Coronavirus Update

Primary Health Properties Plc - Interim Results June 2020

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Primary Health Properties PLC

Interim results for the six months ended 30 June 2020

Strong operational and financial performance notwithstanding the COVID-19 pandemic

Primary Health Properties PLC ("PHP", the "Group" or the "Company"), a leading investor in modern primary health facilities, announces its interim results for the six months ended 30 June 2020.

Harry Hyman Managing Director of PHP, commented:

"The COVID-19 pandemic has highlighted the demands on health systems around the world, not least the NHS in the UK and HSE in Ireland, where the underlying demand for healthcare is increasingly driven by growing and ageing populations. The need for modern, integrated, local primary healthcare facilities is becoming ever more pressing in order to relieve the pressures being placed on hospitals and A&E departments.

"As a result of the COVID-19 pandemic, we see strong demand for extra space to help alleviate the backlog of consultations that has arisen as a result of the coronavirus, while facilitating the movement of activity out of hospitals and the continued care of patients that have suffered from COVID-19.

"The successful equity placing on 9 July raised £140m of proceeds and was upsized from £120m due to strong investor demand. The funds raised will help further accelerate our growth by funding near-term portfolio expansion, forward funded developments and asset management projects."

"PHP looks forward to delivering further earnings and dividend growth and remains confident of its future outlook."


Income statement metrics

Six months to

30 June 2020

Six months to

30 June 2019



Net rental income1




Adjusted EPRA earnings1,2




Adjusted EPRA earnings per share1,2




IFRS profit before tax excluding MedicX exceptional adjustments1,5




IFRS profit/(loss) for the period (2019 includes £123.9m of non-cash losses)9




IFRS earnings/(loss) per share2








Dividend per share6




Dividends paid6




Dividend cover1




Balance sheet and operational metrics

30 June


31 December




Adjusted EPRA NTA (NAV) per share1,3




IFRS NAV per share1,3




Property portfolio




Investment portfolio valuation4




Net initial yield ("NIY") 1




Contracted rent roll (annualised)1,8




Weighted average unexpired lease term ("WAULT")1

12.5 years

12.8 years






Rent-roll funded by government bodies1








Average cost of debt




Loan to value ratio1




Pro-forma loan to value ratio post equity raise10




Weighted average debt maturity

6.7 years

7.2 years


Total undrawn loan facilities and cash7,10





1   Definitions for net rental income, adjusted EPRA earnings, adjusted EPRA earnings per share, earnings per share ("EPS"), dividend cover, loan to value ("LTV"), IFRS profit before tax excluding MedicX exceptional adjustments, net tangible assets ("NTA"), net disposal value ("NDV"), rent roll, NIY, WAULT and net asset value ("NAV") are set out in the Glossary of Terms.

2 See note 7, earnings per share, to the financial statements.

3 See note 16, net asset value per share, to the financial statements. From 1 January 2020 Adjusted EPRA NAV, EPRA NAV and EPRA NNNAV have been replaced with four new metrics: adjusted EPRA net tangible assets, EPRA net tangible assets ("NTA"), EPRA net disposal value ("NDV") and EPRA net reinstatement value ("NRV") which are considered to be alternative performance measures. The Group has determined that adjusted EPRA net tangible assets is the most relevant measure and hence is now reported in place of adjusted EPRA NAV.

4 Percentage valuation movement during the period based on the difference between opening and closing valuations of properties after allowing for acquisition costs and capital expenditure.

5 The IFRS profit before tax excluding MedicX exceptional adjustments is set-out in detail in the summarised results table on page 12.

6 See note 8, dividends, to the financial statements.

7 After deducting the remaining cost to complete contracted acquisitions, properties under development and asset management projects.

8 Percentage contracted rent roll increase during the period is based on the annualised uplift achieved from all completed rent reviews and asset management projects.

9 £123.9m of non-cash losses are composed of £138.4m exceptional revaluation loss arising on the merger with MedicX less the £14.5m exceptional transactions costs.

