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Research: Real Estate
Strong accounting returns continued for Target Healthcare REIT during Q322, extending its record of consistent positive returns since IPO. Indexed rent uplifts, an extension of long-term fixed-rate debt and a historical ability of operators to match inflation pressures with fee growth offer good inflation protection. In combination with continuing investment, this supports Target’s well-charted path to full dividend cover.
Target Healthcare REIT |
Q322 quarterly return of 2.5% |
Quarterly report |
Real estate |
23 May 2022 |
Share price performance
Business description
Next events
Analyst
Target Healthcare REIT is a research client of Edison Investment Research Limited |
Strong accounting returns continued for Target Healthcare REIT during Q322, extending its record of consistent positive returns since IPO. Indexed rent uplifts, an extension of long-term fixed-rate debt and a historical ability of operators to match inflation pressures with fee growth offer good inflation protection. In combination with continuing investment, this supports Target’s well-charted path to full dividend cover.
Year end |
Rental income (£m) |
Adjusted net earnings* (£m) |
Adjusted |
NAV**/ |
DPS |
P/NAV |
Yield |
06/21 |
49.9 |
26.0 |
5.46 |
110.4 |
6.72 |
1.05 |
5.8 |
06/22e |
59.5 |
29.9 |
4.99 |
111.4 |
6.76 |
1.04 |
5.8 |
06/23e |
73.2 |
40.4 |
6.52 |
115.7 |
6.86 |
1.00 |
5.9 |
06/24e |
77.6 |
42.9 |
6.92 |
119.0 |
6.96 |
0.97 |
6.0 |
Note: *Adjusted earnings exclude revaluation movements, non-cash income arising from the accounting treatment of lease incentives and guaranteed rent review uplifts, and acquisition costs, and include development interest under forward fund agreements. **NAV is net tangible assets (NTA).
Continuing progress despite pandemic challenges
Q322 EPRA NTA per share increased 0.9% to 111.8p and, including DPS paid, the quarterly accounting total return was 2.5%. Target is well on track to meet its FY22 DPS target of 6.76p. Returns were driven by index-linked rent reviews, investment completions and modest yield tightening. The Q222 acquisition of an 18-home portfolio, adding £9.3m to annualised rents, contributed fully, and was the main driver of the 34% increase in adjusted EPRA earnings to £9.0m. Active asset management is also supporting returns with four homes successfully re-tenanted and generating a positive financial result. The cumulative impact of the pandemic requires further initiatives with two tenants, with rent collection falling to 92% versus 96% previously. Our FY22 forecasts include additional provisioning, but we expect this to be short-lived with increased DPS effectively covered by FY24.
Sustainably meeting a long-term need
A growing elderly population and the need to improve the existing estate point to continuing demand for new, purpose-built homes with flexible layouts and high-quality residential facilities. With its unwavering focus on asset and tenant quality, these are the homes in which Target invests. They are appealing to residents and support operators in providing better and more effective care. Target believes that best-in-class assets, in areas with strong demand/supply characteristics, and sustainable rent levels will always be attractive to tenants and are key to providing sustainable, long-duration, inflation-linked income. Rent collection has remained robust during the pandemic and, as the Omicron wave recedes, home occupancy is once more recovering, while tenant operators continue to report strong demand from potential new residents.
Valuation: Inflation-protected long income
The FY22e DPS represents an attractive 5.8% yield, with good prospects for DPS growth. Meanwhile, the shares trade at a small c 3% premium to Q322 NAV compared with an average c 7% since IPO and a peak of 11%.
Consistently positive returns
The 2.5% Q322 NAV1 total return2 takes the FY22 year to date total to 5.8%, despite significant property acquisition costs incurred in Q222. We estimate that adjusting for this, the year-to-date total return would be 7.0%. Consistently positive returns since IPO in January 2013, on both a quarterly and annual basis, reflect the resilience of the sector and of Target’s strategy. The average annual compound return over this period has been 6.1%, of which c 80% reflects dividends paid. A Q322 DPS of 1.69p per share was declared for payment on 27 May 2022 and total DPS declared year to date is 5.07p, with the company well on track to meet its 6.76p (+0.6%) FY22 target.
