Some £138m of revaluation losses from its all-share merger with MedicX Fund pushed Primary Health Properties (PHP) into the red during the first half of 2019. That was to be expected. However, interim results flagged not just a 44 per cent rise in net rental income and a £4m drop in the enlarged GP landlord's operating costs, but also further signs of its organic growth credentials.
Rent reviews resulted in a 1.9 per cent annualised income increase, and 22 refurbishment or development projects were either completed, on-site or about to commence, which should add a further £0.3m in annual rents. Excluding MedicX’s contribution, recurring adjusted earnings rose by almost a fifth to £20.3m, driven by last year’s acquisitions and refurbishing properties.
In July the group issued a £150m unsecured convertible bond, the proceeds of which were partly used to repay a higher-rate retail bond. That helped lower the average cost of debt by 25 basis points to 3.75 per cent, although following this year’s merger the loan-to-value ratio of the portfolio has edged up to 47.9 per cent. Managing director Harry Hyman said the weighted average unexpired lease term of 13 years and the security of having government cover 90 per cent of income meant he was comfortable with higher leverage than some other Reits.
House broker Peel Hunt expect adjusted net asset value per share of 107p at the December 2019 year-end, rising to 110.5p in 2020.
| PRIMARY HEALTH PROPERTIES (PHP) | ||||
| ORD PRICE: | 134.8p | MARKET VALUE: | £1.53bn | |
| TOUCH: | 134-6-134.8p | 12-MONTH HIGH: | 139p | LOW: 106p |
| DIVIDEND YIELD: | 4.1% | TRADING PROP: | NIL | |
| PREMIUM TO NAV: | 36% | |||
| INVESTMENT PROP: | £2.35bn | NET DEBT: | 100% | |
| Half-year to 30 Jun | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2018 | 99.8 | 38.7 | 5.7 | 2.7 |
| 2019 | 99.1 | -106 | -10.7 | 2.8 |
| % change | -1 | - | - | +4 |
| Ex-div: | 11 Jul | |||
| Payment: | 23 Aug | |||
| *Dividends paid quarterly, XD and payment dates refer to the 1.4p-a-share third quarter dividend | ||||
