Primary Health Properties Plc · LSE:PHP
Primary Health Properties — H1 2024 Earnings Presentation
43 slides from Primary Health Properties's earnings presentation, Jul 24, 2024
Slide 1: Interim Results
Interim Results Six Months Ended 30 June 2024 Secure Long-Term Income Delivering a Growing Dividend
Slide 2: Agenda
Agenda 1 Key Highlights 2 CEO: First Impressions of New Role 3 Financial Results 4 Rental Growth Disciplined Approach to Asset Management, 5 Development and Investment 6 Investment Case and Outlook 7 Appendices Primary Health Properties PLC 2
Slide 3: Key Highlights
Key Highlights Primary Health Properties PLC 3
Slide 4: Key Highlights
Key Highlights 28th Year of Consecutive Secure and Long Income Continues to Drive a Growing Dividend Dividend Growth Financial Highlights ▪ Another year of rental growth with like for like income up £1.8.m in six months (HY23: +£2.2m). This £2.8 billion Portfolio equates to annual like for like of +
Slide 5: 28th Year of Consecutive Growth and Sector Outperformance
28th Year of Consecutive Growth and Sector Outperformance 8.0 Implied PHP 2024 dividend yield 6.90p2 Historic dividend progression CAGR 8.3%1 6.50p 6.70p 6.20p Share price3 Yield 5.90p 6.0 5.60p 4.88p 5.00p 5.125p 5.25p 5.40p 93.5p 7.4% 4.50p 4.63p 4.75p 4.13p 4.25p 4.38p 4.0 3.75p 3.38p 3.00p 2.25p
Slide 6: CEO: First Impressions of New Role
CEO: First Impressions of New Role Primary Health Properties PLC 6
Slide 7: CEO: First Impressions of new role
CEO: First Impressions of new role My Background ▪ Worked in the listed property sector for a long time ▪ What attracted me to PHP First 50 Days ▪ Good transition period and seamless handover ▪ Strong team with experience in the right areas ▪ Portfolio quality - site visits to key assets across the
Slide 8: Political Change: A Boost for PHP
Political Change: A Boost for PHP Significant Policy Changes ▪ New Labour government will be good for PHP ▪ Wes Streeting committed to diverting £billions from hospitals to GP’s and community health ▪ Labour have a good understanding of what it will take to fix NHS and are boosting the proportion of
Slide 9: Other Government Policies Driving Growth Opportunities
Other Government Policies Driving Growth Opportunities Housing Policy: ▪ “Beds and Meds” - new homes create demand for GP’s and new medical centres ▪ Population growth including 1.5m new homes could create demand for up to 300 new primary health centres ▪ At the time planning is being considered for
Slide 10: Financial Results
Financial Results H1 2024 Key Financial Highlights Primary Health Properties PLC 10
Slide 11: Key Financial Highlights
Key Financial Highlights Performance 30 June 2024 30 June 2023 Change Net rental income (£m) £76.2m £75.5m +0.9% Adjusted earnings (£m) £46.3m £45.9m +0.9% Adjusted earnings per share (pence) 3.5p 3.4p +2.9% Dividends paid (£m) £46.1m £44.8m +2.9% Dividend cover 100% 102% - Dividend per share (pence
Slide 12: Valuation: Yield Expansion Offset by Rental Growth
Valuation: Yield Expansion Offset by Rental Growth Every 10bps change in Adjusted NTA per share (pence) NIY impacts the 115.0 valuation by c.£52m or 3.5 (3.5) 3.9p per share and LTV by c.100bps 110.0 108.0 (3.0) 105.0 105.0 100.0 Yield expansion: 13 bps or £73m deficit or -5.5p 95.0 Rental growth: £
Slide 13: Delivering Financial Management
Delivering Financial Management ▪ £308m undrawn headroom after capital commitments available to deal with future refinancings ▪ £170m term and RCF facility with Barclays, credit committee approved, to refinance £70m variable bond maturing in Dec.25 with c.90 bps saving in margin ▪ Advanced discussio
Slide 14: Debt Summary
Debt Summary ▪ Total debt facilities of £1.64bn (91% secured / 9% unsecured) Euro Private Placements £207m/€244m ▪ Net debt drawn £1.32bn (13%) ▪ £308m undrawn headroom after capital commitments and post period end transactions Convertible bond £150m (9%) ▪ 96% of net debt fixed or capped with broad
Slide 15: Continued Improvement in Open Market Rental Growth
Continued Improvement in Open Market Rental Growth Primary Health Properties PLC 15
Slide 16: Rent Reviews – Improving Open Market Rental Growth Outlook
