Primary Health Properties (PHP) is moving close to achieving full dividend cover - historically a weak point for the GP surgery landlord. At 8.9p per share, up a fifth year on year, underlying earnings from rent covered 89 per cent of the dividend payout in the first half, compared with 84 per cent for 2014 as a whole and just 76 per cent in the first half of last year. And chief executive Harry Hyman now says he expects the group to achieve full dividend cover by the end of the year - faster than expected.
Profits are rising mainly thanks to cost reductions. Management fees fell 8 per cent to £3.4m year on year, and the average cost of debt also fell 50 basis points to 4.9 per cent following a major refinancing programme last year.
But the other reason profits are rising is growth in rental income - up 5.2 per cent to £30.6m in the first half. Acquisitions are largely responsible, and PHP made seven more of these for a combined £33.6m in the first half, including a £7.7m medical centre in Westbury. The group now leases out more than 250 properties to GPs, pharmacies and other healthcare organisations. Underlying rental growth remains weak, at 1.1 per cent based on those rent reviews completed in the period. But that might change as the £8bn of funding committed to the NHS by the new government comes into play.
Broker Peel Hunt expects adjusted book value to reach 330p at the year-end, up from 319p in December 2014.
PRIMARY HEALTH PROPERTIES (PHP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 412p | MARKET VALUE: | £459m | |
| TOUCH: | 411.5-412p | 12M HIGH / LOW | 420p | 324p |
| DIVIDEND YIELD: | 4.9% | DEVELOPMENT PROP: | nil | |
| PREMIUM TO NAV: | 37% | |||
| INVESTMENT PROP: | £1.07bn | NET DEBT: | 203% | |
| Half-year to 30 June | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 282 | 22.0 | 19.9 | 9.75 |
| 2015 | 300 | 32.4 | 29.1 | 10.00 |
| % change | +6 | +47 | +46 | +3 |
Ex-div: 17 Sep Payment: 30 Oct | ||||
