision; reducing
the Group's exposure to its current largest tenant to c.8.8% from c.16.0%.
Given investors' preference for scale, and reflecting both our growth strategy
and confidence in the long-term financial outlook for modern, purpose-built
care homes, the intention is to re-invest the proceeds from the disposal into
earnings-enhancing acquisitions of standing assets and forward funding of new
developments. The latter will utilise the revolving credit facilities to
minimise the impact of cash drag. Such acquisitions are expected to follow the
Investment Manager's measured approach of identifying best-in-class properties
in the right geographical locations, which are leased at sustainable rental
levels and acquired at appropriate yields. As previously mentioned, the Group
has a strong pipeline of accretive investment opportunities including high
quality, strongly performing existing UK care homes all with en suite
wet-rooms, and new purpose-built forward funded assets in attractive
locations.
6. Dividend
In the absence of unforeseen circumstances, the Board intends to increase the
quarterly dividend in respect of the year ending June 2026 by 2.5% to 1.508
pence per share, providing an annual total dividend of 6.032 pence per share.
This increase represents a modest discount to the Group's like-for-like rental
growth of 3.3%, in order to reflect the one-off adjustment from resetting the
interest rate on the Group's shortest dated debt facilities.
7. Shareholder engagement
We have always placed a significant emphasis on ensuring that the views of
shareholders are reflected in any strategic decisions we take on behalf of the
Company. We recognise that there will generally be a spectrum of views,
particularly given the current market environment for both property and listed
companies, and we have sought to increase direct engagement with shareholders
in recent times.
8. Annual General Meeting ('AGM')
The AGM will be held in London on 4 December 2025. Shareholders that are
unable to attend are encouraged to make use of the proxy form provided in
order to lodge their votes, and to raise any questions or comments they may
have in advance of the AGM through the Company Secretary.
9. Outlook
We remain confident in the Group's investment strategy; investing in
high-quality care home assets with sustainable rental streams. We therefore
remain firmly committed to continuing this approach whilst increasing the
scale of the portfolio over time. The strong foundations provided by (i) the
modern, future-proofed portfolio; (ii) the sustainable, long-term and
inflation-linked rental income; (iii) the strengthening of the Group's balance
sheet; and (iv) the availability of capital for re-investment, are expected to
provide a basis to further drive shareholder returns.
In order to achieve this aim, the Group intends to:
• Re-invest the proceeds of the recent disposal into standing assets and
forward fund acquisitions at earnings-enhancing yields;
• Continue to identify and acquire further investment opportunities
on a measured basis, through the use of additional debt in the first instance,
with the full deployment of the Group's available capital of £139 million and
its additional debt accordion arrangements potentially taking the Group's LTV
to c.30%; and
• Continue to consider further asset management or investment
activities, including disposals, developments and/or any other
earnings-enhancing opportunities that may arise, to further improve the
quality of our portfolio and maintain its best-in-class credentials.
Despite the challenging market backdrop for real estate, our portfolio
continues to consist of future-proofed, best-in-class real estate in a
defensive asset class supported by compelling long-term demographic tailwinds.
This leaves the portfolio well-positioned, with the Group ready to act nimbly
to take advantage of any opportunities that the uncertain market conditions
may present.
Alison Fyfe
Chair
13 October 2025
Investment Manager's Report
Portfolio performance
During the year, property level transactions completed by the Group remained
low with (i) a single property disposal, which formed part of a wider asset
management transaction; and (ii) the progression of two development sites,
with one reaching practical completion during the year and the other
completing subsequent to the year end. Transactions did, however, continue to
be considered, with a significant disposal of nine care homes subsequent to
the year end, as set out in detail below.
As expected in any portfolio of scale and with a wide range of tenant
operators, asset management activities continued. These included (i)
converting a further 41 rooms to provide full en suite wet‑rooms across two
homes thereby increasing the portfolio towards 100% wet-rooms; (ii) making,
and rentalising, performance payments totalling £3.4 million for three homes
thereby increasing the contracted rent from the portfolio by £0.2 million per
annum; (iii) re-tenanting two homes, from two different tenant operators, on
attractive financial terms and with any tenant incentives being funded by the
outgoing tenants; and (iv) reaching agreement to re-tenant a third home, which
will result in a further surrender premium being received during the current
year. Overall, these activities demonstrate an ability to re-tenant
high-quality properties of the type held by the Group to alternative operators
where it benefits the overall portfolio.
On 2 July 2025 the Group also completed the re-tenanting of the home which had
contributed significantly to the increase in the Group's costs and credit loss
allowance in the year, securing its future stability.
At the portfolio level, two key portfolio metrics are presented in the Annual
Report which are reflective of the investment grade characteristics of our
prime, modern UK care home portfolio. Firstly, rental growth was 3.3% on a
like-for-like basis (2024: 3.8%) and this has been supported by a quality
rental stream from 34 tenants with a robust average rent cover for the last
twelve months of over 1.9x (2024: 1.9x), the highest reported by the Group
since IPO. Underlying demand for places in our homes remains high at 86%
mature home occupancy (2024: 87%), with scope for further profitability growth
were occupancy to trend further towards the 90% long-term average.
Secondly, portfolio-level total returns remain strong. We are pleased to have
continued to perform well against the MSCI UK Annual Healthcare Property Index
for the calendar year 2024, with a standing assets return of 10.5% for the
year compared to the benchmark return of 5.4%. More importantly, this is
sustained performance as the Group's portfolio also ranks second of 12 over
the 10-year period ending 2024. This long-term portfolio performance resulted
in the Group recently winning the MSCI award for the highest 10-year risk
adjusted total return.
The like-for-like valuation growth for the year was 2.6%, primarily driven by
3.3% from the growth in rents and the expiry of rent free periods, offset by
0.7% from an outward movement in valuation yields.
Our overall portfolio metrics remain strong. 92% of homes are mature in their
trading, 84% have a younger than 2010-build date, and the WAULT remains long
at over 25 years. These characteristics, and the bias towards private-fee
payments of our tenants' revenue (79%) all support the quality of our rental
stream and its annual and compounding long-term growth.
Property regulation
In July 2025, the Government issued a proposal to ban upward only rent reviews
in leases. Whilst aimed at retail properties, this has the potential for
significant unintended consequences elsewhere. The details remain unclear at
this stage, although it would appear that any legislation will not be
retrospective, so the Group's existing leases would not be directly affected.
We do not believe that the proposal would be a welcome change and are working
with the British Property Federation and others in the sector to help inform
the Government on the potential impact on the sector if it were to proceed.
Care home trading
Our typical investment appraisal has historically been based on a home's
ability to achieve earnings of at least 1.6x the home's rent. More recently, a
level of 1.8x has been sought, to provide headroom and financial resilience.
The mature homes portfolio has achieved over 1.9x rent cover for the last
twelve months, the highest since IPO, and 2.0x rent cover for the final
quarter of the year, endorsing our investment case on the trading potential of
prime care home real estate. Average weekly fees for residents have increased
by c.8% across the portfolio's mature homes during the year, illustrating that
inflationary cost increases are largely being passed on by operator tenants.
Investment market
Low volatility of valuation continues
The UK care home investment market has seen transaction volumes increase
compared with the prior year. The US REITs, in particular, have begun
investing significant capital in our sector and this trend is expected to
continue. This will provide both structural support and transactional evidence
to corroborate property valuations. Some US REITs are investing on a slightly
different basis to the Group by taking an ownership interest in care home
operations in addition to acquiring the freehold interest in the properties.
We believe that there are many operators for whom the Group's partnership
approach and more traditional triple net lease structures are preferable to
the management contract arrangements preferred by some investors and that this
remains a suitable market for us to be investing in.
Other market participants have returned to investment activity and it is
anticipated that new investors may enter the care home sector meaning that
investment demand, particularly for prime care home real estate such as ours,
is expected to remain robust.
Market pricing has remained relatively flat in recent quarters and supports
both the current portfolio valuation and the indicative pipeline pricing.
Health and social care update
We note below a number of areas which are prominent in our minds and those of
our tenants:
Social care reform
The social care review led by Baroness Casey commenced this May, with an
initial report due out in 2026. While many in the sector feel the process is a
repeat of numerous other similarly well‑intentioned reviews carried out over
previous decades, there is some optimism that Baroness Casey will indeed bring
some pragmatism to the process. The second phase of the review, scheduled to
report back in 2028, will build on the initial recommendations, but again
there are fears that the timing of this element may be overshadowed by a
future election, and become lost or diluted in the process. Current ministers,
helpfully, do express a strong belief that an efficient and productive NHS is
increasingly dependent on a fully functional and aligned social care sector.
Further scrutiny via Baroness Casey should at least help to keep the sector's
frustrations on the Government's radar. During spring, the sector further
welcomed the NHS 10-year plan - the sector being well positioned to assist in
the provision of resources.
Spring statement and spending reviews
Both of these proved to be a frustration for the sector, with little mention
of wider support to social care. The Association of Directors of Adult Social
Services Spring Survey further highlighted the challenging situation that many
Local Authorities ("LAs") find themselves in, with increasing care costs
driven by ageing demographics consuming the lion's share of their budgets. The
squeeze on LAs has been compounded by cuts to Independent Care Boards with NHS
Continuing Healthcare services in places being withdrawn. Our recent research
notes that the numbers receiving domiciliary care have dropped between 2016
and 2023 due to the increased cost of domiciliary care per person - which
doubled between the same dates. Likewise, we note that the numbers of private
residents entering care homes has now overtaken publicly funded placements,
likely an indication of the pressure on LA budgets as much as demographics.
Staffing
We reported six months ago that operators were much more comfortable with
staffing recruitment, despite more onerous conditions on overseas recruitment
including the restriction on accompanying family members. However, operators
were dismayed in May by the blanket Government restriction on overseas
recruitment for the social care sector. Between 2022 and 2024, 185,000 care
staff were recruited from overseas, while going forward 43,000 new care
workers will be required every year until 2035, excluding the current
c.135,000 vacancies, all of which causes consternation within the sector.
Proposed changes in employment legislation are also awaited with some
trepidation.
Costs and fees
Care home operating costs have mainly increased on the back of minimum wage
and NIC increases, albeit ancillary costs have been relatively subdued. This
has led to large fee increases for the fourth year running, with operators,
where possible, passing the costs onto residents. This continues to equate to
private fee increases of around 8 to 10% per annum. Families, overall, have
reportedly remained forbearing, likely due to inflationary pressures being
widely publicised. LA fee increases, as far as we can ascertain, seem to be
between 3% to 6%. Nursing homes, the majority of homes within the Group, have
received a useful 7.7% rise in Funded Nursing Care payments.
Regulatory
The Care Quality Commission (CQC) continues to face challenges in scaling the
inspection regime up to its own targets, with many organisations frustrated by
extended timescales between inspections and slow results process. The CQC
report some progress but dated inspection reports remain unhelpful to both
operators and the general public, who may need to make decisions for the
appropriate placement of their loved ones.
Target Fund Managers Limited
13 October 2025
Our Strategy
We are a responsible investor in ESG-compliant, purpose-built care home real
estate which is commensurate with modern living and care standards.
We are advocates of the benefits that intelligently designed, purpose-built
care homes can bring and we want more residents, care professionals, families
and local communities to benefit from their positive social impact.
Our Investment Manager is a specialist who understands the operational
challenges our tenants face on a daily basis when providing quality care.
The key strengths of our approach are:
1. Our premium quality real estate is attractive to both operators and
investors, in that:
a. it is future-proofed against anticipated legislative change and societal
trends influencing demand; and
b. it generates high quality earnings from financially sustainable rents.
2. Specialist manager, highly engaged within sector and with our tenants.
3. Prudent approach to financial risks with diversified income sources,
low gearing and long-term, fixed rate debt.
Strategic pillar #1
Build high-quality portfolio: Acquire high quality real estate via a mix of
new developments, recently completed builds, and modern assets at mature
trading.
Well designed, purpose-built care homes
Our care homes are modern, purpose-built and are future-proofed for social and
environmental trends, meeting demand and supporting financial performance.
Focus on maintaining modernity and quality metrics
The Group's limited access to new capital resulted in a temporary pause on new
investment during the year, and the Group instead focused on enhancing the
existing portfolio. The single asset sold during the year formed part of a
wider transaction to facilitate the exit of an operator tenant from the
market.
All disposals in recent years have been made at or above carrying value, and
at attractive return metrics. We continue to consider opportunistic disposals
of assets where the sale of existing properties and the reinvestment in
alternative assets improves the overall quality of the Group's portfolio, as
this is expected to maximise shareholders' returns over the long-term. This
approach was demonstrated by the post year-end disposal of nine homes leased
to a single tenant for £85.9 million, representing an 11.6% premium to
carrying value, which will provide capital for reinvestment.
We have also been active on two development sites, with one home reaching
practical completion during the year and the other in September 2025. The
latter added a further 60 beds and £0.6m of contractual rent to the
portfolio.
