Final Results

RNS Number : 6464H

Primary Health Properties PLC

25 February 2010

 



Primary Health Properties PLC ('PHP' or the 'Group')

Annual Report for the year ended 31 December 2009

Primary Health Properties PLC, one of the UK's largest providers of modern primary healthcare facilities, is pleased to announce its audited results for the year ended 31 December 2009.

Group Financial Highlights

• Successful capital raisings of £60.7 million net of expenses

• Payment of 17p of dividends during the year

• 8.75p second interim dividend for 2009 declared and payable on 26 March 2010

• Operating profit before revaluation result and fair value gain/loss on derivatives rose from £4.7million to £7.9million

• Loan to value ratio reduced to 49% at 31 December 2009 against covenant of 70%

• Basic net asset value increased to 247.2p per share (31 December 2008 (Adjusted): 226.7p)

• EPRA net asset value of 279.9p per share (31 December 2008 (Adjusted): 272.9p)

• Borrowing facilities not due for renewal until 2013

Group Operational Highlights

• Continued success of our strategy of investing in modern purpose built healthcare centres

• Increase in the portfolio from £316.9million to £341.9million

• Rental growth of approximately 3.12% per annum

• Rent roll at year end of £21.3million

• Important decision achieved on rent review appeal process during the year

• Portfolio 100% let

• Portfolio including commitments valued at £371million as at 31 December 2009 on an initial yield of 6.0%

Harry Hyman, Executive Managing Director of PHP, commented:

"The Group's strategy of continued investment in modern purpose built healthcare centres has yielded excellent financial results for the year.  Whilst the challenging economic environment continues to have a negative impact on the value of commercial property, the niche primary care market in which PHP operates still has good fundamentals.

Spending on healthcare is driven by demographics as well as the growth of the economy.  Primary care remains at the heart of the changes in healthcare in the UK.  There remains a stronger demand for larger purpose built primary care centres and we are also still recording rental increases.  The new procedure for appeals has also started to yield positive results.

Given these continuing developments, our recent capital raisings and our commitment to increasing the Group's portfolio on a prudent basis, we look forward to providing a secure and attractive rate of return to our Shareholders."

Enquiries:

Pelham Bell Pottinger Corporate and Financial

David Rydell/ Victoria Geoghegan

Tel: [phone]

Primary Health Properties PLC

Harry Hyman

Managing Director

Tel: [phone]

Operating and Financial Review

As reported during 2009, the challenging economic environment continued to have a negative impact on the value of commercial property.  However, the niche primary care market in which we operate still has good fundamentals and there is continued demand for the provision of modern primary health care facilities, from both tenants and investors.  The Group has an excellent portfolio of modern properties with secure long leases and high quality tenants, backed by the Government. Our buildings are all used in the delivery of primary care which is in the front line of delivery of NHS services. Spending on healthcare through the NHS remains at the heart of the Government's and the Opposition's policy agendas. The medium term outlook for rental growth prospects is also enhanced by the High Court judgment in March 2009 which will encourage a fairer, more robust and more transparent system for reviewing rent.

The Board remains committed to increasing the Group's portfolio on a prudent basis, actively managing assets through refurbishment, enhancement and redevelopment, increasing revenue from existing leases and delivering returns for shareholders. We believe that the business is well positioned and remain confident in the prospects for the Group.

Trading performance

An analysis of the trading performance for the year ended 31 December 2009 is set out below:

		Restated
	Year to	Year to
	31-Dec-09	31-Dec-08**
	£m	£m
Annualised rent roll*	21.3	19.6
Operating profit before revaluation result and financing	18.0	15.2
Net financing costs	(10.1)	(10.5)
Operating profit before revaluation result and fair value gain/(loss) on derivatives	7.9	4.7
Fair value gain/(loss) on derivatives	1.3	(10.7)
Revaluation gain/(loss) on property portfolio	1.6	(17.7)
Profit/(loss) before tax	10.8	(23.7)
Dividends paid	5.8	5.5

*On completed properties

**Restated as described in note 2 to the financial statements

High Court verdict

On 31 March 2009, the Group announced that, in a landmark judgment in the High Court, it had made a successful challenge to the dispute resolution procedures to be followed when determining the level of rent to be reimbursed by the Department of Health for GPs' leasehold premises.

The Board believes that this will lead to a fairer, more robust and more transparent system for reviewing rent and is likely to improve the Group's rental growth prospects over time.

Rental growth

The achieved increase on rental review of leases agreed in the year to 31 December 2009 was 9.37% over three years (equivalent to 3.12% per annum) compared with 12.35% over three years (equivalent to 4.12% per annum) reported in 2008. Rental growth, although not formally linked to inflation, is likely to be subdued in a low inflation environment. However, the Joint Managers believe that increased specification, where new buildings have a much higher specification due to the need for higher energy efficiency and reduced carbon footprint requirements in the NHS, is driving replacement costs higher which are important criteria in justifying higher rent.

Analysis of annualised rent by tenant

The table shows the percentage of the Group's portfolio by rent roll derived from each major tenant class: GPs, PCTs, Health Authorities, pharmacy operators and others. Some 99% of rent comes directly or indirectly from GPs, PCTs, Health Authorities and pharmacy operators.

GPs	76%
PCTs	11%
Pharmacy	9%
Health Authorities	3%
Other	1%

Tenancy split by floor area

The table indicates tenancy split by floor area (psm).

GPs	80%
PCTs	11%
Pharmacy	6%
Health Authorities	2%
Other	1%

Analysis of rental income by pharmacy operator

The table shows the breakdown of the 9% of total rent received from pharmacy operators by well known brands (67%), large independents with over five units (20%) and small independents with five or less units (13%).

Lloyds	44%
Rowlands	12%
Boots	6%
Co-op	5%
Large independent	20%
Small independent	13%

Analysis of rental income by geographic region

The table shows the percentage split of rental income by geographic region.

South East	25%
West Midlands	13%
East Midlands	12%
North West	11%
Yorkshire & Humberside	8%
Scotland	8%
Wales	8%
London	7%
South West	4%
North	3%
East Anglia	1%

Analysis of annualised rent by unexpired lease term

The table demonstrates that the Group has in excess of 75% of leases with a life of 15 years or longer.

More than 20 years	22%
15-20 years	53%
6-15 years	24%
Less than 5 years	1%

Security of income by term certain

The table shows that by year 10, the Group would still be receiving 94% of its current income and by year 15, 72%, taking no account of any lease renewals or rent reviews during the period.

