REG - Target Healthcare - Final Results <Origin Href="QuoteRef">THRLT.L</Origin> - Part 2
29/09/2016 07:06
- Part 2: For the preceding part double click ID:nRSc1441La
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 2016
As at 30 June 2016 As at 30 June 2015
Notes £'000 £'000
Non-current assets
Investment properties 4 200,720 138,164
Trade and other receivables 3,742 2,530
204,462 140,694
Current assets
Trade and other receivables 13,222 6,457
Cash and cash equivalents 65,107 29,159
Total assets 282,791 176,310
Non-current liabilities
Bank loan 6 (20,449) (30,865)
Interest rate swap (316) -
Trade and other payables (3,742) (2,530)
(24,507) (33,395)
Current liabilities
Trade and other payables (5,002) (3,623)
Total liabilities (29,509) (37,018)
Net assets 253,282 139,292
Stated capital and reserves
Stated capital account 7 246,533 136,846
Hedging reserve (316) -
Capital reserve 4,698 495
Revenue reserve 2,367 1,951
Equity shareholders' funds 253,282 139,292
Net asset value per ordinary share (pence) 3 100.4 97.9
Consolidated Statement of Changes in Equity (audited)
For the year ended 30 June 2016
Stated capital account Hedging reserve Capital reserve Revenue reserve Total
Notes £'000 £'000 £'000 £'000 £'000
At 30 June 2015 136,846 - 495 1,951 139,292
Total comprehensive income for the year: - (316) 3,563 8,139 11,386
Transactions with owners recognised in equity:
Dividends paid 1 (1,973) - - (7,723) (9,696)
Issue of ordinary shares 7 114,438 - - - 114,438
Buyback of ordinary shares into treasury 7 - - (14,159) - (14,159)
Resale of ordinary shares from treasury 7 - - 14,799 - 14,799
Expenses of issue 7 (2,778) - - - (2,778)
At 30 June 2016 246,533 (316) 4,698 2,367 253,282
For the year ended 30 June 2015
Stated capital account Capital reserve Revenue reserve Total
Notes £'000 £'000 £'000 £'000
At 30 June 2014 91,516 (2,252) 954 90,218
Total comprehensive income for the year: - 2,747 6,805 9,552
Transactions with owners recognised in equity:
Dividends paid 1 (1,313) - (5,808) (7,121)
Issue of ordinary shares 47,802 - - 47,802
Expenses of issue (1,159) - - (1,159)
At 30 June 2015 136,846 495 1,951 139,292
Consolidated Statement of Cash Flows (audited)
For the year ended 30 June 2016
Year ended30 June 2016 Year ended30 June 2015
Notes £'000 £'000
Cash flows from operating activities
Profit before tax 11,726 9,591
Adjustments for:
Interest receivable (173) (99)
Interest payable 1,102 815
Revaluation gains on property portfolio (4,787) (2,921)
Increase in trade and other receivables (233) (308)
Increase in trade and other payables 1,271 1,003
8,906 8,081
Interest paid (854) (613)
Interest received 173 99
Tax paid (164) (47)
(845) (561)
Net cash inflow from operating activities 8,061 7,520
Cash flows from investing activities
Purchase of investment properties 4 (34,833) (51,736)
Acquisition of subsidiaries (27,091) (5,845)
Net cash outflow from investing activities (61,924) (57,581)
Cash flows from financing activities
Issue of ordinary share capital 100,279 47,802
Expenses of issue paid (2,778) (1,158)
Resale of ordinary shares from treasury 14,799 -
(Repayment)/drawdown of bank loan facility (10,638) 19,225
(Grant)/repayment of development loan (2,170) 3,300
Dividends paid (9,681) (7,074)
Net cash inflow from financing activities 89,811 62,095
Net increase in cash and cash equivalents 35,948 12,034
Opening cash and cash equivalents 29,159 17,125
Closing cash and cash equivalents 65,107 29,159
Transactions which do not require the use of cash
Movement in fixed or guaranteed rent reviews and lease incentives 4,362 3,760
Issue of ordinary share capital 14,159 -
Buyback of ordinary shares into treasury (14,159) -
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 2016, of which this statement of results is an extract,
have been prepared in accordance with applicable 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, UK Healthcare Investment and Strategic
Objectives include a fair review of the important events that have occurred
during the financial year and their impact on the financial statements;
· 'Principal Risks and Uncertainties' includes a description of the
Company's principal 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
Mr Malcolm Naish
Chairman
28 September 2016
Extract from Notes to the Audited Consolidated Financial Statements
1. Dividends
Amounts paid as distributions to equity holders during the year to 30 June
2016.