Throughout this report, net asset value (NAV) represents EPRA net tangible assets (NTA) unless stated otherwise.
Change in NAV plus dividends paid. Unlike the company’s measure of returns, we do not assume reinvestment of dividends. Consequently, the returns quoted by Target are higher.
Exhibit 1: NAV total return
Q122 |
Q222 |
Q322 |
Year to date |
|
Sep-21 |
Dec-21 |
Mar-22 |
Mar-22 |
|
Opening NAV per share (p) |
110.4 |
111.3 |
110.76 |
110.4 |
Closing NAV per share (p) |
111.3 |
110.76 |
111.8 |
111.8 |
DPS paid (p) |
1.68 |
1.69 |
1.69 |
5.06 |
NAV TR % |
2.3% |
1.0% |
2.5% |
5.8% |
Source: Target Healthcare REIT data, Edison Investment Research
Unwavering focus on asset quality
Target’s unwavering focus on asset quality is core to its strategy for generating sustainable financial returns and social impact. Its investment thesis is that best-in-class properties in local areas with positive demand/supply characteristics and prevailing rental levels that are sustainable will always be attractive to existing or alternative tenants. The quality and appeal of Target’s assets contributes significantly to income security. This is best demonstrated by Target’s ability to successfully re-tenant properties where the need arises, although re-tenanting is also driven by opportunities to optimise the portfolio. The successful re-tenanting of a minority of Target’s assets and the continued modest tightening of valuation yields also provides tangible evidence of the continuing strong investment demand for care homes as an asset class and for high-quality assets.
High-quality homes are in a minority3
We refer here to the physical real estate.
Across the sector, despite recent new building and the continued withdrawal of obsolete stock, there are still many older, often converted properties. Many of these may be unsuitable for upgrading and may increasingly be seen as unfit for purpose or economically unviable. While modern, purpose-built homes with flexible layouts and high-quality residential facilities do not guarantee good levels of care, in combination with careful tenant selection they confer clear advantages to operators and residents alike. Among a range of indicators that guide Target’s investment decisions is full ensuite wet room provision, the appeal of which to residents is obvious and the operational advantages have been highlighted by the pandemic through enhanced infection control capabilities. Data sourced by Target from LaingBuisson suggest that across the UK sector, rooms with full ensuite wet room facilities represent a minority (c 28%) of the care home stock, with the vast majority of ensuite facilities representing WC and handwash basins only. Target will only invest in homes with full ensuite wet room facilities in place (more than 95% of portfolio beds) or, on occasion, where there is an agreement with the tenant that a satisfactory upgrade will be undertaken. Most homes in its portfolio were built within the previous 10 years.
Successful track record of re-tenanting
Where performance problems arise with a tenant, as an engaged landlord, the investment manager leverages its extensive industry experience to work collaboratively with its partners to support and deliver the best long-term solution. In some cases, the optimal solution is to re-tenant the assets to a stronger operator and, as Target’s portfolio has increased in size and diversity, there have been several examples of this being successfully achieved, with no negative impacts on home residents or Target’s financial returns.
Most homes in the portfolio are mature with stabilised, high levels of occupancy under normal trading conditions. However, with its focus on asset quality, Target also invests in completed newly opened homes and commits to acquire pre-let developments at completion, often forward funding the development phase. Under normal trading conditions, newly opened homes typically require up to 36 months to establish occupancy levels and reach mature levels of financial performance. However, the pandemic has increased pressures on home operators across the sector and has lengthened the time required for new homes to reach maturity, especially for homes where private fee-paying occupancy has been slower to recover.
