Trading Update

RNS Number : 9171K

Primary Health Properties PLC

22 April 2015

 

PRIMARY HEALTH PROPERTIES PLC

A specialist REIT providing Primary Care accommodation to the NHS

Trading Update

Primary Health Properties PLC ("PHP", the "Group" or the "Company") the UK's leading investor in modern primary healthcare facilities, today issues a trading update for the period from 1 January 2015 to 22 April 2015, the date of the Company's Annual General Meeting.

Highlights

·     Acquired or committed to acquire a further three properties for a total of £15.7 million

·     Property portfolio with a combined value of £1.05 billion*

·     Annualised contracted rent roll, including commitments, increased to £61.7 million

·     Weighted average unexpired lease term in portfolio of 15.2 years

·     Attractive pipeline of acquisition opportunities

·     Interim dividend of 10.0p per share paid to shareholders on 1 April 2015

*Including properties under development as if completed

Property portfolio

In the period under review, the Group has secured three new acquisitions:

Asset	Acquisition basis	Acquisition cost	Size sqm	Target completion date
White Horse Health Centre, Wiltshire	Completed investment	£7.7 million	2,033	Income producing
Colwyn Bay, North Wales	Forward commitment	£4.6 million	1,535	January 2016
Dinas Powys, South Wales	Forward commitment	£3.4 million	1,148	January 2016

The acquisitions detailed above grow the Group's portfolio to 268 high quality medical centre assets, with an aggregate value of £1.05 billion, including 262 completed, income producing assets and six that are currently on site under development.  The next independent valuation of the Group's property portfolio will be undertaken as at 30 June 2015 and reflected in the half year results.

There is a strong pipeline of attractive acquisition opportunities that are in solicitors' hands or that PHP is appraising or negotiating.  These include a mix of completed, income producing assets and forward commitments to fund and acquire properties under development when completed.  By funding such transactions at the low interest rates currently available in the market, the Group will be able to increase earnings and further enhance dividend cover.

Rent roll and rental growth

The Group's forward funded development of The Fountains Medical Centre in Chester has recently been completed.  This crystallises the occupational leases and the commencement of rent totalling £1.13 million per annum, for 25 year terms.  Tenants include four GP practices and a pharmacy.

The total contracted rent from the portfolio, including all on-site developments, is now £61.7 million, up from £60.9 million as at 31 December 2014.

The Group has completed 16 rent reviews in the period, generating an annualised rate of growth of 1.9%, which is marginally above that achieved for the 2014 financial year of 1.8%.  We do expect to see further growth through the remainder of the year but the Board expect the average rate of growth for the year to be slightly lower.

Financing

Having completed a number of significant refinancings within its debt portfolio in 2014, the period under review has seen the Group utilise its existing headroom to complete acquisitions and development funding.

The Group's net debt as at 31 March 2015 was £662.3 million with available headroom totalling £95 million.  Group LTV stood at 63.9%.

The future capital requirements of the Group are continually reviewed.  Discussions are ongoing with existing and potential new finance partners to look to further lower the overall cost of debt for the Group and extend the longevity of available facilities.

Interest rate hedging

The period has seen increased volatility in forward interest rates but overall expectations of interest rate increases have fallen.  As a result, the total mark to market liability of the derivative portfolio had risen to £42.4 million as at 31 March 2015, increased from £41.0 million as at 31 December 2014.  The change in the mark to market valuation has no cash impact for the Group.

Outlook

The General Election on 7 May 2015 is finely balanced and the outcome uncertain.  The recent release of the different party manifestos has once again emphasised support from all parties for the NHS.  Varying levels of commitment to provide additional funding have been made which should support the strategy announced by Simon Stevens in his five year plan for NHS England.  This sees GP based primary care continue to be the bedrock of the NHS, augmented by moving more services into the community and integrating them with social and other care services.  Further modern, flexible premises such as those provided by PHP will be required to achieve this.

We have seen the first awards made from the Primary Care Infrastructure Fund, established in November 2014 by the government to specifically facilitate premises enhancement.  Twelve PHP properties have been allocated funding from this pool in the first round awards and management is working with our tenants to ensure that this is utilised effectively.

Harry Hyman, Managing Director, commented:

"PHP has demonstrated its ability to secure earnings-enhancing acquisitions despite a restricted number of opportunities in the market.  Our links with established developers and experience of working with our tenants to enhance and expand our properties enables the Group to realise additional income and value from both new assets and the management of our portfolio.

"We have a strong pipeline of opportunities that we are pursuing, which together with the improving terms available in debt markets and a proportionately reducing cost base should enhance earnings and ensure that we progress further toward our aim of full dividend cover."

For further information contact

Harry Hyman Primary Health Properties PLC T:  [phone] [e-mail]	Phil Holland Primary Health Properties PLC T:  [phone] [e-mail]
David Rydell/Victoria Geoghegan/Elizabeth Snow Bell Pottinger	T: [phone]

This Trading Update may contain forward-looking statements. By their nature forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.

These statements reflect the knowledge and information at the time of the release of this Trading Update. Nothing in this Trading Update should be construed as a profit forecast or estimate.

Apart from the information contained in this Trading Update there have been no material events or transactions affecting the Group during the period.

 

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