Primary Health Properties Plc · LSE:PHP
Primary Health Properties — H1 2023 Earnings Presentation
34 slides from Primary Health Properties's earnings presentation, July 2023
Slide 1: Half Year Results Presentation 2023: Delivering Long Term Sustainable Income
PRIMARY HEALTH PROPERTIES PLC HALF YEAR RESULTS PRESENTATION 2023 DELIVERING LONG TERM SUSTAINABLE INCOME
Slide 2: Agenda
AGENDA KEY HIGHLIGHTS DIVIDEND TRACK RECORD FINANCIAL REVIEW PROPERTY REVIEW PIPELINE AND OUTLOOK APPENDICES Primary Health Properties PLC Annual Results Presentation 2022 1
Slide 3: Key Highlights
KEY HIGHLIGHTS ORGANIC RENTAL GROWTH CONTINUING TO DRIVE SECURE AND SUSTAINABLE INCOME PERFORMANCE Primary Health Properties PLC Half Year Results Presentation 2023 2
Slide 4: Key Highlights
KEY HIGHLIGHTS 27th year of consecutive Security and longevity of our income drives our progressive dividend policy dividend growth Long-term demographic, macro and political trends supportive across UK and Ireland Portfolio ✓ Populations are growing, ageing and suffering more instances of chronic i
Slide 5: 27th Year of Consecutive Dividend Growth
27TH YEAR OF CONSECUTIVE DIVIDEND GROWTH 8.0 7.0 Historic dividend progression CAGR 8.5% 1 6.70p 6.50p Implied PHP 2023 dividend yield2 6.20p 5.90p 6.0 Share price3 Yield 5.60p 5.25p 5.40p 94.6p 7.1% 5.00p 5.125p 5.0 4.63p 4.75p 4.88p 4.38p 4.50p 4.13p 4.25p Q1 – Q3 4.0 3.75p Q1-Q3 2023 paid or decl
Slide 6: The Future of Primary Care in the UK: Eastbourne
THE FUTURE OF PRIMARY CARE IN THE UK Case study: Eastbourne Rationale ✓ Failing GP practices unable to cope with increasing patient demand which has affected service provision, patient care, outcomes and staff retention ✓ Merged into one super-practice operating as a single Primary Care Network ✓ Ex
Slide 7: Financial Review
FINANCIAL REVIEW ORGANIC RENTAL GROWTH AND EFFECTIVE COST MANAGEMENT DRIVE EARNINGS Primary Health Properties PLC Half Year Results Presentation 2023 6
Slide 8: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Performance 30 June 2023 30 June 2022 Change Net rental income (£m) 75.5 71.1 +6.2% Adjusted earnings (£m) 45.9 44.7 +2.7% Adjusted earnings per share (pence) 3.4p 3.4p No change Dividends paid (£m) 44.8 43.3 +3.5% Dividend cover 102% 103% Dividend per share (pence) 3.35p 3.