During Q322, in an example of portfolio optimisation, Target completed the re-tenanting of four homes that it had initiated, moving from a large national operator to an established regional operator, more focused on the local market, in line with strategy. Although the homes were performing satisfactorily, with a substantial remaining lease term, Target was able to negotiate a surrender premium from the outgoing tenant to cover short-term lease incentives for the incoming tenant and lease change impacts on valuation.4 Target says it benefits from a positive financial effect, following agreed capex to each of the homes.
Arising from the external valuation impact from the change in tenant covenant, moving from a larger to smaller tenant group.
Currently, Target is in the process of undertaking comprehensive asset management initiatives involving two tenants whose resilience in managing multiple new homes has been stretched following restrictions during the most recent COVID-19 Omicron wave. As part of this process, we expect the company to actively pursue the re-tenanting of at least some of the assets operated by these tenants.
Further details on Q322 financial performance
The quarterly and year to date NAV movement reflects a positive revaluation movement net of acquisition costs, with dividends paid exceeding the movement in revenue reserves.
Exhibit 2: Reconciliation of NAV movement
Pence per share |
Sep-21 |
Dec-21 |
Mar-21 |
Mar-21 |
Q122 |
Q222 |
Q322 |
9M22 |
|
Opening EPRA NAV |
110.4 |
111.3 |
110.8 |
110.4 |
Revaluation gains/(losses) om investment properties |
0.8 |
1.4 |
1.4 |
3.6 |
Net revaluation gains/(losses) on assets under construction* |
0.1 |
0.0 |
(0.1) |
0.0 |
Net impact of acquisition costs |
(0.1) |
(1.3) |
0.0 |
(1.4) |
Net gains/(losses) on investment property revaluation |
0.8 |
0.1 |
1.3 |
2.2 |
Equity issuance |
0.4 |
0.0 |
0.0 |
0.4 |
Movement in revenue reserve |
1.1 |
1.1 |
1.4 |
3.6 |
Dividend paid |
(1.4) |
(1.7) |
(1.7) |
(4.8) |
Closing EPRA NAV per share (p) |
111.3 |
110.8 |
111.8 |
111.8 |
Source: Target Healthcare REIT data, Edison Investment Research. Note: *The carrying value of assets under development is calculated by the external valuer through application of a discount to the accumulated costs. The discount varies depending on factors such as the remaining development time. As the asset progresses towards completion, the discount is unwound.
The end-Q322 portfolio value was £886.8m, an increase of £16.3m or 1.9% in the period. Acquisitions added 0.8% and like-for-like uplifts, generated by index-linked rental uplifts and modest yield compression, added 1.1%. At the end of the period, the portfolio comprised 99 assets let to 33 different tenants. As previously announced, an operational home in greater Manchester was acquired for £7.2m, let to Harbour Healthcare, a new tenant to the group. Subsequently, Target has committed to the forward funding of a development asset in Dartford, Kent, its 100th asset.
Exhibit 3: Key portfolio statistics
September 2021 |
December 2021 |
March 2022 |
|
Q122 |
Q222 |
Q322 |
|
Like-for-like |
0.7% |
1.3% |
1.1% |
Acquisitions |
1.5% |
21.5% |
0.8% |
Asset management |
0.4% |
1.1% |
0.0% |
Total movement in portfolio value |
2.6% |
23.9% |
1.9% |
Closing portfolio value including held for sale assets (£m) |
702.7 |
870.5 |
886.8 |
EPRA 'topped-up' net initial yield |
5.82% |
5.84% |
5.82% |
Source: Target Healthcare REIT
Contractual rent increased by £0.7m or 1.2% during the quarter, including a like-for-like increase of 0.8% from settled index-linked rent reviews. Target has a long WAULT of more than 27 years which, combined with upward-only annual RPI-linked (96% of income) and fixed (4%) contractual rent uplifts, provides significant income visibility and protection against inflation. Uplifts are typically capped at c 4% (with a floor of c 2%) and although this means that while Retail Price Index (RPI) inflation is above 4%, rental growth will lag in real terms, it contributes towards rents remaining affordable for tenant operators and enhances the security of Target’s income.
