Final Results

PRIMARY HEALTH PROPERTIES PLC 4 October 1999 PRIMARY HEALTH PROPERTIES PLC Modern accommodation for the Provision of Primary Health Care Services Preliminary Results for the year ended 30 June 1999 GROUP FINANCIAL RIGHLIGHTS Year to Year to 30 June 1999 30 June 1998 Net Asset value per share 117.4p 107.0p Portfolio purchased and committed £45.7m £36.2m Annual rent roll £2.9m £1.7m Profit before exceptional costs £1.065m £1.064m Profit before taxation £0.961m £1.064m Profit after taxation £1.051m £0.84m Earnings per share 6.6p 5.3p Final dividend per share 3.4p 3.1p Total dividend per share 6.Op 5.6p Total return per share 16.4p 10.6p 'We believe the Group is now the largest specialist investor in primary care property in the UK and that our portfolio is unrivalled in terms of quality, length of lease and geographical diversity. Our pipeline of future transactions under consideration is higher than ever before and we are optimistic that we will be able to move our portfolio through to a level where securitisation or other non-recourse funding will be open to the Group, which would then enable us to continue our growth without necessarily increasing our recourse borrowings.' Harry Hyman, Managing Director Enquiries: Primary Health Properties PLC Harry Hyman Tel: 01483 306912 Managing Director Mobile: 0973 344768 Bell Pottinger Financial Bob Gregory Tel: 0171 353 9208 Chairman's Statement I am delighted to report another successful year during which the portfolio has increased in size to £45.7m (including commitments). Shareholders will be pleased to know that the total return per share was 16.4p (1998: 10.6p). The Group profit after taxation for the year ended 30 June 1999 totalled £1,054,000 (1998: £841,000) after exceptional items of £104,000 (1998: nil), relating to the costs of moving from AIM to the official list of the London Stock Exchange. The profit of £1,065,000 before exceptional charges and taxation was adversely effected by the purchase of 53 Charlotte Street, where, until the rent review later this year, the carrying cost exceeds the rent passing. The Board has recommended a final dividend of 3.4p which, when added to the interim, makes a total of 6.0p (1998: 5.6p). Lambert Smith Hampton has carried out a valuation of the Group's investment properties, which has resulted in a revaluation surplus of £1.5million. The net asset value per ordinary share has risen to 117.4p, an increase of 10.4p per share (9.7%). This year saw the continued tightening of yields in the property sector and while this has had a beneficial impact on valuations it is making it harder to secure new properties at attractive yields relative to long term gilt yields. During the current year, the Group's investment portfolio of both delivered and contracted properties expanded to £45.7 million, £6.7 million of which is to be delivered after the year end. At last year's Annual General Meeting, the Company was given power to repurchase its shares. During the year the Company repurchased a total of 300,000 ordinary shares at an average cost of 97.3p per share. The Company had 15,700,000 shares outstanding at the year end. We believe the Group is now the largest specialist investor in primary care property in the UK and that our portfolio is unrivalled in terms of quality, length of lease and geographical diversity. Our pipeline of future transactions under consideration is higher than ever before and we are optimistic that we will be able to move our portfolio through to a level where securitisation or other non-recourse funding will be open to the Group, which would then enable us to continue our growth without necessarily increasing our recourse borrowings. We are negotiating an increased banking facility which will increase our available banking resources by a further £10m to £40m and enable our portfolio to expand. During the year approximately 30% of the Group's rent roll falls due for review. We anticipate that these reviews will result in a significant increase in total rental income. G Elliot Chairman 4 October 1999 Managing Director's Review The year to 30 June 1999 saw the continued development of our portfolio. This is reflected in the growth in the Group's turnover, which rose from £1,357,000 to £2,391,000 and an increase in the year end rent roll from £1,740,000 to £2,900,000. During the year we continued to expand our portfolio, both in total terms and on a delivered basis, such that at 30 June 1999 our portfolio