These initiatives continue to maintain the portfolio's modernity and
longevity. The positive impact can be seen through modest progression and
maintenance of key portfolio metrics:
2025 2024
Purpose- built 2010 onwards 84% 84%
WAULT (years) 25.9 26.4
EPC A&B rated 100% 99%
En suite wet-rooms 100% 99%
Best-in-class care home real estate
Our investment thesis remains that modern, purpose-built care homes will
outperform poorer real estate assets and continue to provide compelling
returns.
Company England & Scotland
Purpose-built since 2000 97% 21%
En suite wet-rooms 100% 34%
Space per resident 48m(2) 40m(2)
EPC ratings: B or better* 100% 45%
carehome.co.uk average rating 9.6 out of 10 9.3 out of 10
Regulatory ratings: 'good' or better 75% 80%
Sources: Target Fund Managers Limited, Carterwood and carehome.co.uk
*Comparative EPC ratings are for illustrative purposes only, capturing homes
with matched postcodes.
Wet-rooms (100%): These are essential for private and dignified personal
hygiene, with a clear trend to this being the minimum expected standard for
care home beds.
Energy efficiency (100% EPC A or B): Energy efficiency of real estate is
critical, with legislative change and public opinion demanding higher
standards. Our portfolio is already fully compliant with anticipated incoming
legislation, reducing capital expenditure requirements.
Purpose-built and modern (100%): All our properties are designed and built to
be used as care homes and to best meet the needs of residents and staff, and
are expected to remain in demand by tenant operators.
Financials: Our metrics reflecting capital values and rental levels compare
favourably with other care home portfolios, despite being significantly better
real estate, demonstrating sustainability and longevity.
Relatively stable valuations growing with rental income
The portfolio value increased by 2.4% during the year. This primarily
reflected the like-for-like movement of 2.6%, consisting of 3.3% from the
positive impact of the rental growth on valuations, offset by an outward yield
shift of 0.7%. The Group's capital expenditure added £9 million in value,
offset by an £11 million decrease from the disposal of one property and the
receipt of a surrender premium in relation to another.
Valuation certificates are received quarterly by the Group from its external
valuers with up-to-date values reflecting latest asset trading and comparable
market transactions. The portfolio has a strong track record of valuation
growth contributing to total returns.
Valuation Analysis £millions
Valuation at 30 June 2024 909
Acquisitions and developments 9
Disposals (11)
Market yield shift (7)
Rent reviews 30
Valuation at 30 June 2025 930
Diversification
We continue to ensure the portfolio remains diversified, by leasing our homes
to a range of high-quality regional operators. The Group's total number of
tenants has remained unchanged overall at 34, despite the portfolio activity
in the year.
The largest tenant at 30 June 2025 also remained unchanged with Ideal
Carehomes ('Ideal'), part of the wider HC-One group, operating 18 of the
Group's homes and accounting for c.16% of contracted rent. However, the
disposal subsequent to the year end of nine homes leased to Ideal has reduced
this exposure to c.9% with tenant diversification becoming more evenly spread
across the portfolio.
Underlying resident fees are balanced between private and public sources, with
a deliberate bias towards private. There is strong anecdotal evidence that
these residents are more accepting of higher fees, particularly for the
quality real estate and care services that our properties and their operators
provide.
Census data from our tenants show that 79% of residents are privately-funded,
with 52% being fully private and 27% from 'top up' payments where residents
pay over and above that which the Local Authority funds for them. 21% of
residents are wholly publicly funded.
Geographically, Yorkshire and the Humber remained the Group's largest region
by asset value at 30 June 2025, at 19.5%, marginally ahead of the South East,
which accounted for 19.3%. The impact on the key portfolio statistics from the
significant post-year end disposal does not significantly change the
portfolio's geographical weighting.
Strategic pillar #2
Trusted landlord: Manage assets and tenants commercially yet fairly,
recognising the value of long-term relationships and our influence within a
complex sector.
Manage portfolio as a trusted landlord in a fair and commercial manner
The Investment Manager has deep experience within the sector and uses its
unique knowledge to manage the portfolio. Starting with an informed assessment
of home performance using profitability and operational metrics, through
empathetic and sensitive engagement with our tenants and sector participants
as a whole - we are trusted and respected and people want to partner with us.
This enables fair treatment and commerciality to be balanced - essential in a
complex sector.
Portfolio operational performance - Steady occupancy and strong profitability
continues at home level
Our completed portfolio is fully let with long-term occupational leases to our
tenants, the care providers. Their underlying resident occupancies have
remained stable at 86%, consistent with the 87% we reported at this time last
year. Operators continue to focus on accepting new residents at fee levels
commensurate with the services provided, rather than filling to capacity at
uneconomic fees. This approach efficiently manages demand, minimises the need
for expensive agency staff, and facilitates a care-led approach when welcoming
new residents to a home. Despite the changes to the licensing regime, which
reduced the availability of overseas staff, most operators are now reporting
stable workforce numbers.
Rent covers have remained stable at over 1.9x for the year, rising to 2.0x for
the most recent available quarter (June 2025). These profitability levels
support rental payments and financial resilience, and incentivise care
providers to invest in their businesses and people.
Despite increased staff costs following increases in both the national living
wage and employers' national insurance contributions, operators have generally
been able to increase revenues to maintain profitability.
Rent collection was 97% for the year (2024: 99%), with no exclusions for
non-performing or turnaround homes. The slight dip in 2025 was primarily due
to the position with two tenants, and were resolved subsequent to the year
end. These are covered in more detail in the Chair's Statement above.
Growing and compounding rental income
The portfolio's contractual rent roll was £61.2 million at year-end (2024:
£58.8 million). The 4.0% increase in contractual rent over the year was
driven by like-for-like rental growth, being the Key Performance Indicator
used by management in assessing recurring rental growth, of 3.3%.
The positive contribution from capex and our developments, offset by our
disposal, contributed the remaining 0.7%. Rent from the Group's leases
increase annually, linked to inflation. Collars on this (averaging c.1.6%)
ensure the Group receives guaranteed growth, while caps (averaging c.3.9%)
ensure assets do not become over-rented, risking rents becoming unaffordable,
in periods of higher inflation as we have seen in recent years. This is an
important aspect in providing long-term security to our tenants, and in
achieving sustainable investment returns.
Annual Movement in Contacted Rent £millions
Contracted rent at 30 June 2024 58.8
Rent reviews 1.9
Development completed 0.9
Disposals (0.7)
Other rent increases (capex and deferred consideration 0.3
Contracted rent at 30 June 2025 61.2
Tenant and resident satisfaction
We remain committed to our role as an effective, supportive and engaged
landlord. We have previously invited our tenants to provide formal feedback
via a survey performed by an independent third party. We use this output,
alongside learnings from the many informal points of contact we have, to
inform our approach. The survey returned positive quantitative results, and
more usefully some qualitative feedback on how we may consider altering our
interactions with tenants to recognise that no two tenants are the same.
Resident satisfaction
Regulator (CQC in England) ratings are informative but limited. The Investment
Manager also monitors reviews on 'Carehome.co.uk', a 'Tripadvisor' style
website for care homes, as a useful source of real-time feedback which is more
focussed on the resident experience, and that of their loved ones.
Strategic pillar #3
Deliver returns: Convert portfolio income and capital returns into sustainable
returns to shareholders through disciplined financial and risk management.
Regular dividends for shareholders
The Group has achieved like-for-like rental growth; NTA growth; and a dividend
fully covered by earnings from its disciplined financial and risk management.
Pence per share
EPRA NTA per share as at 30 June 2024 110.7
Property revaluations - standing assets 3.5
Property revaluations - developments 0.1
Disposals and surrender premium 0.2
Adjusted EPRA earnings 6.1
Dividends paid (5.8)
EPRA NTA per share as at 30 June 2025 114.8
Earnings
Earnings decreased by 0.8%, as measured by adjusted EPRA EPS; the Group's
primary performance measure. Rental income for the year has increased by 3.3%,
driven primarily by inflation-linked rental growth plus completed
developments. This is partially offset by the annualised effect of disposals,
mainly in the prior year.
The credit loss allowance (for doubtful debts) increased compared to the prior
year as, although the portfolio as a whole generally performed well from a
rent collection and rent cover perspective, the provision in relation to two
tenants was increased by £1.5 million to £2.9 million. Of these, one tenant
at a single home was re-tenanted on 2 July 2025, and it is anticipated that
the majority of the fully provided for rental arrears of £1.3 million will
not be recovered. The three homes leased to the second tenant were re-tenanted
in September 2025 and, although the rent arrears remain outstanding at the
time of writing, the contractual terms of the re-tenanting include terms which
improve the Group's ability to recover the rent outstanding.
The Group's reported operating expenses increased significantly, by 27.1%,
however this was primarily due to the non-recurring administration costs
associated with the property which was re‑tenanted in July 2025. Excluding
these one-off costs, operating costs increased by 2.6% in the year.
Due to fixed interest rates and stable debt levels, with the Group's interest
costs being fixed/hedged on £230 million of drawn debt until November 2025,
net finance costs remained largely unchanged at £10.2 million. The majority
of the net saving arose from £0.4 million of interest earned on cash held in
a secured account under the terms of the loan facilities following the
property disposals near the end of the prior year.
Expense ratio
The Group's expense ratios reflect these movements. The adjusted EPRA cost
ratio, expressing costs as a percentage of the Group's rental income,
increased to 21.8% from 19.1%, due mainly to the net increase in the credit
loss allowance and the £0.9 million of non-recurring tenant administration
costs.
The Ongoing Charges Figure, which provides a measure of recurring operating
expenses and which excludes non-recurring property expenses, including bad
debts, was stable at 1.51% (2024: 1.51%).
2025 2024
Earnings Summary £m Movement £m
Rental income (excluding guaranteed uplifts) 60.6 +3% 58.6
Administrative expenses (including management fee and credit loss allowance)
(13.4) +15% (11.6)
Net financing costs (10.2) -5% (10.8)
Interest from development funding 0.7 -59% 1.8
Adjusted EPRA earnings 37.7 -1% 38.0
Adjusted EPRA EPS (pence) 6.08 -1% 6.13
EPRA EPS (pence) 7.72 +1% 7.61
Adjusted EPRA cost ratio 21.8% +270bps 19.1%
EPRA cost ratio 18.3% +170bps 16.6%
Ongoing Charges Figure ('OCF') 1.51% - 1.51%
Total Returns
Total accounting return, using EPRA NTA movement and dividends paid, was a
healthy 9.3% for the year ended June 2025 and an annualised 7.5% since launch.
Our portfolio has returned like-for-like valuation growth for each of the ten
quarters since the December 2022 macro-driven response to the higher interest
rate environment. Our valuations have been less volatile than the wider
commercial property population, as reported within the MSCI Monthly Index (All
Property), due to the strength of investment demand and the trading
performance at the underlying home level.
This valuation performance, allied with our dividend payouts, fully covered by
earnings, has seen EPRA NTA per share grow by 3.7% over the year, and
contribute to total returns.
The consistency of Group level total accounting returns and those at portfolio
level clearly demonstrate the stability of our business model, and the
defensive, non-cyclical nature of prime care homes as a real estate asset
class.
Debt
Debt facilities were unchanged in the year at £320 million. The weighted
average term to expiry on the Group's total committed loan facilities was 4.2
years (30 June 2024: 5.2 years), with drawn debt of £242 million incurring a
weighted average cost, inclusive of amortisation of loan arrangement costs, of
3.8% (3.7% on a cash only basis with costs excluded).
Net LTV at 30 June 2025 was 21.8% (2024: 22.5%), with the Group's revolving
credit facilities allowing flexible drawdowns/ repayments in line with capital
requirements.
Debt analysis at 30 June 2025:
Debt Provider Facility Size Drawn at Maturity at
Debt Type at 30 June 2025 30 June 2025 30 June 2025
Phoenix Group £150m Term debt £150m (fixed rate) Jan 2037 - £63m Jan 2032 - £87m
RBS £30m Term debt £30m (hedged) Nov 2025
£40m Revolving credit facility £12m (floating rate)
HSBC £100m Revolving credit facility £50m (hedged) Nov 2025
Total £320m £242m
Subsequent to the year end, the Group has refinanced each of its debt
facilities with RBS and HSBC as set out in the table below. Both facilities
have been extended by three years, with the option of two further one-year
extensions, subject to lender approval. The facilities also include accordion
elements providing, in aggregate, additional uncommitted borrowings of a
further £70 million.
Debt analysis post refinancing:
Debt Provider Facility Size
Debt Type post refinancing Maturity post refinancing
Phoenix Group £150m Term debt (fixed rate) Jan 2037 - £63m
Jan 2032 - £87m
RBS £20m Term debt (hedged) Sept 2028 (with two 1-year extensions)
£30m Revolving credit facility
HSBC £30m Term debt (hedged) Sept 2028 (with two 1-year extensions)
£50m Revolving credit facility
Total £280m
Further details on the refinancing are below and in Note 12 to the Extract
from the Consolidated Financial Statements.
Net debt to EBITDA ratio of 4.6x (2024: 4.6x)
This is a leverage ratio that compares the Group's long-term liabilities in
the form of net debt to an estimate of its cash flow available to pay down
this debt, in the form of EBITDA (which stands for earnings before interest,
taxes, depreciation and amortisation).
