Primary Health Properties confirms decent dividend after 'strong' year

Health facilities investor Primary Health Properties issued its audited annual results for the year ended 31 December on Thursday, reporting an 18.7% improvement in EPRA earnings to £36.8m.

The FTSE 250 firm said EPRA earnings per share were unchanged at 5.2p, while its EPRA net asset value per share was 4.4% higher at 105.1p.

It confirmed a 2.9% rise in the dividend to 5.4p per share.

Looking at its property portfolio, its valuation went up by 2.5% during the year to £1.5bn, while the net initial yield slipped to 4.85% from 4.91%.

The contracted rent roll was ahead 9.8% over the prior year at £79.4m, with the weighted average unexpired lease term falling slightly to 13.1 years from 13.2 years.

Occupancy was slightly ahead at 99.8%, compared to 99.7%, while the portion of the rent roll funded by government bodies increased to 91% from 90%.

Net rental income stood at £76.4m, an increase of 7.2% year-on-year.

On an IFRS basis, PHP’s reported profit for the year was down 19.2% at £74.3m and its earnings per share slid 31.4% to 10.5p, while its net asset value per share was up 8.2% at 102.5p.

The total amount of dividends paid during the year was 16.6% higher at £36.6m, with dividend cover improving to 101% from 99% a year earlier.

Debt became cheaper for the firm too, with its average cost of debt dropping to 3.9% from 4.09%, and its loan-to-value ratio sliding to 44.8% from 52.9%.

Weighted average debt maturity was 5.4 years at year-end, down from 6.3 years, with total undrawn loan facilities standing at £190.6m, compared to £101m.

“We have selectively and successfully invested the proceeds from the over-subscribed equity raise in April 2018 and further strengthened the balance sheet,” said Primary Health Properties managing director Harry Hyman.

“PHP's high-quality portfolio and capital base has helped to deliver another year of strong performance and our 22nd year of unabated dividend growth.

“Continuing improvements to the rental growth outlook and further reductions in the cost of finance will help to maintain our strategy of paying a progressive dividend to our shareholders which is fully covered by earnings.”

Hyman noted that the company recently announced the proposed all-share merger with MedicX, which he said would bring together two “highly complementary” portfolios in the UK and Ireland, with the combined business representing a “stronger platform” for the future.

“Combining the two businesses in this transformational deal is expected to create significant value for the shareholders of the enlarged group and importantly, the potential to deliver significant operating and financial savings.

“We are excited by the opportunities that will be created.

“The merger represents another significant and important step in our strategy of selectively growing the portfolio, focusing on large hub primary care centres which are reducing pressures on the NHS, and it significantly extends the scale of the business and asset value.”