Sign up Australia
Proactive Investors - Run By Investors For Investors

Primary Health Properties encouraged by continued improvement in rental growth

The group continues to focus its activities on large hub primary care facilities both in the UK and Ireland
Care worker and patient
The demand for new, purpose built premises continues and is now being supported by NHS initiatives to modernise the primary care estate

Primary Health Properties PLC (LON:PHP) is seeing a continuing improvement in rental growth in the healthcare facilities sector.

In its interim results statement, the investment company said its earnings on an EPRA (European Public Real Estate) basis rose by 11% in the first half of 2018 to £17.1mln from £15.4mln in the first half of last year.

EPRA earnings per share eased 3.8% to 2.5p from 2.6p as a result of the shares issued in April when the company raised £115mln.

Net rental income in the period rose by 7.5% to £37.4mln from £34.8mln the year before with the net initial yield on the company’s portfolio contracting to 4.85% at the end of June from 4.91% at the end of 2017.

Profit before tax declined to £38.7mln from £44.3mln as the value of Primary Health’s property portfolio was only marked up by £21.2mln this time around (which inflates profit) compared to a £29.9mln the year before.

The property portfolio currently holds 308 assets valued at £1.42bn, up from £1.36bn at the end of 2017, with a contracted rent roll of £74.4mln, up from £72.3mln at the end of 2017.

The company has a strong pipeline of acquisitions totalling over £175mln in the UK and Ireland that are being progressed.

Primary Health (PHP) said 99.7% of its portfolio has been let with a weighted average unexpired lease term of 12.9 years, down from 13.2 years at the beginning of the reporting period.

READ: Primary Health Properties expands Irish portfolio with construction funding contract

"The successful, over-subscribed equity raise has strengthened the balance sheet and provides significant headroom for future investment in a strong, disciplined and selective pipeline. As we have already demonstrated, we are actively engaged in expanding our portfolio, with particular growth in the number of significant Irish assets. PHP continues to benefit from the strong fundamental characteristics and government-backed income which position primary health care as a highly attractive investment opportunity,” said Harry Hyman, the managing director of PHP.

The company revealed that of the £115mln raised in new capital in April, £53mln has been committed while a further £37mln of transactions have been agreed but not yet completed.

“We are also encouraged by the continuing improvement in rental growth in the sector which will help to maintain our strategy of paying a progressive dividend to our shareholders which are covered by earnings," he added.

“PHP delivered a good first half with NAV [net asset value] +3.5% to 104.2p, 2% ahead of our expectation due to stronger than expected yield compression and rental growth. EPRA EPS +4% and the DPS +3% were in line with our expectation,” said Liberum Capital Markets.

“Positively, rent reviews have shown further improvement with annualised growth of 1.7% and continue to be enhanced by acquisitions with associated scale benefits. We expect PHP’s portfolio to continue to benefit from long-term structural growth, driven by a growing and ageing UK population, coupled with efforts to improve the efficiency and cost effectiveness of the NHS by expanding the scope of services provided by GPs,” the broker said.

Liberum rates the shares a ‘buy’ and has a target price of 125p.

PHP’s shares were unchanged at 116.4p.

--- adds broker comment and share price ---

 

View full PHP profile View Profile

Primary Health Properties PLC Timeline

Related Articles

Care room
September 05 2018
It is not the only listed operator in the healthcare sector but it is one of the few property companies to offer exposure to what is a low-risk, non-cyclical market
industrial property warehouse
June 12 2018
Custodian’s portfolio is weighted towards industrial sector and split between industrial, retail, office and other properties
Kenya
October 02 2018
The Africa-focused property trust raised US$132mln when it joined the London market

No investment advice

The information on this Site is of a general nature only. It does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions. You acknowledge and understand that neither the Company, its related bodies corporate, the information providers or their affiliates will advise you personally about the nature, potential value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You should read our FSG and any other relevant disclosure documents and if necessary seek persona advice prior to making any investment decision.

You understand and agree that no Content (as defined below) published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person.

You understand that in certain circumstances the Company, its related bodies corporate, the information providers or their affiliates may have received, or be entitled to receive, financial or other consideration in connection with promoting, and providing information about, certain entities on the Site and in communications otherwise provided to you.

You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

Before you act on any general advice we provide, please consider whether it is appropriate for your personal circumstances.

© Proactive Investors 2018

Proactive Investors Australia PTY LTD ACN:132787654 ABN:19132787654.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use