Primary Health Properties- Preliminary Results for Year Ended 31st December 2021

Primary Health Properties PLC

Preliminary results for the year ended 31 December 2021

Successful management internalisation, refinancing and operational performance drive earnings growth

Primary Health Properties PLC (“PHP”, the “Group” or the “Company”), a leading investor in modern primary health facilities, announces its audited preliminary results for the year ended 31 December 2021.

Harry Hyman , Chief Executive, commented:

“2021 has been another strong year of progress for PHP, having successfully completed the internalisation of our management structure and refinanced a number of legacy loan facilities which have delivered substantial annual cost savings. In addition, we have a strong targeted pipeline and continue to see good organic rental growth from rent reviews and asset management projects with record levels of activity during the year.

“Throughout 2021 PHP has successfully worked with the NHS, HSE and the Group's GP tenants to help them utilise our properties for deployment in the front line of the COVID-19 pandemic, delivering vaccines and boosters across the UK and Ireland. The need for modern, integrated, local primary healthcare facilities is becoming ever more pressing in order to relieve the pressures being placed on hospitals and A&E departments and to catch up on the back-log of missed procedures.

“Having successfully delivered 25 years of secure and reliable growth for our shareholders, we have firmly established ourselves as a sector leader and the Board looks forward to delivering further earnings and dividend growth in 2022 and remains confident in PHP's future outlook.”

FINANCIAL AND OPERATIONAL HIGHLIGHTS

¹   Definitions for net rental income, adjusted earnings, adjusted earnings per share, earnings per share (“EPS”), dividend cover, loan to value (“LTV”), net tangible assets (“NTA”), rent roll, NIY, WAULT, Total Adjusted NTA return and net asset value (“NAV”) are set out in the Glossary of Terms.

² See note 9, earnings per share, to the financial statements.

³ See note 9, net asset value per share, to the financial statements. Adjusted net tangible assets, EPRA net tangible assets (“NTA”), EPRA net disposal value (“NDV”) and EPRA net reinstatement value (“NRV”) are considered to be alternative performance measures. The Group has determined that adjusted net tangible assets is the most relevant measure.

⁴ Percentage valuation movement during the year based on the difference between opening and closing valuations of properties after allowing for acquisition costs and capital expenditure.

⁵ See note 10, dividends, to the financial statements.

⁶ After deducting the remaining cost to complete contracted acquisitions, properties under development and asset management projects.

⁷ Percentage contracted rent roll increase during the year is based on the annualised uplift achieved from all completed rent reviews and asset management projects.

⁸ Pro-forma including debt facilities secured post year-end.

DELIVERING EARNINGS AND DIVIDEND GROWTH

• Adjusted earnings per share increased by 6.9% to 6.2p (2020: 5.8p)
• Contracted annualised rent roll increased by 4.1% to £140.7 million (31 December 2020: £135.2 million)
• Additional annualised rental income on a like-for-like basis of £2.4 million or 1.8% from rent reviews and asset management projects (FY 2020: £2.0 million or 1.6%; FY 2019: £1.9 million or 1.5%)
• Successful refinancing of a number of legacy loan facilities with Aviva Investors reducing average cost of debt to 2.9% (31 December 2020: 3.5%) resulting in annualised interest cost savings of approximately £5.0 million
• Successfully completed the internalisation of the Group's management structure which resulted in annual cost savings of approximately £4.0 million, equivalent to 0.3 pence per share
• EPRA cost ratio reduced to 9.3% (FY 2020: 11.9%) the lowest in the UK REIT sector
• Quarterly dividends totalling 6.2 pence per share distributed in the year, a 5.1% increase over 2020 (5.9 pence per share)
• First quarterly dividend of 1.625 pence per share declared, payable on 25 February 2022, equivalent to 6.5 pence on an annualised basis and a 4.8% increase over the 2021 dividend per share, marking the Company's 26^thconsecutive year of dividend growth

DELIVERING NET ASSET VALUE GROWTH

• Adjusted Net Tangible Assets (“NTA”) per share increased by 3.4% to 116.7 pence (31 December 2020: 112.9 pence)
• Property portfolio at 31 December 2021 valued at £2.8 billion (31 December 2020: £2.6 billion) reflecting a net initial yield of 4.64% (31 December 2020: 4.81%)
• Revaluation surplus, including profit on sales, was generated in the year of £110.5 million (31 December 2020: £51.4 million), representing growth of 4.1% (2020: 2.0%)
• Strong pipeline of targeted acquisitions, developments and asset management projects with a value of approximately £337 million in the UK and £107 million (€127 million) in Ireland of which £72 million and £80 million (€95 million) is in legal due diligence in both countries
• Portfolio in Ireland now comprises 20 assets, valued at £213 million (€253 million)
• The portfolio's metrics continue to reflect the secure, long-term and predictable income stream with occupancy at 99.7% (31 December 2020: 99.6%) and a WAULT of 11.6 years (31 December 2020: 12.1 years)
• Strong progression of asset management projects with 30 completed in the year and a further nine currently on-site, investing £15.0 million, creating additional rental income of £0.4 million per annum and extending the weighted average unexpired lease term (WAULT) back to over 20 years

DELIVERING FINANCIAL MANAGEMENT

• LTV ratio 42.9% (31 December 2020: 41.0%), towards the lower end of the Group's targeted range of between 40% to 50%
• Weighted average debt maturity extended to 8.2 years (31 December 2020: 6.5 years)
• Post period end €75 million private placement loan note issued for a 12-year term at a fixed rate of 1.64% to finance continued expansion in Ireland
• Refinanced a number of legacy loan facilities with Aviva Investors, with a new sustainability linked £200 million facility for a 15-year term at a fixed rate of 2.52% and renewed existing facilities with NatWest and Santander
• Significant liquidity headroom with cash and collateralised undrawn loan facilities totalling £321.2 million (2020: £361.5 million) after capital commitments

DELIVERING STRONG TOTAL RETURNS

¹ The de finition for total property return is set out in the Glossary of Terms.

DELIVERING RESPONSIBLE BUSINESS AND ESG

• Net Zero Carbon (“NZC”) Framework published with the five key steps the Group is taking to achieve the ambitious target of being NZC by 2030 for all of PHP's operational, development and asset management activities
• Construction of PHP's first two NZC developments in Lincolnshire and West Sussex about to commence in the first quarter of 2022
• All developments completed in the year achieved BREEAM rating of Excellent or Very Good and all asset management projects completed met EPC target of B or above
• £300 million of sustainability linked loan facilities with Aviva and NatWest raised in the year
• £0.2 million distributed from the Community Impact Program to charities and groups focused on social prescribing and wellbeing linked to the patients and communities served by PHP's properties

Presentation and webcast:

A virtual briefing for analysts will be held today, 16 February 2022 at 9.30am, via a live webcast and conference call facility.

The presentation will be accessible via live video webcast and a live conference call facility:

Webcast: https://webcasting.brrmedia.co.uk/broadcast/61e13c18e3976b4d1b2d6e85  

Tel : +44 (0)330 336 9601

Participant PIN code: 3760982

If you would like to join the briefing, please contact Buchanan via php@buchanan.uk.com to confirm your place.

For further information contact: