Interim Results
Primary Health Properties PLC
23 March 2006
Primary Health Properties PLC
22 March 2006
Embargoed for release at 7am on 23 March 2006
PRIMARY HEALTH PROPERTIES PLC ('PHP PLC')
Modern accommodation for the Provision of Primary Health
Care Services
Interim Results for the six months ended
31 December 2005
Group Financial Highlights
*Pre tax profits increased by 58% to £9,365,000 (2004: £5,915,000)
*Dividend increased by 13% to 6.75p (2004: 6.0p)
*Portfolio revaluation increased by £7.8m
*Portfolio owned, leased and committed increased by 31% to £210m (2004: £160m)
*Adjusted diluted earnings per share increased by 14% to 6.5p (2004: 5.7p) **
*Adjusted diluted NAV per share increased 8% to 345.8p (30 June 2005: 320.2p)***
** Adjusted diluted earnings per share - excludes deferred tax and revaluation
gains on property
*** Adjusted diluted net asset value - excludes deferred tax.
Harry Hyman, Managing Director, commented:
"The Group has continued to make strong progress in the first half of the year,
demonstrated by the 58% increase in pre-tax profits and the 13% increase in
interim dividend. We continue to actively manage the Group's portfolio. In the
period, we have taken delivery of £12m of completed and fully let properties at
five locations across the UK and entered into new commitments totalling £10m at
a further three locations.
The Group welcomes the publication of the recent Government White Paper, "Our
Health, our Care, our Say: a New Direction for Community Services" as this
foresees a transfer of approximately 5% of the NHS budget into the primary care
arena and an increasing role for PHP as an operator in the private sector."
Enquiries:
Bell Pottinger Corporate & Financial
David Rydell/Zoe Sanders/Kate Ruck Keene
Tel: 020 7861 3232
Primary Health Properties PLC
Harry Hyman
Managing Director
Tel: 01483 306912
Mobile: 07973 344768
Chairman's Statement
This is the first time that Group results have been prepared using International
Financial Reporting Standards (IFRS). Accordingly, the Group's results for the
comparative periods have been restated. This change of accounting basis has had
no effect on the underlying business performance or strategy of the Group, but
IFRS does represent a fundamental change in accounting and reporting. The
published interim report will include reconciliations (in the form of transition
statements in the notes to the accounts) and describes for Shareholders the key
impacts of the conversion from UK GAAP to IFRS. The commentary to be included in
the notes to the published interim financial statements explains the changes in
accounting policies that have been brought about as a result of the conversion
to IFRS.
The Group has made significant progress during the six months ended 31 December
2005. Group profit before taxation, which under IFRS, includes the benefit of
revaluation gains on investment properties, for the six months to 31 December
2005, totalled £9,365,000 (2004: £5,915,000) - an increase of 58%. Diluted
earnings per share, which include the benefit of revaluation gains on investment
properties, were 33.0p - an increase of 79% over the first half of last year
(18.4p).
Adjusted diluted earnings per share for the first half were 6.5p, 14% higher
than the interim period last year (5.7p).
The Board proposes to pay an interim dividend of 6.75p per share, a rise of
0.75p per share over last year's interim dividend. The dividend will be paid on
22 May 2006 to Shareholders on the Register of Members on 18 April 2006.
The Board has decided that the expense of a scrip dividend scheme is no longer
justified and have made alternative arrangements with the Registrar, Capita IRG,
to offer a dividend reinvestment scheme for Shareholders who wish to reinvest
their dividend as shares. A letter explaining this scheme, together with terms
and conditions and an application form, will be posted to Shareholders with the
published Interim Report.
As a result of the regular six-monthly review of the property portfolio, the
value of the portfolio has increased by £7.8m, with the diluted net asset value
per share increasing by 9% to 267.8p per share compared to 246.6p at 30 June
2005. This increase reflects both higher rents and the tightening of yields in
the market. On an adjusted basis, adding back deferred tax and timing
differences on revaluation gains and removing deferred tax on hedging
derivatives, the diluted net asset value was 345.8p (30 June 2005: 320.2p) (see
note 4 of the financial statements).
During the six months ended 31 December 2005 we have taken delivery of £12m of
completed and fully let properties at Stockton on Tees, Cardiff, Hednesford,
Haddenham, Stafford and Gateshead, and entered into new commitments totalling
£10m during the period at Clowne, Luton and Mawsley.