Dividend rate(pence per share) Year ended30 June 2016£'000
Fourth interim dividend for the year ended 30 June 2015 1.530 2,177
First interim dividend for the year ended 30 June 2016 1.545 2,199
Second interim dividend for the year ended 30 June 2016 1.545 2,660
Third interim dividend for the year ended 30 June 2016 1.545 2,660
Total 6.165 9,696
Amounts paid as distributions to equity holders during the year to 30 June
2015.
Dividend rate(pence per share) Year ended30 June 2015£'000
Sixth interim dividend for the period ended 30 June 2014 1.50 1,428
First interim dividend for the year ended 30 June 2015 1.53 1,721
Second interim dividend for the year ended 30 June 2015 1.53 1,795
Third interim dividend for the year ended 30 June 2015 1.53 2,177
Total 6.09 7,121
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 2016, of 1.545
pence per share, was paid on 26 August 2016 to shareholders on the register on
12 August 2016 amounting to £3,896,000. It is the intention of the Directors
that the Group will continue to pay dividends quarterly.
2. Fees paid to Target Advisers LLP
Year ended30 June 2016 Year ended30 June 2015
£'000 £'000
Base management fee 1,783 1,140
Performance fee 871 466
Total 2,654 1,606
The Company's Investment Manager is Target Advisers LLP (the 'Investment
Manager' or 'Target') and is responsible for the day-to-day management of the
Company. Target has also been appointed as the Company's Alternative
Investment Fund Manager (the "AIFM"). The Investment Manager is entitled to an
annual base management fee of 0.90 per cent of the net assets of the Group and
an annual performance fee calculated by reference to 10 per cent of the
outperformance of the Group's portfolio total return relative to the MSCI UK
Annual Healthcare Index ('the Index'). The maximum amount of total fees
payable by the Group to the Investment Manager is limited to 1.25 per cent of
the average net assets of the Group over a financial year.
The first performance fee period was 8 March 2013 to 31 December 2014.
Subsequent performance fee periods will be annually to 31 December, in line
with the Index. Portfolio performance is measured over three cumulative
rolling performance periods whereby any performance fees paid to the
Investment Manager are subject to clawback if cumulative performance
underperforms the Index.
A performance fee in respect of the year to 31 December 2015 totalling
£636,000 (period to 31 December 2014: £506,000) has been paid of which
£110,000 (2015: £150,000) was accrued in the prior period accounts. At the
year-end an accrual of £345,000 (inclusive of estimated irrecoverable VAT) has
been made based on the Group's historical portfolio performance relative to
the Index.
With effect from 30 September 2016, the Investment Management Agreement can be
terminated by either party on 12 months' written notice provided that such
notice shall not expire earlier than 30 September 2019. Should the Company
terminate the Investment Management Agreement earlier than 30 September 2019
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. Earnings per share and Net Asset Value per share
EPRA is an industry body which issues best practice reporting guidelines and
the Group report an EPRA NAV quarterly. EPRA has issued best practice
recommendations for the calculation of certain figures which are included
below.
Earnings per share
Year ended 30 June 2016 Year ended 30 June 2015
£'000 Pence per share £'000 Pence per share
Revenue earnings 8,139 4.74 6,805 5.71
Capital earnings 3,563 2.07 2,747 2.31
Total earnings 11,702 6.81 9,552 8.02
Average number of shares in issue 171,734,587 119,160,560
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 the
performance fee.
The reconciliations are provided in the table below:
Year ended30 June 2016 Year ended30 June 2015
Earnings per IFRS Consolidated Statement of Comprehensive Income 11,702 9,552
Adjusted for rental income arising from recognising guaranteed rent review uplifts and lease incentives (4,136) (3,760)
Adjusted for revaluations of investment properties (425) 839
Adjusted for cost of corporate acquisitions 998 174
EPRA earnings 8,139 6,805
Adjusted for performance fee 871 466
Group specific adjusted EPRA earnings 9,010 7,271
Earnings per share ('EPS') (pence per share)
EPS per IFRS Consolidated Statement of Comprehensive Income 6.81 8.02
EPRA EPS 4.74 5.71
Group specific adjusted EPRA EPS 5.25 6.10
Net Asset Value per share
The Group's Net Asset Value per ordinary share of 100.4 pence (2015: 97.9
pence) is based on equity shareholders' funds of £253,282,000 (2015:
£139,292,000) and on 252,180,851 (2015: 142,298,226) ordinary shares, being
the number of shares in issue at the year-end.