	Percentage of total income
Years from 31 December 2009	as at 31 December 2009
0.0	100
0.5	100
1.0	100
1.5	100
2.0	100
2.5	100
3.0	99
3.5	99
4.0	99
4.5	99
5.0	98
5.5	98
6.0	98
6.5	98
7.0	98
7.5	98
8.0	98
8.5	98
9.0	97
9.5	97
10.0	97
10.5	97
11.0	95
11.5	93
12.0	92
12.5	91
13.0	86
13.5	84
14.0	80
14.5	78
15.0	75

Forthcoming rent reviews

The table shows the annual amounts of rent falling due for review in each of the next three years.

£1.5million of rent is reviewed on a longer pattern and £685k, included in the first column for 2010, is reviewed annually.

2010	£6.093m
2011	£7.580m
2012	£6.163m
Longer pattern	£1.487m

Analysis of portfolio by age of buildings

The table shows a breakdown of the portfolio by value and number of assets in age groupings. The few older buildings have all been subject to extensive refurbishment within the last 15 years. Approximately 75% of the portfolio comprises purpose built health centres which are under nine years old and around 97% of the properties are under 15 years old.

	Value of	Number of
	properties	properties
	£m
Under 3 years	92.57	20
3-6 years	103.34	37
6-9 years	53.79	22
9-12 years	50.47	20
12-15 years	22.19	9
15-18 years	0	0
18-21 years	0	0
Over 21 years	10.37	4

Acquisitions and disposals

The Group purchased the following properties during the year ended 31 December 2009. There were no disposals during the year.

Property	Acquisition cost		Occupational tenants
	£m
The Forest Surgery, Hugglescote	2.7		GP practice and pharmacy
Firdale Medical Centre, Sale	4.2		GP practice and pharmacy
Port Talbot Resource Centre, Port Talbot	15.9		GP practice and pharmacy

Commitments

Commitments may be analysed as follows:

Property	New commit-ments in 2009	Total out-standing commit-ments		Occupational tenants
	£m	£m
Cowbridge Medical Centre, Vale of Glamorgan	6.9	5.6		GP practices and PCT accommodation
The Sloane Practice Medical Centre, Sheffield	2.9	1.7		GP practice and pharmacy
The New Shefford Health Centre, Shefford	5.5	5.2		GP practice and PCT accommodation
Total new commitments	15.3	12.5
Connahs Quay *		9.3
Treharris *		4.3
Total commitments		26.1

* initial commitment in 2008.

Portfolio

The table below sets out the portfolio as at 31 December 2009.

	31-Dec-09	31-Dec-08
	£m	£m
Investment properties	338.4	314.4
Properties in the course of development	3.5	2.5
Total properties	341.9	316.9
Finance leases	3.0	3.0
Total owned and leased	344.9	319.9
Development loans	-	0.3
Total owned and leased (including development loans)	344.9	320.2
Committed	26.1	34.0
Total owned, leased and committed	371.0	354.2
Closing annualised rent roll (on completed properties)	21.3	19.6

Property valuation

The freehold, leasehold and development properties of the Group have been independently valued at fair value by Lambert Smith Hampton, Chartered Surveyors and Valuers (LSH), as at 31 December 2009.

At the year end they reflected a 6.00% initial yield and a 6.24% true equivalent yield compared with 5.97% initial yield and true equivalent yield of 6.16% at the end of the previous year. This compares with 30 June 2009 which showed an initial yield of 6.06% and a true equivalent yield of 6.25%.

Discounted cash flow property valuation

In addition to the market value exercise performed by LSH, the Joint Managers monitor the value of the Group's completed investment portfolio based on a discounted cash flow ("DCF") analysis. The DCF valuation of delivered assets as at 31 December 2009 was £379million compared to the market value of £342million, including properties in the course of development (31 December 2008: DCF valuation of £367million compared to the market value of £316million). The difference of £37million represents an additional 60.2p of net asset value per share as at 31 December 2009.

The assumptions used in the DCF analysis are:

      • A discount rate of 7% (2008: 7%);

      • An average annual increase in the individual property rents at review of 2% (2008: 3%);

      • Capital growth in residual values of 1% (2008: 1%) per annum; and

• In the case of each property, the DCF analysis is over the remaining period of the lease at 31 December 2009.

Comparative values using the discount rates below are as follows:

Discount rate	Value
6.50%	£399.0m
7.50%	£359.8m

Portfolio performance

The Investment Property Databank recently launched the IPD Healthcare Property Index and our portfolio is a founder constituent of the index. This demonstrated the robust nature of the sector when compared to the wider commercial property market

Performance for year ended 31 December 2008 (latest available data)
PHP Portfolio total return	-0.5%
IPD Healthcare Property Index total return	-4.6%
IPD All Property Index total return	-22.1%

Net assets and EPRA NAV

Net assets have increased significantly as a result of the capital raisings during the year.

	31-Dec-09	31-Dec-08
Net assets	£151.92m	£78.29m
Net asset value per share	247.2p	226.7p**
EPRA net asset value per share*	279.9p	272.9p**

*EPRA net asset value is calculated as balance sheet net assets including the valuation result on trading properties, excluding fair value adjustments for debt and related derivatives ("EPRA" is the European Public Real Estate Association).

**The NAV per share is based on the restated audited consolidated balance sheet of the Group, as adjusted to illustrate the effect of the capital raisings which occurred in 2009, as if those events had been completed on 31 December 2008.

Borrowings

At 31 December 2009, Group borrowings were £167million in aggregate. At the year end date, aggregate facilities were £265million of which £255million was on a term loan basis and £10million available on an overdraft basis. Taking into account further commitments of £26.1million, there was £71.9million of committed headroom available for the Group to continue with its acquisition policies. The term facilities are not due for renewal/replacement until 2013. The Board is satisfied with the pricing and term of its existing facilities.

The capital raised during the year has initially been applied to reduce borrowings.

The loan to value ratio at 31 December 2009 was 49% compared to a maximum covenanted level of 70% as of March 2010. Interest cover was 2.2 times compared to a minimum covenanted level of 1.3 times.

Hedging

The amount of fixed rate cover in place at 31 December 2009 (including £88million of callable swaps) was £183million.  Basis rate swaps totalling £200million were also in place during the year, but matured on 11 February 2010 and contributed £470,000 to the 2009 profits.

