Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Impact Healthcare REIT PLC (LSE:IHR, Financial) has successfully grown its dividend for the sixth consecutive year, with a target dividend of 6.95p for 2024, up from 6.77p in 2023.
- The company's dividends for the first half of 2024 were 106% covered by adjusted earnings, indicating strong financial sustainability.
- Net Asset Value (NAV) increased from 115p at the end of 2023 to 118p by June 30, 2024, contributing to an annualized total return of 11% for the first half of the year.
- The portfolio value grew by 2.9% to GBP670.1 million, driven by RPI uplifts in rent and asset management activities.
- The company maintains a conservative balance sheet with a stable net loan-to-value (LTV) ratio of 27.8% and a well-secured debt profile with an average maturity of 5.8 years.
Negative Points
- The share price performance has been disappointing, with a total shareholder return of only 4% per annum since inception, which the management acknowledges is not satisfactory.
- The company faced challenges with the Silverline portfolio, resulting in a loss of approximately GBP400,000 in rent and ongoing efforts to stabilize and improve performance.
- Net cash finance expenses increased by 4.4% to GBP4.3 million due to rising interest rates, impacting overall earnings.
- The transition from interest income to rental income on certain acquisitions led to a perceived reduction in cash earnings.
- The market for care homes remains fragmented, and while this presents opportunities, it also poses challenges in terms of consolidation and achieving economies of scale.
Q & A Highlights
Q: Martyn King from Edison Investment Research asked if the external valuation considered the progress in weekly fees rather than focusing on rent growth and rent cover.
A: Andrew Cowley, Managing Partner, explained that the external valuer looks at each building individually, focusing primarily on rent cover at the building level. While average weekly fees are considered, the main concern is whether rent cover is becoming more or less sustainable.
Q: Martyn King also inquired about We Care's rent cover compared to the wider portfolio and the potential for future growth with them.
A: Andrew Cowley noted that We Care is a successful regional operator, and while early signs are positive, it is too soon to predict future growth. They hope to do more business with We Care if their performance continues positively.
Q: Mark Stephenson from Investment Technique Limited asked for clarification on the Silverline loan rent issue.
A: David Yaldron, Finance Director, explained that a working capital facility was provided to support operational turnaround, which included a rent-free period for We Care leases. The reduction in cash rent income was due to the absence of income from Silverline in the current period.
Q: Emma Bird from Winterflood asked if the company is liaising with the new government to highlight the importance of care homes in reducing NHS waiting lists.
A: Andrew Cowley confirmed that they are in discussions with the government at various levels, including regional mayors, to address capacity issues in elderly care and explore potential solutions.
Q: Sarim Chaudhry at Jefferies questioned the sustainability of fee increases in line with minimum wage hikes.
A: Andrew Cowley highlighted a historical correlation between care fees and minimum wage increases, suggesting that fee increases have kept pace with wage hikes over the past decade, which is expected to continue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
