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. This information is provided by RNS The company news service from the London Stock Exchange Z
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