Target Healthcare REIT PLC · LSE:THRL
Target Healthcare REIT — FY2024 Earnings Presentation
37 slides from Target Healthcare REIT's earnings presentation, Sep 17, 2024
Slide 1: Investing in care. Delivering returns.
Investing in care. Delivering returns. Results for the year ended 30 June 2024 Webinar and Presentation | 17 September 2024 | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 Roden Hall, Telford <#>
Slide 2: Presentation Team Agenda
Presentation Team Agenda Section Page 1 Introduction 1 2 About Target Healthcare REIT 2 3 2024 Results – Financial performance 7 4 2024 Results – Portfolio performance 19 5 Care sector 26 6 Care property 29 Kenneth MacKenzie Gordon Bland Chief Executive Finance Director 7 Q&A 35 Target Fund Managers
Slide 3: Target Healthcare REIT
Target Healthcare REIT Portfolio of scale with robust rental income stream £909m 6.20% 94 Care 6,331 £59m Portfolio EPRA 34 Homes Beds1 Contracted rent value Topped-Up Tenants NIY | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 1 A further 126 beds and £1.5m rent will be
Slide 4: Differentiated by quality, modernity & ESG-compliance
Target Healthcare REIT Differentiated by quality, modernity & ESG-compliance 99% 99% 99% A & B EPC ratings 26.4 years En suite Inflation-linked WAULT wet- rooms (100% A-C) rental uplifts1 | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 1 1% fixed annual uplift 3
Slide 5: Delivered returns
Delivered returns 11.8% Top performer in Index #1/37 MSCI UK Annual Healthcare Property Index 20231 Accounting total return 2024 +2% Dividend growth resumed +3% Dividend growth July 2023 onwards July 2024 onwards 1 The index is published annually and covers the calendar years. | Investor ResultsPres
Slide 6: Significant disposals to improve portfolio metrics and recycle capital
Significant disposals to improve portfolio metrics and recycle capital THR Portfolio Geography June 2024: 4 homes, £44.5 million proceeds; Implied NIY 5.64% Pricing at premium to the carrying value as at 31 December 2023 (prior to the bid being received) and 31 March 2024 Number of homes Sale of 4 h
Slide 7: Rating
Rating Reflections on discount to NAV: • Attractive growing dividend at current price - dividend yield of 7.3% based on the 5 August 2024 closing share price of 77.8 pence. • 9 Asset disposals - £71m proceeds (8% of portfolio by value) • All above NAV • All above purchase price • Dividend will grow
Slide 8: Financial Performance
Financial Performance | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 7
Slide 9: Financial highlights: Year to June 2024
Financial highlights: Year to June 2024 EPRA NTA Adjusted EPRA Dividend per share EPS Accounting total 5.712p return 110.7p 6.13p +2.2% 7.3% yield1 11.8% +5.9% 107% cover • 6th consecutive quarter of NTA growth • Certainty of rental income growth • 2% dividend growth, compared to 6 months to June 20
Slide 10: Earnings summary
Earnings summary 2024 2023 Change £ million (%) Rental income (excluding guaranteed uplifts) 58.6 56.4 +4% - Management fee (7.5) (7.4) +1% - Operating expenses (3.1) (3.0) +1% - Credit loss allowance/bad debts (1.0) (0.3) - Total expenditure (11.6) (10.7) +8% Net financing costs (10.8) (9.4) +15% I
Slide 11: Highlights
Highlights 2024 2023 Change NRI: +4% from rent reviews & developments, despite effect of March & June 2023 disposals Net rental income (£m) 58.6 56.4 +4% Adjusted EPRA cost ratio (%) 19.1% 18.7% +40bps Cost ratio: Increase due to prior year credit loss benefitting from significant arrears collection
Slide 12: Growth in rent roll 2024 achieved