Slide 9: Income Statement
INCOME STATEMENT 30 June 2023 30 June 2022 Change £m £m Net rental income 75.5 71.1 +6.2% Axis contribution 0.5 - Administrative expenses (6.1) (5.5) -10.9% Operating profit before financing costs 69.9 65.6 +6.6% Net financing costs (24.0) (20.9) Adjusted earnings 45.9 44.7 +2.7% Revaluation (defici
Slide 10: Valuation Decline: Yield Expansion Partially Offset by Rental Growth
VALUATION DECLINE: YIELD EXPANSION PARTIALLY OFFSET BY RENTAL GROWTH Every 10bps change in NIY Adjusted NTA per share (pence) impacts the valuation by 120.0 c. £56m or 4.2p per share 3.4 (3.4) and LTV by 100bps 115.0 112.6 (0.9) (0.5) (0.1) 111.1 110.0 105.0 8 bps yield expansion: £45m deficit or -3
Slide 11: Debt Summary
DEBT SUMMARY ✓ Total debt facilities of £1.60bn (91% secured/9% unsecured) Euro private placements £168m/€196m (11%) ✓ Net debt drawn £1.27bn Convertible ✓ £314m undrawn headroom after capital commitments and post period end transactions bond £150m Aviva £530m ✓ 97% of net debt fixed or capped with
Slide 12: Delivering Financial Management
DELIVERING FINANCIAL MANAGEMENT ✓ c. £52m of sterling debt converted to €60m euro debt taking advantage of cheaper euro denominated debt and capped at 2.0% for 2.5 years increasing proportion of net debt hedged to 97% ✓ No debt refinancing requirement until July 2025 ✓ £314m undrawn headroom after c
Slide 13: Property Review
PROPERTY REVIEW IMPROVING RENTAL GROWTH OUTLOOK FROM RENT REVIEWS AND ASSET MANAGEMENT PROJECTS Primary Health Properties PLC Half Year Results Presentation 2023 12
Slide 14: Rent Reviews - Long Leases with Improving Rental Growth Outlook
RENT REVIEWS - LONG LEASES WITH IMPROVING RENTAL GROWTH OUTLOOK ✓ Effectively upward only rent roll in UK Drivers of rental growth Additional income from rent reviews – growing momentum ✓ Rents in Ireland linked to Irish CPI £m ✓ Typically 3-yearly review cycle 4.0 2023 forecast ✓ £2.2m additional r
Slide 15: Rent Review Results
RENT REVIEW RESULTS ✓ £2.2m or 9.9% (4.4% p.a.) increase over previous passing rent increase from 172 rent reviews completed in UK and Ireland Open market Number of Six months to 30 June 2023 rent reviews outstanding reviews ✓ £2.6m or 3.1% uplift expected on 607 open market value reviews outstandin
Slide 16: Asset Management – Updating Our Current Portfolio
ASSET MANAGEMENT – UPDATING OUR CURRENT PORTFOLIO ✓ Limited lease expiry risk, £13m or 9% of income expiring in next 3 years, in excess of 70% are engaged/agreed to renew ✓ 5 projects completed to-date and further 8 currently on site, investing £9.4m, £0.2m additional rent and extending leases back
Slide 17: Property Portfolio Overview
PROPERTY PORTFOLIO OVERVIEW 70%+ agreed terms or advanced discussions to renew Key Figures1 30 June 2023 Income Expiry Profile £m % Total number of properties 513 < 3 years 13.3 9% Including properties in Ireland 20 Investment portfolio value (£bn) 2.8 4-5 years 14.8 10% Floor area (000’s sqm / 000’
Slide 18: Ireland Opportunity – Continued Strategic Expansion
IRELAND OPPORTUNITY – CONTINUED STRATEGIC EXPANSION ✓ Growing and ageing population: 5 million people growing to 6 million by 2050 Attractive income accretion ✓ Government support: programme to modernise healthcare in Ireland and establish a network of 200 purpose-built Primary Care Centres with hea
Slide 19: Strategic Acquisition of Axis Technical Services and Long-Term Development Agreement
STRATEGIC ACQUISITION OF AXIS TECHNICAL SERVICES AND LONG-TERM DEVELOPMENT AGREEMENT Axis Technical Services Limited ✓ Provides a permanent presence on the ground in Ireland, further strengthening our position as we seek out new investment, development and asset management opportunities ✓ Property m
Slide 20: Property Review: Disciplined Approach to Investment, Development and Asset Management
PROPERTY REVIEW DISCIPLINED APPROACH TO INVESTMENT, DEVELOPMENT AND ASSET MANAGEMENT Primary Health Properties PLC AnnualResults Presentation 2022 19
Slide 21: Disciplined Approach to Pipeline
DISCIPLINED APPROACH TO PIPELINE Total funding requirement of c. £80m over the next 1-2 years to fund a mix of future acquisition pipeline, direct developments and asset management projects Funding requirement In legals Advanced pipeline 1 Region Total Cost Number Est. cost Number Est. cost Pipeline
