The challenge of how to care properly for our ageing population isn’t something that Britain is facing in isolation (Greig Cameron writes). Nations worldwide are trying to work out how to cope with the pressures that demographic changes are causing. The problem, however, has rarely been as prominent in the public consciousness as it is now.
The reason, of course, is the coronavirus outbreak, which struck early and devastatingly in care homes across the country last year, but the issue is a fundamental one that will long outlive the pandemic. It concerns everybody, from political leaders and the health sector to every family in the country — and to the City and the stock market.
Target Healthcare Reit is at the centre of the investment case for the care industry. Listed on the London Stock Exchange’s main market when it floated in 2013, it became the first property investment fund solely focused on the sector. It has been managed by Target Fund Managers, a specialist care home investment boutique based in Stirling, since its inception.
The Reit — or real estate investment trust — has built a portfolio of more than 70 modern care homes around Britain, stretching from Aberdeenshire to Dorset. Typically, it invests in newly built sites or forward-funds bespoke projects where planning permission has been granted and an operator is lined up.
There is a mix of tenants and, with leases having an average of 28 years left to run, there is a predictable income stream, with many of the agreements index-linked to inflation measures. Rental collection has stayed above 92 per cent even amid the toughest months of lockdown. There is a mix of fee-payers, with purely public sources, such as the NHS and local authorities, making up 37 per cent, private payers about 47 per cent and the remainder a blend of both elements.
Analysts believe that the trust’s income is likely to be close to £50 million for the 12 months to the end of June, up from £44.2 million in the previous financial year. Occupancy declined during the pandemic, but was still about 85 per cent and is said to have stabilised more recently.
The trust has suggested that a recovery in occupancy is expected amid a growing number of enquiries as vaccination progress continues and as society opens up again.
Incidences of Covid-19 have remained low, running at a level equivalent to less than 1 per cent of the beds in its homes this year. That compares with an April 2020 peak of 3.2 per cent of suspected or confirmed cases.
Analysts at Edison expect steady growth in rental and a yield that will be maintained at about 5.7 per cent. The dividend was 6.58p in the 2019 financial year, 6.68p in 2020 and is forecast to be 6.72p in 2021.
Target Healthcare raised £60 million in February after increasing its initial target of £50 million because of demand from investors. The money was to help it to pursue more than £46 million of acquisitions. This month it confirmed that deals worth a combined £33 million had been completed for an existing care home in Scotland and a new-build project in Buckinghamshire, which is expected to open in 2023. The company is understood to have a strong pipeline of potential deals, but it is likely to remain focused on the UK rather than looking towards Europe.
The share price has been on a slow but steady recovery since hitting a low of 90¼p in May last year during the market shock of the first Covid lockdown. In recent days the stock has been changing hands for about 115p.
ADVICE Hold
WHY Track record of steady income returns from a sector where demand is going to remain high
Fulham Shore
David Page, the 69-year-old chairman of Fulham Shore, has just been to the doctor’s with a nasty bout of sciatica (Dominic Walsh writes). The reason? He’s just spent a fortnight driving 2,000 miles criss-crossing the country to visit the group’s existing restaurants, as well as seeking out new sites for expansion.
The company has 55 Franco Manca pizzerias and 19 Real Greek outlets, but is taking advantage of the woes of many of its rivals during the pandemic to step up the pace on securing new sites. It has just opened Franco Mancas in High Holborn, London, and in Glasgow as it targets ten to twelve openings this year, and is hoping for fifteen to sixteen next year. New flags on the map will include sites in Cardiff, Cheltenham, Norwich, Manchester and St Albans.
Not only that, but there are strong rumours that Fulham Shore is close to signing up franchisees to take the Franco Manca brand overseas (apart from one in Sicily that operates for six months a year), probably to Portugal and Greece.
As well as expanding its horizons, the company is trading strongly. Since the relaunch of indoor dining in England on May 17, Fulham Shore has turned in revenues just ahead of the same period in 2019 and Page was forecasting a 20 per cent uplift after yesterday’s scheduled removal of all remaining restrictions. The government’s caution means that “Freedom Day” has been pushed back a month, although he remains sanguine: “If customers feel safer from another month of vaccinations, them that’s probably a good thing.”
Some analysts reckon that next month’s results for the year to the end of March will show the group turning marginally positive at the ebitda level — earnings before interest, tax, depreciation and amortisation — which is pretty impressive. It has also reached a new rent deal with 85 per cent of its landlords, which again is what shareholders want to hear.
Page did not create the chain of quality Neapolitan-style pizzerias but acquired it when it was small and expanded it in slightly off-pitch sites with less punitive rents. The fit-out is also pared back, all of which enables him to keep prices below those of PizzaExpress et al.
ADVICE Buy
WHY Will prove to be a winner amid casual dining carnage
