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Primary Health Props (PHP)

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Wednesday 18 September, 2002

Primary Health Props

Final Results

Primary Health Properties PLC
18 September 2002

Primary Health Properties PLC
17 September 2002



                         PRIMARY HEALTH PROPERTIES PLC
            Providing Accommodation for Primary Health Care Services

                     Preliminary Results for the year ended
                                  30 June 2002


Group Financial Highlights

*Dividend increased 13% to 9.0p (2001: 8.0p)
*NAV increased 19% to 181.3p (2001: 152.5p)
*Portfolio increased to £80.1m (2001: £63.5m)
*Total return per share increased to 37.8p (2001: 30.8p)
*Pre tax profits increased by 27% to £2,015,000 (2001: £1,582,000)

Harry Hyman, Managing Director said:

"PHP is committed to the restructuring of primary healthcare and believes
that through the increased resources made available by the Government
to the NHS that it is in a strong position to contribute to this process,
which in turn will deliver good shareholder returns."

Enquiries:

Primary Health Properties PLC
Harry Hyman
Managing Director
Tel: 01483 306912
Mobile: 0973 344768

Bell Pottinger Financial
David Rydell/Zoe Sanders
Tel: 020 7861 3887



Chairman's Statement



I am delighted to be able to report another year of substantial progress for
your Group. The total basic return per Ordinary share rose from 30.8p to 37.8p,
and from 25.2p to 31.4p on a fully diluted basis. Group profit before taxation
for the year ended 30 June 2002 totalled £2,015,000 (2001: £1,582,000), an
increase of 27%.

The Board has recommended a final dividend of 4.5p per Ordinary share which,
with the interim dividend, makes a total of 9.0p per share for the year, an
increase of 13% over the total dividend of 8.0p per share paid in respect of the
previous year.

During the year the Company took advantage of strong demand for its shares by
placing 785,000 shares at 148p in January 2002 to raise around £1.1 million
after expenses.

The year end valuation carried out on behalf of the Board by Lambert Smith
Hampton has resulted in a revaluation surplus of some £4.5 million for the year.
The net asset value per share has risen from 152.5p to 181.3p on an undiluted
basis and from 142.2p to 164.6p on a fully diluted basis.

The Group has again been successful in negotiating rent reviews that have
exceeded inflation on a medium term basis and there have been some strong
performances from properties located in the south of England.

During the year the Group's portfolio of investment properties, finance leases
and properties in the course of development has increased to £80.1 million
including revaluation surpluses. In addition, at the balance sheet date the
Group had commitments to purchase a further £3.5 million of property, which has
subsequently increased by further additions of £1.7 million at the date of the
announcement of results.

At the year end our rent roll had increased from £5,014,000 at 30 June 2001 to
£6,190,000, an increase of 23%.

Our expansion has been financed by the share issue referred to above and further
drawings on our committed long term bank lines. At the year end, total debt
including the convertible loan stock stood at £47.75 million. We continue to
monitor the Group's interest rate exposure carefully and maintained our hedging
position with approximately 50% of total debt at the period end with an average
fixed rate before margin of some 6.0%.

Although our shares have stood at a modest premium to basic net asset value
during the period the Board wishes to retain the option to effect repurchases
and accordingly a resolution enabling the Group to do this is included in the
Notice for this year's Annual General Meeting.

We remain on track to expand our portfolio to the £100 million level when we
believe that further non-recourse methods of finance will be available to us.

During the period we established a joint venture, Primary Health Solutions Ltd,
with one of our major developers, Brackley Investments Ltd. This joint venture
is designed to enable PHP to take part in developments both of Primary Care
Trust sale and leasebacks and the Government's new LIFT programme. To date,
several tenders have been made, but success has not been forthcoming. We will
continue to strive for selection on these types of projects. Our maximum
commitment to the project is some £2.5 million and during the year we spent
£50,000 on share capital.

At this time of market volatility it is important to note that 92% of our income
derives directly or indirectly from the Government via the NHS, with pharmacy
operators making up the majority of the balance.

The Government has earmarked substantial new funds for the modernisation of the
NHS and we stand poised to make our contribution to the radical restructuring of
the NHS that is in progress, in a way that should continue to deliver good
shareholder returns.



G A Elliot
Chairman                                                      17 September 2002

Managing Director's Report

Portfolio Movements

The table below sets out the development of our portfolio during the year under
review. We took delivery of a number of new developments and purchased an
investment in June leased to Northumbria Ambulance Service NHS Trust. At the
year end the portfolio, when commitments are included, reached £83.6 million
(2001: £72.7 million) as set out below.