All swaps are taken out in order to mitigate exposure to interest rate risk, but under accounting rules only certain swaps qualify as "effective" hedges and the mark to market movement on these is matched against the hedged liability in the Balance Sheet.  Due to the rise in money market rates during the year to 31 December 2009, the value of the Group's "effective" interest rate swaps increased by £7.7million (12.5p per share), partially offsetting losses recorded in previous periods. This gain is included in the total comprehensive income result.  The revaluation of swaps regarded as ineffective for IAS39 purposes was also a gain of £1.3million (2008: loss of £10.7million), which is included in the profit for the year. These gains were a significant factor in the uplift in the net asset value from 226.7p to 247.2p. The revaluation gain on ineffective swaps included a gain on the callable swaps of £1.7million (31 December 2008: loss of £11.1million).  The mark to market value fluctuates with movements in term interest rates, and in the case of the callable swaps, with market volatility.  The improvement in the value of all swaps reflects the increase in medium term interest rates and, as in prior periods, the movement in value does not affect cash flows.

Finance and interest rate hedging (assuming callable swaps are not called)

This table shows the level of bank borrowings economically hedged by interest rate swaps for each financial year to 31 December 2027. Shown in £million.*

Year	Amount hedged (£m)	Rate (%)
2009	188	4.79
2010	202	4.79
2011	208	4.80
2012	212	4.80
2013	190	4.79
2014	178	4.80
2015	180	4.79
2016	164	4.75
2017	158	4.69
2018	168	4.69
2019	168	4.69
2020	168	4.69
2021	131	4.66
2022	80	4.58
2023	80	4.58
2024	80	4.58
2025	80	4.58
2026	50	4.61
2027	20	4.76

Finance and interest rate hedging

This table shows the level of bank borrowings covered by effective hedges for each financial year to 31 December 2027. Shown in £million.*

Year	Amount hedged (£m)	Rate (%)
2009	188	4.79
2010	114	4.80
2011	120	4.81
2012	124	4.81
2013	102	4.79
2014	90	4.81
2015	92	4.79
2016	76	4.69
2017	70	4.56
2018	80	4.58
2019	80	4.58
2020	80	4.58
2021	80	4.58
2022	80	4.58
2023	80	4.58
2024	80	4.58
2025	80	4.58
2026	50	4.61
2027	20	4.76

*The tables above show the weighted average amount hedged throughout each financial year for the period to 31 December 2027. The charts assume that the term loans to the Group which expire in 2013 will be renewed.

Revenues and administration expenses

At a trading level, revenues for the year ended 31 December 2009 rose to £21.3million as a result of new deliveries and favourable rent reviews.  Operating profit before revaluation result and fair value gain on derivatives was £7.9million.  Administration expenses were slightly lower during the year mainly due to lower management fees.

Management fees and Performance incentive scheme

Details of management fees payable to the Joint Managers are shown in note 12.

There is no performance incentive fee payable to the Joint Managers for the year ended 31 December 2009 (year ended 31 December 2008: £Nil).

There is a deficit of some £57million (2008: deficit of £74million) to be made up in the net asset value before any further performance incentive fee becomes payable under the terms of the Management Agreement.

Capital raising

On 24 March 2009, the Group raised £3.7million gross (£3.3million net of expenses), by way of a placing of 1,679,354 new ordinary shares of 50p each at a price of 220p per placing share (the "Placing"). This Placing was taken up by institutional and other investors. The proceeds were used for general working capital purposes.

On 7 October 2009, PHP issued 26,086,956 new ordinary shares by way of a Firm Placing and Placing and Open Offer at a price of 230p per share, raising approximately £60million gross (£57.4million net of expenses). The net proceeds of the fundraising have been used initially to reduce the Group's net indebtedness. The Group intends to make selected acquisitions of medical properties to expand its property portfolio which will be funded, in part, by redrawing those elements of the Group's bank facilities that can be redrawn.

Interim dividend

Interim dividends per ordinary share were paid during the year ended 31 December 2009 on 15 April 2009 (8.5p) and 20 November 2009 (8.5p). In order to accelerate dividend payments to Shareholders instead of a final dividend, the Board announced on 11 February 2010 the payment of a second interim cash dividend of 8.75p per ordinary share in respect of the year ended 31 December 2009 to Shareholders on the register of members on 19 February 2010 for payment on 26 March 2010, and in the current tax year. The Group's policy is to pay a minimum of 90% of the profits of its tax exempt business in dividends in accordance with UKREIT Regulations.

Scrip Dividend Scheme

At the Company's general meeting held on 6 October 2009, Shareholders granted authority to the Directors to implement the Scrip Dividend Scheme in respect of future cash dividends. Shareholders will be offered the opportunity to receive the second interim cash dividend in respect of the year ended 31 December 2009 in new ordinary shares and a circular and scrip mandate form will be posted on 2 March 2010. The final date for the receipt of the scrip mandate forms (if Shareholders have not already signed one for future dividends and wish to take shares instead of the interim cash dividend) is 16 March 2010.

On 16 November 2009, 103,894 new ordinary shares of 50 pence each were allotted and issued in lieu of the interim cash dividend for the six months ended 30 June 2009 under the Scrip Dividend Scheme. Admission to the Official List of the UK Listing Authority of the new ordinary shares was effective on 20 November 2009.

Key performance indicators ("KPIs")

Objective	Metric	Performance
To create sustainable long term rental income and capital growth for shareholders	- Sustained real growth in EPS - Annual revenue to exceed budget target - Sustained dividend growth	- Adjusted EPS rose from 14.0p to 18.4p - Turnover rose to £21.3m - Dividend grew for 10th year to 17p per share 3.0% higher than in 2008 - Successful establishment of robust rent appeal process
To maximise the returns from the investment portfolio	- Out-performance versus the IPD benchmark	- Basic NAV grew from 226.7p to 247.2 p. - performance was better than the IPD benchmark - rental increases the equivalent of 3.12% per annum were achieved in 2009
To generate long term value for shareholders	- Growth in NAV - Growth in dividends	- Basic NAV grew from 226.7p to 247.2p - Dividend grew from 16.5p to 17p
To manage our balance sheet effectively	- Maintain appropriate balance between debt and equity within covenanted levels	- £60.7m of capital raised, reducing gearing to 49%
To identify new units to purchase	- Future commitments - Deliveries	- New commitments of £15.3m were entered into during the year -  Deliveries during the year were £21.1m - Board approval was given to new purchases of £34.5m completed in the period between the year end and the date of this report
To complete and let properties under the course of development	Growth in annualised rent roll	- New deliveries added £1.3m of rent to the rent roll - The portfolio was 100% let at the year end
To maintain good quality leases	- Long average lease term - Maintain a minimal percentage of voids	- Weighted average lease length of 17.3 years - Portfolio 100% let  - 90% of income effectively paid for by the NHS