The table below sets out the portfolio as at 31 December 2005:
31 December 30 June 31 December
2005 2005 2004
£m £m £m
Investment properties 180.2 160.0 139.2
Properties in the course of development 3.2 2.2 2.4
Total investment properties 183.4 162.2 141.6
Development loans 1.8 2.2 1.7
Finance leases 2.5 2.5 2.5
Total owned and leased 187.7 166.9 145.8
Deposit paid 0.2 0.4 0.1
Committed 22.0 19.7 14.1
Total owned, leased and committed 209.9 187.0 160.0
Although there have been reports of funding delays within the NHS we have a
strong forward pipeline of transactions. The Group welcomes the publication of
the recent Government White Paper, 'Our Health, our Care, our Say: a New
Direction for Community Services' and notes that this foresees a transfer of
approximately 5% of the NHS budget into the primary care arena and an increasing
role for the private sector.
The annualised rent roll has increased from £10.0m at 30 June 2005 to £11.1m at
31 December 2005, representing both new deliveries and rental increases. Rental
increases secured during the period amounted to £48,000. On balance, we
continue to obtain satisfactory rent reviews
We have continued to monitor our exposure to interest rates and, during the
period, have entered into new swaps. The gearing of the Group was 53% as at 31
December 2005 and from 2 January 2006 we have covered 81% of our exposure to
interest rates for the current financial year. We have broadly similar hedging
in place for the next nine years.
The share save scheme has 36 members representing 68,257 shares. Further details
can be found on the Company's website www .phpgroup.co.uk.
Since the end of 2005 the Group has continued to purchase new properties. It has
also disposed of James Pringle House, Charlotte Street, London W1 and Scotswood
House, Newcastle for a total net consideration of £7.3m. Both properties had
leases with less than 10 years to run and were not used as primary care centres,
one being a sexual health clinic and the other being the headquarters of an
ambulance service. The disposals increase the weighted average lease length of
the portfolio and will enable the proceeds to be applied to the core business of
the Group.
The portfolio now has some 78 properties with a further 11 contracted for
delivery. The portfolio has performed extremely well and we believe that the
combination of the high-quality property portfolio, long lease lengths and
strong covenant quality make a desirable portfolio for future income and capital
appreciation.
The Group notes the Budget statement issued by HM Treasury today and we will be
considering the implications for the Group.
G A Elliot
Chairman
22 March 2006
GROUP INCOME STATEMENT (unaudited)
for the six months ended 31 December 2005
Six months ended Year ended Six months ended
31 December 30 June 31 December
2005 2005 2004
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Rental income 5,303 9,339 4,444
Finance lease income 140 274 136
Rental and related income 5,443 9,613 4,580
Net valuation gain on property portfolio 7,837 16,602 4,694
Administrative expenses (1,308) (2,207) (1,154)
6,529 14,395 3,540
Operating profit before financing costs 11,972 24,008 8,120
Finance income 161 278 162
Finance costs (2,768) (4,899) (2,367)
Profit before tax 9,365 19,387 5,915
Current taxation - - -
Deferred taxation (1,639) (6,713) (1,897)
Profit for the period* 7,726 12,674 4,018
Earnings per share - basic 34.1p 59.1p 19.4p
- diluted 33.0p 55.4p 18.4p
Adjusted earnings per share - basic 6.7p 13.0p 5.9p
- diluted 6.5p 12.3p 5.7p
* wholly attributable to equity shareholders of Primary Health Properties plc ("PHP Plc")
All activities are continuing.