Rent Reviews – Improving Open Market Rental Growth Outlook ▪ Effectively upward only rent roll in UK ▪ Rents in Ireland linked to Irish CPI Additional Income From Rent Reviews 4.0 ▪ £1.6m additional rent in H1 from rent reviews 7.8% increase over previous passing rent 4.0 2024 3.5 forecast ▪ Total w
Slide 17: Robust Rent Review Results
Robust Rent Review Results Drivers of rental growth Number of Open market Six months to 30 June 2024 outstanding reviews ▪ Typically 3-yearly review cycle rent reviews completed (current rent) ▪ Building cost inflation Reviews relating to calendar years: No % No £m <=2019 7 2.5 51 7.3 ▪ Completion o
Slide 18: Disciplined Approach to Asset Management, Development and Investment
Disciplined Approach to Asset Management, Development and Investment Primary Health Properties PLC 18
Slide 19: Asset Management and Development Pipeline
Asset Management and Development Pipeline Total funding requirement of c. £79m over the next three years to fund a mix of future asset management projects, direct and forward funded developments Funding Requirement In Legals Advanced Pipeline Total Cost 1 Asset Active management of Estimated capex o
Slide 20: PHP’s First NZC-Led Asset Management Project
PHP’s First NZC-Led Asset Management Project Swan Lane Medical Centre, Norfolk NZC future proofed medical centre with 21-year lease regear and £57k of additional rent ▪ 20+ year old building in Long Stratton, Norfolk refurbished and extended ▪ 8 GP’s and 13 healthcare professionals serving 12,000 pa
Slide 21: Development and Investment Activity
Development and Investment Activity ▪ Short-cycle and de-risked development activity: Adding high quality assets, capturing attractive development margins and supporting ESG commitments ▪ Direct developments: Advanced pipeline of one further project being progressed and rents being renegotiated ▪ Ir
Slide 22: Investment Case and Outlook
Investment Case And Investment Outlook Case And Outlook Primary Health Properties PLC 22
Slide 23: Compelling Investment Case for PHP
Compelling Investment Case for PHP ▪ Stable and growing income ▪ Strong tenant profile with c90% government backed with long term leases and high occupancy ▪ PHP has a market leading position in an attractive real estate sector where demand for space is set to grow ▪ There are clear demand drivers i
Slide 24: Closing Remarks
Closing Remarks ▪ Continued focus on earnings and dividend growth ▪ Strong sustainable rental growth driven by improving open market value outlook • Strong control on costs with industry leading EPRA cost ratios ▪ Strong market fundamentals driven by long-term demographic and macro trends ▪ Supply s
Slide 25: Appendices
Appendices Primary Health Properties PLC 25
Slide 26: PHP’s Property Portfolio Overview
PHP’s Property Portfolio Overview Covenant Exposure by Rent Roll (£153 million) 516 Assets, Inc. 21 in Ireland, with 99.2% Occupancy Other Pharmacy 3% 8% Government backed income (UK GPs/NHS/HSE) 89% Geographical Spread by Valuation (£2.8 billion) South West Wales 5% 7% Midlands and East Anglia Scot
Slide 27: PHP’s Property Portfolio Overview
PHP’s Property Portfolio Overview Key Figures 30 June 2024 Income Expiry Profile £m % Total number of properties 516 Holding over1 6.6 4% Including properties in Ireland 21 < 3 years1 13.2 9% Investment portfolio value (£bn) 2.75 Floor area (000’s sqm / 000’s sq. ft.) 712 / 7,664 4 - 5 years 18.7 12
Slide 28: The Future of Primary Care in the UK
The Future of Primary Care in the UK Case Study: Eastbourne ▪ Failing GP practices unable to cope with The Future increasing patient demand which has affected Let for 25 years to allow patients and the wider primary service provision, patient care, outcomes and care network to access a wide range of
Slide 29: Ireland Opportunity
Ireland Opportunity Attractive Income Accretion ▪ Growing and ageing population: 5 million people growing to 6 million by 2050 Existing Portfolio ▪ Government support: programme to modernise healthcare in Ireland and establish a network of 6.0% 5.3% 2.5% 200 purpose-built primary care centres with h