Exhibit 4: Key contractual rent statistics
September 2021 |
December 2021 |
March 2021 |
|
Q122 |
Q222 |
Q322 |
|
Like-for-like uplift |
0.6% |
1.0% |
0.8% |
Acquisitions |
0.7% |
21.5% |
0.7% |
Asset management/development completions |
3.6% |
1.1% |
-0.3% |
Total increase in contractual rent |
4.9% |
23.6% |
1.2% |
Contractual rent (£m) |
43.2 |
53.4 |
54.1 |
Number of completed rent reviews |
14.0% |
17 |
20.0% |
Average uplift on completed rent reviews |
3.3% |
4.0% |
3.9% |
Source: Target Healthcare REIT
While contractual rent continued to increase in Q322, passing rent declined slightly to £49.7m (Q222: £51.1m) as a result of short-term lease incentives provided as part of the re-tenanting of four homes in the period (see below).
Well-charted path to dividend cover
We expect the current dip in rent collection, to 92% in Q322 versus 96% in Q222, to be short-lived with no material impact on Target’s expected progression to full dividend cover on an adjusted (‘cash’) earnings basis,5 discussed in detail in our April update. We now assume that rent collection remains at 92% until end-June 2022 (end-FY22) and that uncollected rents for Q322 and Q422 are provided for in full (8% of passing rents). This takes the FY22 provisioning rate to 6.6% (c £3.3m) compared with 2.9% (c £1.4m) previously. We expect a sharp decline from FY23 as asset management actions take effect, continuing to expect a return to a background level, prudently assumed at 2.5% of rents receivable. Target’s expected path to full dividend cover includes the impact of continuing capital deployment, a full contribution from previous acquisitions, development completions, rent reviews and economies of scale. Including the April commitment to fund the development of a new home in Kent, Target says that it now has c £67m of capital available for further deployment, allowing for existing commitments, fully allocated to board-approved deals in due diligence. Including the deployment of this available capital and completion of the assets that are under development (including the Kent commitment), we estimate that the Q322 annualised contractual rent of £54.1m will increase to c £64m. We forecast FY24 dividend cover of 99%, based on continuing growth in dividends. We had previously forecast 100% but have increased our interest cost assumption in line with current market rates.
Compared with EPRA earnings, adjusted earnings exclude non-cash IFRS rent smoothing adjustments but include licence fee income in respect of forward-funded developments.
H122 dividend cover was 85% on an EPRA earnings basis and 65% on an adjusted earnings basis. Excluding the £0.8m of non-recurring income in Q3, the net £8.2m of adjusted earnings compares with £10.5m of dividends, suggesting 78% cover. Like H122, including undisclosed adjustments, EPRA dividend cover will have been higher.
Well placed to manage risks in an inflationary environment
Also discussed in our April 2022 update, Target’s long WAULT of more than 27 years, combined with upward-only annual RPI-linked (96% of income) and fixed (4%) contractual rent uplifts, provides significant income visibility and protection against inflation. Rent uplifts are typically capped at c 4% with a floor of c 2% and, although rent growth will lag in real terms while RPI inflation is above 4%, this contributes towards rents remaining affordable for tenant operators and enhances the security of Target’s income. Across the sector the growth in average fees charged has tracked or exceeded inflation over the past c 20 years and we expect improving home occupancy to further assist tenant operators in meeting the inflationary challenge and providing an offset to the gradual withdrawal of government financial support that was put in place at the peak of the pandemic.
The new £100m fixed-rate funding facility that was agreed in November 2021 significantly increased Target’s protection against the prospect of further interest rate increases. Total debt facilities amounted to £320m, of which c £223m had been drawn at end-Q322. Including interest rate swaps, £180m of the drawn borrowings had been fixed at an all-in rate of 3.22% (including amortisation of arrangement costs) at least until November 2025 and mostly (£150m) until January 2032. On the drawn element of floating rate borrowing, priced at a margin over the SONIA benchmark rate, we have increased our debt cost assumption in line with the recent rise in market interest rates.