The EPRA Net Asset Value ('EPRA NAV') per share is arrived at by adjusting the
net asset value ('NAV') calculated under International Financial Reporting
Standards ('IFRS'). The EPRA NAV provides a measure of the fair value of a
company on a long-term basis. The only adjustment required to the NAV is that
the EPRA NAV excludes the fair value of the Group's interest rate swap, which
was recognised as a liability of £316,000 under IFRS as at 30 June 2016 (2015:
nil).
EPRA believes that, under normal circumstances, the financial derivatives
which property investment companies use to provide an economic hedge are held
until maturity and so the theoretical gain or loss at the balance sheet date
will not crystallise.
As at30 June 2016 As at 30 June 2015
NAV per financial statements (pence per share) 100.4 97.9
Valuation of interest rate swap 0.2 -
EPRA NAV (pence per share) 100.6 97.9
4. Investments
Freehold and leasehold properties
As at 30 June 2016 As at 30 June 2015
£'000 £'000
Opening market value 143,748 83,246
Opening fixed or guaranteed rent reviews and lease incentives (5,584) (1,824)
Opening carrying value 138,164 81,422
Purchases 32,912 49,424
Purchase of property through a business combination 27,298 5,845
Acquisition costs capitalised 1,921 2,312
Acquisition costs written off (1,921) (2,312)
Revaluation movement 6,708 5,233
Movement in market value 66,918 60,502
Movement in fixed or guaranteed rent reviews and lease incentives (4,362) (3,760)
Movement in carrying value 62,556 56,742
Closing market value 210,666 143,748
Closing fixed or guaranteed rent reviews and lease incentives (9,946) (5,584)
Closing carrying value 200,720 138,164
Changes in the valuation of investment properties
Year ended30 June 2016£'000 Year ended30 June 2015£'000
Revaluation movement 6,708 5,233
Acquisition costs written off (1,921) (2,312)
Movement in fixed or guaranteed rent reviews and lease incentives (4,362) (3,760)
Gains/(losses) on revaluation of investment properties 425 (839)
The properties were valued at £210,666,000 (2015: £143,748,000) by Colliers
International Property Consultants Limited ('Colliers'), in their capacity as
external valuers. The valuation was undertaken in accordance with the RICS
Valuation - Professional Standards, incorporating the International Valuation
Standards January 2014 ('the Red Book') 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.
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 and lease incentives was £200,720,000 (2015:
£138,164,000). The adjustment consisted of £9,719,000 relating to fixed or
guaranteed rent reviews and £227,000 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 current assets within 'trade and other receivables'.
5. Investment in subsidiary undertakings
The Company owns 100 per cent of the issued ordinary share capital of Target
Healthcare REIT (Mossvale) Limited ('THRM'), a company registered in Scotland.
The principal activity of Target Healthcare REIT (Mossvale) Limited is that of
an investment and property company.
The Company owns 100 per cent of the issued ordinary share capital of THR
Number One PLC ('THR1'), a company registered in England & Wales. The
principal activity of THR1 is that of an investment and property company.
THR1 owns 100 per cent of the share capital of THR Number Two Limited
('THR2'), a company registered in England & Wales. The principal activity of
THR2 is that of an investment and property company. THR1 also owns 100 per
cent of the share capital of THR Number 3 Limited ('THR3'), a company
registered in England & Wales. The principal activity of THR3 is that of an
investment and property company.
Acquisition of THR Number 4 Limited ('THR4')
On 6 October 2015, the Company acquired 100 per cent of the voting shares of
THR Number 4 Limited, a company registered in England and Wales. Prior to
acquisition, the company owned and operated a care home. As part of the
transaction, the operation of the care home was sold to a third party
specialist elderly care home operator, who entered into an agreement with the
company to lease the care home property. Therefore from the date of
acquisition onwards, the company has been an investment and property company.
Acquisition of THR Number 5 Limited ('THR5')
On 3 February 2016, the Company acquired 100 per cent of the voting shares of
THR Number 5 Limited, a company registered in England and Wales. Prior to
acquisition, the company owned and operated a care home. As part of the
transaction, the care home continued to be operated by the incumbent operator,
who entered into an agreement with the company to lease the property.
Therefore from the date of acquisition onwards, the company has been an
investment and property company.
Acquisition of THR Number 6 Limited ('THR6')
On 23 June 2016, the Company acquired 100 per cent of the voting shares of
Hi-Hand Limited, a company registered in England and Wales. Prior to
acquisition, the company owned and operated a care home. As part of the
transaction, the operation of the care home was sold by the company to a
UK-wide care home operator, who entered into an agreement with the company to
lease the property. Therefore from the date of acquisition onwards, the
company has been an investment and property company. Subsequent to the year
end, the name of the company was changed from Hi-Hand Limited to THR Number 6
Limited.
