Interim Results

Primary Health Properties PLC
17 March 2003

Primary Health Properties PLC
14 March 2003



                         PRIMARY HEALTH PROPERTIES PLC
            Modern accommodation for the Provision of Primary Health
                                 Care Services



                    Interim Results for the six months ended
                                31 December 2002



Group Financial Highlights



*Interim dividend increased 11% to 5.0p (31 December 2001: 4.5p)
*Basic NAV increased 18% to 180.7p (31 December 2001: 153.2p)
*Portfolio increased 13.9% to £86.1m (31 December 2001: £75.6m)
*Basic earnings per share to 5.5p (31 December 2001:5.4p)
*Fully diluted earnings per share to 5.1p (31 December 2001: 5.0p)




Enquiries:


Bell Pottinger Financial
David Rydell/Zoe Sanders
Tel: [phone]


Primary Health Properties PLC
Harry Hyman
Managing Director
Tel: [phone]
Mobile: [phone]





Chairman's Statement



Group profit before taxation for the six months to 31 December 2002 totalled
£1,024,000 (2001: £943,000), an increase of 9%.



Profit after taxation was £913,000 (2001: £849,000), an increase of 8% yielding
basic earnings per share of 5.5p (2001: 5.4p) and fully diluted earnings per
share of 5.1p (2001: 5.0p).



As the Group undertakes an annual valuation of its property portfolio at its
year end at 30 June 2002, the net asset value per share has remained relatively
static after accounting for retained profits at the interim report and the issue
of 213,333 shares following the exercise of management options held by one of
the joint managers.



The net asset value per share of the Group at 31 December 2002 was 180.7p basic
(30 June 2002: 181.3p) after providing for the interim dividend of 5.0p proposed
by the Board (2001: 4.5p). On a fully diluted basis, the net asset value per
share was 164.9p (30 June 2002: 164.6p).



At the Extraordinary General Meeting held on 21 November 2002, the Directors
were granted authority to offer Ordinary shares instead of cash in respect of
dividends. A circular, Form of Election and Notice of Entitlement will be posted
to shareholders with the interim report offering the shareholders on the
register of members on 28 March 2003 the opportunity to elect to receive new
Ordinary shares instead of cash in respect of the interim dividend. Forms of
Election and Notices of Entitlement are to be posted on 10 April 2003 and the
latest date for receipt of Forms of Election is 6 May 2003.



During the six months ended 31 December 2002, we have taken delivery of
completed properties at Stretford and Lancaster whilst entering into new
commitments totalling £2.6 million during the period at Yeovil, Grantham and
Send. Since 31 December 2002, we have entered into a further £1.1 million of new
commitments.



The table below sets out the property portfolio at 31 December 2002:

                                                            31 December 2002         31 December 2001
                                                                   £m                       £m
Investment properties                                            80.2                     63.0
Properties in course of development                               0.8                      0.3
Finance leases                                                    2.5                      2.5

Total owned and leased                                           83.5                     65.8
Committed                                                         2.6                      9.8

Total owned, leased and committed                                86.1                     75.6



We have continued to monitor our exposure to interest rates and, in order to
provide longer term cover, have effectively extended our £25 million of swapped
out cover to March 2008. In addition, we entered into a new swap for £5 million
commencing in July 2003, which expires in March 2008. Accordingly, from 1 July
2003, we will have £30 million of cover at an average rate of 5.5% per annum.
Including the Loan Stock, this provides cover of 66.7% against total debt of
some £51 million.




During the six months ended 31 December 2002, we also negotiated an extension of
our bank lines with The Royal Bank of Scotland. We entered into a new £15
million term loan commitment and extended our ability to convert all of our term
facilities of £55 million into longer term finance which would mature in 2022,
whilst retaining the flexibility to refinance if we so choose. Total available
facilities at 31 December 2002 amounted to £65 million, including an overdraft
facility of £10 million.



During the period, J O Hambro Capital Management Limited exercised management
options in respect of 213,333 shares at £1 each. Proposals relating to the
amendment to the terms of the existing management options and the grant of new
management options and Notice of an Extraordinary General Meeting will be posted
to shareholders in due course.



Our rent roll has increased from £6.2 million at 30 June 2002 to £6.5 million at
31 December 2002 representing new deliveries and rental increases. We expect to
complete all outstanding rent reviews by 30 June 2003. We continue to obtain
satisfactory reviews, all of which have beaten our own internal benchmark
targets.



The new share save scheme has been implemented and uptake has begun.



During the period, considerable efforts have been made on behalf of our joint
venture, Primary Health Solutions Ltd (PHS), to participate in the Government's
much heralded NHS Local Improvement Finance Trust (LIFT) scheme. As previously
announced, PHS has been short listed by Sandwell where a fully costed submission
was made in early January. We await the outcome which is expected in early
April. The first phase of the Sandwell LIFT would involve new build expenditure
of some £10 million within the Sandwell LIFT Company, of which, it is expected
that PHS would be a 60% shareholder alongside the NHS with 40%. PHS' funding
commitment for Sandwell would be in the order of £2.5 million in total, with the
balance being provided by the senior debt providers and the public sector. In
the meantime, awaiting the outcome of the submission, the Company has provided
in full for the anticipated costs of some £200,000 to date.