Slide 22: Development Activity
DEVELOPMENT ACTIVITY ✓ Short-cycle and de-risked development activity adding high quality assets, capturing attractive development margins and supporting ESG commitments ✓ Direct developments: significantly advanced pipeline across three projects expected on site during 2024, with an estimated cost
Slide 23: Outlook
OUTLOOK 27th year of consecutive dividend growth ✓ Long-term demographic, macro and political trends supportive across UK and Ireland Portfolio £2.8 billion (2022: £2.8 billion) ✓ Strong stewards of under-invested, key social infrastructure assets with c.40% of all assets in the UK considered unfit
Slide 24: Further Background on PHP
FURTHER BACKGROUND ON PHP Primary Health Properties PLC Half Year Results Presentation 2023 23
Slide 25: PHP's Approach to ESG
PHP’S APPROACH TO ESG ✓ Environmental - committed to transitioning to net zero carbon (NZC) by 2030 for all operational, development and asset management activities0 for all of PHP’s operational, development and asset management activities ✓ Social - activities result in better patient experiences a
Slide 26: PHP's Approach to ESG
PHP’S APPROACH TO ESG Net Zero Carbon by 2030 Portfolio EPC ratings A-C 84% 2022: 81% Projects EPC B or better Strategy supports a low carbon approach 100% ✓ Operations (ALREADY NZC), developments and asset management activities to be NZC by 2030 2022: 100% ✓ Operationally light portfolio, assets wi
Slide 27: Primary Health Care Opportunity in the UK
PRIMARY HEALTH CARE OPPORTUNITY IN THE UK ✓ The UK population has been steadily getting older and this trend is projected to continue in the future. ✓ By 2066, it is estimated there will be a further 8.6 million UK residents aged 65 years and over, an increase broadly equivalent to the size of the p
Slide 28: Primary Health Care Opportunity in the UK
PRIMARY HEALTH CARE OPPORTUNITY IN THE UK ✓ However, many GP Premises in the UK remain unfit for their current purpose, let alone this expanded role. Common challenges include lack of space in waiting rooms, consultation rooms and administration space together with growing list sizes and lack of dis
Slide 29: Balance Sheet
BALANCE SHEET £m 30 June 2023 31 December 2022 Investment properties 2,783.4 2,796.3 Cash 2.4 29.1 Debt (1,272.2) (1,290.4) Net debt (1,269.8) (1,261.3) Other net current liabilities (28.9) (30.2) Adjusted net tangible assets (NTA) 1,484.7 1,504.8 Convertible bond fair value adjustment 12.7 7.1 Axis
Slide 30: Spread of Funding Sources
SPREAD OF FUNDING SOURCES Unsecured Secured facilities 3 facilities1 Convertible Secured Secured Standard Provider Santander Barclays RBS1 HSBC Lloyds bond bond bond Life Tenor Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Expiry Jul-2025 Jan-2025 Sept-2025 Oct-2025 Nov-2025 Dec-202
Slide 31: Spread of Funding Sources (Continued)
SPREAD OF FUNDING SOURCES (CONTINUED) Secured facilities3 Cash/ Unfettered Total assets MetLife Provider Aviva Ignis Euro PP Euro PP Aviva Aviva Euro PP Tenor Bullet Bullet Bullet Bullet Amortising Bullet Bullet Dec-2028 Sept-2028 Expiry Nov-2028 Dec-2028 Sept-2031 Feb-2034 Oct-2036 Dec-2030 Sept- 2
Slide 32: EPRA Cost Ratio
EPRA COST RATIO 30 June 2023 30 June 2022 31 December 2022 £m £m £m Gross rent less ground rent, service charge and other income 78.2 73.5 147.0 Direct property expense 7.9 5.7 12.6 Less: service charge and recharged costs recovered (5.7) (3.2) (7.0) Non-recoverable property costs 2.2 2.5 5.6 Admini
Slide 33: Contact Details
CONTACT DETAILS Harry Hyman Richard Howell David Bateman Chief Executive Officer Chief Financial Officer Chief Investment Officer harry.hyman@phpgroup.co.uk richard.howell@phpgroup.co.uk david.bateman@phpgroup.co.uk Primary Health Properties PLC Half Year Results Presentation 2023 32
Slide 34: Disclaimer
DISCLAIMER This document comprises the slides for a presentation in respect of Primary Health Properties PLC (the “Company”) and its 2023 half year results presentation (the “Presentation”). No reliance may be placed for any purposes whatsoever on the information in this Presentation or on its compl
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