Target Healthcare REIT PLC on Tuesday said net asset value declined in its recent financial year, prompting a dividend cut, but it reported an improvement in its rental income.

Target Healthcare REIT is a real estate investment trust focused on care homes in the UK. As of June 30, it had a portfolio of 97 assets let to 32 tenants with a total value of £868.7 million.

NAV per share on June 30 was 105.6 pence, down 6.1% from 112.7p a year prior. NAV total return was negative 1.2% in the financial year compared to a positive return of 8.1% the year before.

The care home investor said this was driven by an EPRA net tangible asset reduction of 6.9% to 104.5p per share as at June 30 from 112.3p at the same time a year prior.

Target Healthcare swung to a pretax loss of £6.6 million in the recent year from a £49.1 million profit the year before, driven by a loss on revaluation of investment properties of £54.0 million.

More positively, rental income increased by 13% to £56.4 million from £49.8 million the year prior.

Target Healthcare lowered its full-year dividend by 8.6% to 6.18p from 6.76p in financial 2022.

The dividend for the recent year was composed of a first and second interim dividend of 1.69p and a third and fourth one of 1.40p. Looking ahead to financial 2024, Target Healthcare plans to increase the quarterly dividend back up by 2% to 1.428p per share. This would represent a total annual dividend of 5.712p, still down 7.6% from financial 2023.

Target Healthcare said its earnings outlook remains robust, citing a 99% improvement in rent collection in the most recent quarter.

Chair Alison Fyfe commented: ‘Our portfolio has achieved rental growth of 2%, rental collection has increased to 99% and portfolio rent cover has increased to 1.75 times. This improvement in portfolio performance, when combined with our effective management of interest rate exposure, gives us confidence in the group’s earnings outlook, allowing us to increase our dividend in line with rental growth.

The board remains confident in the group’s prospects. Our portfolio consists of premium quality assets in a critical real estate investment class with compelling sector tailwinds.’

Shares in Target Healthcare were up 1.4% at 76.24 pence each in London on Monday morning.

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