The Group uses adjusted EPRA earnings as its EBITDA, and the gradual reduction
illustrates the improvement in the Group's ability to repay the capital value
of its debt from earnings over a period in which interest rates have risen.
Strategic pillar #4
Social purpose: To adhere to our responsible investment fundamentals,
delivering positive social impact allied with a firm commitment to
environmental sustainability and good governance.
To achieve our social purpose
We have a clear ESG Charter (Targeting Tomorrow) to ensure the social impact
objective we launched with remains embedded in our business for years to come,
working with shareholders, tenants and other stakeholders. We have made firm
ESG commitments which we measure and report progress on annually.
ESG commitments
What this means for Target Status
Responsible investment Continue to provide better care home real estate which results in positive Met
social impact for residents, their carers and local communities.
Support the sector's transition from poor real estate standards via long-term Met
financial/ investment support for new developments.
Obtain reliable certification and insightful data on the energy efficiency of Met
our real estate.
Increase data coverage of energy consumption by our tenants, aiding Met
transparency and our ability to positively influence energy efficiency.
Ensure ESG factors embedded into acquisition process and portfolio management. Met
Net zero carbon commitment with comprehensive, ambitious and realistic targets Met
set with a clear pathway including measurable milestones.
Responsible partnerships Engage with tenants to ensure real estate is meeting their operational and Met
staff needs, allowing effective care for residents.
Be a responsible landlord to our tenants and their communities through Met
significant challenges, such as pandemics.
Use energy data obtained from tenants to positively influence behaviours where Partially met
possible.
Responsible business To establish an ESG Committee to provide appropriate focus and impetus to ESG Met
matters.
Ensure the benefits of Board diversity are achieved. Partially met
Participate in benchmarking and sector appropriate programmes to provide Partially met
comparable information to stakeholders.
Other reporting: Align financial and non-financial reporting with widely used Partially met
frameworks.
Significant post-year end transactions: Disposal and Refinancing
Disposal of nine care homes
Subsequent to the year end, the Group has entered into an agreement to sell a
portfolio of nine care homes, leased to Ideal Carehomes ('Ideal'), to an
institutional purchaser for £85.9 million. This represents a premium of 11.6%
to the Group's carrying value at the year end and an implied net initial yield
of 5.24%.
This disposal, which represent 537 beds and a total of c.8.3% of the Group's
overall portfolio value as at 30 June 2025, is highly accretive, adding 1.4
pence to the Group's EPRA NTA per share. However, the primary intention of the
transaction is to reduce the Group's exposure to its largest tenant, something
which the Investment Manager has been considering since Ideal was acquired by
the UK's largest care home operator, HC-One, in the prior year. Prior to this
disposal, Ideal was the Group's largest tenant, accounting for c.16% of the
Group's contracted rent as at 30 June 2025.
Completion of the disposal is unconditional and is expected to take place on
22 October 2025, and will result in an annualised ungeared internal rate of
return ('IRR') in excess of 11%, demonstrating the Group's active approach to
portfolio management and ability to drive shareholder returns.
Use of Proceeds
The Group has a strong pipeline of near-term assets at a net initial yield of
c.6%. This comprises a combination of accretive investment opportunities
including high-quality, strongly performing existing homes and new
purpose-built forward funded assets. The acquisition of the first of the
existing homes is expected to take place in November. Execution of this
pipeline is expected to fully utilise the proceeds of the disposal as well as
make efficient use of the new debt facilities detailed below, and will result
in a refreshed Group portfolio with longer average unexpired lease terms, more
homes capable of being operationally net zero carbon, a more diverse tenant
base and an improved yield on assets.
The transaction improves tenant diversification and provides further capital
to re-invest in earnings accretive, and portfolio enhancing, acquisitions
without significantly changing the other key portfolio statistics. The tables
below show the impact of adjusting the portfolio at 30 June 2025 to exclude
the nine assets which the Group has agreed to sell.
Portfolio at 30 June 2025 (adjusted)
Portfolio at
30 June 2025 Disposals
Total contracted rent £61.2m £4.8m £56.4m
Rent per bed £9,696 £8,952 £9,765
Total portfolio value £929.9m £77.0m £853.0m
EPRA topped-up net initial yield 6.22% 5.85% 6.25%
Rent cover (spot) 2.0x 2.2x 2.0x
Rent cover (last twelve months) 1.9x 2.4x 1.9x
Average age of homes 12 years 13 years 12 years
Mature homes 93% 100% 93%
WAULT 26 years 24 years 26 years
Tenant diversification (by rental income)
Portfolio at 30 June 2025 (adjusted)
Portfolio at
30 June 2025 Disposals
Largest tenant 16% 100% 9%
Largest five tenants 41% - 37%
Largest ten tenants 64% - 61%
Geographical diversification
The disposal does not significantly change the geographical weighting of the
portfolio.
Debt refinancing
The Group refinanced its shortest dated debt facilities on 23 September 2025.
This results in the Group having committed debt facilities of £280 million,
including £200 million on which the interest rate has been fixed/hedged until
at least 23 September 2030 at a weighted average rate of 3.9% (30 June 2025:
£230 million at 3.7%). The Group has additional revolving credit facilities
of £80 million, of which £47.6 million is currently drawn. The drawn element
is likely to be repaid initially with the proceeds from the disposal and, once
redrawn, will carry interest at SONIA plus a margin, including arrangement
costs, of 1.8%. It is anticipated that the Group will hedge the revolving
credit facilities in due course through the use of interest rate caps.
ESG Commitments in focus: Net Zero Carbon Pathway (NZP)
Net Zero Carbon Pathway
• 2025 Scope 1 and 2 net zero carbon achieved
• 2030 target to have renewable energy generation (or heat pumps) at
50% of its homes
• 2040 net zero carbon target for property portfolio related Scope 3
emissions
Quality of input data
Achieving a net zero-carbon portfolio is a crucial part of our suite of
"targeting tomorrow" commitments as a responsible business. It is essential to
adopt a strategy that is:
(i) based on comprehensive and reliable data;
(ii) achievable and measurable; and
(iii) suitably ambitious.
We are now collecting our tenants' energy usage data to an extent which allows
a reliable analysis of our portfolio's current position and of the impacts of
initiatives.
Output status
The output we currently have:
• Benchmark data on where we currently stand on carbon intensity,
relative to the CRREM and SBTi joint 1.5°C decarbonisation pathway.
• Suggested energy efficiency and carbon reduction initiatives
relevant to our properties.
• Cost estimates and impact assessments on carbon intensity.
Timeline and actions
• Between 2025 and 2030: Quick wins: energy efficiency measures,
such as thermal installation in plant rooms (2-3% CO2 savings) and increase
renewable energy generation (including by heat pumps) at 50% of homes.
• Between 2025 and 2035: Increase PV or solar thermal panel coverage
towards 100% of portfolio.
• Between 2030 and 2040: Electrification of heating, phase out gas
boilers and install heat pumps and appropriate upgrade of distribution in
homes.
Risks and areas outside our control
• Suitable technology being available at the required scale and
cost, per expectations as advised by our external experts, in the time period
outlined.
• Materials and labour being available such that the Group is able to
have technology installed in a sensible timeframe and at fair, market (not
surge) pricing.
• Agreement with tenants as to disruption timeframes for works.
• That the relevant investment costs do not depress investment returns
to such an extent the Group cannot achieve its investment objectives to the
satisfaction of shareholders.
Principal and emerging risks and risk management
Risk Description of risk and factors Mitigation
affecting risk rating
Poor performance of investments/ investment assets There is a risk that a tenant's business could become unsustainable if its The Investment Manager focuses on tenant diversification across the portfolio
care homes trade poorly. This could lead to a loss of income for the Group and and, by considering the local market dynamics for each home, aims to ensure
Risk rating & change: High (decreased) an adverse impact on the Group's results and shareholder returns. The strategy that rents are set at sustainable levels. Rent deposits or other guarantees
of investing in new purpose-built care homes could lead to additional fill-up are sought, where appropriate, to provide additional security for the Group.
risk and there may be a limited amount of time that operators can fund The Investment Manager has ongoing engagement with the Group's tenants to
start-up losses. proactively assist and monitor performance. Rent cover, a key measure of the
underlying home profitability, is currently at the highest level since the
Group's IPO.
High inflationary An increase in the UK inflation rate to a level above the rent review caps in The Group's portfolio includes inflation-linked leases, with primarily annual
place across the portfolio's long-term leases may result in a real term upwards-only rent reviews within a cap and collar. Despite the rise in the RPI
environment decrease in the Group's income and be detrimental to its performance. In inflation rate since June 2024, the rate of inflation remained below the level
addition, cost increases for tenants, particularly in relation to staffing and of the majority of the Group's rent review caps. The Investment Manager is
Risk rating & change: utilities, may erode their profitability and rent cover unless their revenue monitoring tenant performance, including rent covers and whether average
increases accordingly. weekly fees paid by the underlying diversified mix of publicly funded and
Medium (unchanged) private-fee paying residents are growing in line with inflation.
Adverse interest Adverse interest rate fluctuations will increase the cost of the Group's The Group has a conservative gearing strategy. The gearing level remained
variable rate debt facilities; limit borrowing capacity; adversely impact consistent throughout the year, although net gearing is anticipated to
rate fluctuations property valuations; and be detrimental to the Group's overall returns. increase as the Group nears full investment. Loan covenants and liquidity
levels are closely monitored for compliance and headroom. The Group had fixed
/ debt covenant interest costs on 95% of its total borrowings as at 30 June 2025 and, as part
of its more recent loan refinancing, entered into new five-year interest rate
compliance swaps to hedge its interest rate exposure.
Risk rating & change:
Medium (unchanged)
Negative A negative perception of the care home sector, due to matters such as societal The Group is committed to investing in high quality real estate with high
trends, pandemic or safeguarding failures, or difficulties in accessing social quality operators. These assets are expected to experience demand ahead of the
perception of care, may result in a reduction in demand for care home beds, causing asset sector average while in the wider market a large number of care homes without
performance to fall below expectations despite the demographic shifts and the fit-for-purpose facilities are expected to close. A trend of improving
the care home realities of needs-based demand in the sector. The resultant reputational occupancy rates across the portfolio has been noted in recent times, with
damage could impact occupancy levels and rent covers across the portfolio. occupancy rates approaching pre-pandemic levels.
sector
Risk rating & change:
Medium (unchanged)
Availability Without access to equity or debt capital, the Group may be unable to grow The Group maintains regular communication with investors and existing debt
through acquisition of attractive investment opportunities. This is likely to providers, and, with the assistance of its brokers and sponsor, regularly
of capital be driven by both investor demand and lender appetite which will reflect Group monitors the Group's capital requirements and investment pipeline alongside
performance, competitor performance, general market conditions and the opportunities to raise both equity and debt. Whilst the Company's shares
Risk rating & change: relative attractiveness of investment in UK healthcare property. remain at a discount, potentially limiting access to equity capital for
further growth, the loan facilities due to expire in November 2025 were
Medium (unchanged) successfully refinanced subsequent to the year end.
ESG and climate A change in climate, such as an increased risk of local or coastal flooding, The Group is committed to investing in high quality real estate with high
or a change in tenant/investor demands or regulatory requirements for quality operators. The portfolio's EPC and BREEAM in-use ratings suggest the
change properties which meet certain environmental criteria, such as integral heat portfolio is well positioned to meet future requirements/expectations. The
pumps, may result in a fall in demand for the Group's properties, reducing Investment Manager uses a house standard to ensure ESG factors are fully
Risk rating & change: rental income and/or property valuations. considered during the acquisition process.
Medium (unchanged)
Reduced Recent trends have reduced the availability of key staff in the care sector The Group is committed to investing in high quality real estate with high
which may result in a reduction in the quality of care for the underlying quality operators and these should be better placed to attract staff. The
availability of residents of our homes, restrict tenants from being able to admit residents or Investment Manager continues to engage with tenants in the portfolio and to
result in wage inflation. share examples of best practice in recruitment and retention of staff.
carers, nurses
and other care
home staff
Risk rating & change:
Medium (unchanged)
Breach A breach of REIT regulations, primarily in relation to making the necessary The Group's activities, including the level of distributions, are monitored to
level of distributions, may result in loss of tax advantages derived from the ensure all conditions are adhered to. The REIT rules are considered during
of REIT Group's REIT status. The Group remains fully compliant with the REIT investment appraisal and transactions structured to ensure conditions are met.
regulations and is fully domiciled in the UK.
regulations
Risk rating & change:
Medium (unchanged)
Development The high inflationary environment, particularly for building materials and The Group is not significantly exposed to development risk, with forward
staff, combined with supply chain difficulties, may result in an increased funded acquisitions being developed under fixed price contracts, with the
costs risk that the developers of contracted developments do not fulfil their Investment Manager having considered both the financial strength of the
obligations and/or may increase the cost of new development opportunities. developer and the ability of the developer's profit to absorb any cost
Risk rating & change: overruns. As at 30 June 2025, the Group held only one remaining development,
although this may increase as the Group invests its available capital.