GROUP BALANCE SHEET
as at 31 December 2005
At 31 December At 30 June At 31 December
2005 2005 2004
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Non current assets
Investment properties 183,430 162,311 141,561
Development loans 1,758 2,310 1,762
Net investment in finance leases 2,510 2,523 2,536
187,698 167,144 145,859
Current assets
Trade and other receivables 1,678 1,655 1,453
Cash and cash equivalents 2,236 1,112 3,340
3,914 2,767 4,793
Total assets 191,612 169,911 150,652
Current liabilities:
Deferred income (2,347) (2,184) (2,050)
Corporation tax payable (681) (681) (681)
Trade and other payables (3,472) (3,315) (3,712)
(6,500) (6,180) (6,443)
Non current liabilities
Term Loan (102,000) (88,800) (84,460)
Deferred tax (18,930) (17,860) (13,044)
Derivatives (1,896) - -
(122,826) (106,660) (97,504)
Total liabilities (129,326) (112,840) (103,947)
Net assets 62,286 57,071 46,705
Equity
Share capital 11,339 11,326 10,826
Share premium 12,022 11,952 9,566
Capital reserve 1,618 1,618 1,618
Cash flow hedging reserve (1,327) - -
Retained earnings 38,634 32,175 24,695
Total equity * 62,286 57,071 46,705
Net asset value - basic 274.66p 251.94p 215.70p
- fully diluted 267.83p 246.60p 212.62p
Adjusted net asset value - basic 358.13p 330.78p 275.94p
- fully diluted 345.80p 320.24p 268.72p
* Wholly attributable to equity holders of Primary Health Properties PLC
Group Statement of Changes in Net Equity (unaudited)
for the six months ended 31 December 2005
Cash flow
Share Share Capital hedging Retained
capital premium reserve reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
30 June 2005 11,326 11,952 1,618 - 32,175 57,071
Opening adjustment to reserves for IAS 39 - - - (1,292) - (1,292)
As restated 1 July 2005 11,326 11,952 1,618 (1,292) 32,175 55,779
Profit for the period - - - - 7,726 7,726
Losses on cashflow hedges taken to equity - - - (50) - (50)
Deferred tax on cashflow hedges taken to
equity - - - 15 - 15
Total recognised income and expenses for the
period - - (35) 7,726 7,691
Issue of shares 13 74 - - - 87
Issue expenses - (4) - - - (4)
Share based payment charge - - - - 92 92
Dividends paid and declared
Final dividend for the year ended 30 June
2005 - - - - (1,359) (1,359)
31 December 2005 11,339 12,022 1,618 (1,327) 38,634 62,286
Group Statement of Changes in Net Equity (unaudited)
for the year ended 30 June 2005
Share Share Capital Retained
capital premium reserve earnings Total
£'000 £'000 £'000 £'000 £'000
30 June 2004 9,074 7,459 1,618 21,553 39,704
Profit for the period - - - 12,674 12,674
Total recognised income and expenses for
the period - - 12,674 12,674
Issue of shares 2,252 4,813 - - 7,065
Issue expenses - (320) - - (320)
Share based payment charge - - - 245 245
Dividends paid and declared
Final dividend for the year ended 30
June 2004 - - - (998) (998)
Interim dividend for the year ended 30
June 2005 - - - (1,299) (1,299)
30 June 2005 11,326 11,952 1,618 32,175 57,071
Group Statement of Changes in Net Equity (unaudited)
for the six months ended 31 December 2004
Share Share Capital Retained
capital premium reserve earnings Total
£'000 £'000 £'000 £'000 £'000
30 June 2004 9,074 7,459 1,618 21,553 39,704
Profit for the period - - - 4,018 4,018
Total recognised income and expenses for
the period - - 4,018 4,018
Issue of shares 1,752 2,345 - - 4,097
Issue expenses - (238) - - (238)
Share based payment charge - - - 122 122
Dividends paid and declared
Final dividend for the year ended 30
June 2004 - - - (998) (998)
31 December 2004 10,826 9,566 1,618 24,695 46,075
Group Cash Flow Statement
for the six months ended 31 December 2005
Six months ended Year ended Six months ended
31 December 2005 30 June 2005 31 December 2004
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Operating activities
Group operating profit before financing costs 11,972 24,008 8,120
Adjustments to reconcile group operating profit to
net cash flows from operating activities
Less: Revaluation gains on property (7,837) (16,602) (4,694)
Plus: Shares based payment expense 92 245 122
Increase in trade and other receivables (196) (158) (177)
Increase in trade and other payables 160 240 117
Cash generated from operations 4,191 7,733 3,488
Interest received 114 300 11
Interest paid (3,897) (4,275) (1,898)
Net cash flow from operating activities 408 3,758 1,601
Investing activities
Payments to acquire tangible fixed assets (10,459) (17,451) (8,741)
Development loans advanced (749) (2,550) (1,171)
Deposits paid - (393) (172)
Net cash flow from investing activities (11,208) (20,394) (10,084)
Financing activities
Ordinary share issue (net of expenses) (4) 2,680 (204)
Term bank loan 13,200 16,590 12,250
Equity dividends paid (1,272) (2,231) (932)
Net cash flow from financing activities 11,924 17,039 11,114
Increase in cash and cash equivalents for the period 1,124 403 2,631
Cash and cash equivalents at start of period 1,112 709 709
Cash and cash equivalents at end of period 2,236 1,112 3,340
NOTES:
1. The interim financial information has been prepared, for the first
time, using International Financial Reporting Standards (IFRS) as adopted by the
European Commission. Similarly, the Group's results for comparative periods have
been restated. The preliminary opening balance sheet and IFRS comparatives,
together with current period numbers, have been prepared by management using its
best knowledge of the expected standards and interpretations of the
International Accounting Standards Board and facts and circumstances and
accounting policies that will be applied when the Group prepare the first
complete set of IFRS financial Statements for the year ended 30 June 2006.
