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Primary Health Props (PHP)

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Wednesday 26 April, 2017

Primary Health Props

Trading Update

RNS Number : 3180D
Primary Health Properties PLC
26 April 2017

26 April 2017

Primary Health Properties PLC

Trading Update


Primary Health Properties PLC ("PHP" or "Company"), the UK's leading investor in modern primary healthcare facilities, today publishes a trading update for the period 1 January 2017 to 25 April 2017.

Investment activity

PHP has continued to grow the portfolio completing £13.5m of acquisitions in the first quarter of 2017, and has continued to build a strong pipeline of opportunities both in the UK (£45m) and Ireland (€30m).

Cove Bay Medical Centre and Pitmedden Medical Centre, two modern, purpose built healthcare facilities located close to Aberdeen were acquired in January 2017 for a total consideration of £7.2 million. The properties benefit from long unexpired terms of 15.3 years and 13.0 years respectively.

PHP also completed its second acquisition in Ireland, contracting to provide development funding for the construction of a new primary care centre in Carrigaline, County Cork for a total cost of €7.3 million. The centre comprises circa 2,900m2 and will be fully let for 25 years from completion. Over three quarters of the rent roll is contracted to the Irish Government's Health Service Executive with the remainder derived from a group of GPs and a pharmacy operator.

These acquisitions increase PHP's portfolio to 299 assets including two developments currently on site. The development at Swindon is on target to complete in May 2017 and construction work at Carrigaline is expected to be completed by Q3 2017.

Rental income increased

PHP has continued to enhance and grow the rental income of its existing portfolio with 48 rent reviews settled in the first quarter, increasing rent by £0.2m, with a weighted average annualised increase of 1.6%, an increase over the 0.9% achieved in 2016. In addition, a further £0.9m has been committed to enhance and extend existing assets within PHP's portfolio and a strong pipeline of projects is being progressed to further increase rental income and extend unexpired occupational lease terms.

New long-term financing

In March 2017, new senior secured ten year notes for a total of £100m were issued at a fixed coupon of 2.83%. The issuance represented PHP's first transaction in the private placement market and demonstrates its ability to source funding from a broad range of alternative providers at attractive rates.

The proceeds of the issue have been partially applied to refinance PHP's existing "club" facility with The Royal Bank of Scotland plc ("RBS") and Santander Corporate Banking. The £115m club facility, which was due to mature in August 2017, was replaced by a new £50m bilateral term loan with RBS. The new RBS facility is for an initial four year term and PHP retains an option to both extend the term by a further year and increase the loan facility to a maximum total of £100m with the agreement of RBS.

These debt transactions extended the average weighted maturity of PHPs debt facilities to 6.1 years (31 December 2016: 5.1 years).

At 31 March 2017, PHP's net debt stood at £669.0m (31 December 2016: £655.7m) with a pro-forma loan to value ratio of 54.3% (31 December 2016: 53.7%).


The quarterly dividend for each of the first two quarters of 2017 has been increased by 2.24% to 1.31p per share; equivalent to 5.25p (2016: 5.125p) on an annualised basis. The first quarter's dividend was paid in February 2017 and the second quarter's dividend will be paid in May 2017. PHP remains committed to paying a fully covered and growing dividend to shareholders.

Revised advisory agreement terms

Last week, we announced revised terms to the advisory agreement between PHP and the property adviser, Nexus Tradeco Limited (Nexus). The fee payable for the management of PHP's property portfolio has been amended to incorporate additional lower fee increments as PHP continues to add scale. The fee payable for gross assets above £1.5bn, previously 0.3%, has been reduced to 0.275% for gross assets between £1.5bn and £1.75bn and 0.25% for gross assets between £1.75bn and £2.0bn.

In addition, the terms under which Nexus is entitled to a performance incentive fee (PIF) have been amended. Nexus will continue to be entitled to 11.25% of the 'total return' above a hurdle rate of 8%, but this will now be based on the change in EPRA net asset value (NAV) plus dividends paid, rather than the change in IFRS NAV plus dividends paid. Changes in IFRS NAV include the impact of changes in the mark to market valuation of the company's derivatives and convertible bonds, which do not reflect the performance of the underlying property portfolio.

New controls on the PIF have been introduced. The PIF in respect of any year is now capped at the lower of 20% of the management fee payable to Nexus in that year or £2.0m. Half of any PIF payment will be deferred to the following year, with performance against the hurdle rate (both positive and negative) carried forward in a notional cumulative account with any future payment subject to the account being in a surplus position. Furthermore, the payment of any PIF is restricted if it would otherwise cause PHP's dividend cover to fall below 98%. The Nexus team working on PHP's account, other than Harry Hyman, will receive 25% of any PIF paid, to aid staff motivation and retention. No PIF has been paid to Nexus since 2007 and the notional cumulative PIF deficit of £12.1m at the end of 2016, entirely attributable to the aforementioned IFRS mark to market adjustments, has been eliminated.


The significant demand for quality, available healthcare is increasingly driven by the growing and ageing population in both the UK and Ireland and the need for modern, integrated, local primary healthcare facilities is becoming more acute in order to relieve the pressures being placed on hospitals and A&E departments. We do not anticipate that the result of the forthcoming UK General Election will have any material impact on the important role primary healthcare will play in the future in the provision of health services; away from over-burdened hospital settings.


Harry Hyman, Managing Director of Primary Health Properties, commented:

"PHP has made a good start to 2017, completing further acquisitions and growing rental income. We have a strong pipeline of potential assets both in the UK and Ireland helping us to achieve our future growth targets.

PHP will continue to focus on growing earnings through selective acquisitions, strategic asset management activity, careful debt management and securing growth from rent reviews. This will enable PHP to continue to pay an increased, fully covered dividend to shareholders."



For further information contact:


Harry Hyman

Primary Health Properties PLC

T: 0207 451 7050

[email protected]


Richard Howell

Primary Health Properties PLC

T: 0207 104 5599

[email protected]


David Rydell / Elizabeth Snow / Eve Kirmatzis

Bell Pottinger

T: 0203 772 2582



Further information about PHP can be found on the Company's website


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

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