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 48m² of space per resident (2024: 48m²)

 

⁽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

 

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	48m2	40m2
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%).

 

Earnings Summary	2025 £m	Movement	2024 £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	Debt Type at 30 June 2025	Drawn at 30 June 2025	Maturity at 30 June 2025
Phoenix Group	£150m	Term debt	£150m (fixed rate)	Jan 2037 - £63m Jan 2032 - £87m
RBS	£30m £40m	Term debt Revolving credit facility	£30m (hedged) £12m (floating rate)	Nov 2025
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 £30m	Term debt (hedged) Revolving credit facility	Sept 2028 (with two 1-year extensions)
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 social impact for residents, their carers and local communities.	Met
	Support the sector's transition from poor real estate standards via long-term financial/ investment support for new developments.	Met
	Obtain reliable certification and insightful data on the energy efficiency of our real estate.	Met
	Increase data coverage of energy consumption by our tenants, aiding transparency and our ability to positively influence energy efficiency.	Met
	Ensure ESG factors embedded into acquisition process and portfolio management.	Met
	Net zero carbon commitment with comprehensive, ambitious and realistic targets set with a clear pathway including measurable milestones.	Met
Responsible partnerships	Engage with tenants to ensure real estate is meeting their operational and staff needs, allowing effective care for residents.	Met
	Be a responsible landlord to our tenants and their communities through significant challenges, such as pandemics.	Met
	Use energy data obtained from tenants to positively influence behaviours where possible.	Partially met
Responsible business	To establish an ESG Committee to provide appropriate focus and impetus to ESG matters.	Met
	Ensure the benefits of Board diversity are achieved.	Partially met
	Participate in benchmarking and sector appropriate programmes to provide comparable information to stakeholders.	Partially met
	Other reporting: Align financial and non-financial reporting with widely used frameworks.	Partially met

 

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	Disposals	Portfolio at 30 June 2025 (adjusted)
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	Disposals	Portfolio at 30 June 2025 (adjusted)
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 affecting risk rating	Mitigation
Poor performance of investments/ investment assets Risk rating & change: High (decreased)	There is a risk that a tenant's business could become unsustainable if its care homes trade poorly. This could lead to a loss of income for the Group and an adverse impact on the Group's results and shareholder returns. The strategy of investing in new purpose-built care homes could lead to additional fill-up risk and there may be a limited amount of time that operators can fund start-up losses.	The Investment Manager focuses on tenant diversification across the portfolio and, by considering the local market dynamics for each home, aims to ensure that rents are set at sustainable levels. Rent deposits or other guarantees are sought, where appropriate, to provide additional security for the Group. The Investment Manager has ongoing engagement with the Group's tenants to 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 environment Risk rating & change: Medium (unchanged)	An increase in the UK inflation rate to a level above the rent review caps in place across the portfolio's long-term leases may result in a real term decrease in the Group's income and be detrimental to its performance. In addition, cost increases for tenants, particularly in relation to staffing and utilities, may erode their profitability and rent cover unless their revenue increases accordingly.	The Group's portfolio includes inflation-linked leases, with primarily annual upwards-only rent reviews within a cap and collar. Despite the rise in the RPI inflation rate since June 2024, the rate of inflation remained below the level of the majority of the Group's rent review caps. The Investment Manager is monitoring tenant performance, including rent covers and whether average weekly fees paid by the underlying diversified mix of publicly funded and private-fee paying residents are growing in line with inflation.
Adverse interest rate fluctuations / debt covenant compliance Risk rating & change: Medium (unchanged)	Adverse interest rate fluctuations will increase the cost of the Group's variable rate debt facilities; limit borrowing capacity; adversely impact property valuations; and be detrimental to the Group's overall returns.	The Group has a conservative gearing strategy. The gearing level remained consistent throughout the year, although net gearing is anticipated to increase as the Group nears full investment. Loan covenants and liquidity levels are closely monitored for compliance and headroom. The Group had fixed 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 swaps to hedge its interest rate exposure.

 