Forecasts and valuation
Our forecasts are updated for the increase in FY22 rent provisioning and, to a lesser extent, for the increase in the cost of floating rate debt due to higher market interest rates. FY22e adjusted earnings and adjusted EPS are both reduced by 10% to £29.9m and 5.0p respectively. Our FY23 and FY24 forecasts are unaffected by the increase in FY22 provisioning, which we expect to be short-lived, with adjusted earnings and adjusted EPS c 0.7% lower as a result of the increased borrowing cost assumption.
Exhibit 5: Forecast revisions
Rental income (£m) |
Adjusted net earnings (£m) |
Adjusted EPS (p) |
EPRA NAV/share (p) |
DPS (p) |
|||||||||||
Old |
New |
Change (%) |
Old |
New |
Change (%) |
Old |
New |
Change (%) |
Old |
New |
Change (%) |
Old |
New |
Change (%) |
|
06/22e |
59.5 |
59.5 |
0.0 |
33.3 |
29.9 |
-10.1 |
5.6 |
5.0 |
-10.1 |
111.7 |
111.4 |
-0.3 |
6.76 |
6.76 |
0.0 |
06/23e |
73.2 |
73.2 |
0.0 |
40.7 |
40.4 |
-0.7 |
6.6 |
6.5 |
-0.7 |
116.1 |
115.7 |
-0.3 |
6.86 |
6.86 |
0.0 |
06/24e |
77.6 |
77.6 |
0.0 |
43.2 |
42.9 |
-0.7 |
7.0 |
6.9 |
-0.7 |
119.4 |
119.0 |
-0.3 |
6.96 |
6.96 |
0.0 |
Source: Edison Investment Research
The current year DPS target of 6.76p (up 0.6% versus FY21) represents an attractive yield of 5.8%, while the shares trade at a small c 3% premium to Q322 NAV per share of 111.8p. This compares with an average premium since IPO of 7% and a high of c 11%.
Exhibit 6: P/NAV history |
Source: Refinitiv. Note: Prices as at 20 May 2022. Company NAV data. |
In Exhibit 7, we show a summary of the performance and valuation of a group of REITs that we consider to be Target’s closest peers within the broad and diverse commercial property sector. The group is invested in the primary healthcare, supported housing and care home sectors, all targeting stable, long-term income growth derived from long lease exposures.
Exhibit 7: Peer valuation and performance summary
WAULT* |
Price |
Market cap (£m) |
P/NAV** |
Yield*** |
Share price performance |
|||||
1 month |
3 months |
ytd |
12 months |
3 years |
||||||
Assura |
12 |
67 |
1990 |
1.15 |
4.3 |
1% |
11% |
-12% |
-8% |
19% |
Civitas Social Housing |
23 |
83 |
507 |
0.76 |
6.6 |
-5% |
-4% |
-21% |
-27% |
-19% |
Home REIT |
N/A |
270 |
662 |
1.12 |
2.1 |
-7% |
2% |
12% |
7% |
N/A |
Impact Healthcare |
19 |
126 |
486 |
1.12 |
5.1 |
1% |
14% |
16% |
13% |
23% |
Primary Health Properties |
12 |
145 |
1930 |
1.24 |
4.3 |
-2% |
9% |
-5% |
-5% |
25% |
Residential Secure Income |
N/A |
102 |
189 |
0.97 |
4.9 |
-6% |
0% |
14% |
6% |
9% |
Triple Point Social Housing |
26 |
89 |
356 |
0.82 |
5.9 |
1% |
0% |
-21% |
-15% |
-16% |
Average |
18 |
1.03 |
4.8 |
-3% |
5% |
-2% |
-4% |
7% |
||
Target Healthcare |
27 |
116 |
717 |
1.03 |
5.8 |
2% |
7% |
1% |
2% |
1% |
UK property sector index |
1,751 |
-9% |
-4% |
9% |
1% |
-4% |
||||
UK equity market index |
4,084 |
-2% |
-2% |
11% |
2% |
-3% |
Source: company data, Refinitiv pricing at 20 May 2022. Note: *Weighted average unexpired lease term. **Based on last reported NAV/NTA. ***Based on trailing 12-month DPS declared.