Medium (unchanged)
Changes in Changes in government policies, including those affecting local authority Government policy is monitored by the Group to increase the ability to
funding of care, may render the Group's strategy inappropriate. Secure income anticipate changes. The Group's tenants also typically have a multiplicity of
government and property valuations will be at risk if tenant finances suffer from policy income sources, with their business models not wholly dependent on government
changes. funding.
policies
Risk rating & change:
Medium (unchanged)
Reliance on The Group is externally managed and, as The Investment Manager, along with all other significant service providers, is
subject to regular performance appraisal by the Board. The Investment Manager
third party such, relies on a number of service providers. Poor quality service from has retained the majority of key personnel since the Group's IPO and has
providers such as the Investment Manager, company secretary, brokers, legal successfully hired further skilled individuals and invested in its systems.
service advisers or depositary could have potentially negative impacts on the Group's
investment performance, legal obligations, compliance or shareholder
providers relations.
Risk rating & change:
Medium (unchanged)
Failure to Failing to differentiate strategy and qualities from competitors is a The stakeholder communications strategy of the Group has always been to
significant risk for the business, with increased competition in the highlight the quality of the real estate in which the Group invests. The
differentiate healthcare real estate sector. The failure to communicate these effectively to regular production of investor relations materials (annual and interim
stakeholders could have a negative impact on the Company's share price, future reports, investor presentations and quarterly factsheets) along with direct
qualities from demand for equity raises and/or debt finance and wider reputational damage. engagement with investors helps to mitigate this risk.
competitors or
poor investment
performance
Risk rating & change:
Medium (unchanged)
The Company's risk matrix is reviewed regularly by the Board. Emerging risks
are identified though regular discussion at Board meetings of matters relevant
to the Company and the sectors in which it operates; including matters that
may impact on the underlying tenant operators. In addition, the Board holds an
annual two-day strategy meeting which includes presentations from relevant
external parties to ensure that the Board is fully briefed on relevant
matters. At the strategy meeting, as part of an overall SWOT analysis,
principal and emerging risks are discussed and reviewed to ensure that they
have all been appropriately identified and, where necessary, addressed.
The detailed consideration of the Company's viability and its continuation as
a going concern, including sensitivity analysis to address the appropriate
risks, is set out below.
Section 172 Statement: Promoting the success of Target Healthcare REIT plc
The Board considers that it has made decisions during the year which will
promote the success of the Group for the benefit of its members as a whole.
a) The likely consequences of any decision in the long term Our investment approach is long-term with an average lease length of 25.9
years. We believe this is the most responsible approach to provide stability
and sustainability to tenants and key stakeholders. Therefore, most decisions
require consideration of long-term consequences, from determining a
sustainable rent level and the right tenant partner for each investment, to
considering the impact of debt and key contracts with service providers on the
recurring earnings which support dividends to shareholders.
b) The interests of the Company's employees The Company is externally managed and therefore has no employees.
c) The need to foster the Company's business relationships with As a REIT with no employees, the Board works in close partnership with the
Investment Manager, which runs the Group's operations and portfolio within
suppliers, customers and others parameters set by the Board and subject to appropriate oversight. The
Investment Manager has deep relationships with tenants, the wider care home
sector, and many of the Group's other suppliers. These are set out in more
detail in the following table.
d) The impact of the Company's operations on the community and The Board is confident the Group's approach to investing in a sensitive sector
is responsible with regard to social and environmental impact. This is set out
the environment in more detail in the community and the environment section of the following
table.
e) The desirability of the Company maintaining a reputation for high standards The Board requires high standards of itself, service providers and
of business conduct stakeholders. The Group's purpose and investment objectives dictate that these
standards are met in order to retain credibility. The ethos and tone is set by
the Board and the Investment Manager.
f) The need to act fairly as between members of the Company The Board encourages an active dialogue with shareholders to ensure effective
communication, either directly or via its brokers and/or Manager. The
interests of all shareholders are considered when issuing new shares and/or
considering the level of distributions or other return of capital.
( )
The significant transactions where the interests of stakeholders were actively
considered by the Board during the year were:
Ongoing investment and asset management activity
The Group was actively engaged in several re-tenantings during the year.
Further details on which are described in detail in the Annual Report.
One of these involved placing a tenant into administration, the first time
that this has been undertaken by the Group and a decision which was not taken
lightly given both the costs involved and its potential impact across a number
of stakeholders. This transaction required careful consideration by the Board
to balance the competing interests of the Group, its shareholders, the tenant
operator and the staff and residents of the relevant care home. Despite the
additional costs involved in this process, it resulted in a successful
re-tenanting of the care home; preventing a further loss of rental income and
protecting capital value for the Group, whilst ensuring continuity of the
home's operations for staff and residents.
Another significant tenant activity involved an operator who decided to exit
the elderly care home market. Working with the operator, the Group disposed of
one property in June 2025 and agreed the re-tenanting of another two care
homes to existing tenants of the Group.
A further home was re-tenanted to accommodate an operator which had also taken
the strategic decision to exit the elderly care sector. This introduced a new
tenant with an experienced management team and ensured the continued provision
of care services to the local community, whilst securing attractive financial
terms for the Group and its shareholders.
Subsequent to the year end, the Group agreed a transaction to sell nine
properties as set out in detail above.
The Board also determined, and approved for publication, the Group's Net Zero
Carbon Pathway, including an initial interim target and intended timescale, as
part of its annual Sustainability Report.
Advisers
The Board appointed Panmure Liberum Limited as joint broker during the year to
improve both investor engagement and the quantum and availability of market
research published in relation to the Group.
Board
The Board concluded that, both in order to meet the 'comply or explain'
requirement of the UK Listing Rules to have at least one Director from an
ethnic minority and to aid the Board with future succession planning, a sixth
Director should be appointed to the Board over the following twelve months.
Capital financing
The Board finalised the refinancing of its shortest dated debt facilities with
each of the existing lenders in advance of their November 2025 expiry. This
required the Board to assess the appropriate gearing level of the Group and
the potential lenders to be considered, as well as the appropriate duration,
interest rate hedging strategy and financial terms of the loan facilities.
Dividends paid
The Board recognised the importance of dividends to its shareholders and,
after careful financial analysis, decided to increase the Company's dividends
in relation to the year ending 30 June 2026 to reflect net rental growth
whilst remaining at a level which is expected to be fully covered with the
potential for further growth.
Stakeholders
The Company is a REIT and has no executive directors or employees and is
governed by the Board of Directors. Its main stakeholders are shareholders,
tenants and their underlying residents, debt providers, the Investment
Manager, other service providers and the community and the environment. The
Board considers the long-term consequences of its decisions on its
stakeholders to ensure the long-term sustainability of the Company.
Shareholders Shareholders are key stakeholders and the Board proactively seeks the views of
its shareholders and places great importance on communication with them.
The Board reviews the detail of significant shareholders and recent movements
at each Board Meeting and receives regular reports from the Investment Manager
and brokers on the views of shareholders, and prospective shareholders, as
well as updates on general market trends and expectations. The Chair and other
Directors make themselves available to meet shareholders when required to
discuss the Group's business and address shareholder queries. The Directors
make themselves available at the AGM in person, with the Company also
providing the ability for any questions to be raised with the Board by email
in advance of the meeting.
The Company and Investment Manager also provide regular updates to
shareholders and the market through the Annual Report, Interim Report,
Sustainability Report, regular RNS announcements, quarterly investor reports
and the Company's website. The Investment Manager holds a results presentation
on the day of publication of each of the Annual and Interim Reports, and meets
with analysts and members of the financial press throughout the year.
Tenants and underlying residents The Investment Manager liaises closely with tenants to understand their needs,
and those of their underlying residents, through visits to properties and
regular communication with both care home personnel and senior management of
the tenant operators. The effectiveness of this engagement is assessed through
a regular survey which, during 2024, was undertaken by an external
third-party.
The Investment Manager also receives, and analyses, management information
provided by each tenant at least quarterly and regularly monitors the CQC, or
equivalent, rating for each home and any online reviews, such as
carehome.co.uk. Any significant matters are discussed with the tenant and
included within the Board reporting.
Debt providers The Group has term loan and revolving credit facilities with the Royal Bank of
Scotland plc, HSBC Bank plc and Phoenix Group (see Note 7 to the extract from
the Consolidated Financial Statements for more information). The Company
maintains a positive working relationship with each of its lenders and
provides regular updates, at least quarterly, on portfolio activity and
compliance with its loan covenants in relation to each loan facility. Since
the year-end, the Group has finalised the refinancing of the proportion of its
debt facilities which had been due to expire in November 2025.
Investment Manager The Investment Manager has responsibility for the day-to-day management of the
Group pursuant to the Investment Management Agreement. The Board, and its
committees, are in regular communication with the Investment Manager and
receive formal presentations at every Board Meeting to aid its oversight of
the Group's activities and the formulation of its ongoing strategy.
The Board, through the Management Engagement Committee, formally reviews the
performance of the Investment Manager, the terms of its appointment and the
quality of the other services provided at least annually. Further details on
this process and the conclusions reached in relation to the year ended 30 June
2025 are contained in the Annual Report.
Other service providers The Board, through the Management Engagement Committee, formally reviews the
performance of each of its significant service providers at least annually.
The reviews will include the Company's legal advisers, brokers, tax adviser,
auditor, depositary, external valuer, company secretary, insurance broker,
surveyors and registrar. The purpose of these reviews is to ensure that the
quality of the services provided remains of the standard expected by the Board
and that overall costs and other contractual arrangements remain in the
interests of the Group and other significant stakeholders. The Investment
Manager also reports regularly to the Board on these relationships.
The significant other service providers, particularly the Group's legal
advisers and brokers, are invited to attend Board Meetings, including the
annual Strategy Meeting, and report directly to the Directors where
appropriate.
Community and the environment The Group's principal non-financial objective is to generate a positive social
impact for the end-users of its real estate. Investment decisions are made
based on the fundamental premise that the real estate is suitable for its
residents, the staff who care for them, and their friends, families and local
communities, both on original acquisition and for the long-term.
Environmental considerations are an integral part of the acquisition and
portfolio management process, given the strategy of only acquiring modern
buildings which benchmark well from an energy efficiency aspect and which meet
the requirements of the Investment Manager's ESG Charter 'Targeting Tomorrow'.
Under the remit of the ESG Committee, the progression of the Group's ESG
strategy has prioritised gathering useful energy/consumption data on its
portfolio, whilst identifying and commencing work on a straightforward
hierarchy of initiatives to maximise the Group's impact over both the short
and longer term. The Group is now working on improving its feedback and
reporting to tenants of the data collected in order to highlight areas in
which they may be able to improve their own performance. The Group has
formulated and published a high-level longer term portfolio strategy in
relation to setting and meeting the Group's net zero carbon target, including
initial consideration of a short term interim target and intended timescale.
Alison Fyfe
Chair
13 October 2025
Viability Statement
The AIC Code requires the Board to assess the Group's prospects, including a
robust assessment of the emerging and principal risks facing the Group
including those that would threaten its business model, future performance,
solvency or liquidity. This assessment is undertaken with the aim of stating
that the Directors have a reasonable expectation that the Group will continue
in operation and be able to meet its liabilities as they fall due over the
period of their assessment.
The Board has conducted this review over a five-year time horizon, which is a
period thought to be appropriate for a company investing in UK care homes with
a long-term investment outlook. At each Board Meeting, the Directors consider
the key outputs from a detailed financial model covering a similar five-year
rolling period, as this is considered the maximum timescale over which the
performance of the Group can be forecast with a reasonable degree of accuracy.
At 30 June 2025, the Group had a property portfolio which has long leases and
a weighted average unexpired lease term of 25.9 years.
Following the Group's refinancing in September 2025, the Group's committed
loan facilities have staggered expiry dates with £130.0 million being
committed until at least 23 September 2028, £87.3 million to 12 January 2032
and £62.7 million to 12 January 2037. The Group's debt facilities also
include additional accordion facilities which, subject to approval of the
relevant lender, may provide additional uncommitted loan facilities of up to
£70.0 million until at least 23 September 2028. At 13 October 2025, the Group
had drawn borrowings of £247.6 million consisting of:
• £150.0 million on which the interest rate had been fixed directly
until at least 12 January 2032 at a maximum weighted interest rate of 3.18 per
cent per annum;
• £50.0 million on which the interest rate had been hedged or
capped through interest rate derivatives until 23 September 2030 at a weighted
average margin of 5.30 per cent per annum; and
• £47.6 million which carried interest at SONIA plus a weighted
average margin of 1.50 per cent per annum, with SONIA capped at 3.0 per cent
per annum for the short period to 5 November 2025.
All interest rates stated exclude the amortisation of arrangement costs on
each of the relevant loan facilities.
The Directors' assessment of the Group's principal risks are highlighted
above. The most significant risks identified as relevant to the viability
statement were those relating to:
• Poor performance of investments/investment assets: The risk that a
tenant is unable to sustain a sufficient rental cover, leading to a loss of
rental income for the Group;
• High inflationary environment: The risk that the level of the UK
inflation rate results in a real term decrease in the Group's income or erodes
the profitability of tenants;
• Adverse interest rate fluctuations: The risk that an increase in
interest rates may impact property valuations, increase the cost of the
Group's variable rate debt facilities, and/or limit the Group's borrowing
capacity;
• Negative perception of the care home sector: The risk that overall
demand for care home beds is reduced resulting in a decline in the capital
and/or income return from the property portfolio; and
• Reduced availability of care home staff: The risk that unavailability
of staff restricts the ability of tenants to admit residents or results in
significant wage cost inflation, impacting on the tenants' rental cover and
leading to a loss of rental income for the Group.