Principal risks and uncertainties

In common with most businesses, the Group is affected by a number of risks and uncertainties, not all of which are wholly within the Group's control. These principal risks and uncertainties are summarised below. The Board has reviewed and agreed policies for managing each of the risks:

Risk description	Impact/Risk	Mitigation
Capital adequacy	- Unable to counteract the impact of fluctuating property values on the Group's balance sheet - Inability to invest in suitable property on favourable terms to enable expansion	- Capital raisings strengthened the Group's balance sheet - Liquidity and gearing are kept under constant review
Liquidity risk	- Inability to fund operations and capital expenditure programme - Restrictive covenant regime - Limited market debt capacity - Inability to raise sufficient new funding - Breach of covenants and LTVs	- Board approves an annual plan setting out expected financial requirements - Majority of borrowing matures in more than 12 months - Covenant and LTV ratio actively monitored - Commitments not wholly taken up
Interest rate risk	- Increased borrowing costs - Market risk exposure through interest rates and availability of credit	- Borrowings on a variable basis but interest rate risk is mitigated through use of swaps - All borrowing is in Sterling
Tax risk	- Increased taxes payable as a result of government policy changes - Compliance with the Real Estate Investment Trust (REIT) taxation regime	- On-going monitoring and management of the criteria to meet UK-REIT status
Occupier market conditions	- Downturn in primary care market and demand for specialist portfolios - Government changes primary care initiative and policies - Threat of voids in the portfolio - Prolonged downturn in tenant demand	- No sign of policy changes from any of the major political parties -100% of the portfolio let - Demographics increasing demand for healthcare facilities - Effectively upwards only rent reviews and weighted average lease length of some 17.3 years
Market cycles	- Risk of falling property values	- Target ranges for balance sheet gearing - Secure income under UK lease structure
Property risks	- Asset value concentration - Poor performance of single asset having a material impact on the portfolio - Loss of value - Property deterioration	- No sign of policy changes regarding primary care - Multi-asset portfolio with long leases - Primarily let to the NHS - Properties predominately leased on tenant repairing leases.  Properties regularly inspected and adequately insured
Retention of Joint Managers	- As the Group has no employees, operations would be adversely affected if the services of the Joint Managers were not available	- Contractual arrangements in place which are regularly reviewed by the Management Engagement Committee

Environmental matters 

PHP specialises in the ownership of freehold or long leasehold interests in modern purpose-built healthcare facilities, the majority of which are leased to general practitioners and other associated healthcare users.

The Board views the assessment of environmental risk as an important element of its due diligence process when it acquires land or purpose built properties. Before purchase, an environmental desk top study is carried out and energy efficiency certificates are obtained.   PHP has engaged an Environmental Consultant, Collier & Madge, to help specifically in this process.  PHP's ability to influence the energy efficiency of buildings is limited where ready built properties are acquired and let on FRI terms. However, the buildings acquired are generally specified to meet the NHS's exacting standards.

PHP is committed to the principles of continuous improvement in managing environmental issues, including the proper management and monitoring of waste, the reduction of pollution and emissions and compliance with environmental legislation and codes of practice.  PHP considers environmental matters as part of the assessment of the suitability of purchasing new state of the art medical centres to expand the portfolio, either through forward purchase development agreements or through open market purchases and if appropriate, environmental issues are included in the leases entered into by the medical practitioners.

Relationships

Other than Shareholders, the Group's performance and value are influenced by other stakeholders, principally its lessees (the PCTs, the GPs and healthcare users), the property developers, the District Valuers, lenders and the Joint Managers. The Group's approach to these relationships is based on the principle of mutual understanding of aims and objectives and the highest standards of ethics and business practice.

Social and community issues

The Group provides purpose built healthcare properties for use by GPs, PCTs, pharmacies and healthcare users thus indirectly benefiting the communities in which they are based.

Annual General Meeting

The Annual General Meeting is convened on 27 April 2010 at 10.30am at the registered office of the Company, Ground Floor, Ryder Court, 14 Ryder Street, London SW1Y 6QB. The Circular to Shareholders and the Notice of Annual General Meeting will be posted separately.

Outlook

Spending on healthcare is driven by demographics as well as the growth of the economy. Primary care remains at the heart of the changes going on in healthcare in the UK. There remains a strong demand for larger purpose built primary care centres. We also see evidence of more institutional and corporate interest in the sector.

The underlying property portfolio remains attractive, particularly in today's market. It currently offers 100% occupancy with some 90% of the rent roll effectively being paid for by the Government and has an unexpired lease length of almost 18 years. We are also still recording rental increases. The new procedure for appeals has started to yield positive results.

Since the year end, we have completed the acquisition of £34.5million of properties being the Anchor Meadow Medical Centre, Aldridge, for £5.5million, a portfolio of fourteen medical properties from Care Capital Plc for £24.2 million and two medical centres for £4.8million developed by the Abstract Group. These acquisitions will add approximately £2.1million to the annual rent roll. We have further deals totalling £10million in an advanced stage of negotiation, which we expect to announce shortly.

Given these continuing developments, a more positive outlook for commercial property generally and following our recent capital raisings, we look forward to providing a secure and attractive rate of return to our Shareholders.