                                    30 June 2002                   30 June 2001
                                              £m                             £m

Investment properties                       76.9                           59.2
Properties in course of development          0.7                            1.8
Finance leases                               2.5                            2.5
Total owned and leased                      80.1                           63.5
Committed                                    3.5                            9.2
Total owned, leased and committed           83.6                           72.7


Portfolio Purchases During the Year

The Group completed the purchases of a number of properties during the year,
details of which are set out below:

Property                       Acquisition Cost      Occupational Tenants
                                             £m

Buckingham Road, Bicester                  1.60      Doctors and Physiotherapist
Faringdon, Oxon                            2.11      Two Doctors Practices
Swinton, Manchester                        1.53      Doctors and Pharmacy
Coppice Farm, Walsall                      1.23      Doctors and Pharmacy
Arthurstone Terrace, Dundee                2.14      Two Doctors Practices
Monks Lane, Newbury                        1.76      Doctors and Pharmacy
Scotswood House, Newcastle                 2.63      NHS Trust

                                          13.00

Revaluation

As reported in the Chairman's Statement, the annual portfolio valuation has
resulted in an uplift of some £4.5 million which has been incorporated into the
balance sheet, giving a closing property investment valuation of £80.1 million,
including property in the course of development. This increase amounted to 27.1p
per share on an undiluted basis and 20.7p per share on a fully diluted basis.
The valuation surplus reflects the impact, during the period, of our successful
rent reviews. There has also been a slight hardening of investment yields during
the period.

Rent Reviews

The Group completed a number of rent reviews during the year and there are a
number of reviews outstanding that we expect to see resolved during the coming
year. The results of the reviews completed during the year added some £150,000
to our rent roll. The table below shows the timing of reviews across our
portfolio. We are still hampered by the long timescale that reviews follow,
although we are fully protected through the chargeability of interest.

Rent Roll and Yield on Cost

At 30 June 2002, our portfolio had a rent roll over of some £6.2million (2001:
£5.0 million), producing a yield on cost of 9.3% (2001: 9.4%). Yield on
valuation was around 7.3% (2001: 7.8%).

Primary Health Solutions (PHS)

As announced at the time of our interim results, PHP has set up a joint venture
company with Brackley Investments Ltd. This company, PHS, has been set up to
tender for projects that involve whole estate properties and projects being
advanced under the Government's LIFT initiative. Our maximum capital commitment
is £2.5 million and, during the year, £50,000 had been spent as our share of
share capital.

To date we have submitted bids for three LIFT projects, been invited to
interview on two of these, but have not yet been short listed.

Although it is early days, we believe that our involvement in PHS will enable
PHP to participate in development opportunities and to secure future purchase
opportunities.

Tax Charge and Accounting Policy Changes

Financial Reporting Standard (FRS)19 "Deferred Tax" requires that deferred tax
should now be provided in full on most timing differences. The FRS does not
normally require deferred tax to be recognised on the revaluation surplus. Our
accounting policy was previously to recognise deferred tax only to the extent
that liabilities or assets were expected to crystallise. FRS19 has no effect on
actual tax payments. We have therefore changed our accounting policy to make
full provision for timing differences which, in our case, arise primarily from
capital allowances. As allowed by FRS19, the Group has discounted the potential
deferred tax liability and considers there to be no material impact on the tax
charge for the year. As a result, there is no material impact on the prior year
and therefore no restatement has been made.

Future Accounting Standards

For accounting periods starting after 1 January 2005, all listed companies in
the UK have to comply with International Accounting Standards ("IAS").

The Directors are currently assessing the impact this will have on the Group.
The extent to which the change to IAS will have on UK Company Law is currently
the subject of consultation by the DTI. The Directors will address these
proposals in due course.

Finance and Interest Rate Hedging

Bank borrowings increased during the year from £33.4 million to £43.75 million.
Including the convertible loan stock of £4 million year end borrowings totalled
£47.75 million of which £29 million has been hedged (e.g. swapped from floating
rate to fixed rate) as follows:

Convertible-fixed rate of 7.75%                                    £4.0m
Swaps at average rate before margin of 5.69%                       £25.0m
Total hedged debt                                                  £29.0m

The weighted average cost of finance for the fixed element of the debt is 5.98%,
before margin on the swaps (2001: 6.02%).

The Group has facilities of £50 million, £10 million is on a 364 day facility
basis while the balance of £40 million is a 7 year bullet facility repayable in
2008.

Portfolio Characteristics

Users

The table below shows the percentage of our portfolio by rent roll derived from
each of our major tenant classes, GPs, NHS Trusts including PCTs, Health
Authorities, pharmacy operators and others. Some 99% (2001: 99%) of our rent
roll comes directly or indirectly from the NHS and pharmacy operators.