The Company's portfolio continues to grow. During the period, a further two
surgeries amounting to £3.2 million were acquired and there is a healthy
pipeline of transactions. Rent reviews are on balance, being achieved at levels
reflecting the quality of the properties and the covenants.





G A Elliot
Chairman
14 March 2003


CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 December 2002
                                                      Six months                Year         Six months
                                                           ended               ended              ended
                                                     31 December             30 June        31 December
                                                            2002                2002               2001
                                                           £'000               £'000              £'000
                                                     (unaudited)           (audited)        (unaudited)

Turnover                                                   3,208               5,550              2,665
Administrative expenses                                     (655)             (1,118)              (549)

Operating profit                                           2,553               4,432              2,116
Share of operating loss in joint venture                     (86)                 (3)                 -

                                                           2,467               4,429              2,116

Interest receivable                                           32                 102                 61
Interest payable                                          (1,475)             (2,516)            (1,234)

Profit on ordinary activities before tax                   1,024               2,015                943


Taxation                                                    (111)               (203)               (94)

Profit on ordinary activities after tax                      913               1,812                849


Dividend
Interim dividend of 5.0p per share                          (835)             (1,484)              (742)
  (2002: interim 4.5p and final 4.5p)


Profit retained for the period                                78                 328                107



Earnings per share   - basic                                 5.5p               11.3p               5.4p
                     - diluted                               5.1p               10.4p               5.0p




There were no recognised gains and losses other than those passing through the
profit and loss account.  All activities are continuing.




CONSOLIDATED BALANCE SHEET
at 31 December 2002
                                                           At 31              At 30               At 31
                                                        December               June            December
                                                            2002                2002               2001
                                                           £'000               £'000              £'000
                                                     (unaudited)           (audited)        (unaudited)

Fixed Assets
Tangible assets                                           81,037              77,638             63,343
Investments                                                  (25)                 62                255

                                                          81,012              77,700             63,598
Current assets
Debtors                                                      602               2,998                381
Net investment in finance leases: amounts                  2,556               2,568              2,484
falling due in more than 1 year
Cash at bank                                               2,003                 361              1,612

                                                           5,161               5,927              4,477

Creditors: amounts falling due within one                (11,993)             (9,738)            (4,022)
year:


Net current (liabilities)/assets                          (6,832)             (3,811)               455



Total assets less current liabilities                     74,180              73,889             64,053



Creditors: amounts falling due after
more than one year:
Term loan                                                (40,000)            (40,000)           (36,000)
Convertible loan stock 2016                               (4,000)             (4,000)            (4,000)

                                                         (44,000)            (44,000)           (40,000)


                                                          30,180              29,889             24,053


Capital and reserves:
Called up share capital                                    8,349               8,243              7,850
Share premium account                                      6,670               6,563              5,810
Capital reserve                                            1,618               1,618              1,618
Revaluation reserve                                       12,756              12,756              8,287
Profit and loss account                                      787                 709                488

Equity shareholders' funds                                30,180              29,889             24,053



Net asset value  - basic                                   180.7p              181.3p             153.2p
                 - fully diluted                           164.9p              164.6p             142.7p





SUMMARISED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 December 2002

                                                         Six months                Year        Six months
                                                              ended               ended             ended
                                                        31 December             30 June       31 December
                                                               2002                2002              2001
                                                              £'000               £'000             £'000
                                                        (unaudited)           (audited)       (unaudited)

Net cash inflow from operating activities                     2,962               4,451             2,384


Return on investment and servicing of finance
Interest received                                                 4                  20                 9
Interest paid                                                (1,419)             (2,459)           (1,216)

Net cash outflow from return on investment and                                   
servicing of finance                                          (1415)             (2,439)           (1,207)


Taxation
UK Corporation tax recovered                                      3                   -                 -

Capital expenditure
Payments to acquire tangible fixed assets                    (3,079)            (12,051)           (1,861)


Acquisitions and disposals
Payments to acquire share in joint venture                        -                 (50)                -

Equity dividends paid                                          (742)             (1,409)             (667)


Net cash outflow before financing                            (2,271)            (11,498)           (1,351)



Financing
Ordinary share issue (net of expenses)                          213               1,146                 -
Term bank loan 2008                                               -               6,625             2,625
12 month overdraft                                            3,700               3,750                 -

Net cash inflow from financing                                3,913              11,521             2,625


Increase in cash                                              1,642                  23             1,274





RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT


                                                         Six months                Year        Six months
                                                              ended               ended             ended
                                                        31 December             30 June       31 December
                                                               2002                2002              2001
                                                              £'000               £'000             £'000
                                                        (unaudited)           (audited)       (unaudited)

Increase in cash in the period                                1,642                   23            1,274
Cash inflow from loans                                       (3,700)            (10,375)           (2,625)


