Primary Health Properties Plc · LSE:PHP
Primary Health Properties — FY2022 Earnings Presentation
37 slides from Primary Health Properties's earnings presentation, 2023
Slide 1: Annual Results Presentation 2022: Delivering Long Term Sustainable Income
Primary Health Properties PLC Annual Results Presentation 2022 DELIVERING LONG TERM SUSTAINABLE INCOME
Slide 2: Agenda
AGENDA KEY HIGHLIGHTS DIVIDEND TRACK RECORD STRONG RELATIVE PERFORMANCE FINANCIAL REVIEW PROPERTY REVIEW PIPELINE AND OUTLOOK APPENDICES Primary Health Properties PLC Annual Results Presentation 2022 1
Slide 3: Key Highlights: Record Year for Rental Growth Driving Performance
KEY HIGHLIGHTS RECORD YEAR FOR RENTAL GROWTH DRIVING PERFORMANCE Primary Health Properties PLC Annual Results Presentation 2022 2
Slide 4: 2022 Key Highlights
2022 KEY HIGHLIGHTS Entering 27th year of Security and longevity of our income drives our progressive dividend policy consecutive dividend growth Long-term demographic, macro and political trends supportive across UK and Ireland Portfolio ✓ Populations are growing, ageing and suffering more instance
Slide 5: Entering 27th Year of Consecutive Dividend Growth
ENTERING 27TH YEAR OF CONSECUTIVE DIVIDEND GROWTH 8.0 Historic dividend progression CAGR 8.5% 1 2 7.0 Implied PHP 2023 dividend yield2 6.50p 6.70p 6.20p Share price3 Yield 5.90p 6.0 5.60p 108.8p 6.2% 5.40p 5.125p 5.25p 4.88p 5.00p 5.0 4.50p 4.63p 4.75p 4.38p 4.13p 4.25p Q1 – Q3 4.0 3.75p 3.38p 3.00p
Slide 6: Strong Track Record of Relative Performance
STRONG TRACK RECORD OF RELATIVE PERFORMANCE ✓ IRR over period since inception of 12.4%1 (Average annual inflation (RPI) over same period: 3.2%) CAGR total shareholder returns PHP TSR (absolute change) over 1, 3 and 5 years 110% PHP FTSE All Share Index FTSE EPRA Nareit UK Index PHP Assura EPRA UK 85
Slide 7: Financial Review
FINANCIAL REVIEW ORGANIC RENTAL GROWTH AND EFFECTIVE COST MANAGEMENT DRIVE EARNINGS Primary Health Properties PLC Annual Results Presentation 2022 6
Slide 8: Key Financial Highlights
KEY FINANCIAL HIGHLIGHTS Performance 31 December 2022 31 December 2021 Change Net rental income (£m) 141.5 136.7 +3.5% Adjusted earnings (£m) 88.7 83.2 +6.6% Adjusted earnings per share (pence) 6.6p 6.2p +6.5% Dividends paid (£m) 86.7 82.4 +5.2% Dividend cover 102% 101% Dividend per share (pence) 6.
Slide 9: Income Statement
INCOME STATEMENT 31 December 2022 31 December 2021 Change £m £m Net rental income 141.5 136.7 +3.5% Administrative expenses (9.6) (10.5) -8.6% Operating profit before financing costs 131.9 126.2 +4.5% Net financing costs (43.2) (43.0) Adjusted earnings 88.7 83.2 +6.6% Revaluation (deficit) / surplus
Slide 10: Valuation Decline: Yield Expansion Partially Offset by Rental Growth
VALUATION DECLINE: YIELD EXPANSION PARTIALLY OFFSET BY RENTAL GROWTH Adjusted NTA (NAV) per share (pence) Every 10bps change in NIY impacts the valuation by 130.0 c. £57m or 4.3p per share 125.0 6.6 (6.5) and LTV by 90bps 120.0 116.7 (4.6) 115.0 0.4 112.6 110.0 18bps yield expansion: -10p 105.0 (£13
Slide 11: Debt Summary
DEBT SUMMARY ✓ Total debt facilities of £1.61bn (91% secured/9% unsecured) Euro private placements £173m/€196m (11%) ✓ Net debt drawn £1.26bn ✓ £326m undrawn headroom after capital commitments and post period end transactions Convertible bond Aviva £531m £150m (9%) (33%) ✓ 94% of net debt fixed or c
Slide 12: Delivering Financial Management
DELIVERING FINANCIAL MANAGEMENT Refinanced or raised £516m of debt facilities locking in historically low rates and eliminating any short-term refinancing risk ✓ MetLife €75m (£66m) for 12-year term at a fixed rate of 1.64% with option to increase to €150m in next 3-years ✓ Santander RCF increased t
Slide 13: 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 14: PHP's Approach to ESG
PHP’S APPROACH TO ESG Net Zero Carbon by 2030 Portfolio EPC ratings A-C 81% 2021: 80% 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 2021: 100% ✓ Operationally light portfolio, assets wi
Slide 15: Property Review
PROPERTY REVIEW DISCIPLINED APPROACH TO INVESTMENT, DEVELOPMENT AND ASSET MANAGEMENT Primary Health Properties PLC AnnualResults Presentation 2022 14
Slide 16: Disciplined Approach to Pipeline