6. Bank Loan
As at30 June 2016£'000 As at30 June 2015£'000
Principal amount outstanding 21,000 31,510
Set-up costs (836) (708)
Amortisation of set-up costs 285 63
Total 20,449 30,865
At 30 June 2015, the Group had a £35.0 million committed term loan and
revolving credit facility with the Royal Bank of Scotland plc ('RBS') which
was repayable on 23 June 2019. With effect from 1 April 2016, the quantum of
the facility was increased to £50.0 million, with other significant terms of
the loan remaining unchanged. Interest accrues on the bank loan at a variable
rate, based on 3 month LIBOR plus margin and mandatory lending costs, and is
payable quarterly. At 30 June 2016, the margin was 2 per cent per annum for
the duration of the loan. A non-utilisation fee of 1 per cent per annum was
payable on any undrawn element of the facility.
This bank loan is secured by way of a fixed and floating charge over the whole
of the assets of the THR Number One PLC Group ('THR1 Group') which consists of
THR1 and its two directly held subsidiaries, THR2 and THR3. Under the bank
covenants related to this loan, the Group is to ensure that for THR1 Group:
- The loan to value percentage does not exceed 50 per cent; and
- The interest cover is greater than 300 per cent on any calculation date.
THR1 Group has complied with all the bank loan covenants during the year.
On 22 June 2016, the Group entered into an interest rate swap for a notional
value of £21.0 million, with a starting date of 7 July 2016 and a termination
date of 23 June 2019. Under the terms of the interest rate swap, the Group
will pay quarterly a fixed rate of interest of 0.85 per cent per annum and
will receive 3-month LIBOR. The fair value of the interest rate swap at 30
June 2016 was a liability of £316,000 (2015: nil).
On 1 September 2016, the Group extended its loan facility to 1 September 2021,
with an option of two further one year extensions thereafter, subject to the
consent of RBS. The margin on the extended facility was reduced from 2.0 per
cent to 1.5 per cent per annum for the duration of the loan. On 21 September
2016, the Group entered into a second interest rate swap under which, for the
period from 24 June 2019 to 1 September 2021, the Group will pay quarterly a
fixed rate of interest of 0.70 per cent per annum and will receive 3-month
LIBOR. Inclusive of both the interest rate swaps, the interest rate on the
Group's £21.0 million of drawn down borrowings was therefore fixed at an
all-in rate of 2.35 per cent per annum until 23 June 2019 and 2.20 per cent
per annum from 24 June 2019 to 1 September 2021. There were no other material
amendments to the loan facility.
7. Stated Capital Movements
As at 30 June 2016
Number of shares £'000
Allotted, called-up and fully paid ordinary shares of no par value
Opening balance 142,298,226 136,846
Issued on 27 August 2015 14,229,822 14,159
Issued on 20 November 2015 15,652,803 16,279
Issued on 12 May 2016 80,000,000 84,000
251,284
Expenses of issue (2,778)
248,506
Dividends allocated to capital (1,973)
Balance as at 30 June 2016 252,180,851 246,533
Under the Company's Articles of Incorporation, the Company may issue an
unlimited number of ordinary shares.
During the year to 30 June 2016, the Company repurchased 14,229,822 ordinary
shares (2015: nil) into treasury at a total cost of £14,159,000. During the
year to 30 June 2016, the Company resold 14,229,822 ordinary shares (2015:
nil) from treasury raising gross proceeds of £14,799,000. At 30 June 2016, the
Company did not hold any ordinary shares in treasury (2015: nil). Transactions
through treasury are recorded through the capital reserve and are not included
in the stated capital movements above.
During the year, the Company issued 109,882,625 ordinary shares raising gross
proceeds of £114,438,000. The total expenses of issuing these shares were
£2,778,000.
Capital management
The Company's capital is represented by the stated capital account, hedging
reserve, capital reserve and revenue reserve. The Company is not subject to
any externally-imposed capital requirements.
The capital of the Company is managed in accordance with its investment
policy, in pursuit of its investment objective. The Company is able to pay a
dividend out of the Stated Capital Account as permitted by the Companies
(Jersey) Law 1991 (as amended).
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.
Where ordinary shares are held in treasury these are available to be sold to
meet on-going market demand. The ordinary shares will be sold only at a
premium to the prevailing NAV per share. 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 objectives, policies or processes during the
year.