Graeme Elliot

Chairman

24 February 2010

Group Statement of Comprehensive Income for the year ended 31 December 2009

		31-Dec-09	31-Dec-08
	Notes	£000	£000
			(restated)***
Rental income		20,994	19,312
Finance lease income		338	379
Rental and related income		21,332	19,691
Direct operating expenses arising from investment property that generated rental income		(210)	(250)
Administrative expenses: recurring		(3,460)	(3,522)
Administrative expenses: non-recurring		372	(794)
Operating profit before net valuation gain/(loss) on property portfolio		18,034	15,125
Net valuation gain/(loss) on property portfolio		1,615	(17,707)
Operating profit/(loss) before financing costs		19,649	(2,582)
Finance income		86	2,024
Finance costs		(10,267)	(12,526)
Fair value gain/(loss) on derivatives		1,318	(10,655)
Profit/(loss) on ordinary activities before taxation		10,786	(23,739)
Current taxation		-	-
Conversion to UK-REIT charge		-	(160)
Taxation charge		-	(160)
Profit/(loss) for the year*		10,786	(23,899)
Other comprehensive income being movement in cash flow hedging reserve		7,657	(16,350)
Total comprehensive income for the year net of tax*		18,443	(40,249)
Earnings per share (basic and diluted)**	5	26.6p	(62.0p)
Adjusted earnings per share (basic and diluted)***	5	18.4p	14.0p

The above relates wholly to continuing operations.

*Wholly attributable to equity shareholders of Primary Health Properties PLC.

**There is no difference between basic and fully diluted EPS

***Adjusted for large one-off items and movements in fair value.

****Restated as described in note 2 to the financial statements.

Group Balance Sheet as at 31 December 2009

		31-Dec-09	31-Dec-08
	Notes	£000	£000
			(restated)
Non current assets
Investment properties	4	341,890	316,862
Net investment in finance leases		3,014	2,989
Derivative interest rate swaps		1,386	-
		346,290	319,851
Current assets
Derivative interest rate swaps		63	454
Trade and other receivables		1,939	2,090
Net investment in finance leases		49	50
Cash and cash equivalents		212	675
		2,263	3,269
Total assets		348,553	323,120
Current liabilities
Derivative interest rate swaps		(12,208)	(13,917)
Corporation tax payable		(29)	(29)
UK-REIT conversion charge payable		(1,455)	(1,559)
Deferred rental income		(4,638)	(4,275)
Trade and other payables		(1,991)	(3,817)
		(20,321)	(23,597)
Non current liabilities
Term loans		(166,139)	(204,088)
Derivative interest rate swaps		(9,322)	(14,923)
UK-REIT conversion charge payable		(856)	(2,226)
		(176,317)	(221,237)
Total liabilities		(196,638)	(244,834)
Net assets		151,915	78,286
Equity
Share capital		30,729	16,794
Share premium		50,664	48,009
Capital reserve		1,618	1,618
Special reserve		44,442	-
Cashflow hedging reserve		(7,266)	(14,923)
Retained earnings		31,728	26,788
Total equity*		151,915	78,286
Net asset value per share		247.2p	226.7p***
EPRA net asset value per share**		279.9p	272.9p***

*Wholly attributable to equity Shareholders of Primary Health Properties PLC.

**EPRA net asset value is calculated as balance sheet net assets including the valuation result on trading properties, excluding fair value adjustments for debt and related derivatives.

***The NAV is based on the restated audited consolidated balance sheet of the Group, as adjusted to illustrate the capital raisings which occurred in 2009, as if those events had been completed on 31 December 2008.

Group Statement of Changes in Equity for the year ended 31 December 2009

	Share capital	Share premium	Special reserve	Capital reserve	Cashflow hedging reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
1 January 2009	16,794	48,009	-	1,618	(14,923)	26,788	78,286
Profit for the year	-	-	-	-	-	10,786	10,786
Income and expense recognised directly in equity:
Transfer to Group Statement of comprehensive Income on cash flow hedges	-	-	-	-	3,148	-	3,148
Fair value gains on cash flow hedges taken to equity	-	-	-	-	4,509	-	4,509
Total comprehensive income	-	-	-	-	7,657	10,786	18,443
Proceeds from capital raisings	13,935	3,088	46,956	-	-	-	63,979
Expenses of capital raisings	-	(433)	(2,514)	-	-	-	(2,947)
Dividends paid:
Second dividend for the year ended 31 Dec 2008 (8.50p)	-	-	-	-	-	(2,855)	(2,855)
First interim dividend for the year ended 31 Dec 2009 (8.50p)	-	-	-	-	-	(2,707)	(2,707)
Scrip issue in lieu of interim cash dividends (net of expenses)	-	-	-	-	-	(284)	(284)
31 December 2009	30,729	50,664	44,442	1,618	(7,266)	31,728	151,915
1 January 2008	16,794	48,009	-	1,618	1,427	56,229	124,077
Loss for the year	-	-	-	-	-	(23,004)	(23,004)
Adjustment to retained earnings	-	-	-	-	-	(895)	(895)
Restated loss for the year	-	-	-	-	-	(23,899)	(23,899)
Income and expense recognised directly in equity:
Transfer to Group Statement of Comprehensive Income on cash flow hedges	-	-	-	-	(1,535)	-	(1,535)
Fair value losses on cash flow hedges taken to equity	-	-	-	-	(14,815)	-	(14,815)
Total comprehensive income	-	-	-	-	(16,350)	(23,899)	(40,249)
Dividends paid:
Third dividend for the period ended 31 Dec 2007 (8.25p)	-	-	-	-	-	(2,771)	(2,771)
First interim dividend for the year ended 31 Dec 2008 (8.25p)	-	-	-	-	-	(2,771)	(2,771)
31 December 2008 (restated)	16,794	48,009	-	1,618	(14,923)	26,788	78,286

*Attributable to the equity holders of Primary Health Properties PLC.

Group Cash Flow Statement for the year ended 31 December 2009

		Year ended	Year ended
		31-Dec-09	31-Dec-08
	Notes	£000	£000
			(restated)
Operating activities
Profit/(loss) before tax		11,456	(23,739)
Less: Finance income		(5,114)	(2,024)
Plus: Finance costs		14,625	12,586
Plus: Fair value (gain)/loss on derivatives		(1,318)	10,655
Operating profit/(loss) before financing		19,649	(2,522)
Adjustments to reconcile Group operating profit/(loss) to net cash flows from operating activities:
Revaluation (gain)/loss on property		(1,615)	17,707
Plus: Goodwill impairment		-	90
(Increase)/decrease in trade and other receivables		(131)	1,577
(Decrease)/increase in trade and other payables		(377)	269
Cash generated from operations		17,526	17,121
UK-REIT conversion charge instalment		(1,575)	(1,322)
Net cash flow from operating activities		15,951	15,799
Investing activities
Payments to acquire investment properties		(23,413)	(41,465)
Interest received on developments		46	262
Bank interest received		4	160
Other interest		36	20
Acquisition of SPCD companies		-	(7,846)
Net cash flow used in investing activities		(23,327)	(48,869)
Financing activities
Proceeds from issue of shares (net of expenses)		60,748	-
Term bank loan drawdowns		38,990	69,900
Term bank loan repayments		(77,290)	(24,150)
Net swap interest received		-	1,835
Net swap interest paid		(6,541)	-
Interest paid		(3,432)	(12,160)
Equity dividends paid		(5,562)	(5,542)
Net cash flow from financing activities		6,913	29,883
Decrease in cash and cash equivalents for the year		(463)	(3,187)
Cash and cash equivalents at start of year		675	3,862
Cash and cash equivalents at end of year		212	675