Growth in rent roll 2024 achieved Movement in Contracted Rent (£ millions) £62.0m £2.8m £60.0m £58.8m £2.1m (£2.7m) £58.0m £56.6m £56.0m £54.0m 30 June 2023 Rent reviews Acquisitions and Disposals 30 June 2024 developments | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 1
Slide 13: Growth in rent roll - 2025 Organic/committed
Growth in rent roll - 2025 Organic/committed Pro-forma contracted rent from: +4.4% £62.0m • On-site, committed activities £1.5m £0.2m £61.4m • Rent reviews • Further improving portfolio £60.0m £0.9m quality/metrics with rentalisation • Lower inflation assumed, rent uplifts at collar £58.8m £58.0m £5
Slide 14: Balance sheet
Balance sheet 2024 2023 Change (%) Portfolio market value (per independent valuers)* 908.6 868.7 +5% Cash 38.9 15.4 - Working capital* (17.9) (6.2) - Debt 243.0 230.0 +6% EPRA Net Tangible assets (NTA) 686.5 647.9 +6% EPRA NTA per share (pence) 110.70 104.50 +6% 22.5% £77m 5.2 years Weighted average
Slide 15: NTA bridge
NTA bridge EPRA NTA per share (pence) 120.0 5.9 115.0 5.8 110.7 110.0 (5.7) 105.0 104.5 0.3 (0.1) 100.0 95.0 90.0 85.0 80.0 30 June 2023 Acquisition costs Disposal Property Adjusted EPRA Dividends paid 30 June 2024 Revaluations earnings | Investor ResultsPresentation: for the year August ended 2021
Slide 16: Portfolio value bridge
Portfolio value bridge Valuation analysis (£ millions) £950m £50m £31m £909m £900m £1m £869m (£42m) £850m £800m 30 June 2023 Acquisitions and Disposals Market yield shift Rent reviews 30 June 2024 developments | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 15
Slide 17: Valuation movement
Valuation movement THRL topped up NIY and MSCI monthly index – Like-for-like Valuation Growth by quarter All Property NIY 1.5% 1.4% 1.0% 0.9% 0.8% 0.8% 0.6% 0.5% 0.5% 0.0% Mar 23 Jun 23 Sep 23 Dec 23 Mar 24 Jun 24 | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 16
Slide 18: Debt summary
Debt summary Net debt: EBITDA Debt Provider Facility Size Drawn at Hedging Maturity 30 June 2024 £150m fixed Jan-32: £87m £150m £150m rate Jan-37: £63m £30m hedged, £70m £43m Nov-25 £13m floating Interest costs well-hedged £100m £50m £50m hedged Nov-25 Total £320m £243m £230m | Investor ResultsPrese
Slide 19: LTV levels deliver attractive earnings
LTV levels deliver attractive earnings Earnings Yield v LTV. Source: Stifel research as at 6 September 2024 10.0% Triple Point Assura 9.0% SUPR 8.0% LandSec Target PHP 7.0% LMP Hammerson British Land Earnings Yield (%) 6.0% Picton Workspace Tritax BigBox UNITE 5.0% Big Yellow Safestore Derwent 4.0%
Slide 20: Portfolio performance
Portfolio performance | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 19
Slide 21: Resident occupancy
Resident occupancy Mature* portfolio and full portfolio spot occupancies 95% 90% 86.0% 86.2% 85% 86.7% 87.2% 85% 80% 75% 70% 65% 87.7% 13 Sept 2024 60% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 2
Slide 22: Rent Cover
Rent Cover Mature portfolio quarterly rent cover – spot and last twelve months rolling 2.2x 2.0x 1.8x 1.6x 1.4x 1.2x 1.0x 0.8x 0.6x Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 Q1 24 Q2 24 Spot occupan
Slide 23: Portfolio insights - Operator
Portfolio insights - Operator 2024 2023 2022 2021 2020 Average weekly fee Increase +10% +13% +9% +4% +4% Inflation Rate (RPI) 2.9% 10.7% 11.8% 3.9% 1.1% Operator Private pay % 74% 73% 67% 62% 66% Staff costs as a % of total fees 53% 56% 58% 59% 57% Agency costs as a % of staff costs 8% 15% 14% 6% 9%
Slide 24: Portfolio insights - Group
Portfolio insights - Group 2024 2023 2022 2021 2020 Modernity (% of portfolio purpose 84% 80% 79% 84% 83% build 2010 onwards) WAULT (years) 26.4 26.5 27.2 28.8 29.0 Group Mature homes % 90% 90% 84% 79% 73% En-suite wet room% 99% 98% 96% 96% 95% | Investor ResultsPresentation: for the year August end