Covenant Analysis by Annual Rent

GP's                                     70.00%
Health Authorities                        5.00%
NHS Trusts                               17.00%
Pharmacy                                  7.00%
Other                                     1.00%
                                        100.00%

Length of Leases

The two tables below show the length of lease by lease expiry and percentage of
today's passing rent. The table shows that some 89.5% (2001: 91%) of the lease
income has more than 15 years unexpired whilst the security of the income table
shows the contracted cash flow as a percentage of the year end rent roll,
ignoring any increase during the subsequent periods. This shows that by year 20
the Group would still be receiving 71% of its current income.

Analysis of Annual Rent by Term Unexpired

Less than 5 years                          0.50%
6 - 15 years                              10.00%
15 - 20 years                             18.50%
More than 20 years                        71.00%
                                         100.00%

Security of Income by Lease Expiry

Year                                 % of Passing
                                         Rent

1                                         100%
5                                         100%
10                                         96%
15                                         89%
20                                         75%

Geographical Spread

The table below shows the percentage of the portfolio by rent roll derived from
each of the NHS regions.

Annual Rent by Region

Anglia and Oxford                       16.00%
North Thames                            19.00%
North West                              10.00%
Northern and Yorkshire                  15.00%
South Thames                             2.00%
South and West                          10.00%
Trent                                    6.00%
West Midlands                           17.00%
Scotland                                 4.00%
Wales                                    1.00%
                                       100.00%

Forthcoming Reviews

The table below shows the annual amount of rent falling due for review in each
of the next 4 years. As at 30 June 2002, rent reviews outstanding which were due
in the year 2001/2002, in rental terms, totalled £998,000.

Rent Reviews by Annual Rent

2002/2003                               1,725
2003/2004                               1,364
2004/2005                               2,118
2005/2006                                 887
2006/2007                                  95

Future Prospects

We are optimistic that the increased resources made available by the Government
to the NHS will assist in the modernisation of the Primary Care Estate, and that
this will result in an increased flow of deals for PHP. At the same time the
areas of the country covered by LIFT should provide exciting prospects for our
joint venture, PHS, to invest to its advantage.

In the meantime our existing portfolio continues to perform well and we are
working hard to add value from rent reviews and other situations as they arise.


Harry Hyman
Managing Director               17 September 2002


CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2002
                                                                           30 June 2002  30 June 2001
                                                                                  £'000         £'000

Turnover                                                                          5,550         4,626
Administrative expenses                                                          (1,118)         (972)

Operating profit                                                                  4,432         3,654
Share of operating loss in joint venture                                             (3)            -

                                                                                  4,429         3,654

Interest receivable                                                                 102           115
Interest payable                                                                 (2,516)       (2,187)

Profit on ordinary activities before taxation                                     2,015         1,582

Taxation                                                                           (203)         (158)

Profit on ordinary activities after taxation                                      1,812         1,424

Interim dividend of 4.50p per share (2001: 3.75p)                                  (742)         (589)
Final dividend proposed of 4.50p (2001: 4.25p)                                     (742)         (667)

                                                                                 (1,484)       (1,256)

Profit retained for the year                                                        328           168

Net profit after tax and dividends for the year retained by:
The Company                                                                         286           140
Subsidiary undertakings (after declaring dividends of £5,215,000)                    45            28
Joint venture                                                                        (3)            -

                                                                                    328           168

Earnings per share - basic                                                         11.3p          9.1p
                   - diluted                                                       10.4p          8.7p

Dividends per share (net)                                                           9.0p          8.0p

Increase in net asset value per share - basic                                      28.8p         22.8p
                                      -  fully diluted                             22.4p         17.2p

Total return per share - basic                                                     37.8p         30.8p
                       - fully diluted                                             31.4p         25.2p

All activities are continuing.




CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 30 June 2002
                                                                               30 June 2002   30 June 2001
                                                                                      £'000          £'000

Profit for the financial year excluding share of loss in joint venture                1,815          1,424
Share of joint venture's loss for the year                                               (3)             -

Profit for the financial year attributable to members of the Parent Company           1,812          1,424
Unrealised surplus on revaluation of properties                                       4,469          3,415

Total gains and losses relating to the year                                           6,281          4,839


All activities are continuing.