10 Including the £136.9m net proceeds from the equity raise completed post period end


· Adjusted EPRA earnings per share increased by 7.1% to 3.0p (30 June 2019: 2.8p)

· Average uplift of 2.2% per annum on rent reviews completed in the period, continuing the positive trend in rental growth (FY 2019: 1.9%; FY 2018: 1.4%)

· Additional annualised rental income on a like-for-like basis of £0.9 million or 0.7%, from rent reviews and asset management projects (FY 2019: £1.9 million or 1.5%; FY 2018: £1.3 million or 1.8%)

· Contracted annualised rent roll increased by 4.4% to £133.3 million (31 December 2019: £127.7 million)

· Portfolio of 22 purpose-built medical centres acquired, one of which was acquired on 1 July 2020, for £54 million with good asset management opportunities

· Three forward funded developments acquired in the period with a net development cost of £23.0 million at Arklow, Ireland, Epsom, Surrey and Llanbradach, Wales

· Two quarterly dividends totalling 2.95p per share distributed in the period and third quarterly dividend of 1.475p per share declared, payable on 21 August 2020, equivalent to 5.9p on an annualised basis. This represents a 5.4% increase over the 2019 dividend per share and will mark the Company's 24th consecutive year of dividend growth

· The Company intends to make a further dividend payment in November 2020 and maintain its strategy of paying a progressive dividend, in equal quarterly instalments, covered by underlying earnings in each financial year


· Adjusted EPRA Net Tangible Assets (NTA) per share increased by 1.1% to 109.1 pence (31 December 2019: 107.9 pence)

· Property portfolio at 30 June 2020 valued at £2.514 billion (31 December 2019: £2.413 billion) reflecting a net initial yield of 4.86% (31 December 2019: 4.86%). A revaluation surplus was generated in the period of £10.5 million (30 June 2019: £17.7 million), representing growth of 0.4% (30 June 2019: 0.8%)

· Portfolio in Ireland now comprises 17 assets, valued at £194 million (€214 million), including two forward funded developments currently under construction which, if valued as complete, increases the total asset value to approximately £211 million (€233 million)

· The Group completed the forward funded developments at Athy, Bray and Rialto in Ireland during the period and has six developments currently on site with a net development cost of £41.5 million. All sites in the UK and Ireland remain open and construction continues to progress

· Strong pipeline of targeted acquisitions and asset management projects with a value of approximately £128 million, of which £44 million is currently under offer

· Progression of asset management projects with 12 either completed or currently on-site, investing £4.1 million, creating additional rental income £0.12 million per annum and extending the weighted average unexpired lease term (WAULT) back to 21 years

· The Group has a strong pipeline of over 80 incremental asset management projects which have either been approved by the Board or are in advanced negotiations. The pipeline of projects equates to investing approximately £36 million in 2020 and 2021 generating £1.1 million of additional income and extending the WAULT on those leases back to 21 years

· Only £3.0m or 2.3% of annualised rent roll expiring in the next three years of which £2.6m is subject to either a planned asset management initiative or terms having been agreed to renew the lease

· The portfolio's metrics continue to reflect the secure, long-term and predictable income stream with occupancy at 99.5% (31 December 2019: 99.5%) and a WAULT of 12.5 years (31 December 2019: 12.8 years)


· Post period end £140.0m (£136.9m net of expenses) over-subscribed equity placing at 145p per share or 32.9% premium to reported Adjusted EPRA NTA of 109.1p as at 30 June 2020

· Following the equity placing the Company lowered the upper range for the Group's loan to value ("LTV") ratio from 55% to 50%

· At 30 June 2020 the Group's net debt stood at £1,150.3 million (31 December 2019: £1,067.3 million) and the LTV ratio was 45.8% (31 December 2019: 44.2%) falling to 40.3% on a pro-forma basis post equity placing

· Post the equity placing and after capital commitments the Group has undrawn loan facilities and cash on deposit totalling £403.6 million (31 December 2019: £356.6 million) providing significant liquidity headroom. Cash on deposit totals £201.0 million

· Significant headroom in LTV and interest cover covenants in the Group's various borrowing facilities


· Of PHP's contracted rental income, 90% is paid either directly or indirectly by the UK and Irish governments, with the balance mainly coming from pharmacies co-located at our properties

· Rental collections continue to remain robust and as at 27 July 2020 96% had been collected in both the UK and Ireland for the third quarter of 2020 and ahead of the collection rates experienced for the second quarter of the year which now stand at over 99% for both countries. The balance of rent due for the third quarter of 2020 is expected to be received shortly

· The Group has allowed £1.1 million of quarterly rents, predominantly pharmacies, to be paid by monthly instalments, given short-term rent deferrals of £0.3 million and concessions of £0.2 million