Impact Health Regulatory News (IHR)

THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE PURPOSES OF MARKET ABUSE REGULATION (EU) NO. 596/2014

3 September 2019

Impact Healthcare REIT plc

(the "Company" and with its subsidiaries, the "Group")

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2019

Impact Healthcare REIT plc (ticker: IHR), the real estate investment trust which gives investors exposure to a diversified portfolio of UK healthcare real estate assets, in particular care homes, is today reporting its half year results for the six month period from 1 January 2019 to 30 June 2019.

Financial highlights

·; Successful implementation of new progressive dividend policy. Paid dividends of 3.09p per share in respect of the first half of the year, a 3% increase on H1 2018, in line with target.

·; Dividends well covered by our EPRA earnings per share, which increased 12.1% to 3.62p (H1 2018: 3.23p).

·; Portfolio valuation increased by 21.3% to £271.6 million as at 30 June 2019 (as at 30 June 2018: £184.3 million), reflecting £39.5 million of acquisitions, £3.1 million invested in capital improvements and a value uplift of £5.2 million. The value uplift was driven by rent increases and the Group's investment in capital improvements.

·; NAV per share increased 3% to 104.67p (30 June 2018: 102.03p).

·; NAV total return for the period of 4.39%, composed of a dividend paid in the period of 3.04p per share and 1.49p per share growth in NAV.

·; Total expense ratio reduced 12% to 1.51% (H1 2018: 1.71%).

·; Delivered a 29% increase in profit before tax to £10.94 million (30 June 2018: £8.47 million).

·; The Company successfully raised £100 million of new equity from its significantly oversubscribed placing in May 2019, 85% of which has now been committed.

·; Signed a £25 million debt facility during the period taking total debt facilities available to £75 million, with £25 million drawn at the period end, resulting in an LTV ratio of 7.67%, down from 11.2% as at 30 June 2018.

Operational highlights

·; Acquired nine properties with 471 beds in the period ended 30 June 2019, adding two new tenants, taking the total number of tenants to eight3, and growing the number of properties in the portfolio to 81 with a total of 3,924 beds.

·; Grew our contracted rent roll by 49% to £21.6 million (30 June 2018: £14.5 million).

·; Weighted average unexpired lease term ("WAULT") of 19.6 years at 30 June 2019.

·; Rent reviews in the period added £0.4 million to contracted rent, representing a 2.41% increase on the associated portfolio.

·; 100% inflation linked leases.

Post balance sheet highlights

·; Completed the acquisition of two homes in Devon and Oxfordshire, adding a further 91 beds to the portfolio.

·; Exchanged contracts on a portfolio of two homes in Suffolk with a further 98 beds and adding a new tenant.

·; Solicitors have been instructed in respect of a number of other transactions and the Group remains confident that it will continue to identify and execute on further acquisitions, which meet the Company's investment criteria and return profile and are expected to deliver further value for shareholders. The Group continues to exercise robust capital discipline, to deliver value at the point of acquisition or investment.

Rupert Barclay, Chairman of Impact Healthcare REIT PLC, commented

"This was a period of continued, but measured growth in line with the strategy we set out at IPO. These strong first half results give the Company good momentum going into the second half and make us well placed to continue to deliver value in the short and longer term.

We appreciate the support existing and new shareholders gave us in the equity placing we closed in May, the proceeds of which have given us the capacity to bring further high-quality assets into the portfolio, increasing our diversification and reducing risk.

We have strong relationships with a growing number of high-quality tenants, who offer an essential regulated service and provide good care. This in turn ensures the Group has a secure income stream.

This stands us in good stead in an uncertain economic and political environment, including where the outcome of Brexit negotiations is still uncertain, and underpins our new progressive dividend policy and total return target, which reflect our confidence in the Group's prospects."

FOR FURTHER INFORMATION, PLEASE CONTACT:

The Company's LEI is 213800AX3FHPMJL4IJ53.

Further information on Impact Healthcare REIT is available at www.impactreit.uk.

NOTES:

Impact Healthcare REIT plc is a real estate investment trust ("REIT") which aims to provide shareholders with an attractive return, principally in the form of quarterly income distributions and with the potential for capital and income growth, through exposure to a diversified portfolio of UK healthcare real estate opportunities, in particular residential care homes. The Group's investment policy is to acquire, renovate, extend and redevelop high quality healthcare real estate assets in the UK and lease those assets primarily to healthcare operators providing residential healthcare services under full repairing and insuring leases.

