Target Healthcare REIT PLC

Good morning, everybody. Thank you for coming to this morning call. And welcome to our presentation of our results for the year ended 30th June, 2026. My name is Kenneth McKenzie. I'm the founder and chief executive of Target. And I'm delighted to be making this presentation. with some colleagues. There's actually been a little bit of a change in our presentation team compared to this time last year. James, fortunately, is still here with us, but he's now in the role of managing director, which we announced over the last few days. And we also have with us, though he's not going to be speaking so much today, Callum Bruce, who's come into the role of being head of investor relations. It's actually quite interesting having Callum here with me because way back in 2008 when I was coming up with the idea of creating funds to invest in modern purpose-built care homes the first person I met was Callum Bruce who introduced me to the head of Scottish Widows so it's quite interesting to see that long connection As you know, our CFO resigned a few months ago, Alistair, but I'm glad to say that we are making good progress and we expect to have an announcement soon in terms of our new CFO. So today you're having Kenneth presenting the numbers to you. I'm glad I'm still a chartered accountant. And these are a good set of results for us to present to you all. So I look forward to taking you through them today. It's all based on the compelling investment case, which you can see on the next slide. We have a robust defensive portfolio. As you know, it's made up of modern purpose-built care homes. There are underlying inflation-linked rental increases It's also based on a team creating these results. We have proven asset management. We are a specialist team. We are a pretty unique team. And when I speak about team, I'm going to say everything from the investors, the investment team, the asset management team, the finance team, and all of you guys yourselves, investors in us, who enable us to do this together with our advisors. And the sector tailwinds that we anticipated back in 2008 are the tailwinds that we're reaping the fruit of today. And we have another 25 years of growth to go. so we have a wonderful opportunity and with all of that we have market leading long-term returns since launch in 2003 as you'll see in that box on the right hand side this is the highest total accounting return of 12% in this year under review and in the 13 or 14 years we've been doing this I remember saying that I thought we could do seven and a half percent when I did the IPO back in 2013 and if this wouldn't humble you, here's 7.8% annualised over the whole period. So what are the next slide? Financial highlights for the year to 30th June 2026. Well, the annualised contractual rent went up by 3.7%, like for like growth, and that resulted in adjusted EPRA earnings per share increasing by 7.6% to 6.54p, and the dividend per share that we paid, which had risen by 2.5%, to 6.03%. and the EPRA NTA per share rose 6.5% also to 122.1% and all of that created this quite remarkable total accounting return of 12%. Next slide. It's all predicated on the results, no, not the results, the assets, the care homes that we buy performing well and how they create income and how the value increases. And you'll see on this slide that for the MSCI UK Annual Health Care Property Index, we have outperformed it every one of the last 10 years. In fact, we're first out of 33 over three years, second out of 12 over 10 years, and the annualized return on standing assets of just around about 10.5% versus 7.6% from the index. I'm sure you'll agree that these are quite compelling. And I think it's really important for us as we consider the company to stay focused on the simple and important things and the fundamentals of this business. and that is what your management team is doing. I'll now hand over to James who's going to take you through some of the results highlights.

Thanks Kenneth. I will update you regarding the composition of the portfolio at the year end and then talk through some of the highlights of the year. You have a portfolio of scale with robust rental income stream differentiated by quality, modernity and stability. As at the year end, the portfolio has 87 homes and contracted rental income of £61.1 million, with a total value of £924 million and 6.21% EPRA topped up net initial yield. It's let to 31 tenants, giving you a diversified income stream. And as I'll talk about more in the presentation, your portfolio is differentiated by its quality. 100% have en suite wet rooms, 100% have EPC ratings of A or B, and 100% have an annual inflation linked rental increases. And your income stream is long term. The weighted average unexpired lease term is 26 years for this portfolio. 2026 has been a strong year and as manager we've been very busy. We disposed of 11 assets over the year for in total 97 million, representing an average premium of 11% and an implied net initial yield of 5.5%. These disposals, which facilitated a reduction in the group's exposure to its largest tenant whilst adding 1.6 pence per share to the EPRA NTA, primarily resulted from the sale of nine assets in late October last year. We also acquired four standing assets for 45 million, a forward commitment to acquire a fifth home for 13 million once built, which we expect to complete in the next few days, and a forward funded development which will total 15 million over the build period. And one of our assets in development reached practical completion during the year. This deployment has improved the overall diversification of the portfolio and additionally the funding of new developments provides the group with access to new high quality assets and maintains the average lease length. This also has the benefit of increasing the quantum of quality real estate available to this important sector. And we've also been busy in the day-to-day asset management side too. We secured the recovery of agreed rent arrears of 1.9 million, contributing a non-recurring 0.18 pence per share to the group's adjusted EPS. We completed the retenanting of a total of six assets in the year, all at unchanged or improved rental levels, and received a 1.4 million surrender premium from one of these retenantings. This activity, during which there was 100% tenancy continuity, plus the crystallization of a performance-linked rental uplift incorporated in the lease as part of a retenanting in a prior year, has resulted in an increase in capital values of 6.5% for the re-tenanted homes, with the potential for further yield tightening should the relevant homes evidence the expected operational improvement. And the portfolio has returned to 100% rent collection by the year end. And I'll now hand back to Kenneth to talk through the financial performance of the group.