Target’s share price yield is clearly above the group average, while its P/NAV is in line with the average. There are several factors that suggest a continuing positive outlook for the shares including a combination of the WAULT with no break clauses and upward-only, triple net rents, mostly linked to RPI. These provide considerable visibility over a growing stream of contracted rental income, supported by the resilience of tenants through the pandemic and their long track record of being able to pass through inflationary cost pressures to fee increases.
Exhibit 8: Financial summary
Year to 30 June (£m) |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
INCOME STATEMENT |
||||||||
Rent revenue |
17.8 |
22.0 |
27.9 |
36.0 |
41.2 |
49.5 |
61.4 |
65.5 |
Movement in lease incentive/fixed rent review adjustment |
5.1 |
6.3 |
6.4 |
8.2 |
8.7 |
10.0 |
11.9 |
12.1 |
Rental income |
22.9 |
28.4 |
34.3 |
44.2 |
49.9 |
59.5 |
73.2 |
77.6 |
Other income |
0.7 |
0.0 |
0.0 |
0.0 |
0.1 |
0.1 |
0.0 |
0.0 |
Total revenue |
23.6 |
28.4 |
34.3 |
44.3 |
50.0 |
59.6 |
73.2 |
77.6 |
Gains/(losses) on revaluation |
1.6 |
6.4 |
6.2 |
1.7 |
9.4 |
4.1 |
17.7 |
8.6 |
Realised gains/(losses) on disposal |
0.0 |
0.0 |
0.0 |
0.6 |
1.3 |
0.0 |
0.0 |
0.0 |
Management fee |
(3.8) |
(3.7) |
(4.7) |
(5.3) |
(5.8) |
(7.4) |
(7.8) |
(8.1) |
Other expenses |
(1.2) |
(1.5) |
(2.7) |
(4.3) |
(5.3) |
(6.4) |
(4.0) |
(4.2) |
Operating profit |
20.1 |
29.6 |
33.0 |
37.0 |
49.6 |
49.9 |
79.2 |
74.0 |
Net finance cost |
(0.8) |
(2.0) |
(3.1) |
(5.4) |
(5.7) |
(6.6) |
(9.8) |
(10.4) |
Profit before taxation |
19.3 |
27.6 |
29.9 |
31.6 |
43.9 |
43.3 |
69.4 |
63.6 |
Tax |
(0.2) |
0.0 |
0.0 |
0.0 |
0.0 |
(0.0) |
0.0 |
0.0 |
IFRS net result |
19.1 |
27.6 |
29.9 |
31.6 |
43.9 |
43.3 |
69.4 |
63.6 |
Adjust for: |
||||||||
Gains/(losses) on revaluation |
(2.2) |
(6.4) |
(6.2) |
(1.7) |
(9.5) |
(4.1) |
(17.7) |
(8.6) |
Other EPRA adjustments |
0.4 |
0.0 |
0.7 |
0.5 |
(0.3) |
0.0 |
0.0 |
0.0 |
EPRA earnings |
17.3 |
21.2 |
24.5 |
30.5 |
34.0 |
39.2 |
51.6 |
55.0 |
Adjust for fixed/guaranteed rent reviews |
(5.1) |
(6.3) |
(6.4) |
(8.2) |
(8.7) |
(10.0) |
(11.9) |
(12.1) |
Adjust for development interest under forward fund agreements |
0.0 |
0.3 |
2.0 |
1.0 |
0.6 |
0.7 |
0.6 |
0.0 |
Adjust for performance fee |
1.0 |
0.6 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Group adjusted earnings |
13.2 |
15.7 |
20.1 |
23.2 |
26.0 |
29.9 |
40.4 |
42.9 |
Average number of shares in issue (m) |
252.2 |
282.5 |
368.8 |
440.3 |
475.4 |
599.3 |