Notes to the Financial Statements

1 Corporate information

The Group's financial statements for the year ended 31 December 2009 were approved by the Board of the Directors on 24 February 2010 and the Balance Sheets were signed on the Board's behalf by the Chairman, G A Elliot. Primary Health Properties PLC is a public limited company incorporated and domiciled in England & Wales. The Company's Ordinary Shares are admitted to the Official List of the UK Listing Authority, a division of the Financial Services Authority and traded on the London Stock Exchange.

2 Accounting policies

Basis of preparation

The Group's financial statements have been prepared on a historical cost basis, except for investment properties and derivative financial instruments that have been measured at fair value.

The Group's financial statements are presented in Sterling rounded to the nearest thousand.

Statement of compliance

The Group prepares consolidated financial statements under International Financial Reporting Standards ("IFRS") as adopted by the European Union and applied in accordance with the Companies Act 2006 and Article 4 of the IAS Regulations.

Basis of consolidation

The Group's financial statements consolidate the financial statements of Primary Health Properties PLC and its wholly owned subsidiary undertakings. Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtained control and continue to be consolidated until the date that such control ceases. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement. The financial statements of the subsidiary undertakings are prepared for the accounting reference period ending 31 December each year using consistent accounting policies. All intercompany balances and transactions, including unrealised profits arising from them, are eliminated.

The Parent Company financial statements of Primary Health Properties PLC and each of its subsidiary undertakings will continue to be prepared under UK GAAP and the use of IFRS at Group level does not affect the distributable reserves available to the Group.

Segmental reporting

The Directors are of the opinion that the Group is engaged in a single segment of business, being investment in property in the United Kingdom leased principally to GPs, Primary Care Trusts, Health Authorities and other associated health care users.

Restatement

During the year it was established that a swap interest accrual of £895,000 had been omitted from the 31 December 2008 accounts. The prior year balances have been restated to correct this error. The December 2008 trade and other payables balances has been increased by £895,000 and the bank swap interest income figure has been decreased by the same amount. As a result of the above adjustment, the 31 December 2008 basic loss per share figure increased from 68.5p per share to 71.2p per share and the adjusted earnings per share figure reduced from 18.8p to 16.2p. The retained earnings decreased from £27.7million to £26.8million. In addition £457,000 of bank charges previously recognised in administrative expenses has been reclassified as finance costs. There is no impact on the financial statements for the year ended 31 December 2009.  The Directors have not presented a third column on the Group Balance Sheet because the restatement does not have an impact on the opening 2008 reserves.

3 Capital raisings

On 24 March 2009, the Company issued 1,679,354 new ordinary shares of 50 pence each at a price of 220 pence per new ordinary share of 50 pence each, via a placing, raising £3.7m gross (£3.3m net of expenses). The Placing was taken up by institutional and other investors.

On 7 October 2009, the Company issued 26,086,956 new ordinary shares by way of a Firm Placing and Placing and Open Offer at a price of 230p per share raising approximately £60million gross (£57.4million net of expenses). The net proceeds of the fundraising have been used initially to reduce the Group's net indebtedness

4 Investment properties, investment properties under construction

	Investment properties freehold	Investment  properties  long leasehold	Investment properties under construction	Total
	£000	£000	£000	£000
As at 31 December 2009
As at 1 January 2009	271,880	42,479	2,503	316,862
Additions	205	112	23,096	23,413
Transfer from properties in the course of development upon completion	21,138	-	(21,138)	-
Revaluation for the year	1,197	1,383	(965)	1,615
As at 31 December 2009	294,420	43,974	3,496	341,890
As at 31 December 2008
As at 1 January 2008	235,529	46,195	3,624	285,348
Additions	12,496	4	28,594	41,094
Properties acquired during the year through Northwich and Shavington acquisitions	8,127	-	-	8,127
Transfer from properties in the course of development upon completion	25,666	-	(25,666)	-
Transfer from development properties upon completion	4,049	-	(4,049)	-
Revaluation for the year	(13,987)	(3,720)	-	(17,707)
As at 31 December 2008	271,880	42,479	2,503	316,862

Development loans have been reclassified as a current asset. This reclassification has no impact on the gross asset value.

Properties have been independently valued at fair value by Lambert Smith Hampton ("LSH"), Chartered Surveyors and Valuers, as at the balance sheet date in accordance with IAS 40: Investment Property. LSH confirm that they have valued the properties in accordance with the Practice Statements in the RICS Appraisal and Valuation Standards (Red Book). The Valuers are appropriately qualified and have sufficient market knowledge and relevant experience of the location and category of investment property and have had full regard to market evidence when determining the values.

The properties are 100% let and therefore no assumptions are necessary about rental levels for valuation purposes as these are based on actuals. The valuations reflected a 6.0% initial yield and a 6.24% true equivalent yield. Where properties are within three months of their reviews, an estimate is made of the likely rent on review in line with market expectations and the knowledge of the valuer.

In the year ended 31 December 2009 the Group has adopted the improvements to IAS 40. The amendment has been applied for investment properties under construction from 1 January 2009. Consequently, investment properties under construction have been valued at fair value by LSH. In determining the fair value, the Valuer is required to consider the significant risks which are relevant to the development process including, but not limited to, construction and letting risks. In the case of the Group's portfolio under construction, where the sites are pre-let and construction risk remains with the builder/developer, the valuers have used the special assumptions that, as at the valuation date, the developments have been completed satisfactorily, the agreements of leases have been completed and the rents and other tenants lease obligations have commenced. A fair value decrease of £965,000 in respect of investment property under construction has been recognised in the Group Statement of Comprehensive Income. Prior year figures have not been restated because any adjustment is deemed to be immaterial. Historically, properties under construction or development were included in the Group Balance Sheet at cost.