totalled £39.0 million including £1.1 million of property in the course of development, £0.9million of development loans and £2.5million property classified as a finance lease. As reported in the Chairman's statement, the portfolio has been revalued as at 30 June 1999 and the uplift of £1.5million has been incorporated into the balance sheet, giving a closing property valuation of £35.6m. The increase in net asset value amounts to 10.4p per share. At the year end, the Group also had outstanding commitments to purchase a further £6.7 million of property and had made funding advances of £901,000. This brought the portfolio, including commitments, to a total of £45.7 million at the end of June. As at 30 June 1999 our portfolio had a rent roll of some £2.9 million (1999: £1.7 million) producing a yield on cost of approximately 8.8% (the yield excluding Charlotte Street being approximately 9.2%). We continue to believe that the strength and security of our recurring income stream is extremely attractive because approximately 86% of our rent roll derives from leases with more than 15 years unexpired. The year ended 30 June 2000 will see some £0.9 million of current rent being reviewed, which could have a significant impact on the Company's rent roll, particularly with regard to the properties at Charlotte Street London Wl and Rushton Street, London N1, both of which fall due for review in October 1999. Portfolio Purchases during the Year During the year, we have completed on a number of purchases, which are set out in tabular form below. PROPERTY ACQUISITION COST OCCUPATIONAL TENANTS 53 Charlotte Street, London W1 £2.6 million Camden & Islington NHS Trust Withernsea Community Hospital, East Yorkshire £2.5 million Hull and Holderness NHS Trust Woolston Phase 2, Hampshire £1.4 million Doctors Bourne, Lincolnshire £1.6 million Doctors and Pharmacy Bicester, Oxfordshire £1.8 million Doctors New Milton, Hampshire £2.2 million Doctors, Pharmacy and Newsagent Toddington, Bedfordshire £0.9 million Doctors Walsall Wood, West Midlands £1.5 million Doctors and Pharmacy Auchtermuchty, Fife £0.7 million Doctors TOTAL £15.2 million Since the year end we have continued to take delivery of projects including in July a doctor's surgery, convenience store and pharmacy located in Douglas Road, Aylesbury, with a total acquisition cost of £1.9 million and we have entered into a new commitment at Ringwood. Funding During the year, we have continued to draw down on the banking facilities available to the Group. Bank Borrowings at the year end totalled £15.5 million. In addition to the existing £3 million three year SWAP, a five year SWAP of £10m took effect from 1 July 1999. Accordingly, some £13 million of our existing bank facilities are effectively on a fixed rate basis, in addition to the £4 million of 7.75% convertible loan stock. Thus at the year end £17million of the Group's £19.5 million borrowings wore on a fixed rate basis. Your board continues to keep the treasury exposure of the Group under review. Although short term interest rates are rising, the outlook for medium to long term rates continues to be positive in the light of a continued shortage of appropriate lending opportunities in the capital markets for government gilts and the continued absence of inflation in the UK market place. Future Prospects The launch of Primary Care Groups on 1 April 1999, which replaced funding holding across the country, has led to a short term hiatus in the approval of new projects for development. Doctors are carefully considering the likely shape of the NHS before committing to long term lease obligations. However, the creation of Primary Care Trusts, the first of which will come on stream from 1 April 2000 is, it is believed, likely to see an increase in demand for properties on a rented basis. At the same time there has been an increase in the size of doctors surgeries and primary care centres being requested by Health Authorities, GPs and PCGs. It is possible that the Group may become involved in a number of purchase and lease back opportunities with these entities, which would offer us the opportunity to increase our portfolio at a faster rate. Consolidated Profit & Loss Account for the year ended 30 June 1999 30 June 30 June 1999 1998 £'000 £'000 Turnover 2,391 1,357 Administrative expenses: - non-exceptional items (626) (514) - exceptional item (l04) - (730) (514) Operating profit 1,661 843 Interest receivable 245 329 Interest payable (945) (107) Profit