MIDAS SHARE TIPS: Grow richer as UK gets older – with Impact Healthcare

MIDAS SHARE TIPS: Grow richer as UK gets older – with Impact Healthcare, which aims to deliver substantial returns to shareholders

In 1991, fewer than a million people were over the age of 85 in this country. Now, that figure is approaching two million and by 2030, a good three million UK citizens will be in their late 80s and above. 

Many of them will be able to live happily and healthily at home. Some 15 per cent, however, will need to be looked after, ideally in residential or nursing homes. 

More than 400,000 older people already live in care homes but that number will almost certainly increase over the next eight years and beyond. This creates a host of challenges. 

Growing demand: Impact Healthcare owns 129 care homes and is expanding as Britain’s population ages

There are the financial ones, which the Government is trying to address, not least with the hugely unpopular hike in National Insurance rates. But there are logistical and operational hurdles as well. The number of homes has declined over 20 years, good staff can be really hard to find and quality of care requires constant oversight. 

Impact Healthcare was set up to try to resolve some of these problems, while also delivering substantial returns to shareholders. 

The shares are £1.24 and should rise steadily as the company expands and develops. The group also offers an attractive income through quarterly dividends. Last year, the payout totalled 6.41p and a 6.54p payout is expected this year, putting Impact on a yield of more than 5 per cent. 

Impact owns 129 homes which cater for more than 5,000 residents. These homes are let out to specialist care companies which pay Impact rent on a monthly or quarterly basis. However, Impact does not just sign leases with the first tenants who come along. 

Instead, companies are closely vetted, over months or even years, to ensure they have a genuine record of delivering high quality care to residents. Impact also pays close attention to potential partners’ accounts, only working with firms in strong financial health which can afford to pay the rent. 

Intense due diligence is a critical part of Impact’s strategy. The group is run by Andrew Cowley and Mahesh Patel, who have decades of industry experience between them. When they look for homes to acquire, they analyse not just the local demand for care but also the availability of nearby staff and the quality of managers on site. Once leases are signed, tenants deliver monthly reports so that any issues can be spotted early and dealt with promptly. 

So far, Impact has amassed a group of 13 tenants, each of which owns between three and 80 homes. Cowley and Patel prefer to work with small and medium-sized operators, who, they believe, are better able to keep a close eye on their businesses. The duo add two or three new partners to their roster each year, thereby steadily increasing the size of their estate. 

Most of Impact’s homes are in the Midlands, North of England and Scotland and two-thirds of residents are funded by the NHS or local authorities, which means that the majority of Impact’s rents are Government-backed. When leases are signed, Patel and Cowley also ensure that rents are affordable. As a result, Impact has consistently collected 100 per cent of rent due, even through the Covid-19 pandemic.

This resilience has allowed Patel and Cowley to pay out attractive and rising dividends since their business floated in 2017. 

Looking ahead, further strong growth is expected. Impact actively strives to make homes better, ensuring sites are well maintained, adding new facilities, such as wet rooms and improving environmental credentials too. 

The group recently moved in to development as well, funding homes which are already pre-let to tenants, including a new spot in Norwich, combining full-time care and assisted living.

Midas verdict: Few people want to put their loved ones in a care home or end up in one themselves. Cowley and Patel are acutely aware of this and strive to make Impact’s homes as warm and welcoming as possible. The duo also recognise that the UK needs more good quality homes. Today, they have just 1.5 per cent of the market but would like at least to double that share, while still ensuring that Impact only works with operators whose businesses are sustainable and well regarded. The approach has worked well so far and should continue to do so. At £1.24, the stock is a long-term buy – and the income is an extra attraction. 

Traded on: Main market Ticker: IHR Contact: impactreit.uk or 020 3146 7100 

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