In assessing the Group's viability, the Board has considered the key outputs
from a detailed model of the Group's expected cashflows over the coming five
years under both normal and stressed conditions. The stressed conditions,
which were intended to represent severe but plausible scenarios, included
modelling increases in interest rates of 200bps per annum compared to market
forecasts at 30 June 2025, a reduction in the capital value of the property
portfolio of 20 per cent and a significant default on rental receipts from the
Group's tenants equating to an aggregate of c.13 per cent of the Group's
contracted rent roll. The stressed level of default from the Group's tenants
assumed in the financial modelling was based on a detailed assessment of the
financial position of each individual tenant or tenant group and the structure
in place to secure rental income (such as the strength of tenants' balance
sheets, rental guarantees in place or rental deposits held). The financial
modelling assumed that the Group's dividend continued to be paid throughout
the five year period of the assessment, and that the financial covenants on
the Group's loan facilities remained substantially unchanged. Under the
stressed scenario, the Group's net LTV was forecast to reach a peak of 31 per
cent and no breaches were forecast in relation to the Group's compliance with
the financial covenants on each of its loan facilities.
Based on the results of the scenario analysis outlined above, the Board has a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the five year period of its
assessment.
Consolidated Statement of Comprehensive Income (audited)
For the year ended 30 June
2025
Year ended 30 June 2024
Year ended 30 June 2025
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue
Rental income 60,369 10,841 71,210 58,615 10,927 69,542
Other rental income 202 1,505 1,707 - - -
Other income 11 - 11 9 - 9
Total revenue 60,582 12,346 72,928 58,624 10,927 69,551
Gains on revaluation of investment properties 5 - 12,244 12,244 - 24,693 24,693
Gains on investment properties realised 5 - 39 39 - 1,934 1,934
Total income 60,582 24,629 85,211 58,624 37,554 96,178
Expenditure
Investment management fee 2 (7,816) - (7,816) (7,518) - (7,518)
Credit loss allowance and bad debts 3 (1,612) - (1,612) (962) - (962)
Other expenses 3 (3,907) - (3,907) (3,074) - (3,074)
Total expenditure (13,335) - (13,335) (11,554) - (11,554)
Profit before finance costs and taxation 47,247 24,629 71,876 47,070 37,554 84,624
Net finance costs
Interest income 426 - 426 66 - 66
Finance costs (10,659) (798) (11,457) (10,866) (800) (11,666)
Net finance costs (10,233) (798) (11,031) (10,800) (800) (11,600)
Profit before taxation 37,014 23,831 60,845 36,270 36,754 73,024
Taxation - - - - - -
Profit for the year 37,014 23,831 60,845 36,270 36,754 73,024
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or loss
Movement in fair value of interest rate derivatives designated as cash flow - (1,450) (1,450) - (3,285) (3,285)
hedges
Total comprehensive income for the year 37,014 22,381 59,395 36,270 33,469 69,739
Earnings per share (pence) 4 5.97 3.84 9.81 5.85 5.92 11.77
The total column of this statement represents the Group's Consolidated
Statement of Comprehensive Income, prepared in accordance with IFRS. 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 year.
Consolidated Statement of Financial Position (audited)
As at 30 June 2025
As at As at
30 June 2025 30 June 2024
Notes £'000 £'000
Non-current assets
Investment properties 5 840,432 831,573
Trade and other receivables 101,861 88,426
Interest rate derivatives - 2,820
942,293 922,819
Current assets
Trade and other receivables 3,682 5,667
Interest rate derivatives 572 -
Cash and cash equivalents 39,639 38,884
43,893 44,551
Total assets 986,186 967,370
Non-current liabilities
Loans 7 (148,439) (240,672)
Trade and other payables (12,695) (9,893)
(161,134) (250,565)
Current liabilities
Loans 7 (91,852) -
Trade and other payables (20,740) (27,512)
(112,592) (27,512)
Total liabilities (273,726) (278,077)
Net assets 712,460 689,293
Share capital and reserves
Share capital 8 6,202 6,202
Share premium 256,633 256,633
Merger reserve 47,751 47,751
Distributable reserve 160,531 170,347
Hedging reserve 291 1,741
Capital reserve 101,499 77,668
Revenue reserve 139,553 128,951
Equity shareholders' funds 712,460 689,293
Net asset value per ordinary share (pence) 4 114.9 111.1
Consolidated Statement of Changes in Equity (audited)
For the year ended 30 June 2025
Distrib-utable
Share capital Share premium Merger reserve reserve Hedging Capital reserve Revenue reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 June 2024 6,202 256,633 47,751 170,347 1,741 77,668 128,951 689,293
Profit for the year - - - - - 23,831 37,014 60,845
Other comprehensive income - - - - (1,450) - - (1,450)
Total comprehensive income - - - - (1,450) 23,831 37,014 59,395
Transactions with owners recognised in equity:
Dividends paid 1 - - - (9,816) - - (26,412) (36,228)
At 30 June 2025 6,202 256,633 47,751 160,531 291 101,499 139,553 712,460
For the year ended 30 June 2024
Distrib-utable
Share capital Share premium Merger reserve reserve Hedging Capital reserve Revenue reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 June 2023 6,202 256,633 47,751 187,887 5,026 40,914 110,395 654,808
Profit for the year - - - - - 36,754 36,270 73,024
Other comprehensive income - - - - (3,285) - - (3,285)
Total comprehensive income - - - - (3,285) 36,754 36,270 69,739
Transactions with owners recognised in equity:
Dividends paid 1 - - - (17,540) - - (17,714) (35,254)
At 30 June 2024 6,202 256,633 47,751 170,347 1,741 77,668 128,951 689,293
Consolidated Statement of Cash Flows (audited)
For the year ended 30 June 2025
Year ended Year ended
30 June 2025 30 June 2024
Note £'000 £'000
Cash flows from operating activities
Profit before tax 60,845 73,024
Adjustments for:
Interest income (426) (66)
Finance costs 11,457 11,666
Revaluation gain on investment properties and movements in lease incentives, 5 (23,085) (35,620)
net of acquisition costs written off
Gain on investment properties realised 5 (39) (1,934)
Decrease in trade and other receivables 1,367 3,083
Increase in trade and other payables 646 2,088
50,765 52,241
Interest paid (10,090) (9,962)
Interest received 426 66
(9,664) (9,896)
Net cash inflow from operating activities 41,101 42,345
Cash flows from investing activities
Purchase of investment properties, including acquisition costs (12,985) (40,927)
Disposal of investment properties, net of lease incentives 9,753 44,344
Net cash (outflow)/inflow from investing activities (3,232) 3,417
Cash flows from financing activities
Drawdown of bank loan facilities 13,000 52,500
Repayment of bank loan facilities (14,000) (39,500)
Dividends paid (36,114) (35,244)
Net cash outflow from financing activities (37,114) (22,244)
Net increase in cash and cash equivalents 755 23,518
Opening cash and cash equivalents 38,884 15,366
Closing cash and cash equivalents 39,639 38,884
Transactions which do not require the use of cash
Movement in fixed or guaranteed rent reviews 10,841 10,927
Movement in lease incentives 359 839
Fixed or guaranteed rent reviews derecognised on disposal or (559) (1,449)
re-tenanting
Total 10,641 10,317
Statement of Directors' Responsibilities in Respect of the Annual Financial
Report
In accordance with Chapter 4 of the Disclosure Guidelines and Transparency
Rules, we confirm that to the best of our knowledge:
· The financial statements contained within the Annual Report for the
year ended 30 June 2025, of which this statement of results is an extract,
have been prepared in accordance with applicable UK-adopted International
Financial Reporting Standards, on a going concern basis, and give a true and
fair view of the assets, liabilities, financial position and return of the
Company;
· The Chairman's Statement, Investment Manager's Report and Our
Strategy include a fair review of the development and performance of the
business and the position of the Company, including important events that have
occurred during the financial year and their impact on the financial
statements;
· 'Principal and emerging risks and risk management' includes a
description of the Company's principal and emerging risks and uncertainties;
and
· The Annual Report includes details of related party transactions
that have taken place during the financial year.
On behalf of the Board
Alison Fyfe
Chair
13 October 2025
Extract from Notes to the Audited Consolidated Financial Statements
1. Dividends
Amounts paid as distributions to equity holders during the year to 30 June
2025.
Dividend rate Year ended
(pence per share) 30 June 2025
£'000
Fourth interim dividend for the year ended 30 June 2024 1.428 8,857
First interim dividend for the year ended 30 June 2025 1.471 9,123
Second interim dividend for the year ended 30 June 2025 1.471 9,124
Third interim dividend for the year ended 30 June 2025 1.471 9,124
Total 5.841 36,228
Amounts paid as distributions to equity holders during the year to 30 June
2024.
Dividend rate Year ended
(pence per share) 30 June 2024
£'000
Fourth interim dividend for the year ended 30 June 2023 1.400 8,683
First interim dividend for the year ended 30 June 2024 1.428 8,857
Second interim dividend for the year ended 30 June 2024 1.428 8,857
Third interim dividend for the year ended 30 June 2024 1.428 8,857
Total 5.684 35,254
It is the policy of the Directors to declare and pay dividends as interim
dividends. The Directors do not therefore recommend a final dividend. The
fourth interim dividend in respect of the year ended 30 June 2025, of 1.471
pence per share, was paid on 29 August 2025 to shareholders on the register on
15 August 2025 and amounted to £9,124,000. It is the intention of the
Directors that the Group will continue to pay dividends quarterly.
2. Fee paid to the Investment Manager
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Investment management fee 7,816 7,518
Total 7,816 7,518
The Group's Investment Manager and Alternative Investment Fund Manager
('AIFM') is Target Fund Managers Limited (the 'Investment Manager' or
'Target'). The Investment Manager is entitled to an annual management fee
calculated on a tiered basis based on the net assets of the Group as set out
below. Where applicable, VAT is payable in addition.
Net assets of the Group Management fee percentage
Up to and including £500 million 1.05
Above £500 million and up to and including £750 million 0.95
Above £750 million and up to and including £1 billion 0.85
Above £1 billion and up to and including £1.5 billion 0.75
Above £1.5 billion 0.65
The Investment Manager is entitled to an additional fee of £160,000 per annum
(plus VAT), increasing annually in line with inflation, in relation to their
appointment as Company Secretary and Administrator to the Group.
The Investment Management Agreement can be terminated by either party on 24
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; is 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. Other expenses
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Total movement in credit loss allowance 1,612 962
Bad debts written off - -
Credit loss allowance charge 1,612 962
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Valuation and other professional fees 1,601 1,107
Auditor's remuneration for:
- statutory audit of the Company 167 181
- statutory audit of the Company's subsidiaries 286 277
- review of interim financial information 17 16
Other taxation compliance and advisory* 382 271
Direct property costs 267 199
Secretarial and administration fees 229 229
Directors' fees 227 227
Public relations and marketing 185 179
Printing, postage and website 146 100
Listing and Registrar fees 134 115
Abortive costs 81 9
Other 185 164
Total other expenses 3,907 3,074
* The other taxation compliance and advisory fees were all paid to parties
other than the Company's Auditor.
During the year ended 30 June 2025, the Group incurred additional one-off
costs related to the administration of the tenant entity at one of its care
home properties. These are primarily included in 'valuation and other
professional fees' above.
4. Earnings per share and Net Asset Value per share
Earnings per share
Year ended 30 June 2025 Year ended 30 June 2024
£'000 Pence per share £'000 Pence per share
Revenue earnings 37,014 5.97 36,270 5.85
Capital earnings 23,831 3.84 36,754 5.92
Total earnings 60,845 9.81 73,024 11.77
Average number of shares in issue 620,237,346 620,237,346
There were no dilutive shares or potentially dilutive shares in issue.
EPRA is an industry body which issues best practice reporting guidelines for
financial disclosures by public real estate companies and the Group reports an
EPRA NAV quarterly. EPRA has issued best practice recommendations for the
calculation of certain figures which are included below. Other EPRA measures
are included in the section below entitled EPRA Performance Measures.
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
rental income arising from recognising guaranteed rental review uplifts and
for development interest received from developers in relation to monies
advanced under forward fund agreements which, in the Group's IFRS financial
statements, is required to be offset against the book cost of the property
under development. The Board believes that the Group's specific adjusted EPRA
earnings represents the underlying performance measure appropriate for the
Group's business model as it illustrates the underlying revenue stream and
costs generated by the Group's property portfolio.