The Company's intention is to pay a target dividend of 6.17 pence per share for the year to 31 December 20194.

The Company will seek to grow the target dividend in line with the inflation-linked rental uplifts received by the Group under the terms of the rent review provisions contained in the Group's leases in the prior financial year.

The Group's Ordinary Shares were admitted to trading on the main market of the London Stock Exchange, premium segment, on 8 February 2019. The Company is a constituent of the FTSE EPRA/NAREIT index.

Notes

1 Adjusted earnings per share reflects underlying cash earnings per share in the year. The adjustments made to EPS in arriving at EPRA and Adjusted EPS are set out in note 10 of the Group Financial Statements.

2 As at 28 June 2019, 29 June 2018 and 31 December 2018 respectively.

3 Minster and Croftwood (both subsidiaries of Minster Care Group), Careport, Prestige, Renaissance, Welford, Maria Mallaband Countrywide Group and NHS Cumbria.

4 This is a target only and not a profit forecast. There can be no assurance that the target will be met and it should not be taken as an indicator of the Company's expected or actual results.

A meeting for investors and analysts and live webcast and conference call will be held at 11.00am today

Maitland

3 Pancras Square

London

N1C 4AG

Those wishing to attend the presentation or access the live webcast and conference call are kindly asked to contact Maitland at impacthealth-maitland@maitland.co.uk or by telephone on +44 (0) 20 7379 5151.

The presentation will also be accessible on-demand

In addition, a recorded webcast of this meeting and the presentation will also be available to download on-demand from the Company's website: www.impactreit.uk/investors/reporting-centre/presentations/

CHAIRMAN'S STATEMENT

This was a successful first half for the Group, in which we continued to build on the positive momentum we had created in 2018. We added further care homes and tenants to the portfolio and closed an over-subscribed equity offer to fund further growth, all while maintaining strong capital discipline.

Operational performance

During the period, we completed a number of acquisitions, which together added nine properties with 471 beds to the portfolio and increased our number of tenants from six* to eight*. Our investment portfolio was independently valued at £271.6 million as at 30 June 2019, up from £184.3 million on 30 June 2018, a 47.4% increase. Over the same time period our contracted rent roll grew by 49.3%, from £14.5 million on 30 June 2018 to £21.6 million on 30 June 2019, demonstrating that the acquisitions we have made are accretive for the Group.

Asset management is one of our key value creation tools and is starting to bear fruit. During the period, our tenants have made good progress on filling the 107 new beds we have delivered so far at Garswood House, Ingersley, Littleport, Parkville and Turnpike Court. We are making good progress on significant extensions at Diamond House and Freeland House, which when completed will offer 76 high-quality beds for specialist dementia care.

Our tenants

We have continued to diversify the Group's tenant base. Having started the year with six* tenants, we ended the first half with eight*, adding Maria Mallaband and Countrywide Group (MMCG) and the NHS. MMCG is a top-ten operator of care homes in the United Kingdom with 82 care homes.

This tenant diversification is an important part of our growth strategy, enabling us to expand the business while spreading risk. We choose tenants who prioritise high standards of care and a positive environment for their residents and share our vision of continued asset improvement, as well as meeting our requirements for financial stability. One of the board's priorities is to maintain its assets to a high standard and we pay close attention to our tenants' programmes of repair and maintenance.

Financial performance

The unaudited NAV at 30 June 2019 was £299.9 million or 104.67p per share (30 June 2018 NAV £196.1 million or 102.03p per share).

Unaudited earnings per share (EPS) for the period was 5.05 pence (basic and diluted), up from 4.41 pence in the same period in 2018. EPRA EPS was 3.62p (2018: 3.23p) and Adjusted EPS was 2.58p (2018: 2.37p).

Looking forward, our priorities continue to be to take a disciplined approach to allocating capital as we grow the business, while being as efficient as possible in the way we manage the business.

More information about our financial performance in the period can be found in the Investment Manager's report.

Dividends and total return

Between our inception in March 2017 and the beginning of 2019, we paid seven quarterly dividends of 1.5p per share, in line with the targets we set ourselves at IPO. At the beginning of this year we announced a new progressive dividend policy. Under this policy we aim to grow the target dividend in line with the inflation-linked rental uplifts we received in the previous financial year, which results in a target dividend for 2019 of 6.17p per share. This is a 2.83% increase on the total dividend for 2018.