DISCPLINED APPROACH TO PIPELINE Total funding requirement of c. £86m 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 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: 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 2023, with an estimated cost
Slide 20: The Future of Primary Care in the UK: Croft
THE FUTURE OF PRIMARY CARE IN THE UK Net Zero Carbon Primary Care Centre Case study: Croft, West Sussex, PHP’s first NZC development • Consolidation of three inadequate properties into one purpose-built building which will be PHP’s first NZC development and one of the Rationale first health care bui
Slide 21: Investment Activity
INVESTMENT ACTIVITY ✓ Disciplined approach to investment and future activity will only take place if accretive to earnings ✓ 4 assets selectively acquired in H1 2022 for £53m ✓ 13 smaller assets sold for £27.7m, 13% above Dec.21 book value representing 60 bps of yield compression, taking advantage o
Slide 22: Property Review: Improving Rental Growth Outlook
PROPERTY REVIEW IMPROVING RENTAL GROWTH OUTLOOK FROM RENT REVIEWS AND ASSET MANAGEMENT PROJECTS Primary Health Properties PLC Annual Results Presentation 2022 21
Slide 23: Property Portfolio Overview
PROPERTY PORTFOLIO OVERVIEW 75% agreed terms or advanced discussions to renew Key Figures1 31 December 2022 Income Expiry Profile £m % Total number of properties 513 < 3 years 11.0 8% Including properties in Ireland 20 Investment portfolio value (£bn) 2.8 4-5 years 13.7 9% Floor area (000’s sqm / 00
Slide 24: 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 ✓ Rents in Ireland linked to Irish CPI £m Additional income from rent reviews – growing momentum ✓ Typically 3-yearly review cycle 3.5 ✓ £3.0m additional rent in year fr
Slide 25: Asset Management – Updating Our Current Portfolio
ASSET MANAGEMENT – UPDATING OUR CURRENT PORTFOLIO ✓ Limited lease expiry risk, £11m or 8% of income expiring in next 3 years, 75% are engaged/agreed to renew ✓ 10 projects completed to-date and further 10 currently on site, investing £17.5m, £0.5m additional rent and extending leases back to 19 year
Slide 26: Outlook
OUTLOOK Entering 27th year of consecutive dividend growth ✓ Long-term demographic, macro and political trends supportive across UK and Ireland Portfolio £2.8 billion (2021: £2.8 billion) ✓ Strong stewards of underinvested, key social infrastructure assets with c.40% of all assets in the UK considere
Slide 27: Further Background on PHP
FURTHER BACKGROUND ON PHP Primary Health Properties PLC Annual Results Presentation 2022 26
Slide 28: Rent Review Results
RENT REVIEW RESULTS ✓ £3.0m or 6.8% (3.4% p.a.) increase over previous passing rent increase from 331 rent reviews completed in UK and Ireland OMV Number of outstanding Year to 31 December 2022 Rent reviews reviews (current rent) ✓ £2.0m or 2.4% uplift expected on 618 open market value reviews outst
Slide 29: The Future of Primary Care in the UK: Case Study 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 30: 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 31: 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 32: Balance Sheet
BALANCE SHEET £m 31 Dec. 22 31 Dec. 21 Investment properties 2,796.3 2,795.9 Cash 29.1 33.4 Debt (1,290.4) (1,232.9) Net debt (1,261.3) (1,199.5) Other net current liabilities (30.2) (40.5) Adjusted net tangible assets (NAV) 1,504.8 1,555.9 Convertible bond fair value adjustment 7.1 (21.6) Fixed rat
Slide 33: 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 34: 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 Expiry Nov-2028 Dec-2028 Sept-2031 Sept-2033 Feb-2034 Oct-2036 Dec-2030 £45m £6
Slide 35: EPRA Cost Ratio
EPRA COST RATIO 31 December 2022 31 December 2021 £m £m Gross rent less ground rent, service charge and other income 147.0 139.6 Direct property expense 12.6 8.9 Less: service charge costs recovered (7.0) (5.8) Non-recoverable property costs 5.6 3.1 Administrative expenses 9.6 10.5 Less: ground rent
Slide 36: 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 Annual Results Presentation 2022 35
Slide 37: Disclaimer
DISCLAIMER This document comprises the slides for a presentation in respect of Primary Health Properties PLC (the “Company”) and its 2022 annual results presentation (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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