Primary Health reports static earnings but increases dividend – Primary Healthcare Properties has published results for the year ended 31 December 2018 [a remarkable feat given this is just one month later]. Highlights are:
- A 4.4% increase in the EPRA NAV to 105.1p. The net initial yield of the portfolio fell to 4.85% from 4.91%
- EPRA earnings per share unchanged at 5.2p, despite
- an 18.7% uplift in EPRA earnings to £36.8m on the back of
- an uplift in rent of £1.1m p.a (annualised 1.4% increase following rent reviews)
- The 2018 dividend upped by 2.9% to 5.4p and first quarterly dividend for new financial year of 1.4p (5.6p annualised, +3.7%)
The portfolio continues to expand, with eight properties bought for £106.2m (a large average lot size of £13.3m). This was funded in part with an over-subscribed equity issue completed in April 2018, raising £115.0m (£111.2m net of expenses) at a 7% premium to the end 2017 EPRA NAV, Also £40m of convertible bonds were converted into equity (plus another £6.3m since the year end, leaving a balance of £17m). Additional debt funding was secured – £45.8m (€51.0m) senior secured euro-denominated loan notes issued in the year with a blended rate of 2.4973% and weighted average maturity of 10.4 years – but the loan to value ratio fell to 44.8% (2017: 52.9%). The average cost of debt dropped by 19 basis points (0.19%) to 3.90% (2017: 4.09%).
Within the portfolio, they have a forward funded development at Bray in Ireland which, when complete, will mean they have €110m invested there. Another £190m worth of purchases are in the pipeline with £30m of this under due diligence.
The big news though is the planned deal with MedicX, which will transform the business.
Harry Hyman, managing director, commented: “We have selectively and successfully invested the proceeds from the over-subscribed equity raise in April 2018 and further strengthened the balance sheet. PHP’s high-quality portfolio and capital base has helped to deliver another year of strong performance and our 22nd year of unabated dividend growth. Continuing improvements to the rental growth outlook and further reductions in the cost of finance will help to maintain our strategy of paying a progressive dividend to our shareholders which is fully covered by earnings.
We have recently announced the proposed all share merger with MedicX bringing together two highly complementary portfolios in the UK and Ireland and the combined business will represent a stronger platform for the future. Combining the two businesses in this transformational deal is expected to create significant value for the shareholders of the enlarged group and importantly, the potential to deliver significant operating and financial savings. We are excited by the opportunities that will be created. The merger represents another significant and important step in our strategy of selectively growing the portfolio, focusing on large hub primary care centres which are reducing pressures on the NHS, and it significantly extends the scale of the business and asset value.”
PHP : Primary Health reports static earnings but increases dividend
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