EPRA NAV per share was 107.8p at 30 June 2019 (Q419), an increase of c 0.5% in the quarter and 2.0% in the year. Including dividends paid, the quarterly EPRA NAV total return was 2.1% or 8.2% for the year. Aggregate quarterly DPS for the year increased 2% to 6.58p. The portfolio value increased 5.0% in the quarter to £500.9m, including two acquisitions, continuing investment in the forward-funded developments (two completed in the period and three under construction) and underlying valuation gains. The latter were supported by rental growth on the mainly RPI-linked leases, with modest yield tightening in the period. Acquisitions have taken longer than we assumed but the pipeline remains strong with debt funding available. The share placing programme approved by the EGM along with the new corporate structure provides additional funding flexibility. We continue to forecast DPS growth in FY20, fully covered by earnings. 

Demographics should support growing care-home demand for years to come, while there is an undersupply of the modern, well-designed homes, fully equipped with en-suite wet rooms and suitable communal spaces that differentiate Target’s investment strategy. Investors continue to be attracted by long lease lengths and upwards-only RPI-linked rental growth, with strong competition for assets. Although increasing asset prices have a positive impact on the NAV, they make Target’s disciplined approach to acquisitions, targeting ‘future-proof assets’, an essential ingredient in delivering attractive and sustainable long-term returns. 

Target offers a growing dividend with visible inflation-linked potential for growth, which we expect to be fully covered by adjusted earnings in FY20. The dividend represents a highly attractive yield (FY19: 5.7%) that supports the continuing 8% premium to Q419 EPRA NAV.