Another solid performance in 2018 from Primary Health Properties (PHP) was overshadowed by news of a proposed merger with fellow primary healthcare landlord MedicX Fund (MXF).
Subject to shareholder approval, the deal should be completed in March, and the combined group will offer significant cost synergies on the operational side as well as financial savings, while the portfolio will comprise 470 assets valued at £2.3bn.
PHP raised £115m in the first half of 2018, and used the proceeds to acquire six properties in Ireland and two in the UK, all on a pre-let basis. In addition, there is a potential acquisition pipeline of over £190m.
Headline profits were lower because slowing yield compression meant the valuation uplift at £36m was down from £64.5m in the previous year. Crucially, net rental income was up from £71.3m to £76.4m, accounting for 60 per cent of the revaluation surplus. A total of 187 rent reviews were concluded in 2018, and around two-thirds of rents are reviewed on an open market basis, which are affected by land and construction inflation. As these costs have been increasing, further rental growth is expected.
| PRIMARY HEALTH PROPERTIES (PHP) | ||||
| ORD PRICE: | 116p | MARKET VALUE: | £901m | |
| TOUCH: | 116.4-116.6p | 12-MONTH HIGH: | 118p | LOW: 106p |
| DIVIDEND YIELD: | 4.6% | TRADING PROPERTIES: | nil | |
| PREMIUM TO NAV: | 13% | NET DEBT: | 85% | |
| INVESTMENT PROPERTIES: | £1.5bn | |||
| Year to 31 Dec | Net asset value (p)* | Pre-tax profit (£m) | Earnings per share (p)* | Dividend per share (p)** |
| 2014 | 70 | 36.9 | 8.3 | 4.88 |
| 2015 | 77 | 56.0 | 12.6 | 5 |
| 2016 | 84 | 43.7 | 7.8 | 5.13 |
| 2017 | 95 | 91.9 | 15.3 | 5.25 |
| 2018 | 103 | 74.3 | 10.5 | 5.4 |
| % change | +8 | -19 | -31 | +3 |
| Ex-div: | 10 Jan | |||
| Payment: | 22 Feb | |||
| *Adjusted for four-for-one share consolidation in November 2015 **Dividends paid quarterly, xd and pay dates refer to the 1.4p a share first-quarter dividend for the new financial year. | ||||