The reconciliations are provided in the table below:
Year ended Year
30 June 2025 ended
£'000 30 June 2024
£'000
Earnings per IFRS Consolidated Statement of Comprehensive Income 60,845 73,024
Adjusted for gains on investment properties realised (39) (1,934)
Adjusted for revaluations of investment properties (12,244) (24,693)
Adjusted for finance and transaction costs on the interest rate cap 798 800
Adjusted for other capital items (1,505) -
EPRA earnings 47,855 47,197
Adjusted for rental income arising from recognising guaranteed rent review (10,841) (10,927)
uplifts
Adjusted for development interest under forward fund agreements 725 1,767
Group specific adjusted EPRA earnings 37,739 38,037
Earnings per share ('EPS') (pence per share)
EPS per IFRS Consolidated Statement of Comprehensive Income 9.81 11.77
EPRA EPS 7.72 7.61
Group specific adjusted EPRA EPS 6.08 6.13
Net Asset Value per share
The Group's Net Asset Value per ordinary share of 114.9 pence (2024: 111.1
pence) is based on equity shareholders' funds of £712,460,000 (2024:
£689,293,000) and on 620,237,346 (2024: 620,237,346) ordinary shares, being
the number of shares in issue at the year-end.
The EPRA best practice recommendations include a set of EPRA NAV metrics that
are arrived at by adjusting the net asset value calculated under International
Financial Reporting Standards ('IFRS') to provide stakeholders with what EPRA
believe to be the most relevant information on the fair value of the assets
and liabilities of a real estate investment company, under different
scenarios. The three EPRA NAV metrics are:
· EPRA Net Reinstatement Value ('NRV'): Assumes that entities never
sell assets and aims to represent the value required to rebuild the entity.
The objective is to highlight the value of net assets on a long-term basis.
Assets and liabilities that are not expected to crystallise in normal
circumstances, such as the fair value movements on financial derivatives, are
excluded and the costs of recreating the Group through investment markets,
such as property acquisition costs and taxes, are included.
· EPRA Net Tangible Assets ('NTA'): Assumes that entities buy and sell
assets, thereby crystallising certain levels of unavoidable deferred tax.
Given the Group's REIT status, it is not expected that significant deferred
tax will be applicable to the Group.
· EPRA Net Disposal Value ('NDV'): Represents the shareholders' value
under a disposal scenario, where deferred tax, financial instruments and
certain other adjustments are calculated to the full extent of their
liability, net of any resulting tax. At 30 June 2025, the Group held all its
material balance sheet items at fair value, or at a value considered to be a
close approximation to fair value, in its financial statements apart from its
fixed-rate debt facilities where the fair value is estimated to be lower than
the nominal value. See note 7 for further details on the Group's loan
facilities.
2025 2025 2025 2024 2024 2024
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£'000 £'000 £'000 £'000 £'000 £'000
IFRS NAV per financial statements 712,460 712,460 712,460 689,293 689,293 689,293
Fair value of interest rate derivatives (572) (572) - (2,820) (2,820) -
Fair value of loans - - 27,929 - - 29,780
Estimated purchasers' costs 62,175 - - 60,026 - -
EPRA net assets 774,063 711,888 740,389 746,499 686,473 719,073
EPRA net assets (pence per share) 124.8 114.8 119.4 120.4 110.7 115.9
5. Investment properties
Freehold and leasehold properties
As at As at
30 June 2025 30 June 2024
£'000 £'000
Opening market value 908,530 868,705
Opening fixed or guaranteed rent reviews (68,856) (59,378)
Opening lease incentives (10,011) (9,172)
Opening performance payments (see Note 10) 1,910 -
Opening carrying value 831,573 800,155
Disposals - proceeds (9,753) (44,344)
- (loss)/gain on sale (542) 1,382
Purchases and performance payments 7,650 45,444
Acquisition costs capitalised 30 332
Acquisition costs written off (30) (332)
Unrealised loss realised during the year 581 552
Revaluation movement - gains 25,484 45,496
Revaluation movement - losses (2,010) (8,705)
Movement in market value 21,410 39,825
Fixed or guaranteed rent reviews derecognised on disposal or
re-tenanting
559 1,449
Movement in fixed or guaranteed rent reviews (10,841) (10,927)
Movement in lease incentives (359) (839)
Movement in performance payments (see Note 10) (1,910) 1,910
Movement in carrying value 8,859 31,418
Closing market value 929,940 908,530
Closing fixed or guaranteed rent reviews (79,138) (68,856)
Closing lease incentives (10,370) (10,011)
Closing performance payments (see Note 10) - 1,910
Closing carrying value 840,432 831,573
Changes in the valuation of investment properties Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
(Loss)/gain on sale of investment properties (542) 1,382
Unrealised loss realised during the year 581 552
Gain on investment properties realised 39 1,934
Revaluation movement 23,474 36,791
Acquisition costs written off (30) (332)
Movement in fixed or guaranteed rent reviews (10,841) (10,927)
Movement in lease incentives (359) (839)
Gain on revaluation of investment properties 12,244 24,693
The investment properties can be analysed as follows:
As at As at
30 June 2025 30 June 2024
£'000 £'000
Standing assets 921,080 889,255
Developments under forward fund agreements 8,860 19,275
Closing market value 929,940 908,530
At 30 June 2025, the properties were valued at £929,940,000 (2024:
£908,530,000) by CBRE Limited ('CBRE') in their capacity as external valuers.
The valuation was undertaken in accordance with the RICS Valuation - Global
Standards, 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. CBRE has recent experience in the
location and category of the investment properties being valued.
Market Value represents the estimated amount for which an asset or liability
should exchange on the valuation date between a willing buyer and a willing
seller in an arm's length transaction, after proper marketing where the
parties had each acted knowledgeably, prudently and without compulsion. The
quarterly property valuations are reviewed by the Board at each Board meeting.
The fair value of the properties after adjusting for the movement in the fixed
or guaranteed rent reviews, lease incentives and performance payments was
£840,432,000 (2024: £831,573,000). The adjustment consisted of £79,138,000
(2024: £68,856,000) relating to fixed or guaranteed rent reviews and
£10,370,000 (2024: £10,011,000) 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 accounts
as non-current or current assets within 'trade and other receivables'. An
adjustment is also made, where applicable, to reflect the amount by which the
portfolio value is expected to increase if the performance payments recognised
in 'trade and other payables' are paid and the passing rent at the relevant
property increased accordingly (see Note 10). The total purchases in the year
to 30 June 2025, inclusive of the performance payments recognised in the year
and/or exclusive of those recognised in the prior year, were £5,740,000
(2024: £47,354,000).
6. Investment in subsidiary undertakings
The Group included 50 subsidiary companies as at 30 June 2025 (2024: 49). 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 one subsidiary incorporated in Jersey, two subsidiaries
incorporated in Gibraltar and two subsidiaries incorporated in Luxembourg, all
subsidiaries are incorporated within the United Kingdom.
The Group incorporated one subsidiary during the year, with the intention that
this be used in due course to hold potential forward fund development(s). The
Group did not acquire or dispose of any subsidiaries during the year (2024:
the Group did not incorporate, acquire or dispose of any subsidiaries during
the year).
7. Loans
As at As at
30 June 2025 30 June 2024
Non-current loans £'000 £'000
Principal amount outstanding 150,000 243,000
Set-up costs (2,413) (4,520)
Amortisation of set-up costs 852 2,192
Total 148,439 240,672
As at As at
30 June 2025 30 June 2024
Current loans £'000 £'000
Principal amount outstanding 92,000 -
Set-up costs (2,107) -
Amortisation of set-up costs 1,959 -
Total 91,852 -
In November 2020, the Group entered into a £70,000,000 committed term loan
and revolving credit facility with the Royal Bank of Scotland plc ('RBS')
which is repayable in November 2025. Interest accrues on the bank loan at a
variable rate, based on SONIA plus margin and mandatory lending costs, and is
payable quarterly. The margin is 2.18 per cent per annum on £50,000,000 of
the facility and 2.33 per cent per annum on the remaining £20,000,000
revolving credit facility, both for the duration of the loan. A
non-utilisation fee of 1.13 per cent per annum is payable on the first
£20,000,000 of any undrawn element of the facility, reducing to 1.05 per cent
per annum thereafter. As at 30 June 2025, the Group had drawn £42,000,000
under this facility (2024: £43,000,000).
In November 2020, the Group entered into a £100,000,000 revolving credit
facility with HSBC Bank plc ('HSBC') which is repayable in November 2025.
Interest accrues on the bank loan at a variable rate, based on SONIA plus
margin and mandatory lending costs, and is payable quarterly. The margin is
2.17 per cent per annum for the duration of the loan and a non-utilisation fee
of 0.92 per cent per annum is payable on any undrawn element of the facility.
As at 30 June 2025, the Group had drawn £50,000,000 under this facility
(2024: £50,000,000). Subsequent to the year end, the RBS and HSBC facilities
have each been refinanced. Refer to Note 12 for details.
In January 2020 and November 2021, the Group entered into committed term loan
facilities with Phoenix Group of £50,000,000 and £37,250,000, respectively.
Both these facilities are repayable on 12 January 2032. The Group has a
further committed term loan facility with Phoenix Group of £62,750,000 which
is repayable on 12 January 2037. Interest accrues on these three loans at
aggregate annual fixed rates of interest of 3.28 per cent, 3.13 per cent and
3.14 per cent, respectively and is payable quarterly. As at 30 June 2025, the
Group had drawn £150,000,000 under these facilities (2024: £150,000,000).
The following interest rate derivatives were in place during the year ended 30
June 2025:
Notional Value Interest Paid Counter-party
Starting Date Ending Date Interest Received
30,000,000 5 November 2020 5 November 2025 0.30% Daily compounded SONIA (floor at RBS
-0.08%)
50,000,000 1 November 2022 5 November 2025 nil Daily compounded SONIA above 3.0% cap HSBC
The Group paid a premium of £2,577,000, inclusive of transaction costs of
£169,000, on entry into the £50,000,000 interest rate cap in November 2022.
At 30 June 2025, inclusive of the interest rate derivatives, the interest rate
on £230,000,000 of the Group's borrowings has been capped, including the
amortisation of loan arrangement costs, at an all-in rate of 3.70 per cent per
annum until at least 5 November 2025. The remaining £90,000,000 of debt, of
which £12,000,000 was drawn at 30 June 2025, would, if fully drawn, carry
interest at a variable rate equal to daily compounded SONIA plus a weighted
average lending margin, including the amortisation of loan arrangement costs,
of 2.46 per cent per annum.
The aggregate fair value of the interest rate derivatives held at 30 June 2025
was an asset of £572,000 (2024: £2,820,000). The Group categorises all
interest rate derivatives as level 2 in the fair value hierarchy as they are
valued with reference to published interest rates.
At 30 June 2025, the nominal value of the Group's loans equated to
£242,000,000 (2024: £243,000,000). Excluding the interest rate derivatives
referred to above, the fair value of these loans, based on a discounted
cashflow using the market rate on the relevant treasury plus an estimated
margin based on market conditions at 30 June 2025, totalled, in aggregate,
£214,071,000 (2024: £213,220,000). The payment required to redeem the loans
in full, incorporating the terms of the Spens clause in relation to the
Phoenix Group facilities, would have been £225,493,000 (2024: £226,721,000).
The loans are categorised as level 3 in the fair value hierarchy given the
estimated margin is not observable market data.
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 five subsidiaries. The Phoenix Group loans of
£50,000,000 and £37,250,000 are 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 eight subsidiaries. The Phoenix Group
loan of £62,750,000 is secured by way of a fixed and floating charge over the
majority of the assets of THR Number 43 plc ('THR43'). 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 its
18 subsidiaries. In aggregate, the Group has granted a fixed charge over
properties with a market value of £754,390,000 as at 30 June 2025 (2024:
£743,265,000).
Under the covenants related to the loans, the Group is to ensure that:
· the loan to value percentage for each of THR1 Group and THR15
Group does not exceed 50 per cent;
· the loan to value percentage for THR12 Group and THR43 does not
exceed 60 per cent;
· the interest cover for THR1 Group is greater than 225 per cent on
any calculation date;
· the interest cover for THR15 Group is greater than 200 per cent
on any calculation date; and
· the debt yield for each of THR12 Group and THR43 is greater than
10 per cent on any calculation date.
The significant terms of the facilities remained unchanged and all loan
covenants have been complied with during the year.
Analysis of net debt:
Cash and cash equivalents Cash and cash equivalents
Borrowing Net debt Borrowing Net debt
2025 2025 2025 2024 2024 2024
£'000 £'000 £'000 £'000 £'000 £'000
Opening balance 38,884 (240,672) (201,788) 15,366 (227,051) (211,685)
Cash flows 755 1,000 1,755 23,518 (13,000) 10,518
Non-cash flows - (619) (619) - (621) (621)
Closing balance 39,639 (240,291) (200,652) 38,884 (240,672) (201,788)
8. Share capital
Allotted, called-up and fully paid ordinary shares of £0.01 each Number of shares £'000
Balance as at 30 June 2024 and 30 June 2025 620,237,346 6,202
Under the Company's Articles of Association, the Company may issue an
unlimited number of ordinary shares. Ordinary shareholders are entitled to all
dividends declared by the Company and to all of the Company's assets after
repayment of its borrowings and ordinary creditors. Ordinary shareholders have
the right to vote at meetings of the Company. All ordinary shares carry equal
voting rights.