So far in 2019 we have paid two dividends in relation to the first two quarters of the year of 1.5425p each, delivering on our target. This dividend continues to be well covered by our EPRA EPS of 3.62p.

The NAV total return for the period was 4.4%, in line with the NAV total return target we also introduced at the beginning of this year of 9.0% per annum.

Financing

The Group had an active first half putting in place foundations for its further growth. In February we announced a share placing programme and that our shares were migrating from the specialist fund segment of the main market of the London Stock Exchange to the premium segment of the main market. In May we activated the placing programme with a successful and over-subscribed equity offering at 106 pence per share, which raised £100 million and increased our issued share capital from 192,206,831 shares to 286,546,454 shares. At the end of June our shares were included into the FTSE EPRA/NAREIT Global Real Estate Index Series.

In addition, we increased our available debt facilities with a second revolving credit facility (RCF) of £25 million from Clydesdale Bank, taking our total debt facilities to £75 million. We used these facilities to enable us to make acquisitions during the period and then repaid the RCFs using the proceeds of the equity offering. Our drawn debt at 30 June 2019 was £25.1 million, giving us an LTV of 7.7%, in line with our deliberately conservative policy with regard to debt.

Post balance sheet events

Since the period end, we have completed the acquisition of two care homes in Devon and Oxfordshire, bringing an additional 91 beds into our portfolio. We have also exchanged contracts to acquire two homes in Suffolk, which offer 98 beds and will be operated by Optima Care, the Group's ninth tenant*.

Corporate governance

The Company has a strong and independent Board, comprising me as Chairman and four other Non-Executive Directors. We were delighted to welcome Amanda Aldridge as a new Non-Executive Director of the Company on 1 March 2019. Amanda qualified as a chartered accountant in 1987 and was an audit and advisory partner in KPMG LLP from 1996 until 2017. She became chair of the Audit Committee immediately after the Company's AGM on 14 May 2019. Amanda replaces David Brooks, who tragically died in 2018.

The Board is committed to achieving high standards of corporate governance. We are aware of the new matters set out in the updated AIC Corporate Governance Code and will ensure we are in compliance during 2019.

Investment Manager

Impact Health Partners LLP is our Investment Manager. The Manager is working hard on the Group's behalf and brought acquisitions to the board which have continued to diversify the Group successfully during the first half of 2019. The Investment Manager further strengthened its team during the period, in particular by hiring a senior member of the team to focus on asset management. This will help us to build long-term partnerships with our tenants and drive further value creation.

We are pleased that the Investment Manager received the authorisations required from the FCA to enable it to move from being the Company's Investment Adviser to become our Alternative Investment Fund Manager (AIFM) on 15 March 2019. This move has helped to simplify our management structure and generate efficiencies for the Company.

Outlook and summary

This was a period of continued, but measured growth in line with the strategy we set out at IPO. We remain well placed to deliver value in the short and longer term.

We appreciate the support existing and new shareholders gave us in the equity placing we closed in May, the proceeds of which have given us the capacity to bring further high-quality assets into the portfolio, increasing our diversification and reducing risk. We have strong relationships with a growing number of high-quality tenants, who offer an essential regulated service and provide good care. This in turn ensures the Group has a secure income stream. This stands us in good stead in an uncertain economic and political environment, including where the outcome of Brexit negotiations is still uncertain, and underpins our new progressive dividend policy and total return target, which reflect our confidence in the Group's prospects.

Rupert Barclay

Chairman

3 September 2019

* Minster and Croftwood are both part of Minster Care Group

INVESTMENT MANAGER'S REPORT

This was a successful half year for the Group, during which it continued to implement its proven growth strategy and deliver on its key targets, particularly dividends and total returns.

Investment activity

During the period, the Group deployed £39.0 million into new acquisitions, all of which comply with the Group's strict investment criteria and have risk/return profiles which are consistent with the Group's existing portfolio. Further capital has been committed to transactions which had not completed before 30 June 2019.

In aggregate, the Group acquired a further nine properties with 471 beds, a 13.7% increase on the number of beds at 31 December 2018. These acquisitions, combined with rent increases received during the period, helped to grow our contracted rent roll from £17.8 million on 31 December 2018, to £21.6 million on 30 June 2019, a 21.3% increase.