CONSOLIDATED BALANCE SHEET
as at 30 June 2002
                                                                                 At 30 June     At 30 June
                                                                                       2002           2001
                                                                                      £'000          £'000
Fixed Assets
Tangible assets                                                                      77,638         61,028
Investments:
            Development loans                                                            15             31
            Investment in joint venture
                        Share of gross assets                                            50              -
                        Share of gross liabilities                                       (3)             -

                                                                                         47              -

                                                                                     77,700         61,059
Current assets
Debtors                                                                               2,998            539
Net investment in finance leases: amounts falling due in more than one year           2,568          2,490
(due within one year: 2002: £23,000; 2001: £12,000)
Cash at bank                                                                            361            338

                                                                                      5,927          3,367

Creditors: amounts falling due within one year                                       (9,738)        (3,105)

Net current (liabilities) / assets                                                   (3,811)           262

Total assets less current liabilities                                                73,889         61,321

Creditors: amounts falling due after more than one year
Bank loans                                                                          (40,000)       (33,375)
Convertible loan stock 2016                                                          (4,000)        (4,000)

                                                                                    (44,000)       (37,375)

                                                                                     29,889         23,946
Capital and reserves
Called up share capital                                                               8,243          7,850
Share premium account                                                                 6,563          5,810
Capital reserve                                                                       1,618          1,618
Revaluation reserve                                                                  12,756          8,287
Profit and loss account                                                                 709            381

Equity shareholders' funds                                                           29,889         23,946

Net asset value per share           - basic                                          181.31p        152.52p
                                    - fully diluted                                  164.58p        142.20p



CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2002
                                                                            30 June 2002  30 June 2001
                                                                                   £'000         £'000

Net cash inflow from operating activities                                          4,451         3,828

Returns on investments and servicing of finance
Interest received                                                                     20            43
Interest paid                                                                     (2,459)       (1,845)

                                                                                  (2,439)       (1,802)

Taxation
UK corporation tax paid                                                                -            (9)

Capital expenditure
Payments to acquire tangible fixed assets                                        (12,051)       (8,789)

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

Equity dividends paid                                                             (1,409)       (1,154)

Net cash outflow before financing                                                (11,498)       (7,926)

Financing
Ordinary share issue (net of expenses)                                             1,146             -
Term bank loan 2008                                                                6,625         7,875
Revolving 364 day facility                                                         3,750             -

Net cash inflow from financing                                                    11,521         7,875

Increase/(decrease) in cash                                                           23          (51)



Reconciliation of net cash flow to movement in net debt                             2002          2001
                                                                                   £'000         £'000
Increase/(decrease) in cash in the period                                             23           (51)
Cash inflow from loans                                                           (10,375)       (7,875)

Movement in net debt in period                                                   (10,352)       (7,926)

Net debt at 1 July                                                               (37,037)      (29,111)

Net debt at 30 June                                                              (47,389)      (37,037)

NOTES:

The above results for the year to 30 June 2002 are audited.

1. Earnings per share

   The calculation of earnings per share is based on the following:

                                              As at 30 June 2002                 As at 30 June 2001

                                        Net profit attributable to  Ordinary   Net profit attributable to     Ordinary
                                             ordinary shareholders   shares     ordinary shareholders          shares
                                                          £'000      number       £'000                        number

Basic earnings per share                                  1,812  16,037,657 *     1,424                    15,700,000 *
Option conversion**                                           -    607,013            -                       395,951
Convertible Loan stock conversion***                        279  3,478,261          279                     3,478,261

Diluted earnings per share                                2,091 20,122,931        1,703                    19,574,212


* Weighted average number of Ordinary shares in issue during the year.

**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.


2. Notes to the statement of cash flow

    Reconciliation of operating profit to net cash inflow from operating
activities


                                                                               2002                2001
                                                                              £'000               £'000

Operating profit                                                              4,432               3,654
(Increase)/decrease in operating debtors and prepayments                       (168)                 28
Increase in operating creditors and accruals                                    187                 146


Net cash inflow from operating activities                                     4,451               3,828



3. At the Annual General Meeting, a resolution to declare a final dividend of
4.5p per share will be put to the members and if passed will be paid on 
29 November 2002 to shareholders on the Register of Members at the close of 
business on 1 November 2002.

4. The statutory accounts for the year ended 30 June 2002 will be finalised on
the basis of the financial information presented by the Directors in this 
preliminary announcement and will be delivered to Registrar of Companies 
following the Company's Annual General Meeting.  Copies will be sent to 
shareholders shortly and 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.

The Annual General Meeting is to be held on 21 November 2002 at 2.30pm at
Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB.

5. The financial information set out above does not constitute the Company's
statutory financial statements for the years ended 30 June 2002 or 2001 (but is
derived from and has been prepared on the same basis, as those financial 
statements except that FRS19 has been adopted and there is no impact on either 
the financial statements of this or the previous year).  Statutory financial 
statements for 2001 have been delivered to the Registrar of Companies, and those 
for 2002 will be delivered following the Company's Annual General Meeting.  The 
auditors have reported on those financial statements; their reports were
unqualified and did not contain statements under section 237 (2) or (3) of the 
Companies Act 1985.


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