Primary Health Properties Plc · LSE:PHP
Primary Health Properties — FY2023 Earnings Presentation
35 slides from Primary Health Properties's earnings presentation, 2024
Slide 1: Annual Results Presentation 2023: Sustainable Income Performance
PRIMARY HEALTH PROPERTIES PLC ANNUAL RESULTS PRESENTATION 2023 SUSTAINABLE INCOME PERFORMANCE
Slide 2: Agenda
AGENDA KEY HIGHLIGHTS DIVIDEND TRACK RECORD FINANCIAL REVIEW PROPERTY REVIEW PIPELINE AND OUTLOOK APPENDICES Primary Health Properties PLC Annual Results Presentation 2023 1
Slide 3: Key Highlights
KEY HIGHLIGHTS ORGANIC RENTAL GROWTH CONTINUING TO DRIVE SECURE AND SUSTAINABLE INCOME PERFORMANCE Primary Health Properties PLC Annual Results Presentation 2023 2
Slide 4: Key Highlights
KEY HIGHLIGHTS 28th 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: 28th Year of Consecutive Dividend Growth and Sector Outperformance
28TH YEAR OF CONSECUTIVE DIVIDEND GROWTH AND SECTOR OUTPERFORMANCE 8.0 Implied PHP 2024 dividend yield2 Historic dividend progression CAGR 8.3%1 6.90p2 7.0 6.70p 6.50p Share price3 Yield 6.20p 5.90p 6.0 5.60p 89.35p 7.7% 5.40p 5.00p 5.125p 5.25p 5.0 4.75p 4.88p 4.38p 4.50p 4.63p 4.13p 4.25p Q1 – Q3
Slide 6: Financial Review
FINANCIAL REVIEW ORGANIC RENTAL GROWTH AND EFFECTIVE COST MANAGEMENT DRIVE EARNINGS Primary Health Properties PLC Annual Results Presentation 2023 5
Slide 7: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Performance 31 December 2023 31 December 2022 Change Net rental income (£m) 149.3 141.5 +5.5% Adjusted earnings (£m) 90.7 88.7 +2.3% Adjusted earnings per share (pence) 6.8p 6.6p +3.0% Dividends paid (£m) 89.5 86.7 +3.2% Dividend cover 101% 102% Dividend per share (pence) 6.
Slide 8: Income Statement
INCOME STATEMENT 31 December 2023 31 December 2022 Change £m £m Net rental income 149.3 141.5 +5.5% Axis contribution 1.1 - Administrative expenses (11.6) (9.6) -20.8% Operating profit before financing costs 138.8 131.9 +5.2% Net financing costs (48.1) (43.2) Adjusted earnings 90.7 88.7 +2.3% Revalu
Slide 9: Valuation: Yield Expansion Partially Offset by Rental Growth
VALUATION: YIELD EXPANSION PARTIALLY OFFSET BY RENTAL GROWTH Adjusted NTA per share (pence) Every 10bps change in NIY 125.0 impacts the valuation by c. £54m or 4.0p per share 6.8 (6.7) 120.0 and LTV by c.100bps 115.0 112.6 (4.0) 110.0 (0.5) (0.2) 108.0 105.0 Yield expansion: 100.0 23 bps or £128m de
Slide 10: Debt Summary
DEBT SUMMARY ✓ Total debt facilities of £1.64bn (91% secured/9% unsecured) Euro private placements £211m/€244m (13%) ✓ Net debt drawn £1.31bn ✓ £321m undrawn headroom after capital commitments and post period end transactions Convertible bond £150m Aviva £529m ✓ 97% of net debt fixed or capped with
Slide 11: Delivering Financial Management
DELIVERING FINANCIAL MANAGEMENT ✓ €47.8m (£41.4m) private placement tap, fixed at 4.195% for 10 years, proceeds used to repay expensive variable rate debt ✓ 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 increas
Slide 12: Property Review
PROPERTY REVIEW IMPROVING RENTAL GROWTH OUTLOOK FROM RENT REVIEWS AND ASSET MANAGEMENT PROJECTS Primary Health Properties PLC Annual Results Presentation 2023 11
Slide 13: Rent Reviews - Improving Rental Growth Outlook
RENT REVIEWS - 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 ✓ £4.0m additional rent in year from rent reviews ✓
Slide 14: Record Rent Review Results
RECORD RENT REVIEW RESULTS ✓ £4.0m or 8.9% (4.0% p.a.) increase over previous passing rent increase from 331 rent reviews completed in UK and Ireland Open market Number of Year to 31 December 2023 rent reviews outstanding reviews ✓ £2.2m or 4.5% uplift expected on 334 open market value reviews trigg
Slide 15: Asset Management – Updating Our Current Portfolio
ASSET MANAGEMENT – UPDATING OUR CURRENT PORTFOLIO ✓ Limited lease expiry risk, £17m or 11% of income holding over or expiring in next 3 years with c. 70% subject to a future project or terms agreed to renew ✓ 8 AM projects completed 2023 with a further 6 currently on site, investing £8m, £0.21m addi
Slide 16: Property Portfolio Overview