on ordinary activities before taxation 961 1,064 Corporation tax 93 (223) Profit on ordinary activities after taxation 1,054 841 Interim dividend of 2.6p (1998 : 2.5p) (4l6) (400) Final dividend proposed of 3.4p (1998 : 3.1p) (534) (496) Profit/(loss) retained for the period 104 (55) Net (loss)/profit after tax for the period retained by: The Company (12) (39) Subsidiary undertakings (after declaring dividends of £2,512,000) 116 (16) 104 (55) Earnings per share-basic 6.6p 5.3p - diluted 6.5p 5.3p Dividends per share 6.0p 5.6p Increase in net asset value per share 10.4p 5.0p Total return per share 16.4p 10.6p Statement of Total Recognised Gains and Losses for the year ended 30 June 1999 30 June 30 June 1999 1998 £'000 £'000 Profit for the financial year 1,054 841 Unrealised surplus on revaluation of properties 1,505 849 Total gains and losses relating to the year 2,559 1,690 All activities are continuing Consolidated Balance Sheet at 30 June 1999 At At 30 June 30 June 1999 1999 £'000 £'000 Fixed assets Tangible assets 35,640 22,364 Investments:development loans 901 897 36,541 23,281 Current Assets Debtors 483 1,120 Net investment in finance leases : amounts falling due in more than one year 2,510 - Cash at bank 201 589 3,194 1,709 Creditors amounts falling due within one year Creditors (1,801) (1,873) Net current assets /(liabilities) 1,393 (164) Total assets less current liabilities 37,934 23,117 Creditors amounts falling due in more than one year Convertible loan stock 2016 (4,000) (4,000) Term loan (15,500) (2,000) (19,500) (6,000) 18,434 17,117 Capital & Reserves Called up share capital 7,850 6,000 Share premium account 5,810 7,570 Capital reserve 1,618 - Revaluation reserve 2,960 1,455 Profit and loss account 196 92 Shareholders' funds : Equity 18,434 17,117 Net asset value per share 117.4 107.0p Approved by the Board of Directors on 4 October 1999. Consolidated Cash Flow Statement for the year ended 30 June 1999 30 June 30 June 1999 1998 £'000 £'000 Net cash inflow from operating activities 2,467 941 Returns on investments and servicing of finance Interest received 53 74 Interest paid (919) (107) (866) (33) Taxation UK corporation tax paid including ACT (211) (96) Capital expenditure and financial investment Payments to acquire tangible fixed assets (7,410) (8,228) Development loans advanced (6,664) (897) (14,074) (9,125) Equity dividends paid (912) (720) Management of liquid resources Net sales of certificates of deposit - 4,305 Not cash outflow before financing (13,596) (4,728) Financing Repurchase of shares (292) Term bank loan 2005 13,500 2,000 Convertible loan stock 2016 - 4,000 Repayment of loan - (1,100) 13,208 4,900 (Decrease)/increase in cash (388) 172 Reconciliation of operating profit to net cash flow from operating activities 1999 1998 £'000 £'000 Operating profit 1,661 843 Decrease/(increase) in operating debtors and prepayments 549 (487) increase in operating 257 585 creditors and accruals Net cash inflow from 2,467 941 operating activities Reconciliation of net cash flow to movement in net funds 30 June 30 June 1999 1999 £1000 £1000 (Decrease)/increase in cash in the period (388) 172 Cash inflow from change in liquid resources - (4,305) Cash inflow from loans (13,500) (6,000) Loans acquired with subsidiary - (1,100) Repayment of loans - 1,100 Movement in net debt (13,888) (10,133) in the period Net (debt)/funds at 1 July (5,411) 1,722 Net debt at 30 June (19,299) (5,411) Notes: The financial information has been prepared on the basis of the accounting policies set out in the Group's 1998 statutory accounts. The freehold properties are included at valuation as at 30 June 1999. The calculation of basic earnings per share is calculated on earnings of £1,054,000 and the weighted average number of ordinary shares in issue of 15,965,000. The recommended final dividend of 3.4p per share is to be paid on 21 December 1999 to shareholders whose names appear on the Registrar at close of business on 15 October 1999. The financial information herein does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the preceeding year is based on the statutory accounts for the period ended 30 June 1998. Those accounts, upon which the auditors have been issued an unqualified opinion, have been delivered to the Registrar of Companies. A copy of the Annual Report and Accounts for the year ended 30 June 1999 will be finalised shortly and sent to shareholders thereafter.

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