Okay, so let's go to the slide with the profit and loss accounts, which, as you can see, show some strong results. The rental income for the year is 400,000 less than the prior year, as James made reference just now that we made some significant disposals, which actually took place in the first half of the year. So there's a small fall in the total rental income and indeed a little fall from the development funding. But the costs have been reduced a little bit. As you can see, the operating costs are slightly lower and it's pleasing to see that in terms of what's called here credit loss allowance. I was actually suggesting to the guys we should be saying it's a credit loss credits or some kind of thing because with the recovery of the provision from the previous year, we're in credit on that. so that the total expenditure, as you can see, has a pleasing reduction down from £13.3 million in the prior year to £11.1 million. And the net financing costs have also reduced as we have had lower gearing levels. All of that has resulted in adjusted EPRA earnings improving from 37.7 million to 40.6 million and adjusted EPRA earnings per share have increased from 6.08 pence to 6.54 pence, a 7% increase. And with all of that, the EPRA cost ratio has also dropped a little, returning to historic levels if non-recurring rent or year recovery is excluded. The dividend declared for the period was, as you know, 6.03 pence and the dividend cover for the year under review, 109% compared to 103% last year. So I'm sure you'll agree that these are encouraging figures. On the next slide, we take you through a bridge to see the movement in annualised contracted rent, opening rent at £61.2 million, like-for-like increases of £2.3 million, a development added a little bit of rent. With the disposals, of course, we lost some rent, but we made some acquisitions, so at the end of the year, the rental level is almost the same. You'll note that there was a 3.7% increase in the rent like for like for the assets that we held. Over on the next slide, we can speak to the balance sheet. I remember my previous CFOs all saying that it's a pretty simple balance sheet. So this Highland accountant will also tell you that it is indeed a pretty simple balance sheet. There's the valuation of the portfolio. It's valued quarterly. And you'll see that at the end of June, it's valued at £924.1 million. a like-for-like movement of 4.9%. We have some cash in the balance sheet. We have some net current liabilities. Of course, the rent is paid in advance. And with the debt level, EPRA net tangible assets of £757 million and EPRA NTA per share £122.1 million. being a 6.4% increase in the EPRA NTA per share compared to this time last year. And all of this with a net loan-to-value at the end of June 2026 down 5.7% from 21.8% in June 2025 to 16.1%. The next slide gives you a portfolio valuation bridge. It follows very similar to what I said previously. Opening value of just under 930 million. Like-for-like increase from rent reviews, from a tiny bit of market yield shift, and from disposals and asset management gains. That's quite a significant figure. You can see this year, 12 million. And then we made some disposals and had some surrender premium proceeds and the acquisitions and developments resulting in a year-end figure of 924.1. Now on the next slide to the debt summary. We have a very good debt book. We have a long-term debt provider with Phoenix, two facilities for a total of 150 million, maturity 2032 for 87 of it and 2037 for 63 million of it, interest rate of 3.2 million. and then facilities with both Royal Bank of Scotland and HSBC. Term loans with each of them of £20 and £30 million. These are hedged for five years and they're currently out to 2029 with one year to go. so the weighted average term to maturity of our drawn debt at June 2026 for 5.1 years actually since then we've extended the term of the two bank facilities and it's now 5.6 years after extending and the total weighted average cost of drawn debt at June 2026 3.89%. Let me take you through a bridge on the next slide for the growing net tangible assets per share. You'll see as we started the year that we were at 114.8 pence. Revaluations of property added 4.9 pence. Tiny bit added for market yield shift. Disposals and lease surrender premium added 1.7 pence. Then, of course, whenever we buy things, we write off the acquisition costs, some property revaluation coming, and the earnings of the business created 6.5p and we paid out 6p to your investors, resulting in end of year NTA per share of 122.1 pence. And with that presentation of the financial results from an old Highland accountant, I'll pass back over to James to take you through the portfolio performance.