The acquisitions further diversified the portfolio geographically and added two new tenants to the Group: Maria Mallaband and Countrywide Group and the NHS. With the exception of our two properties leased to the NHS, all our leases have minimum fixed terms of 20 years, no tenant break rights, options to extend and annual rent adjustments at RPI, with a floor of 2% and a cap of 4%.

Asset management

Well delivered asset management has the potential to create value for our shareholders and tenants, while also offering a high quality environment for residents at our homes. In all our asset management opportunities we are adding beds and improving existing homes. We already own the land and our tenants have central services (kitchens, laundry, staff offices) on site so the marginal cost of adding beds is lower than with a new build and the risks easier to assess.

So far we have built, and our tenants have brought into operation, 107 beds at five of our homes. Laura Hill, who joined the Investment Manager in January 2019 to lead on asset management is currently working hard on live projects at 10 of our homes, which when completed will deliver 124 new beds. We are working closely with our tenants to expand this asset management pipeline.

In addition to this capital investment aimed at increasing capacity and repositioning homes, under the terms of the leases our tenants are fully responsible for keeping the Group's buildings in good repair through regular repair and maintenance programmes. We monitor these programmes carefully, to ensure they are being effectively implemented.

The portfolio

As a result of the acquisitions and asset management activity described above, at 30 June 2019 the portfolio comprised 81 properties, with just under 4,000 beds (approximately 0.9% of the beds available in the UK). A complete list of all the assets in the portfolio can be found below.

We are pleased with the current operating performance of our tenants. They have done consistently better than the national averages in the quality of care they provide, as assessed by the relevant national healthcare regulator, while delivering good financial performance. The portfolio's rent cover for the six months to 30 June 2019 was 1.8 times.

Valuation

The portfolio is independently valued by Cushman & Wakefield each quarter, in accordance with the RICS Valuation - Professional Standard (the "Red Book").

As at 30 June 2019, the portfolio was valued at £271.6 million, an increase of £47.8 million or 21.4% from the valuation of £223.8 million at 31 December 2018. The components of this valuation increase were as follows:

·; acquisitions: £39.5 million;

·; capital improvements in homes: £ 3.1 million; and

·; valuation uplift: £5.2 million.

The like-for-like valuation uplift was driven by rent increases during the period as well as the Group's capital improvement investments.

Financial results

Total net rental income recognised for the period was £10.8 million (H1 2018: £7.9 million). Under IFRS, the Group must recognise some rent in advance of receipt, reflecting the minimum 2% uplift in rents over the term of the leases, on a straight line basis. Cash rental income received in the period was £8.6 million (H1 2018: £6.2 million).

Administrative and other expenses totalled £2.0 million (H1 2018: £1.6 million). Net finance costs were £1.2 million (H1 2018: £0.1 million). The change in fair value of investment properties was £3.4 million (H1 2018: £2.3 million), contributing to profit before tax of £10.9 million (H1 2018: £8.5million).

Earnings per share ("EPS") for the period was 5.05p (2018: 4.41p) and EPRA EPS was 3.62p (2018: 3.23p).

All the EPS figures listed above are on both a basic and diluted basis. More information on the calculation of EPS can be found in note 7 to the financial statements.

Dividends

To ensure the Company benefits from the full exemption from tax on rental income afforded by the UK REIT regime, it must distribute at least 90% of the qualifying profits each year from the Group's qualifying rental business.

The Company has declared and paid two quarterly dividends of 1.5425p each in respect of the period. Both dividends were Property Income Distributions and the details were as follows:

Earnings per share cover for the total dividend is discussed in the Chairman's statement.

Financing

We were busy in the first half putting in place the building blocks to allow the Group's continued development. The key milestones were:

·; 5 February 2019: placing programme for up to 200 million shares and migration from the specialist fund segment of the main market of the London Stock Exchange to the premium segment of the main market.

·; 7 March 2019: new £25 million revolving credit facility signed with Clydesdale at a margin of between 225bp and 250bp over three-month LIBOR, taking the Group's total available debt to £75 million.

·; 10 May 2019: closing of an over-subscribed equity offer in which we placed 94.3 million new shares at a price of £1.06 per share with a combination of the Group's existing shareholders and new shareholders.

·; 24 June: inclusion of the Company's shares in the FTSE EPRA/NAREIT Global Real Estate Index Series.