During the year to 30 June 2025, the Company did not issue any ordinary shares
(2024: nil). The Company did not repurchase any ordinary shares into treasury
(2024: nil) or resell any ordinary shares from treasury (2024: nil). At 30
June 2025, the Company did not hold any shares in treasury (2024: nil).
Capital management
The Group's capital is represented by the share capital, share premium, merger
reserve, distributable reserve, hedging reserve, capital reserve, revenue
reserve and long-term borrowings. The Group is not subject to any
externally-imposed capital requirements, other than the financial covenants on
its loan facilities as detailed in note 7.
The capital of the Group is managed in accordance with its investment policy,
in pursuit of its investment objective.
Capital risk management
The objective of the Group is to provide ordinary shareholders with an
attractive level of income together with the potential for income and capital
growth from investing in a diversified portfolio of freehold and long
leasehold care homes that are let to care home operators; and other healthcare
assets in the UK.
The Board has responsibility for ensuring the Group's ability to continue as a
going concern. This involves the ability to borrow monies in the short and
long term; and pay dividends out of reserves, all of which are considered and
approved by the Board on a regular basis.
To maintain or adjust the capital structure, the Company may adjust the
dividend payment to shareholders, return capital to shareholders, issue new
shares or buyback shares for cancellation or for holding in treasury. The
Company may also increase or decrease its level of long-term borrowings. The
Group monitors capital using the net LTV ratio, which was 21.8 per cent at 30
June 2025 (2024: 22.5 per cent). The Board currently intends that, over the
medium term, borrowings of the Group will represent no more than approximately
30 per cent of the Group's gross assets at the time of drawdown.
Where ordinary shares are held in treasury these are available to be sold to
meet on-going market demand. The net proceeds of any subsequent sales of
shares out of treasury will provide the Company with additional capital to
enable it to take advantage of investment opportunities in the market and make
further investments in accordance with the Company's investment policy and
within its appraisal criteria. Holding shares in treasury for this purpose
assists the Company in matching its on-going capital requirements to its
investment opportunities and therefore reduces the negative effect of holding
excess cash on its balance sheet over the longer term.
No changes were made in the capital management objectives, policies or
processes during the year.
9. Financial instruments
Consistent with its objective, the Group holds UK care home property
investments. In addition, the Group's financial instruments comprise cash,
loans and receivables and payables that arise directly from its operations.
The Group's exposure to derivative instruments consists of interest rate swaps
and interest rate caps used to fix the interest rate on the Group's variable
rate borrowings.
The Group is exposed to various types of risk that are associated with
financial instruments. The most important types are credit risk, liquidity
risk, interest rate risk and market price risk. There is no foreign currency
risk as all assets and liabilities of the Group are maintained in pounds
sterling.
The Board reviews and agrees policies for managing the Group's risk exposure.
These policies are summarised below and have remained unchanged for the year
under review. These disclosures include, where appropriate, consideration of
the Group's investment properties which, whilst not constituting financial
instruments as defined by IFRS, are considered by the Board to be integral to
the Group's overall risk exposure.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Group. At the
reporting date, the Group's financial assets exposed to credit risk amounted
to £42,122,000 (2024: £41,536,000), consisting of cash of £39,639,000
(2024: £38,884,000), accrued development interest of £809,000 (2024:
£1,076,000), net rent receivable of £1,089,000 (2024: £890,000) and other
debtors of £585,000 (2024: £686,000).
In the event of default by a tenant if it is in financial difficulty or
otherwise unable to meet its obligations under the lease, the Group will
suffer a rental shortfall and incur additional expenses until the property is
relet. These expenses could include legal and surveyor's costs in re-letting,
maintenance costs, insurances, rates and marketing costs and may have a
material adverse impact on the financial condition and performance of the
Group and/or the level of dividend cover. The Group may also require to
provide rental incentives to the incoming tenant. The Board receives regular
reports on concentrations of risk and any tenants in arrears. The Investment
Manager monitors such reports in order to anticipate, and minimise the impact
of, defaults by occupational tenants. The expected credit risk in relation to
tenants is an inherent element of the due diligence considered by the
Investment Manager on all property transactions with an emphasis being placed
on ensuring that the initial rent is set at a sustainable level. The risk is
further mitigated by rental deposits or guarantees where considered
appropriate. The majority of rental income is received in advance.
As at 30 June 2025, the Group had recognised a credit loss allowance totalling
£4,547,000 (2024: £2,935,000) against a gross rent receivable balance of
£4,828,000 (2024: £3,267,000), gross loans to tenants totalling £788,000
(2024: £952,000) and other tenant debtors of £287,000 (2024: £nil). Of the
gross receivable of £4,219,000 at 30 June 2024, £638,000 was subsequently
recovered and £3,581,000 is still outstanding. There were no other financial
assets which were either past due or considered impaired at 30 June 2025
(2024: nil).
All of the Group's cash is placed with financial institutions with a long-term
credit rating of BBB or better. Bankruptcy or insolvency of such financial
institutions may cause the Group's ability to access cash placed on deposit to
be delayed, limited or lost. Should the credit quality or the financial
position of the banks currently employed significantly deteriorate, cash
holdings would be moved to another bank.
Should the Group hold significant cash balances for an extended period, then
counterparty risk will be spread, by placing cash across different financial
institutions. At 30 June 2025 the Group held £39.4 million (2024: £37.7
million) with The Royal Bank of Scotland plc and £0.2 million (2024: £1.2
million) with HSBC Bank plc. Given the credit quality of the counterparties
used, no credit loss allowance is recognised against cash balances as it is
considered to be immaterial.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in
realising assets or otherwise raising funds to meet financial commitments. The
Group's investments comprise UK care homes. Property and property-related
assets in which the Group invests are not traded in an organised public market
and may be illiquid. As a result, the Group may not be able to liquidate
quickly its investments in these properties at an amount close to their fair
value in order to meet its liquidity requirements.
The Group's liquidity risk is managed on an on-going basis by the Investment
Manager and monitored on a quarterly basis by the Board. In order to mitigate
liquidity risk the Group aims to have sufficient cash balances (including the
expected proceeds of any property sales) to meet its obligations for a period
of at least twelve months.
Interest rate risk
Some of the Company's financial instruments are interest-bearing.
Interest-rate risk is the risk that future cash flows will change adversely as
a result of changes in market interest rates.
The Group's policy is to hold cash in variable rate or short-term fixed rate
bank accounts. At 30 June 2025, interest was being received on cash at a
weighted average variable rate of 1.2 per cent (2024: 1.1 per cent). Exposure
varies throughout the period as a consequence of changes in the composition of
the net assets of the Group arising out of the investment and risk management
policies. These balances expose the Group to cash flow interest rate risk as
the Group's income and operating cash flows will be affected by movements in
the market rate of interest.
At 30 June 2025, the Group had £170,000,000 (2024: £170,000,000) of
committed term loans and revolving credit facilities which were charged
interest at a rate of SONIA plus the relevant margin. At 30 June 2025,
£92,000,000 of the variable rate facilities had been drawn down (2024:
£93,000,000). The fair value of the variable rate borrowings is affected by
changes in the market rate of the lending margin that would apply to similar
loans. The variable rate borrowings are carried at amortised cost and the
Group considers this to be a close approximation to fair value at 30 June 2025
and 30 June 2024.
At 30 June 2025, the Group had hedged its exposure on £80,000,000 of the
£92,000,000 of the drawn variable rate borrowings (2024: £80,000,000 of the
£93,000,000 of drawn variable rate facilities was hedged). On the unhedged
variable rate borrowings, interest is payable at a variable rate equal to
SONIA plus the weighted average lending margin, including the amortisation of
costs, of 2.46 per cent per annum (2024: 2.46 per cent). The variable rate
borrowings expose the Group to cash flow interest rate risk as the Group's
income and operating cash flows will be affected by movements in the market
rate of interest.
At 30 June 2025, the Group had fixed rate term loans totalling £150,000,000
(2024: £150,000,000) and had hedged its exposure to increases in interest
rates on £80,000,000 (2024: £80,000,000) of the variable rate loans, as
referred to above, through entering into a £30,000,000 fixed rate interest
rate swap and a £50,000,000 interest rate cap at 3.0 per cent. Fixing the
interest rate exposes the Group to fair value interest rate risk as the fair
value of the fixed rate borrowings, or the fair value of the interest rate
derivative used to fix the interest rate on an otherwise variable rate loan,
will be affected by movements in the market rate of interest. The
£150,000,000 fixed rate term loans are carried at amortised cost on the
Group's balance sheet, with the estimated fair value and cost of repayment
being disclosed in Note 7, whereas the fair value of the interest rate
derivatives are recognised directly on the Group's balance sheet.
At 30 June 2025, the Group's interest rate derivatives, which had a fair value
of £572,000 (2024: £2,820,000) and hedged a notional value of £80,000,000
(2024: £80,000,000), and its fixed rate term loans of £150,000,000 (2024:
£150,000,000) were exposed to fair value interest rate risk. At 30 June 2025,
an increase of 0.25 per cent in interest rates would have increased the fair
value of the interest rate derivative assets and increased the other
comprehensive income and reported total comprehensive income for the year by
£65,000 (2024: £235,000). The same increase in interest rates would have
decreased the fair value of the fixed rate term loans by an aggregate of
£2,047,000 (2024: £2,221,000); however, as the fixed rate loan is held at
amortised cost, the reported total comprehensive income for the year would
have remained unchanged. A decrease in interest rates would have had an
approximately equal and opposite effect.
Market price risk
The management of market price risk is part of the investment management
process and is typical of a property investment company. The portfolio is
managed with an awareness of the effects of adverse valuation movements
through detailed and continuing analysis, with an objective of maximising
overall returns to shareholders. Investments in property and property-related
assets are inherently difficult to value due to the individual nature of each
property. As a result, valuations are subject to substantial uncertainty.
There is no assurance that the estimates resulting from the valuation process
will reflect the actual sales price even where such sales occur shortly after
the valuation date. Such risk is minimised through the appointment of external
property valuers.
The external valuers are mindful of the potential impacts ESG may have on
capital and rental valuations. Currently in the UK, demands for more precise
and rigorous valuation of sustainability features have grown; however, there
is still a gap in the exact knowledge of how to value sustainability features
to appropriately reflect a 'green premium' or 'brown discount'. Sentiment is
shifting towards a focus on energy use, ensuring buildings meet environmental
energy efficiency standards, with regulation being tightened to meet the UK
government's 'net zero carbon' target. The more stringent Minimum Energy
Efficiency Standards' regulations will require landlords, especially those
whose properties do not meet the Minimum Energy Efficiency Standards'
regulations, to invest further in their properties. In addition, the UK's
introduction of mandatory climate related disclosures and the European Union's
Sustainable Finance Disclosure Regulations may impact on asset values, or how
the market views risks and incorporates them into the sale or letting of
assets. There is also the potential that future legislative change, such as an
update to the Minimum Energy Efficiency Standards or the introduction of an
operational rating, may impact future property valuations.
10. Contingent assets and liabilities
As at 30 June 2025, one property (2024: three properties) within the Group's
investment property portfolio contained a performance payment clause which
provided that, subject to contracted performance conditions being met, a
further capital payment of £1,785,000 (2024: £3,695,000) may be payable by
the Group to the vendor/tenant of the property. The potential timing of this
payment is also conditional on the date(s) at which the contracted performance
conditions are met and is therefore uncertain.
It is highlighted that any performance payments subsequently paid will 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 performance
payment made would be expected to result in a commensurate increase in the
value of the Group's investment property portfolio.
As at 30 June 2024, performance conditions had been met in relation to two
properties and therefore £1,910,000 had been recognised as a liability at
that date. An equal but opposite amount had been recognised as an asset in
'investment properties' (see Note 5) to reflect the increase in the investment
property value that would have been expected to arise from the payment of the
performance payment(s) and the resulting increase in the contracted rental
income. These performance payments of £1,910,000 were subsequently paid and
rentalised during the year ended 30 June 2025. In relation to the one property
performance clause referred to above which remained outstanding at 30 June
2025, the Group determined that the contracted performance conditions had not
been met at the balance sheet date.
11. Capital commitments
The Group had capital commitments as follows:
30 June 2025 30 June 2024
£'000 £'000
Amounts due to complete forward fund developments 912 4,723
Other capital expenditure commitments 1,113 394
Total 2,025 5,117
12. Post balance sheet events
On 23 September 2025, the Group entered into a £20,000,000 committed term
loan and £30,000,000 revolving credit facility with RBS which is repayable in
September 2028, with the option of two one-year extensions thereafter subject
to the consent of RBS. The facility also includes an accordion option that,
subject to the consent of RBS, would increase the total quantum of the
facility to £80,000,000. Interest accrues on the drawn element of the bank
loan at a variable rate, based on SONIA plus margin and mandatory lending
costs, and is payable quarterly. The margin on the facility is 1.50 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 13 October
2025, the Group has drawn £47,575,000 under this facility. The Group has
entered into a five year swap which fixes the interest rate on the
£20,000,000 term loan, including the margin, at 5.26 per cent per annum.