PROPERTY PORTFOLIO OVERVIEW 70%+ agreed terms or advanced discussions to renew Key Figures1 31 December 2023 Income Expiry Profile £m % Total number of properties 514 Holding over 4.1 3% Including properties in Ireland 21 Investment portfolio value (£bn) 2.78 < 3 years 13.0 8% Floor area (000’s sqm
Slide 17: 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 18: 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 19: Property Review
PROPERTY REVIEW DISCIPLINED APPROACH TO INVESTMENT, DEVELOPMENT AND ASSET MANAGEMENT Primary Health Properties PLC AnnualResults Presentation 2023 18
Slide 20: Disciplined Approach to Pipeline
DISCIPLINED APPROACH TO PIPELINE Total funding requirement of c. £94m over the next three years to fund a mix of future asset management projects, direct and forward funded developments Funding requirement 1 In legals Advanced pipeline Region Total Cost Number Est. cost Number Est. cost Pipeline of
Slide 21: 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: in legals across one projects expected on site during 2024, with an estimated cost of £3.3m. Advanced pipel
Slide 22: Outlook
OUTLOOK 28th year of consecutive ✓ Long-term demographic, macro and political trends supportive across UK and dividend growth Ireland Portfolio ✓ Strong stewards of under-invested, key social infrastructure assets with c.33% £2.8 billion (2022: £2.8 billion) of assets in the UK considered unfit for
Slide 23: Further Background on PHP
FURTHER BACKGROUND ON PHP Primary Health Properties PLC Annual Results Presentation 2023 22
Slide 24: 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 25: The Future of Primary Care in Ireland: Ballincollig
THE FUTURE OF PRIMARY CARE IN IRELAND Case study: Enhanced Community Care Facility, Ballincollig Property Details Property Price €29.64m Tenant Health Service Executive (100%) WAULT 25 years Rent Reviews 5-yearly Irish CPI (compounded) Size 6,000 sqm or 64,500 sq.ft. Completion December 2023 ✓ Irela
Slide 26: 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 27: PHP's Approach to ESG
PHP’S APPROACH TO ESG Operations and developments all net zero carbon in 2023 Asset management: first two NZC projects underway Strategy supports a low carbon approach Continued improvement in ✓ Operations and developments (ALREADY NZC), and asset management activities to be NZC by 2030 portfolio EP
Slide 28: 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 29: 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 30: Balance Sheet
BALANCE SHEET £m 31 December 2023 31 December 2022 Investment properties 2,779.3 2,796.3 Cash 3.2 29.1 Debt (1,309.9) (1,290.4) Net debt (1,306.7) (1,261.3) Other net current liabilities (29.6) (30.2) Adjusted net tangible assets (NTA) 1,443.0 1,504.8 Convertible bond fair value adjustment 2.3 7.1 A
Slide 31: 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-2026 Oct-2026 Dec-2026 Dec-202
Slide 32: Spread of Funding Sources (Continued)
SPREAD OF FUNDING SOURCES (CONTINUED) Secured facilities3 Cash / Total unfettered assets MetLife Provider Aviva Ignis Euro PP Euro PP Euro PP Aviva Aviva Euro PP Tenor Bullet Bullet Bullet Bullet Bullet Amortising Bullet Bullet Dec-2028 Expiry Nov-2028 Dec-2028 Sept-2031 Dec-2033 Sept- 2033 Feb-2034
Slide 33: EPRA Cost Ratio – A Strong Control on Costs
EPRA COST RATIO – A STRONG CONTROL ON COSTS 31 December 2023 31 December 2022 £m £m Gross rent less ground rent, service charge and other income 155.8 147.0 Direct property expense 18.2 12.6 Less: service charge and recharged costs recovered (13.3) (7.0) Non-recoverable property costs 4.9 5.6 Admini
Slide 34: Contact Details
CONTACT DETAILS Harry Hyman Mark Davies Richard Howell David Bateman Chief Executive Officer Chief Executive Officer (designate) Chief Financial Officer Chief Investment Officer harry.hyman@phpgroup.co.uk mark.davies@phpgroup.co.uk richard.howell@phpgroup.co.uk david.bateman@phpgroup.co.uk Primary H
Slide 35: Disclaimer
DISCLAIMER This document comprises the slides for a presentation in respect of Primary Health Properties PLC (the “Company”) and its Annual Results Presentation 2023 (the “Presentation”). No reliance may be placed for any purposes whatsoever on the information in this Presentation or on its complete
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