2. The freehold and leasehold properties are included at valuation as at
31 December 2005.
3. The calculation of diluted earnings per share as at 31 December 2005 is based on the following:
Earnings per share for the six months to 31 December 2005
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 7,726 22,658,334 34.1
Option conversion* - 782,328
Diluted earnings per share 7,726 23,440,662 33.0
Adjusted earnings per share for the six months to 31 December 2005
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 7,726 22,658,334 34.1
Adjustments:
Deferred tax 1,639
Net valuation gains on valuation (7,837)
of property
Adjusted basic earnings per share 1,528 22,658,334 6.7
Option conversion* - 782,328
Diluted earnings per share 1,528 23,440,662 6.5
Earnings per share for the year ended 30 June 2005
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 12,674 21,459,735 59.1
Option conversion* - 549,187
Convertible Loan Stock Conversion** 42 926,276
Diluted earnings per share 12,716 22,935,198 55.4
Adjusted earnings per share for the year ended 30 June 2005
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 12,674 21,459,735 59.1
Adjustments:
Deferred tax 6,713
Net valuation gains on valuation (16,602)
of property
Adjusted basic earnings per share 2,785 21,459,735 13.0
Option conversion* - 549,187
Convertible Loan Stock Conversion** 42 926,276
Diluted earnings per share 2,827 22,935,198 12.3
Earnings per share for the six months ended 31 December 2004
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 4,018 20,704,623 19.4
Option conversion* - 411,003
Convertible Loan Stock Conversion** 42 926,276
Diluted earnings per share 4,060 22,041,902 18.4
Adjusted earnings per share for the six months ended 31 December 2004
Ordinary
shares
(weighted
average)
Net profit attributable to Ordinary Shareholders £'000 number Per share pence
Basic earnings per share 4,018 20,704,623 19.4
Adjustments:
Deferred tax 1,897
Net valuation gains on valuation (4,694)
of property
Adjusted basic earnings per share 1,221 20,704,623 5.9
Option conversion* - 411,003
Convertible Loan Stock Conversion** 42 926,276
Diluted earnings per share 1,263 22,041,902 5.7
* 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 International Accounting Standard No.33: Earnings per share.
** The total number of potential share as on conversion of the convertible Loan Stock.
4. Fully diluted net asset value has been calculated as follows:
31 December 2005 30 June 2005 31 December 2004
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Net assets:
Per Consolidated Balance Sheet 62,286 57,071 46,705
Add - Receipts from the exercise of options 2,736 2,736 2,736
65,022 59,807 49,441
No. of shares No. of shares No. of shares
Ordinary shares:
Issued share capital 22,677,718 22,652,776 21,652,776
Add - New shares issued on exercise of options 1,600,000 1,600,000 1,600,000
24,277,718 24,252,776 23,252,776
Fully diluted net asset value per share 267.83p 246.60p 212.62p
Calculations assume that the dilution takes place on the respective balance
sheet dates.
Fully diluted adjusted net asset value per share
31 December 2005 30 June 2005 31 December 2004
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Net assets 62,286 57,071 46,705
Adjustments to add back:
Deferred tax on timing differences 5,045 4,561 4,054
Deferred tax on revaluation gains 14,454 13,299 8,990
Adjustments to remove:
Deferred tax on derivatives (569) - -
Adjusted net assets 81,216 74,931 59,749
Add - Receipts from the exercise of options 2,736 2,736 2,736
83,952 77,667 62,485
No. of shares No. of shares No. of shares
Ordinary shares:
Issued share capital 22,677,718 22,652,776 21,652,776
Add - New shares issued on exercise of options 1,600,000 1,600,000 1,600,000
24,277,718 24,252,776 23,252,776
Fully diluted net adjusted asset value per
share 345.80p 320.24p 268.72p
Calculations assume that the dilution takes place on the respective balance
sheet dates.
5. The financial information set out above does not constitute the Company's
statutory accounts as defined in Section 240 of the Companies Act 1985. The
financial information for the year ended 30 June 2005 is based on the statutory
accounts for the year adjusted for IFRS. Those accounts, upon which the auditors
issued an unqualified opinion, have been delivered to the Registrar of Companies.
The Interim Report will be posted to Shareholders with details of the dividend
reinvestment plan on 3 April 2006, and to those on the mailing list as soon as
practicable thereafter. It will also be available on request from the Company
Secretary, J O Hambro Capital Management Limited, Ground Floor, Ryder Court, 14
Ryder Street, London, SW1Y 6QB.
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