8. Financial instruments
Consistent with its objective, the Group holds UK care home property
investments. In addition, the Group's financial instruments comprise cash and
receivables and payables that arise directly from its operations. The Group's
exposure to derivative instruments consists of an interest rate swap 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 £68.4 million (2015: £29.8 million).
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 reletting,
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 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.
There were no financial assets which were either past due or considered
impaired at 30 June 2016 (2015: 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.
During the year, due to the quantum of cash balances held, counterparty risk
was spread by placing cash across two different financial institutions and at
the year-end the Group held £26.0 million (2015: £14.1 million) with The Royal
Bank of Scotland plc and £39.1 million (2015: £15.0 million) with Lloyds Bank
plc.
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 ongoing 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. Interest is received on cash at fixed rates of 0.50 per cent
and 0.55 per cent and earns interest at these fixed rates for six months.
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.
The Group has a £50 million (2015: £35 million) committed term loan and
revolving capital facility which at 30 June 2016 was charged interest at a
rate of 3 month LIBOR plus a margin of 2 per cent per annum and at the
year-end £21 million was drawn-down (2015: £31.5 million). The bank borrowings
are carried at amortised cost and the Group considers this to be a close
approximation to fair value. The fair value of the bank borrowings is affected
by changes in the market interest rate.
The Group has hedged its exposure on the £21.0 million loan drawn down at 30
June 2016 through entering into a fixed rate Interest Rate Swap. Fixing the
interest rate exposes the Group to fair value interest rate risk.
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.
9. Related Party Transactions
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 Company.
Mr Ross is a director of the Company Secretary and the Administrator, R&H Fund
Services (Jersey) Limited and R&H Fund Services Limited respectively, which
each receive fees from the Company. Mrs Jones is a director of the Company
Secretary, R&H Fund Services (Jersey) Limited.
The Directors of the Company received fees for their services. Total fees for
the year were £115,000 (2015: £113,000) of which £16,000 (2015: £16,000)
remained payable at the year-end.
Target Advisers LLP is considered to be a related party. Target Advisers LLP
received £2,654,000 (2015: £1,606,000) in relation to the year of which
£871,000 (2015: £466,000) related to performance fee. Of this amount £885,000
(2015: £450,000) (inclusive of VAT) remained payable at the year-end.
10. 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 NAV. The
reconciliation between the NAV, as calculated under IFRS, and the EPRA NAV is
detailed in note 3.
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.
11. Post balance sheet events
On 26 August 2016, the Group completed the acquisition of two modern, purpose
built care homes located in Dundee, Scotland and Sandiacre, Derbyshire for
approximately £14.0 million including acquisition costs. The Group acquired
the properties through the Company's corporate acquisition of two existing
property-holding companies incorporated in Gibraltar.
The properties comprise a total of 151 bedrooms with full en-suite bathrooms
including wetrooms and opened in 2007 and 2015. A refurbishment programme on
the older property will be completed imminently with both properties due to
reach operational maturity by the year end. The homes will continue to be
operated by the incumbent operator, Hudson Healthcare. The homes are subject
to 35-year leases with RPI-linked cap and collar. The net initial yield on the
transaction is broadly consistent with the overall average of the Group's
portfolio.
On 1 September 2016, the Group completed the acquisition of a modern, purpose
built care home in Mytchett near Camberley, Surrey, for approximately £6.5
million including acquisition costs. Kingsmead House was completed in 2015 and
has 40 bedrooms over three floors. Upon acquisition, the home was leased back
to the existing tenant, Care Concern Group, who has operated the home since
its opening. The lease is for a term of 35-years and is subject to an
RPI-linked cap and collar. The net initial yield on the transaction is broadly
consistent with the overall average of the Group's portfolio.
12. Financial Statements
These are not full statutory accounts. The report and financial statements
for the year to 30 June 2016 will posted to shareholders and made available on
the website: www.targethealthcarereit.co.uk. Copies may also be obtained from
the Administrator, R&H Fund Services Limited, 20 Forth Street, Edinburgh, EH1
3LH.
This information is provided by RNS
The company news service from the London Stock ExchangeRecent news on Target Healthcare Reit
See all newsREG - Target H'care REIT - Director/PDMR Shareholding
AnnouncementREG - Target H'care REIT - Half-year Report
AnnouncementREG - Target H'care REIT - Investor Presentation via Investor Meet Company
AnnouncementREG - Target H'care REIT - Notice of Half Year Results
AnnouncementREG - Target H'care REIT - Net Asset Value, Corporate Update & Dividend
Announcement