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- Primary Health Properties delivers during transformational year
Primary Health Properties (PHP) has announced its annual results for the year ended 31 December 2019. This is a year that its managing director, Harry Hyman, describes as “transformational”, as it saw the completion of the company’s merger with MedicX, which brought together complementary portfolios in the UK and Ireland. Harry says that this has provided a much stronger platform for the future and has already created significant value delivering a total shareholder return of 49.2% in the year. He reports that the company has already delivered operating synergies of £4.0m per annum, which were outlined at the time of the merger, as well as a 50bp reduction in the average cost of debt.
The company has provided the following key highlights:
PHP has continued to grow its portfolio following the merger, particularly in Ireland where it believes there is a significant opportunity. It has also strengthened its balance sheet with a successful, over-subscribed £100m equity issue, £150m unsecured convertible bond issue and €70m Euro-denominated private placement loan note.
Following its 23rd consecutive year of dividend growth, PHP says that continuing improvements to the rental growth outlook and further reductions in the cost of finance will help to maintain its strategy of paying a progressive dividend to shareholders which is fully covered by earnings.
[QuotedData attended the PHP results presentation this morning and among all the headline numbers showing the positive integration of the MedicX portfolio, one of the biggest cause for optimism going forward was the increase in rental growth in 2019. The company reported a 1.9% growth in its rent in 2019, which has increased from 0.9% in 2016, 1.1% in 2017 and 1.4% in 2018. The company has effectively an upward only rent roll – whereby 7% of its income is subject to fixed annual uplifts, 24% indexed linked and 69% subject to open market reviews (where rents are set a rates determined by recent deals in the wider primary health market). Due to its 69% weighting, open market rent reviews has the most influence on PHP’s rental growth. Managing director Harry Hyman said the prospect of increased rental growth in the sector for the foreseeable future is good as the government and NHS continues to look to modernise the provision of primary care in the UK to keep up with an ageing population. PHP could further benefit from significant rental growth across its London and South East portfolio at the conclusion of rent review negotiations with the NHS at its property in Clapham, South London. The rent review dispute relates to a March 2015 review that is currently being determined by an independent expert. The outcome of that rent review will determine a new market rental benchmark for its other London and South East assets (which makes up 21% of its portfolio by valuation) and, if positive, will provide substantial rental growth. At the moment, 44% of PHP’s outstanding rent reviews are focused in London and the South East as it waits for a resolution in the dispute (PHP is not losing any income while it waits as the new rental levels will be backdated to the rent review date and interest applied).]
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