Movement in net debt in the period                           (2,058)            (10,352)           (1,351)


At the beginning of the period                              (47,389)            (37,037)          (37,037)



At the end of the period                                    (49,447)            (47,389)          (38,388)



Net debt comprises:

Cash at bank and in hand                                      2,003                 361             1,612
Term loan                                                   (40,000)            (40,000)          (36,000)
Convertible Loan Stock 2016                                  (4,000)             (4,000)           (4,000)
 12 month overdraft                                          (7,450)             (3,750)                -


                                                            (49,447)            (47,389)          (38,388)




RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES

                                                         Six months                Year        Six months
                                                              ended               ended             ended
                                                        31 December             30 June       31 December
                                                               2002                2002              2001
                                                              £'000               £'000             £'000
                                                        (unaudited)           (audited)       (unaudited)

Operating profit                                              2,553               4,432             2,116
Decrease/(Increase) in operating debtors and                    104                (168)              158
prepayments
Increase in operating creditors and accruals                    305                 187               110


Net cash inflow from operating activities                     2,962               4,451             2,384





NOTES:



1.       The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2002 statutory accounts.





2.       The freehold properties are included at valuation as at 30 June 2002
plus additions at cost since that date.  Fixed assets consist of:


                                                        31 December             30 June       31 December
                                                               2002                2002              2001
                                                              £'000               £'000             £'000
                                                        (unaudited)           (audited)       (unaudited)

Tangible assets:
Investment properties                                        81,037              77,638            63,343

Investments:
Development loans                                                14                  15               255
Investment in joint venture
  Share of gross assets                                           8                  50                 -
  Share of gross liabilities                                    (47)                 (3)                -

                                                                (25)                 62               255


                                                             81,012              77,700            63,598




 JOINT VENTURE



Primary Health Properties plc owns 50% of the issued Ordinary share capital of
Primary Health Solutions Limited, a company created for the purpose of
developing properties for sale and leaseback and to tender for contracts under
the Government's LIFT (Local Improvement Finance Trust) initiative.  The
remaining 50% of the issued Ordinary share capital is owned by Brackley
Investments Limited.




3.       The calculation of earnings per share is based on earnings of £913,000
(30 June 2002: £1,812,000; 31 December 2001: £849,000) and 16,530,218 Ordinary
shares (30 June 2002: 16,037,657; 31 December 2001: 15,700,000) being the
weighted average number of shares in issue during the period.  Diluted earnings
per share is calculated in accordance with Financial Reporting Standard No. 14:
Earnings per Share.  It is based on earnings of £1,054,000 (30 June 2002:
£2,091,000; 31 December 2001: £989,000) and 20,629,066 Ordinary shares (30 June
2002: 20,122,931; 31 December 2001: 19,649,513) being the weighted average
number of Ordinary shares in issue during the period.


Earnings:                                                Weighted Average Number of Ordinary Shares:

                                                     £                                              Number
Profit on ordinary activities                            Issued share capital                    16,530,218
 after tax                                    913,000    Dilutive effect of options*                620,587
Interest saved on                                        Dilutive effect of convertible
 conversion of loan stock                                loan stock**                             3,478,261
 (including adjustment for tax)               141,000


                                            1,054,000                                            20,629,066




* Excess of the total number of potential shares on option exercise over the
number that could be issued at fair value as calculated in accordance with 
Financial Reporting Standard No. 14: Earnings per share.

** Excess of the total number of potential shares on conversion of the loan
stock over the number that could be issued at fair value as calculated in 
accordance with Financial Reporting Standard No. 14: Earnings per share.





4.       Fully diluted net asset value has been calculated as follows:


                                                   31 December  2002       30 June 2002    31 December  2001  
                                                               £'000              £'000                £'000
                                                         (unaudited)          (audited)          (unaudited)
Net assets:
Per Consolidated Balance Sheet                                30,180             29,889               24,053
Add - Loan Stock conversion                                    4,000              4,000                4,000
       - Receipts from the exercise of
          options                                              1,387              1,600                1,600


                                                              35,567             35,489               29,653


                                                        No. of shares      No. of shares        No. of shares
Ordinary shares:
Issued share capital                                      16,698,333         16,485,000           15,700,000
Add - Loan Stock conversion into shares                    3,478,261          3,478,261            3,478,261
New shares issued on exercise of options                   1,386,667          1,600,000            1,600,000


                                                          21,563,261         21,563,261           20,778,261




Calculations assume that the dilution takes place on the respective balance
sheet dates.




5.       The financial information herein does not constitute statutory accounts 
as defined in Section 240 of the Companies Act 1985. The financial information
for the year ended 30 June 2002 is based on the statutory accounts for the year. 
Those accounts, upon which the auditors issued an unqualified opinion, have been 
delivered to the Registrar of Companies.







Copies of the Interim report will be posted to shareholders and those on the
mailing list as soon as practicable after printing and will also be available on
request from the Company's registered office at Ground Floor, Ryder Court, 14
Ryder Street, London, SW1Y 6QB.


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