On 23 September 2025, the Group entered into a £30,000,000 committed term
loan and £50,000,000 revolving credit facility with HSBC which is repayable
in September 2028, with the option of two one-year extensions thereafter
subject to the consent of HSBC. The facility also includes an accordion option
that, subject to the consent of HSBC, would increase the total quantum of the
facility to £120,000,000. Interest accrues on the drawn element of the bank
loan at a variable rate, based on SONIA plus margin and mandatory lending
costs, and is payable quarterly. The margin on the facility is 1.50 per cent
per annum for the duration of the loan. A non-utilisation fee of 0.60 per cent
per annum is payable on any undrawn element of the facility. As at 13 October
2025, the Group has drawn £50,000,000 under this facility. The Group has
entered into a five year interest rate swap which fixes the interest rate on
the £30,000,000 term loan, including the margin, at 5.32 per cent per annum.
On 24 September 2025, the Group exchanged contracts in relation to the
disposal of nine care homes for proceeds of £85.9 million. This represents a
premium of 11.6 per cent to the aggregate holding value of the properties as
at 30 June 2025, and an implied net initial yield of 5.24 per cent. The
transaction is unconditional and is expected to complete on 22 October 2025.
With effect from 21 August 2025, the Group has an agreement to dispose of a
further property for £8.0 million, a premium of c.13 per cent to its holding
value at 30 June 2025. This disposal is expected to complete in November 2025.
13. Related parties and transactions with the Investment Manager
The Board of Directors is considered to be a related party. No Director has an
interest in any transactions which are, or were, unusual in their nature or
significant to the nature of the Group. The Directors of the Group received
fees for their services. Total fees for the year were £227,000 (2024:
£227,000) of which £nil (2024: £nil) remained payable at the year-end.
The Investment Manager received £7,816,000 (inclusive of irrecoverable VAT)
in management fees in relation to the year ended 30 June 2025 (2024:
£7,518,000). Of this amount £1,979,000 (2024: £1,927,000) remained payable
at the year-end. The Investment Manager received a further £193,000
(inclusive of irrecoverable VAT) during the year ended 30 June 2025 (2024:
£187,000) in relation to its appointment as Company Secretary and
Administrator, of which £48,000 (2024: £47,000) remained payable at the year
end. Certain employees of the Investment Manager are directors of some of the
Group's subsidiaries. Neither they nor the Investment Manager receive any
additional remuneration in relation to fulfilling this role.
There were related party transactions within the Group and its wholly-owned
subsidiaries which are eliminated upon consolidation.
14. 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 to assess the Group's performance is the EPRA NTA. The
reconciliation between the NAV, as calculated under IFRS, and the EPRA NTA 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.
15. Financial statements
This statement was approved by the Board on 13 October 2025. It is not the
Company's full statutory financial statements in terms of Section 434 of the
Companies Act 2006. The statutory annual report and financial statements for
the year ended 30 June 2025 has been approved and audited and received an
unqualified audit report which did not include a reference to any matters to
which the auditor drew attention by way of emphasis without qualifying the
report. The statutory annual report and financial statements for the year to
30 June 2025 will be posted to shareholders in October/November 2025 and will
be available for inspection at Level 4, Dashwood House, 69 Old Broad Street,
London, EC2M 1QS, the registered office of the Company.
The statutory annual report and financial statements will be made available on
the website www.targethealthcarereit.co.uk
(http://www.targethealthcarereit.co.uk) . Copies may also be obtained from
Target Fund Managers Limited, Glendevon House, Castle Business Park, Stirling
FK9 4TZ.
The audited financial statements for the year to 30 June 2025 will be lodged
with the Registrar of Companies following the Annual General Meeting to be
held on 4 December 2025.
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 definitions of all APMs used
by the Company are highlighted in the glossary contained in the Annual Report,
with detailed calculations, including reconciliation to the IFRS figures where
appropriate, being set out below and within the EPRA Performance Measures
which follow.
Discount or Premium - the amount by which the market price per share is lower
or higher than the net asset value per share.
2025 2024
pence pence
EPRA Net Tangible Assets per share (see note 4) (a) 114.8 110.7
Share price (b) 104.2 78.5
(Discount)/premium = (b-a)/a (9.2)% (29.1)%
Dividend Cover - the percentage by which Group specific adjusted EPRA earnings
for the year cover the dividend paid.
2025 2024
£'000 £'000
Group-specific EPRA earnings for the year (see note 4) (a) 37,739 38,037
First interim dividend 9,123 8,857
Second interim dividend 9,124 8,857
Third interim dividend 9,124 8,857
Fourth interim dividend 9,124 8,857
Dividends paid in relation to the year (b) 36,495 35,428
Dividend cover = (a/b) 103% 107%
Net Debt to EBITDA ratio - a leverage ratio that measures the net earnings
available to address debt obligations.
2025 2024
£'000 £'000
Net debt (see below) (a) 219,761 224,385
Group-specific EPRA earnings for the year (see note 4) 37,739 38,037
Net finance costs 10,233 10,800
EBITDA (b) 47,972 48,837
Net debt to EBITDA ratio = (a/b) 4.6 times 4.6 times
Ongoing Charges - a measure of all operating costs incurred, calculated as a
percentage of average net assets in that year.
2025 2024
£'000 £'000
Investment management fee 7,816 7,518
Other expenses 3,907 3,074
Less direct property costs and other non-recurring items* (1,129) (405)
Adjustment to management fee arrangements and irrecoverable VAT**
9 (8)
Total (a) 10,603 10,179
Average net assets (b) 702,441 673,625
Ongoing charges = (a/b) 1.51% 1.51%
* Excludes, amongst other items, the one-off costs related to the
administration of the tenant entity at one of the Group's care home
properties.
** Based on the Group's net asset value as at 30 June 2025, the management fee
is expected to be paid at a weighted average rate of 1.02% (2024: 1.02%) of
the Group's average net asset plus an effective irrecoverable VAT rate of
approximately 9% (2024: 9%). The management fee has therefore been amended so
that the Ongoing Charges figure includes the expected all-in management fee
rate of 1.11% (2024: 1.11%).
The Group is also required to publish a cost figure in its Key Information
Document which follows the methodology prescribed by UK law and regulations
applicable to PRIIPs. Under this methodology the reported 'portfolio
transaction costs' at 30 June 2025 would be 0.06% (2024: 0.51%). At the same
date, 'other ongoing costs' would be 3.53% (2024: 3.45%), which includes
finance costs of 1.63% (2024: 1.73%). The Company's Key Information Document
is available on its website at: www.targethealthcarereit.co.uk.
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.
2025 2024
EPRA NTA IFRS NAV Share price EPRA NTA IFRS NAV Share price
(pence) (pence) (pence) (pence) (pence) (pence)
Value at start of year (a) 110.7 111.1 78.5 104.5 105.6 71.8
Value at end of year (b) 114.8 114.9 104.2 110.7 111.1 78.5
Change in value during year (b-a) (c) 4.1 3.8 25.7 6.2 5.5 6.7
Dividends paid (d) 5.9 5.9 5.9 5.7 5.7 5.7
Additional impact of dividend reinvestment
(e) 0.3 0.2 0.9 0.4 0.4 -
Total gain in year (c+d+e) (f) 10.3 9.9 32.5 12.3 11.6 12.4
Total return for the year = (f/a) 9.3% 8.9% 41.4% 11.8% 11.0% 17.2%
EPRA Performance Measures
The European Public Real Estate Association is the industry body representing
listed companies in the real estate sector. EPRA publishes Best Practice
Recommendations ('BPR') to establish consistent reporting by European property
companies. Further information on the EPRA BPR can be found at www.epra.com
(http://www.epra.com) .
The figures below are calculated and presented in line with the BPR Guidelines
published by EPRA in September 2024.
2025 2024
EPRA Net Reinstatement Value (£'000) 774,063 746,499
EPRA Net Tangible Assets (£'000) 711,888 686,473
EPRA Net Disposal Value (£'000) 740,389 719,073
EPRA Net Reinstatement Value per share (pence) 124.8 120.4
EPRA Net Tangible Assets per share (pence) 114.8 110.7
EPRA Net Disposal Value per share (pence) 119.4 115.9
EPRA Earnings (£'000) 47,855 47,197
Group specific adjusted EPRA earnings (£'000) 37,739 38,037
EPRA Earnings per share (pence) 7.72 7.61
Group specific adjusted EPRA earnings per share (pence) 6.08 6.13
EPRA Net Initial Yield 6.04% 6.05%
EPRA Topped-up Net Initial Yield 6.22% 6.20%
EPRA Vacancy Rate - -
EPRA Cost Ratio - including direct vacancy costs 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (including direct vacancy 21.8% 19.1%
costs)
EPRA Cost Ratio - excluding direct vacancy costs 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs)
21.8% 19.1%
EPRA Loan-to-Value 23.6% 24.7%
Capital Expenditure (£'000) 7,680 45,776
Like-for-like Rental Growth 3.3% 3.8%
EPRA NAV metrics and EPRA Earnings
Full details of these calculations, including reconciliations of each to the
IFRS measures, are detailed in note 4 to the extract from the Consolidated
Financial Statements.
EPRA Net Initial Yield and EPRA Topped-up Net Initial Yield
EPRA Net Initial Yield is calculated as annualised rental income based on the
cash rents 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. The EPRA Topped-up Net Initial Yield
incorporates an adjustment in respect of the expiration of rent-free periods
(or other unexpired lease incentives).
30 June 30 June
2025 2024
£'000 £'000
Annualised passing rental income based on cash rents (a) 59,369 57,462
Notional rent expiration of rent-free periods or other lease incentives
1,800 1,363
Topped-up net annualised rent (b) 61,169 58,825
Standing assets (see note 5) 921,080 889,255
Allowance for estimated purchasers' costs 62,175 60,026
Grossed-up completed property portfolio valuation (c) 983,255 949,281
EPRA Net Initial Yield = (a/c) 6.04% 6.05%
EPRA Topped-up Net Initial Yield = (b/c) 6.22% 6.20%
EPRA Vacancy Rate
EPRA Vacancy Rate is the estimated rental value (ERV) of vacant space
(excluding forward fund developments) divided by the contractual rent of the
investment property portfolio, expressed as a percentage.
30 June 30 June
2025 2024
£'000 £'000
Annualised potential rental value of vacant premises* (a) - -
Annualised potential rental value of the property portfolio (including vacant
properties)
(b) 61,169 58,825
EPRA Vacancy Rate = (a/b) - -
* There were no unoccupied properties at either 30 June 2024 or 30 June 2025.
EPRA Cost Ratio
The EPRA cost ratios are produced using EPRA methodology, which aims to
provide a consistent base-line from which companies can provide additional
information, and include all property expenses and management fees. Consistent
with the Group specific adjusted EPRA earnings detailed in note 4 to the
extract from the Consolidated Financial Statements, similar adjustments have
been made to also present the adjusted Cost Ratio which is thought more
appropriate for the Group's business model.
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Investment management fee 7,816 7,518
Credit loss allowance and bad debts 1,612 962
Other expenses 3,907 3,074
EPRA costs (including direct vacancy costs) (a) 13,335 11,554
Specific cost adjustments, if applicable - -
Group specific adjusted EPRA costs (including direct vacancy costs) (b)
13,335 11,554
Direct vacancy costs (c) - -
Gross rental income per IFRS (d) 72,928 69,551
Adjusted for rental income arising from recognising guaranteed rent review
uplifts
(10,841) (10,927)
Adjusted for surrender premiums recognised in capital (1,505) -
Adjusted for development interest under forward fund arrangements
725 1,767
Group specific adjusted gross rental income (e) 61,307 60,391
EPRA Cost Ratio (including direct vacancy costs) = (a/d) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (including direct vacancy costs)
= (b/e) 21.8% 19.1%
EPRA Cost Ratio (excluding direct vacancy costs) = ((a-c)/d) 18.3% 16.6%
EPRA Group specific adjusted Cost Ratio (excluding direct vacancy costs) = ((b-c)/e)
21.8% 19.1%
EPRA Loan-to-Value
As at As at
30 June 2025 30 June 2024
£'000 £'000
Borrowings 242,000 243,000
Net payables 17,400 20,269
Cash and cash equivalents (39,639) (38,884)
Net debt (a) 219,761 224,385
Investment properties at market value 929,940 908,530
Total property value (b) 929,940 908,530
EPRA Loan-to-Value = (a/b) 23.6% 24.7%
EPRA Capital Expenditure
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Acquisitions (including acquisition costs) 30 332
Forward fund developments 3,085 40,368
Like-for-like portfolio 4,565 5,076
Total capital expenditure 7,680 45,776
Conversion from accrual to cash basis 5,305 (4,849)
Total capital expenditure on a cash basis 12,985 40,927
Like-for-like Rental Growth
Year ended Year ended
30 June 2025 30 June 2024
£'000 £'000
Opening contractual rent (a) 58,825 56,557
Rent reviews 1,939 2,125
Re-tenanting of properties and performance linked increases
15 -
Like-for-like rental growth (b) 1,954 2,125
Acquisitions and developments 1,148 2,819
Disposals (758) (2,676)
Total movement (c) 2,344 2,268
Closing contractual rent = (a+c) 61,169 58,825
Like-for-like rental growth = (b/a) 3.3% 3.8%
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