We continue to take a conservative approach to managing the Group's balance sheet. Immediately before the successful equity placing, we had drawn debt of £61.8 million. After the equity placing, we repaid both revolving loans in full, but left the £25 million term element of the Metro loan in place. This left us with an LTV of 7.7% at 30 June 2019 and £50 million of debt available to redraw to fund further acquisitions and capital investments.

Post balance sheet events

We completed on the acquisition of two care homes after 30 June 2019:

·; Holmesley in Devon, which is leased to Welford, an existing tenant; and

·; Old Prebendal House in Oxfordshire, which has been leased to Careport, also an existing tenant.

We also exchanged contracts to acquire two care homes in Suffolk, which on completion will be leased to Optima Care, a new, high-quality tenant for the Group with a particular focus on complex elderly care.

Acquisition pipeline

When we published the prospectus for the equity placing programme on 11 February 2019, we said that we were working on 11 potential acquisitions. Including the post balance sheet items mentioned above, we have now executed on five of those transactions. Solicitors have been instructed in respect of a number of other transactions.

We remain confident that we will continue to identify and execute on further acquisitions, which meet the Company's investment criteria and return profile and are expected to deliver further value for shareholders. We continue to exercise robust capital discipline, to deliver value at the point of acquisition or investment.

Impact Health Partners LLP

Investment Manager

3 September 2019

KEY PERFORMANCE INDICATORS

The Group uses the following measures to assess its strategic progress.

Market drivers

A number of drivers influence demand for, and provision of, care for older people. This makes it an attractive investment market for well-capitalised asset owners working in partnership with well-managed operators, who are committed to providing high standards of care.

1: Growing demand

People aged over 85, the age group most likely to need care, are the fastest growing segment of the UK population. According to the Office for National Statistics, the number of people over 85 years old in the UK is forecast to double by 2041, from 1.6 million in 2016 to 3.2 million. At the moment, around 15% of those over 85 require a level of care which can only be provided in either a hospital or a care home.

2: Capacity has shrunk from its peak

The number of available residential and nursing home beds in the UK rose rapidly in the 1970s and 1980s, reaching a peak of 563,100 in 1996. It has since declined by 17% from that level, to 464,800 in 2018. This decline is the result of obsolete homes withdrawing from the market, homes being sold for change of use and the amount of new development activity coming to completion. In the years to March 2016 and March 2017, the number of available beds fell by 1,700 and 4,300 respectively. However, in the year to March 2018 there was a small net increase of 900 beds.

3: Severe pressure on the NHS

In the 12 months to May 2019, the NHS in England lost 1,650,875 bed days through delayed transfers. Pressure on the NHS remains severe with Simon Stevens, the CEO of NHS England, estimating that patients who stay in hospitals for more than three weeks, most of them elderly, occupy one in five hospital beds or the equivalent of 36 hospitals.

Acute hospitals are not only more expensive than other care settings, they do not always offer the best environment for the care of elderly people with multiple, long-term chronic medical conditions.

4: Growing calls for major reforms of the system

funding to adult social care (which includes care for working age adults and care at home, as well as money spent on residential care for the elderly). According to research by the House of Commons Library, local authorities will have access to an additional £10 billion in social care funding between 2017/18 and 2019/20.

Additional government funding for adult social care

There is widespread recognition that more needs to be done to find a long-term funding solution for the challenges and opportunities presented by an ageing population. Reports published in 2019 by The House of Lords Economic Affairs Committee, The King's Fund, The Institute for Public Policy Research and Policy Exchange have all suggested that the best solution would be to make personal care for the elderly free at the point of delivery, just as medical care provided by the NHS is free. The new government formed by Boris Johnson in July has committed to develop a long-term solution for social care. However, any structural reforms requiring legislation seem unlikely in the short-term given the government's focus on Brexit.

5 A growing market

Despite this lack of clarity in long-term government policy, as a result of increasing demand and a shift from government provision to independent providers, the independent sector has seen sustained and above-inflation growth. Since 2005, the revenues of for-profit independent providers have increased by 4.2% per annum, and for non-profit independent providers by 4.3% per annum.

According to research by LaingBuisson, the estimated annualised value of residential care services for people over 65 in the UK, as at 31 March 2018, was £16.9 billion.