620.2 |
620.2 |
IFRS EPS (p) |
7.58 |
9.77 |
8.10 |
7.18 |
9.23 |
7.22 |
11.19 |
10.25 |
EPRA EPS (p) |
6.87 |
7.50 |
6.63 |
6.92 |
7.16 |
6.54 |
8.32 |
8.87 |
Adjusted EPS (p) |
5.23 |
5.54 |
5.45 |
5.27 |
5.46 |
4.99 |
6.52 |
6.92 |
Dividend per share (declared) |
6.28 |
6.45 |
6.58 |
6.68 |
6.72 |
6.76 |
6.86 |
6.96 |
Dividend cover (EPRA earnings) |
1.09 |
1.11 |
1.00 |
1.00 |
1.05 |
0.93 |
1.21 |
1.27 |
Dividend cover (Adjusted earnings) |
0.83 |
0.82 |
0.82 |
0.76 |
0.80 |
0.71 |
0.95 |
0.99 |
BALANCE SHEET |
||||||||
Investment properties |
266.2 |
362.9 |
469.6 |
570.1 |
629.6 |
906.2 |
949.8 |
974.2 |
Other non-current assets |
4.0 |
27.1 |
37.6 |
46.0 |
54.8 |
66.4 |
78.2 |
90.4 |
Non-current assets |
270.2 |
390.1 |
507.2 |
616.1 |
684.4 |
972.6 |
1,028.1 |
1,064.6 |
Cash and equivalents |
10.4 |
41.4 |
26.9 |
36.4 |
21.1 |
17.2 |
16.7 |
19.3 |
Other current assets |
25.6 |
3.4 |
4.3 |
11.2 |
12.9 |
12.9 |
8.7 |
7.9 |
Current assets |
36.0 |
44.8 |
31.2 |
47.6 |
34.0 |
30.1 |
25.4 |
27.2 |
Bank loan |
(39.3) |
(64.2) |
(106.4) |
(150.1) |
(127.9) |
(279.4) |
(300.0) |
(315.6) |
Other non-current liabilities |
(4.0) |
(4.7) |
(7.1) |
(6.4) |
(6.8) |
(9.6) |
(10.6) |
(11.3) |
Non-current liabilities |
(43.3) |
(68.9) |
(113.5) |
(156.5) |
(134.7) |
(289.0) |
(310.7) |
(326.9) |
Trade and other payables |
(6.0) |
(7.4) |
(11.8) |
(13.1) |
(18.5) |
(22.1) |
(24.2) |
(25.6) |
Current Liabilities |
(6.0) |
(7.4) |
(11.8) |
(13.1) |
(18.5) |
(22.1) |
(24.2) |
(25.6) |
Net assets |
256.9 |
358.6 |
413.1 |
494.1 |
565.2 |
691.6 |
718.6 |
739.2 |
Adjust for derivative financial liability |
0.0 |
0.1 |
0.7 |
0.2 |
(0.3) |
(0.9) |
(0.9) |
(0.9) |
EPRA net assets |
256.9 |
358.7 |
413.8 |
494.3 |
564.9 |
690.7 |
717.7 |
738.2 |
Period end shares (m) |
252.2 |
339.2 |
385.1 |
457.5 |
511.5 |
620.2 |
620.2 |
620.2 |
IFRS NAV per ordinary share |
101.9 |
105.7 |
107.3 |
108.0 |
110.5 |
111.5 |
115.9 |
119.2 |
EPRA NAV per share |
101.9 |
105.7 |
107.5 |
108.1 |
110.4 |
111.4 |
115.7 |
119.0 |
EPRA NAV total return |
7.5% |
10.1% |
7.8% |
6.8% |
8.4% |
6.9% |
10.0% |
8.9% |
CASH FLOW |
||||||||
Cash flow from operations |
4.4 |
23.6 |
20.5 |
25.6 |
29.2 |
41.7 |
51.9 |
54.9 |
Net interest paid |
(0.6) |
(1.4) |
(2.3) |
(4.1) |
(4.2) |
(6.0) |
(9.2) |
(9.8) |
Tax paid |
(0.5) |
(0.1) |
0.0 |
(0.1) |
(0.0) |
(0.0) |
0.0 |
0.0 |
Net cash flow from operating activities |
3.2 |
22.1 |
18.2 |
21.5 |
25.0 |
35.7 |
42.7 |
45.1 |
Purchase of investment properties |
(63.3) |
(90.0) |
(99.6) |
(117.5) |
(51.4) |