The historical cost of properties held by the Group, including properties in the course of development, was £284.7million (restated 2008: £281.5million).

5 Earnings per share

The calculation of basic and diluted earnings per share is based on the following:

	Year to 31 December 2009			Year to 31 December 2008
	Net profit attributable to Ordinary Shareholders	Ordinary Shares	Per Share	Net loss attributable to Ordinary Shareholders	Ordinary Shares	Per Share
	£000	(number)*	(pence)	£000	(number)*	(pence)
Earnings per share**	10,786	40,623,413	26.6	(23,899)	38,557,502	(62.0)

*Weighted average number of Ordinary Shares in issue during the period.

**There is no difference between basic and fully diluted EPS.

The adjusted earnings per share reflect the large/one-off items affecting earnings per share during the year as follows:

Adjusted earnings per share:

	Year to 31 December 2009			Year to 31 December 2008
	Net profit attributable to Ordinary Shareholders	Ordinary Shares	Per Share	Net loss attributable to Ordinary Shareholders	Ordinary Shares	Per Share
	£000	(number)*	(pence)	£000	(number)*	(pence)
Basic earnings per share	10,786	40,623,413	26.6p	(23,899)	38,557,502	(71)
Adjustments to remove:
Performance incentive fee**	-			-
Goodwill impairment	-			90
UK-REIT conversion charge	-			160
Other non-recurring items	(372)			704
Net property valuation (gains)/losses	(1,615)			17,707
Fair value (gain)/loss on derivatives***	(1,318)			10,655
Adjusted basic and diluted earnings  per share	7,481	40,623,413	18.4p	5,417	38,557,502	14.0p

Fair value result on derivatives:

	2009	2008
	£000	£000
(Gain)/loss on interest rate swaps not qualifying for hedge accounting	(1,709)	11,109
Loss/(gain) on revaluation of basis rate swaps	391	(454)
Fair value (gain)/loss on derivatives, as above	(1,318)	10,655

*Weighted average number of Ordinary Shares in issue during the year.

**The Performance Incentive Fee depends primarily on revaluation gains, which are eliminated in calculating adjusted earnings per share. No fee was payable in respect of 2009 or 2008.

***In view of the continuing volatility in the mark to market adjustment in respect of the period end valuation of derivatives that flows through the Group Statement of Comprehensive Income, the Directors believe that it is appropriate to remove the gain or loss in the calculation of adjusted earnings.

6 Finance income

	Year ended	Year ended
	31-Dec	31-Dec
	2009	2008
	£000	£000
		(restated)
Interest income on financial assets
Bank interest	4	164
Development loan interest	46	262
Other interest	36	63
Swap interest received	-	1,535
	86	2,024

7 Finance costs

	Year ended	Year ended
	31-Dec	31-Dec
	2009	2008
	£000	£000
Interest expense on financial liabilities
Interest paid
Swap interest paid	6,473	-
Bank loan interest paid	3,228	11,874
Other interest paid	(12)	44
Notional UK-REIT interest	103	151
Bank facility non utilization fees	148	151
Bank charges and loan commitment fees	327	306
	10,267	12,526
Derivative fair value result
Net fair value gain/(loss) on derivatives	1,318	(10,655)

The fair value gain (31 December 2008: loss) on derivatives recognised in the profit before tax for the year has arisen from the interest rate swaps for which hedge accounting does not apply. A further fair value gain on hedges which meet the effectiveness criteria under IAS39 of £7.7million (31 December 2008: loss of £16.3million) is credited/ (charged) directly against equity and is shown in other comprehensive income.

Due to underlying interest rates falling below the level at which the Group has fixed its debt, bank swap interest became payable in the year ended 31 December 2009 while, as a result of the reduction in interest rates, bank loan interest was substantially reduced.

Net finance costs are analysed as follows.

	Year ended	Year ended
	31-Dec	31-Dec
	2009	2008
	£000	£000
Finance income	86	2,024
Finance costs	(10,267)	(12,526)
Net finance costs	10,181	10,502

8 Taxation

 Tax expense in the Group Income Statement

	Year ended	Year ended
	31-Dec	31-Dec
	2009	2008
	£	£
Current tax
UK corporation tax	-	-
Charge re conversion to UK-REIT status*	-	160
Total tax charge in Group Income Statement	-	160

*Conversion to a UK-REIT means that the Group is no longer subject to UK corporation tax. This enabled the Group, in 2007, to release deferred tax liabilities in respect of the property acquisitions made in the prior periods at the expense of incurring a conversion charge and in 2008 additional legal costs.

9 Dividends

Amounts recognised as distributions to equity holders in the year:

	Year ended	Year ended
	31-Dec	31-Dec
	2009	2008
	£000	£000
Scrip dividend in lieu of interim cash dividends	284	-
First interim dividend for the year ended 31 December 2009 (8.50p) paid 20 November 2009 (2008: 8.25p)	2,707	2,771
Second interim dividend for the year ended  31 December 2008 (8.50p) paid 28 March 2009 (2008: 8.25p)	2,855	2,771
	5,846	5,542
Per share	17.0p	16.5p

The 26,086,956 New Shares issued by way of the Firm Placing and Open Offer on 7 October 2009 were not entitled to receive the first interim dividend for the year ended 31 December 2009.

10 Net asset value per share

There is no difference between the normal and adjusted net asset values as at 31 December 2009 and 31 December 2008, due to the release of all deferred tax liabilities on conversion to UK-REIT status. Net asset values have been calculated as follows:

	31-Dec	31-Dec	31-Dec
	2009	2008	2008
	£000	£000	£000
		(restated)	(restated and adjusted)
Net assets per Group Balance Sheet	151,915	78,286	139,319
Derivative interest rate swaps (net)	20,144	28,840	28,840
Basis rate swaps	(63)	(454)	(454)
EPRA NAV	171,996	106,672	167,705

	Number of	Number of	Number of
	shares	shares	shares
Ordinary Shares:
Issued share capital	61,457,298	33,587,094	61,457,298
Net asset value per Share	247.2p	233.1p	226.7p
EPRA NAV per Share	279.9p	317.6p	272.9p

EPRA NAV is calculated as Balance Sheet net assets including the valuation result on trading properties but excluding fair value adjustments for debt and related derivatives.