The portfolio

Notes

1: May 2017 unless stated

2: Treated as two properties

3: Capital improvement bed additions under development

* Minster and Croftwood are both part of Minster Care Group

PRINCIPAL RISKS AND UNCERTAINTIES

The board considers that the principal risks and uncertainties for the business, as presented on pages 22-25 of our 2018 Annual Report, have not changed significantly during the period.

A key element of the board's operational processes is effective risk management. The group reviews the level of risk and the group's risk appetite annually with reporting against this framework assessed quarterly. Risk is inherent in any business, and the board seeks to ensure that risks are minimised while delivering progressive returns for shareholders. Key considerations of this approach are summarised below.

·; primary investment focuses on healthcare real estate which has tended to be less cyclical than other real estate sectors;

·; investments focused on properties and tenants with strong rent cover and with a mix of local authority and privately funded residents, providing a diverse underlying operating income base and corresponding rent security;

·; the Group benefits from long initial lease terms, with upwards-only annual rent reviews, providing clear visibility of income;

·; active asset management to ensure properties are well maintained, and resilient for the term of the lease;

·; the Group does not commit to greenfield developments; and

·; debt funding is limited to 35% LTV with the expectation to fix or hedge the majority of interest costs that are expected to be permanently drawn.

The approach taken by the board is rigorous and thorough. It ensures that the assessment of risk remains appropriate and relevant.

The board is continuing to monitor the risks that may arise from the UK 's exit from the European Union ("Brexit"). The final outcome and method of exit remains unclear and it is too early to understand fully the impact this will have on our business and our sector. The impact of Brexit on the macro-economic environment could lead to political uncertainty and volatility in interest rates, which could in turn affect our investment and occupier market our ability to execute our investment strategy and our tenant's ability to recruit staff and source supplies.

The board has concluded that there have been no significant changes to the principal risks and uncertainties faced by the Group, nor do they anticipate any significant changes during the remaining six months to 31 December 2019. Full disclosure of risks and uncertainties faced by the Company are set out within the 2018 Annual Report.

Rupert Barclay

Chairman

3 September 2019

DIRECTORS' RESPONSIBILITIES

The directors confirm that to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union and that the operating and financial review includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency rules of the United Kingdom's Financial Conduct Authority, namely:

·; an indication of important events that have occurred during the first period of the financial year and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·; material related party transactions in the first period of the financial year and any material changes in the related party transactions disclosed in the 2018 Annual Report as disclosed in note 14.

Shareholder information is as disclosed on the Impact Healthcare REIT plc website.

For and on behalf of the board

Rupert Barclay

Chairman

3 September 2019

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The results are derived from continuing operations during the period/year.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2019 (unaudited)

Six months ended 30 June 2018 (unaudited)

12 months ended 31 December 2018 (audited)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Preparation

General information

These unaudited condensed consolidated financial statements for the six month period ended 30 June 2019, are prepared in accordance with International Financial Reporting Standards ("IFRS") and interpretations issued by the International Accounting Standards Board ("IASB") and IAS34 "Interim Financial Reporting" as adopted by the European Union, including the comparative information for the six months period ended 30 June 2018 and for the year ended 31 December 2018.

The condensed consolidated financial statements have been prepared on a historical cost basis, except for investment properties and derivative financial instruments which have been measured at fair value.

The Group has chosen to adopt EPRA best practice guidelines for calculating key metrics such as earnings per share.

The Company is a public listed company incorporated and domiciled in England and Wales. The Company's ordinary shares were listed on the Specialist Fund Segment and moved to the Premium Listing Segment on 8 February 2019. The registered address of the Company is disclosed in the Corporate Information.

The condensed consolidated financial statements presented herein for the year to 31 December 2018 does not constitute full statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's annual report and accounts for the year to 31 December 2018 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those accounts was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2016.

Convention

The condensed consolidated financial statements are presented in Sterling, which is also the Group's functional currency, and all values are rounded to the nearest thousand (£'000), except when otherwise indicated.

Going concern

The directors have considered the Group's financial position as well as the principal risks of the Group.

The majority of the Group's property assets are let to tenants on long leases with annual rent reviews linked to RPI with a 2% floor and a 4% cap, providing a stable and long term income stream. This coupled with a visible and relatively stable cost base provide additional security when assessing the Group's financial position.

The Group has been in compliance with all of the financial covenants of the Group's loan facilities as applicable throughout the period.