(274.6) |
(25.9) |
(15.8) |
Disposal of investment properties |
0.0 |
0.0 |
0.0 |
14.1 |
7.8 |
1.0 |
5.0 |
1.3 |
Net cash flow from investing activities |
(63.3) |
(90.0) |
(99.6) |
(103.4) |
(43.6) |
(273.6) |
(20.9) |
(14.5) |
Issue of ordinary share capital (net of expenses) |
0.0 |
91.7 |
48.9 |
78.2 |
58.3 |
122.5 |
0.0 |
0.0 |
(Repayment)/drawdown of loans |
20.9 |
26.0 |
42.0 |
44.0 |
(22.0) |
152.8 |
20.0 |
15.0 |
Dividends paid |
(15.6) |
(17.4) |
(23.6) |
(29.2) |
(31.5) |
(39.8) |
(42.4) |
(43.0) |
Other |
0.0 |
(1.5) |
(0.3) |
(1.6) |
(1.5) |
(1.5) |
(0.0) |
0.0 |
Net cash flow from financing activities |
5.3 |
98.8 |
67.0 |
91.4 |
3.3 |
233.9 |
(22.4) |
(28.0) |
Net change in cash and equivalents |
(54.7) |
31.0 |
(14.5) |
9.5 |
(15.3) |
(3.9) |
(0.6) |
2.6 |
Opening cash and equivalents |
65.1 |
10.4 |
41.4 |
26.9 |
36.4 |
21.1 |
17.2 |
16.7 |
Closing cash and equivalents |
10.4 |
41.4 |
26.9 |
36.4 |
21.1 |
17.2 |
16.7 |
19.3 |
Balance sheet debt |
(39.3) |
(64.2) |
(106.4) |
(150.1) |
(127.9) |
(279.4) |
(300.0) |
(315.6) |
Unamortised loan arrangement costs |
(0.7) |
(1.8) |
(1.6) |
(1.9) |
(2.1) |
(3.3) |
(2.7) |
(2.1) |
Net cash/(debt) |
(29.6) |
(24.6) |
(81.1) |
(115.6) |
(108.9) |
(265.5) |
(286.1) |
(298.5) |
Gross LTV |
14.2% |
17.1% |
21.6% |
24.9% |
19.2% |
29.3% |
29.7% |
30.1% |
Net LTV |
10.5% |
6.4% |
16.2% |
18.9% |
16.1% |
27.5% |
28.0% |
28.2% |
Source: Company accounts, Edison Investment Research
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Research: Consumer
During H122, Britvic witnessed double-digit revenue growth and volume and price increases in all business units and strong momentum across core brands. Growth continued in the at-home channels, while out-of-home continued to recover towards pre-pandemic levels. Immediate consumption levels are now ahead of where they were before the pandemic. Growth accelerated during the half year, with revenues up 16.5% in Q1 and 20.8% in Q2. In underlying terms, revenue was up 13.6% versus H120 (ie pre-pandemic), and during April momentum has continued to be positive. The company has successfully implemented both pricing and cost actions to mitigate some cost inflation, while continuing to rebuild investment and support the business. Management expects the current geopolitical situation to result in continued cost inflation and pressure on consumer spending, at least until 2023, although Britvic expects to continue to successfully navigate these headwinds.
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