Slide 25: Consistent index outperformance
Consistent index outperformance 60% 50% #1/37 2023 40% 30% #2/10 20% 10 year 10% 59% 0% Cumulative 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 compounded outperformance MSCI UK Annual Healthcare Property Index Total Return THRL Property Portfolio Total Return (ungeared standing assets) THRL Cu
Slide 26: Developments
Developments Kings Court – Holt. Practical The Bridge – Dartford. Practical Mead Field Manor – Weston super Mare. completion February 2024 completion February 2024 Practical completion June 2024 – Net zero Olney (Milton Keynes) Colwall (Malvern) – 66 beds – 60 beds Complete Autumn 2024 Complete Autu
Slide 27: Care Sector
Care Sector | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 26
Slide 28: Health & social care – The Regulator CQC
Health & social care – The Regulator CQC • Dash review reported April 2024 – “Not fit for purpose” • CQC CEO resigns • Interim CEO acknowledges shortcomings • CQC visits reduced from 1,000 to 200 per quarter in last 4 years. Target complete 200 visits per annum • Target hosts roundtable on CQC • Wha
Slide 29: Care Sector – Government, NHS and Social care
Care Sector – Government, NHS and Social care Strong recognition of need for private sector Status quo – more private pay Low priority compared to NHS £2.6 Trn net worth over 65s | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 28
Slide 30: Property
Property | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 29
Slide 31: Supply and quality
Supply and quality 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Target Healthcare Listed Peer Average England & Scotland All REIT Conversion / Conversion plus Extension Purpose built pre-90's Purpose built 1990's Purpose built 2000's Purpose built 2010's - present Listed Peers Average is comprised of
Slide 32: Supply and quality: social impact
Supply and quality: social impact 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Target Healthcare Listed Peer Average England & Scotland REIT All Ensuite wetrooms Ensuite WC rooms Basic rooms Listed Peers Average is comprised of publicly available information available or disclosed by Impact | Investo
Slide 33: Transaction volumes
Transaction volumes Investment – transactions in period – last year prime only, this year sub-prime but at high NIY only Deal volumes (£m) Prime 3.7% £300m Steady flow of transactions Like-for-like valuation £250m Generally institutional buyers movement £200m Competitive around 6% NIY H2 2024 looks
Slide 34: Quality vs. Listed Peers: Financial metrics
Quality vs. Listed Peers: Financial metrics Portfolio NIY Av. Value per m2 Av. Rent per m2 Target 6.2% Target £3.0k Target £195 Listed Listed Listed Peers Av. 6.5% Peers Av. £2.6k Peers Av. £183 | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 m2 for Listed Peer average is
Slide 35: Target Healthcare REIT Market Trends
Target Healthcare REIT Market Trends Trend - Demographics 2046 c.2x over 85s Number of people (m) 25 Today 20 15 10 5 0 85+ 75-84 65-74 Trend – Long-term investment 99% Inflation 26.4 years linked rental uplifts1 WAULT | Investor ResultsPresentation: for the year August ended 2021 30 June 2024 1 1%
Slide 36: Investor Results Presentation: for the year August
| Investor ResultsPresentation: for the year August ended 2021 30 June 2024 34
Slide 37: Important Information
Important Information For the purpose of this disclaimer, the “Presentation” shall mean and include these slides, all comments made by the presenter(s) of the slides and any question and answer session or discussion related to it. The Presentation has been prepared solely for information purposes an
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