The directors have also considered the capital commitments of the Group and the post balance sheet investments.

The directors believe that there are currently no material uncertainties in relation to the Group's ability to continue for a period of at least 12 months from the date of the Group's financial statements. The board is, therefore, of the opinion that the going concern basis adopted in the preparation of the interim report is appropriate.

2. Significant accounting judgements, estimates and assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosures. However, uncertainty about these assumptions and estimates could result in outcomes that could require material adjustment to the carrying amount of the assets or liabilities in future periods.

2.1 Judgements

Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are disclosed below:

Operating lease contracts - the Group as lessor

The Group has acquired investment properties that are subject to commercial property leases with tenants. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, particularly the duration of the lease terms and minimum lease payments, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the leases as operating leases.

The leases when signed, are for between 20 and 25 years with a tenant-only option to extend for one or two periods of 10 years. It has been assumed at this stage that the tenants do not exercise the option to extend.

Business combinations

The Group acquires subsidiaries that own property. At the time of acquisition, the Group considers whether each acquisition represents the acquisition of a business or the acquisition of an asset. The Group accounts for an acquisition as a business combination where an integrated set of activities is acquired in addition to the property. Where such acquisitions are not judged to be the acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities of the entity based upon their relative fair values at the acquisition date. Accordingly, no goodwill or deferred tax arises.

In the current and preceding year all acquisitions were accounted for as asset acquisitions as none of the acquisitions included the acquisition of an integrated set of activities.

Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on the Group's past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

2.2 Estimates

Fair valuation of investment property

The valuations have been prepared in accordance with the RICS Valuation - Global Standards 2017 or the RICS 'Red Book' as it has become widely known.

The basis of value adopted is that of fair value being "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date" in accordance with IFRS 13. The concept of fair value is considered to be consistent with that of market value.

The significant methods and assumptions used by the valuers in estimating the fair value of the investment properties are set out in note 9.

Gains or losses arising from changes in the fair values are included in the condensed consolidated statement of comprehensive income in the period in which they arise. In order to avoid double counting, the assessed fair value may be increased or reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives and/or guaranteed minimum rent uplifts to the condensed consolidated statement of comprehensive income.

3. Summary of significant accounting policies

The accounting policies adopted in this report are consistent with those applied in the Group's statutory accounts for the period ended 31 December 2018 and are expected to be consistently applied during the year ended 31 December 2019.

In addition, the following accounting policies will apply for the year ended 31 December 2019 and therefore the current six month period ended 30 June 2019:

IFRS 16 'Leases'

In January 2016, the IASB published the final version of IFRS 16 'Leases'. IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise lease assets and lease liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from the previous leases standard, IAS 17 and has not had a material impact on the Group.

4. Standards issued but not yet effective

IFRS 3 'Business Combinations'

On 22 October 2018, the IASB issued 'Definition of a Business (Amendments to IFRS 3)' aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020.

The standard is not expected to have material impact on the Group and the Group already performs this assessment. Refer to note 2 where this assessment is considered.

The Group does not consider the adoption of any new standards or amendments, other than those noted above to be applicable to the Group.

5. Property income

For accounting purposes, premiums received are reflected on a straight-line basis over the term of the lease. In addition, the Group benefits from a minimum annual rental uplift of 2% on all leases. For accounting purposes these uplifts are also incorporated to recognise income on a straight-line basis.

6. Taxation

As a REIT, the Group is exempt from corporation tax on the profits and gains from its property investment business, provided it continues to meet certain conditions as per REIT regulations. For the period ending 30 June 2019 and 30 June 2018, the Group did not have any non-qualifying profits except interest income on bank deposits.

7. Earnings per share

Earnings per share (EPS) amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the time weighted average number of ordinary shares outstanding during the period. As there are no dilutive instruments outstanding, basic and diluted earnings per share are identical.

The European Public Real Estate Association ("EPRA") publishes guidelines for calculating adjusted earnings designed to represent core operational activities.

The EPRA earnings are arrived at by adjusting for the changes in fair value of on investment properties and interest rate derivatives.

Adjusted Earnings:

EPRA earnings have been adjusted to exclude the effect of straight lining of rental income and one-off due diligence costs incurred in the year on a large transaction that is not reflective of the standard underlying costs. These have been adjusted to enable the board to consider the level of sustainable cash earnings.

8. Dividends