Doctor’s surgery landlord Primary Health Properties (PHP) delivered a robust first-half performance. Rental income jumped by nearly a half to £29.4m, boosted by the contribution from the Prime Public Partnerships (PPP) portfolio acquired late last year for £233m. Reported profits were also inflated by a £16m net valuation gain on the property portfolio, which pushed its book value ahead by 1.7 per cent like-for-like over the six months to over £1bn.
Crucially, the acquisition has dividend cover has risen from 52 per cent in the first half of last year to 76 per cent. Recent acquisitions have also changed the overall profile of the portfolio, with the proportion now having rent reviews linked to inflation or with fixed increases rising from 15 per cent of rental value to 22 per cent.
However, the uplift on rent reviews dipped to just 1.9 per cent, from 2.2 per cent for the whole of last year. That suggests the recovery in surgery development that should eventually drive up rents remains tepid. But management reckons the first half will prove to be the low point.
PHP has a lot of debt, but the low-risk nature of its assets makes the load affordable. In fact, revisions and extensions to existing loans have driven down the average cost of debt from 5.5 per cent in December to 4.6 per cent.
Analysts at Peel Hunt are forecasting adjusted book value by the year end of 316p, from 308p at 30 June.
| PRIMARY HEALTH PROPERTIES (PHP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 348p | MARKET VALUE: | £387m | |
| TOUCH: | 348-349p | 12-MONTH HIGH: | 370p | LOW: 312p |
| DIVIDEND YIELD: | 5.5% | DEVELOPMENT PROP: | £17.5m | |
| PREMIUM TO NAV: | 23% | |||
| INVESTMENT PROP: | £965m | NET DEBT: | 200% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 266 | 13.6 | 17.4 | 9.5 |
| 2014 | 282 | 22.0 | 19.9 | 9.75 |
| % change | +6 | +62 | +14 | +3 |
Ex-div: 17 Sep Payment: 7 Nov | ||||