Slide 30: The Future of Primary Care in Ireland
The Future of Primary Care in Ireland Case Study: Enhanced Community Care Facility, Ballincollig ▪ Ireland’s first Enhanced Community Care Facility and part of a €240m initiative which aims to increase community healthcare services and reduce pressure on hospitals ▪ The asset will provide a variety
Slide 31: Strategic Acquisition of PHP AXIS Technical Services and Long-Term Development Agreement
Strategic Acquisition of PHP AXIS Technical Services and Long-Term Development Agreement PHP 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 ▪ Pr
Slide 32: UK: Positive Long-Term Demographic, Macro and Political Trends
UK: Positive Long-Term Demographic, Macro and Political Trends ▪ National Health Service (NHS) is a public body established for over 75 years and paid for by the UK Government • NHS was set up in 1948 to provide everyone in the UK with healthcare, based on their needs and is free of charge. Today it
Slide 33: UK: General Medical Services (GMS) Contract and Premises Costs Reimbursement
UK: General Medical Services (GMS) Contract and Premises Costs Reimbursement General Medical Services (GMS) Contract ▪ The system of General Practitioners (GP’s) and primary care is the cornerstone of the NHS. They are the first point of contact for NHS England anyone with a physical or mental healt
Slide 34: Ireland: Long-Term Demographic, Macro and Political Trends Supportive
Ireland: Long-Term Demographic, Macro and Political Trends Supportive ▪ The population in Ireland, currently 5m, is expected to grow by 20% to c.6m by 2050 with the proportion aged over 65 and 80 expected to grow by 170% and 270% respectively over the same period ▪ Like most western economies the Ir
Slide 35: 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 activities for all of PHP’s operational, development and asset management activities ▪ Social - activities result in better patient experiences an
Slide 36: PHP’s Approach to ESG
PHP’s Approach to ESG Development Investment Asset Management Tenant and Operations Projects Net zero project at Croft on site, due Acquired Ballincollig, Ireland, an all First all-electric heat pump project Achieved Toitu Carbon Reduce Solar PV roll-out underway. to complete in 2024 electric enhanc
Slide 37: Income Statement
Income Statement £m 30 June 2024 30 June 2023 Change Net rental income 76.2 75.5 +0.9% PHP Axis contribution 0.7 0.5 +40.0% Administrative expenses (5.9) (6.1) +3.3% Operating profit before financing costs 71.0 69.9 +1.6% Net financing costs (24.7) (24.0) Adjusted earnings 46.3 45.9 +0.9% Revaluatio
Slide 38: Balance Sheet
Balance Sheet £m 30 June 2024 31 December 2023 Investment properties 2,749.5 2,779.3 Cash 4.1 3.2 Debt (1,322.6) (1,309.9) Net debt (1,318.5) (1,306.7) Other net current liabilities (28.1) (29.6) Adjusted net tangible assets (NTA) 1,402.9 1,443.0 Convertible bond fair value adjustment 2.8 2.3 PHP Ax
Slide 39: Spread of Funding Sources
Spread of Funding Sources Unsecured Secured Facilities3 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-2026 Sept-2026 Oct-2026 Dec-2026 Dec-2025
Slide 40: Spread of Funding Sources (Continued)
Spread of Funding Sources (Continued) Cash / Unfettered Secured Facilities3 Total 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 41: EPRA Cost Ratio – A Strong Control on Costs
EPRA Cost Ratio – A Strong Control on Costs 30 June 2024 (£m) 30 June 2023 (£m) 31 December 2023 (£m) Gross rent less ground rent, service charge and other income 80.0 78.2 155.8 Direct property expense 8.7 7.9 18.2 Less: service charge and recovered costs (5.9) (5.7) (13.3) Non-recoverable property
Slide 42: Presentation Team
Presentation Team Mark Davies Richard Howell CEO CFO Primary Health Properties PLC 42
Slide 43: Disclaimer
Disclaimer This document comprises the slides for a presentation in respect of Primary Health Properties PLC (the “Company”) and its interim results presentation for the six months ended 30 June 2024 (the “Presentation”). No reliance may be placed for any purposes whatsoever on the information in th
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