The restated and adjusted NAV is based on the restated audited consolidated balance sheet of the Group, as adjusted to illustrate the effect of the capital raisings which occurred in 2009, as if these events had been completed on 31 December 2008.

11 Related party transactions

Mr Hyman is a director of Nexus PHP Management Limited ("NPM") and Nexus Group Holdings Limited.  Mr Hambro is a director of J O Hambro Capital Management Limited ("JOHCML").  Both NPM and JOHCML are Joint Managers and Messrs Hyman and Hambro are therefore deemed to have an interest in the management agreement and are related parties.

(a) Transactions in the year

In accordance with Listing Rule 11.10.(2) details of the transactions relating to the participation of Mr Hyman and Mr Hambro in respect of their beneficial and non beneficial holdings of shares in the issued share capital in the placing of 1,679,354 new ordinary shares in March 2009 and in the Firm Placing of 19,033,667 new ordinary shares and Placing and Open Offer of 7,053,289 new ordinary shares both in October 2009, are given below. These details were released on the Regulatory News Service at the appropriate times and on the Company's website.

	Placing	Price per share	Firm Placing and Placing and Open Offer	Price per share
	March		October
Name	2009		2009
Nexus Group Holdings Limited (non beneficial holding of Harry Hyman)	82,000	220p	456,332***	230p
			869,565****	230p
Connected person to Harry Hyman	6,589*	220p	1,513	230p
Connected person to Harry Hyman	70,181**	220p		230p
Total	158,770		1,327,410
Harry Hyman (beneficial)	-	220p	9,394	230p
J O Hambro Capital Management Limited	9,317	220p	212,147	230p
James Hambro	3,993	220p	18,885	230p
Total holding	172,080		1,567,836

*T Walker-Arnott (Director of Nexus PHP Management Limited)

**B Kelly (Chairman of Nexus Group Holdings Limited)

***Open offer

****Firm placing

Nexus Group Holdings Limited (NGHL), as disclosed in the Company's prospectus dated 18 September 2009, carried out its stated intention of selling all 869,565 ordinary shares it acquired in the Firm Placing at a price of 288 pence per share and simultaneously entered into a contract for difference over the same number of ordinary shares at a price of 288 pence per ordinary share.

(b) Management Agreement

Pursuant to the Management Agreement dated 14 March 1996 (as amended from time to time and last updated by Deed of Variation on 23 November 2006) between the Company and the Joint Managers (NPM and JOHCML) the Company appointed:

• NPM to provide property advisory and management services and the services of the Managing Director of the       Company

• Each Joint Manager has the continuing right to appoint and remove one person as a Director of the Company and  to receive the Director's fee (currently £20,000 per annum)

• JOHCML to provide administration and accounting services and is the appointed Company Secretary.

The Management Agreement is terminable by not less than two years' written notice (other than in circumstances of default).  The Management Agreement contains no provisions to amend, alter or terminate the agreement on a change of control of the Group following a takeover bid.

NPM and JOHCML are paid a monthly fee equal to 1%  per annum of the first £50million of the gross assets of the Group (0.55% per annum  to NPM (less £5,000) and 0.45% per annum to JOHCML (plus £5,000)) and thereafter at 0.75% per annum of the gross assets (0.4125% to NPM and 0.3375% to JOHCML), subject to a minimum payment of £120,000 per annum, the first £100,000 of which in each year is paid to NPM for the provision of the services of the Managing Director.

NPM and JOHCML are entitled to a Performance Incentive Fee equal to 15% of any performance in excess of an 8% per annum increase in the Company's "Total Return" (as derived from the audited accounts for the immediately preceding financial period prior to the date of payment) provided that if the Total Return is less than 8% in any one year the deficit must be made up in subsequent years before any subsequent Performance Incentive Fee is paid. No performance fee has been payable in 2009 or 2008.

On the basis of the relevant audited accounts, the Total Return is determined by calculating the change in the net asset value per ordinary share, on a fully diluted basis, after any adjustment for any increase or reduction in the issued share capital and adding back gross dividends paid per ordinary share.

In addition, the Company pays NPM a property management fee, agreed out of pocket expenses and a fee for the preparation of the Group's taxation provisions, being the reimbursement for the services of NPM's employees engaged directly on the Group's activities.

12 Subsequent events

Since 31 December 2009, the Group has completed the acquisition of £34.5milliion of properties being the Anchor Meadow Medical Centre, Aldridge for £5.5 million, a portfolio of fourteen medical properties from the Care Capital Plc for £24.2million and two medical centres developed by Abstract Group for £4.8million. The details of the effect of these acquisitions on the Group's assets and liabilities have not been disclosed as the Group is currently in the process of determining the fair value of the net assets acquired.

Directors' Responsibility Statement under the Disclosure and Transparency Rules

The Directors confirm that, to the best of their knowledge and belief:

-     the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole;

-     the management reports (which are incorporated into the Directors' Report) contained in the Annual Report include a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties faced.

For and on behalf of the Board

Graeme Elliot

Chairman

24 February 2010

The Independent Auditors' Report which has been extracted from the Annual Report for the year ended 31 December 2009 which will be printed and posted to Shareholders as soon as practicable.

Independent Auditors' Report to the Members of Primary Health Properties PLC

We have audited the Group financial statements of Primary Health Properties PLC for the year ended 31 December 2009 which comprise the Group Balance Sheet, the Group Statement of Comprehensive Income, the Group Statement of Cash Flows, the Group Statement of Changes in Equity and the related notes 1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the Directors' Responsibilities Statements (on page 26), the Directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion the Group financial statements:

• give a true and fair view of the state of the Group's affairs as at 31 December 2009 and of its profit for the year then ended;

• have been properly prepared in accordance with IFRSs as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulations.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion:

• the information given in the Directors' Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements;

• the information given in the Corporate Governance Statement set out on pages 27 to 32 with respect to internal controls and risk management systems in relation to financial reporting is consistent with the financial statements and;

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

• the Directors' Statement, set out on pages 21 and 22, in relation to going concern; and

• the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the June 2008 Combined Code specified for our review.

Other matter

We have reported separately on the parent company financial statements of Primary Health Properties PLC for the year ended 31 December 2009 and on the information in the Directors' Remuneration Report that is described as having been audited.

David Wilkinson

Senior Statutory Auditor                                                            

for and on behalf of

Ernst & Young LLP

Statutory Auditor

London

24 February 2010

 

END

 

 

FR SELEFLFSSEDE