Negative perception of the care home sector Risk rating & change: Medium (unchanged)	A negative perception of the care home sector, due to matters such as societal trends, pandemic or safeguarding failures, or difficulties in accessing social care, may result in a reduction in demand for care home beds, causing asset performance to fall below expectations despite the demographic shifts and the realities of needs-based demand in the sector. The resultant reputational damage could impact occupancy levels and rent covers across the portfolio.	The Group is committed to investing in high quality real estate with high quality operators. These assets are expected to experience demand ahead of the sector average while in the wider market a large number of care homes without fit-for-purpose facilities are expected to close. A trend of improving occupancy rates across the portfolio has been noted in recent times, with occupancy rates approaching pre-pandemic levels.
Availability of capital Risk rating & change: Medium (unchanged)	Without access to equity or debt capital, the Group may be unable to grow through acquisition of attractive investment opportunities. This is likely to be driven by both investor demand and lender appetite which will reflect Group performance, competitor performance, general market conditions and the relative attractiveness of investment in UK healthcare property.	The Group maintains regular communication with investors and existing debt providers, and, with the assistance of its brokers and sponsor, regularly monitors the Group's capital requirements and investment pipeline alongside opportunities to raise both equity and debt. Whilst the Company's shares remain at a discount, potentially limiting access to equity capital for further growth, the loan facilities due to expire in November 2025 were successfully refinanced subsequent to the year end.
ESG and climate change Risk rating & change: Medium (unchanged)	A change in climate, such as an increased risk of local or coastal flooding, or a change in tenant/investor demands or regulatory requirements for properties which meet certain environmental criteria, such as integral heat pumps, may result in a fall in demand for the Group's properties, reducing rental income and/or property valuations.	The Group is committed to investing in high quality real estate with high quality operators. The portfolio's EPC and BREEAM in-use ratings suggest the portfolio is well positioned to meet future requirements/expectations. The Investment Manager uses a house standard to ensure ESG factors are fully considered during the acquisition process.
Reduced availability of carers, nurses and other care home staff Risk rating & change: Medium (unchanged)	Recent trends have reduced the availability of key staff in the care sector which may result in a reduction in the quality of care for the underlying residents of our homes, restrict tenants from being able to admit residents or result in wage inflation.	The Group is committed to investing in high quality real estate with high quality operators and these should be better placed to attract staff. The Investment Manager continues to engage with tenants in the portfolio and to share examples of best practice in recruitment and retention of staff.
Breach of REIT regulations Risk rating & change: Medium (unchanged)	A breach of REIT regulations, primarily in relation to making the necessary level of distributions, may result in loss of tax advantages derived from the Group's REIT status. The Group remains fully compliant with the REIT regulations and is fully domiciled in the UK.	The Group's activities, including the level of distributions, are monitored to ensure all conditions are adhered to. The REIT rules are considered during investment appraisal and transactions structured to ensure conditions are met.
Development costs Risk rating & change: Medium (unchanged)	The high inflationary environment, particularly for building materials and staff, combined with supply chain difficulties, may result in an increased risk that the developers of contracted developments do not fulfil their obligations and/or may increase the cost of new development opportunities.	The Group is not significantly exposed to development risk, with forward funded acquisitions being developed under fixed price contracts, with the Investment Manager having considered both the financial strength of the developer and the ability of the developer's profit to absorb any cost overruns. As at 30 June 2025, the Group held only one remaining development, although this may increase as the Group invests its available capital.
Changes in government policies Risk rating & change: Medium (unchanged)	Changes in government policies, including those affecting local authority funding of care, may render the Group's strategy inappropriate. Secure income and property valuations will be at risk if tenant finances suffer from policy changes.	Government policy is monitored by the Group to increase the ability to anticipate changes. The Group's tenants also typically have a multiplicity of income sources, with their business models not wholly dependent on government funding.
Reliance on third party service providers Risk rating & change: Medium (unchanged)	The Group is externally managed and, as such, relies on a number of service providers. Poor quality service from providers such as the Investment Manager, company secretary, brokers, legal advisers or depositary could have potentially negative impacts on the Group's investment performance, legal obligations, compliance or shareholder relations.	The Investment Manager, along with all other significant service providers, is subject to regular performance appraisal by the Board. The Investment Manager has retained the majority of key personnel since the Group's IPO and has successfully hired further skilled individuals and invested in its systems.
Failure to differentiate qualities from competitors or poor investment performance Risk rating & change: Medium (unchanged)	Failing to differentiate strategy and qualities from competitors is a significant risk for the business, with increased competition in the healthcare real estate sector. The failure to communicate these effectively to stakeholders could have a negative impact on the Company's share price, future demand for equity raises and/or debt finance and wider reputational damage.	The stakeholder communications strategy of the Group has always been to highlight the quality of the real estate in which the Group invests. The regular production of investor relations materials (annual and interim reports, investor presentations and quarterly factsheets) along with direct engagement with investors helps to mitigate this risk.

 

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 suppliers, customers and others	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 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 environment	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 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 of business conduct	The Board requires high standards of itself, service providers and 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 2025			Year ended 30 June 2024
		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 hedges		-	(1,450)	(1,450)	-	(3,285)	(3,285)
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 30 June 2025	As at 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         

 

		Share capital	Share premium	Merger reserve	Distrib-utable reserve	Hedging reserve	Capital reserve	Revenue 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         

 

		Share capital	Share premium	Merger reserve	Distrib-utable reserve	Hedging reserve	Capital reserve	Revenue 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 30 June 2025	Year ended 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, net of acquisition costs written off	5	(23,085)	(35,620)
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      re-tenanting	(559)	(1,449)
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 (pence per share)	Year ended 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 (pence per share)	Year ended 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 30 June 2025	Year ended 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 30 June 2025 £'000	Year ended 30 June 2024 £'000
Total movement in credit loss allowance	1,612	962
Bad debts written off	-	-
Credit loss allowance charge	1,612	962

 

 

	Year ended 30 June 2025 £'000	Year ended 30 June 2024 £'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 30 June 2025 £'000	Year ended 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 uplifts	(10,841)	(10,927)
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 EPRA NRV £'000	2025 EPRA NTA £'000	2025 EPRA NDV £'000	2024 EPRA NRV £'000	2024 EPRA NTA £'000	2024 EPRA NDV £'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 30 June 2025	As at 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 30 June 2025 £'000	Year ended 30 June 2024 £'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 30 June 2025	As at 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

Non-current loans	As at 30 June 2025 £'000	As at 30 June 2024 £'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

 

Current loans	As at 30 June 2025 £'000	As at 30 June 2024 £'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	Starting Date	Ending Date	Interest Paid	Interest Received	Counter-party
30,000,000	5 November 2020	5 November 2025	0.30%	Daily compounded SONIA (floor at -0.08%)	RBS
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	Borrowing	Net debt	Cash and cash equivalents	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 £'000	30 June 2024 £'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. 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.