European care-home owner Public Service Properties Investments
Reported results for 2010 were also heavily skewed by lots of non-cash charges, particularly £17.4m of write-downs of accrued income relating to theoretical rent guarantees that the company removed for tax purposes. On an adjusted basis, pre-tax profits actually rose 25 per cent to £8m thanks to inflation-indexed lease agreements.
With tightening local-authority budgets, UK care-home operators face a tough period. A further risk for PSPI is client concentration - it only has one tenant in the UK, the privately-owned European Care Group (EC). But finance chief Ralph Beney stresses that PSPI has a strong, decade-old relationship with EC, which should be better protected from public-sector cuts than its peers because it makes 30 per cent of its income from special-needs care.
Brokerage Arbuthnot expects year-end adjusted net asset value (NAV) to rise to 178p (2010: 153p).
| Year to 31 Dec | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 155 | 7.9 | 8.9 | 6.5 |
| 2010 | 120 | -2.4 | 0.7 | 7.0 |
| % change | -22 | - | -93 | +8 |
|
Ex-div: 4 May Payment: 27 May |
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More analysis of company results
IC View
PSPI’s shares are trading 57 per cent below adjusted NAV estimates and yield over 9 per cent. That looks unwarranted for a property company with rock-solid rental growth prospects and a generous dividend policy. Buy.
Last IC view: Good value, 74p, 20 September 2010
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