TIDMPHP
RNS Number : 3180D
Primary Health Properties PLC
26 April 2017
26 April 2017
Primary Health Properties PLC
Trading Update
Primary Health Properties PLC ("PHP" or "Company"), the UK's
leading investor in modern primary healthcare facilities, today
publishes a trading update for the period 1 January 2017 to 25
April 2017.
Investment activity
PHP has continued to grow the portfolio completing GBP13.5m of
acquisitions in the first quarter of 2017, and has continued to
build a strong pipeline of opportunities both in the UK (GBP45m)
and Ireland (EUR30m).
Cove Bay Medical Centre and Pitmedden Medical Centre, two
modern, purpose built healthcare facilities located close to
Aberdeen were acquired in January 2017 for a total consideration of
GBP7.2 million. The properties benefit from long unexpired terms of
15.3 years and 13.0 years respectively.
PHP also completed its second acquisition in Ireland,
contracting to provide development funding for the construction of
a new primary care centre in Carrigaline, County Cork for a total
cost of EUR7.3 million. The centre comprises circa 2,900m(2) and
will be fully let for 25 years from completion. Over three quarters
of the rent roll is contracted to the Irish Government's Health
Service Executive with the remainder derived from a group of GPs
and a pharmacy operator.
These acquisitions increase PHP's portfolio to 299 assets
including two developments currently on site. The development at
Swindon is on target to complete in May 2017 and construction work
at Carrigaline is expected to be completed by Q3 2017.
Rental income increased
PHP has continued to enhance and grow the rental income of its
existing portfolio with 48 rent reviews settled in the first
quarter, increasing rent by GBP0.2m, with a weighted average
annualised increase of 1.6%, an increase over the 0.9% achieved in
2016. In addition, a further GBP0.9m has been committed to enhance
and extend existing assets within PHP's portfolio and a strong
pipeline of projects is being progressed to further increase rental
income and extend unexpired occupational lease terms.
New long-term financing
In March 2017, new senior secured ten year notes for a total of
GBP100m were issued at a fixed coupon of 2.83%. The issuance
represented PHP's first transaction in the private placement market
and demonstrates its ability to source funding from a broad range
of alternative providers at attractive rates.
The proceeds of the issue have been partially applied to
refinance PHP's existing "club" facility with The Royal Bank of
Scotland plc ("RBS") and Santander Corporate Banking. The GBP115m
club facility, which was due to mature in August 2017, was replaced
by a new GBP50m bilateral term loan with RBS. The new RBS facility
is for an initial four year term and PHP retains an option to both
extend the term by a further year and increase the loan facility to
a maximum total of GBP100m with the agreement of RBS.
These debt transactions extended the average weighted maturity
of PHPs debt facilities to 6.1 years (31 December 2016: 5.1
years).
At 31 March 2017, PHP's net debt stood at GBP669.0m (31 December
2016: GBP655.7m) with a pro-forma loan to value ratio of 54.3% (31
December 2016: 53.7%).
Dividend
The quarterly dividend for each of the first two quarters of
2017 has been increased by 2.24% to 1.31p per share; equivalent to
5.25p (2016: 5.125p) on an annualised basis. The first quarter's
dividend was paid in February 2017 and the second quarter's
dividend will be paid in May 2017. PHP remains committed to paying
a fully covered and growing dividend to shareholders.
Revised advisory agreement terms
Last week, we announced revised terms to the advisory agreement
between PHP and the property adviser, Nexus Tradeco Limited
(Nexus). The fee payable for the management of PHP's property
portfolio has been amended to incorporate additional lower fee
increments as PHP continues to add scale. The fee payable for gross
assets above GBP1.5bn, previously 0.3%, has been reduced to 0.275%
for gross assets between GBP1.5bn and GBP1.75bn and 0.25% for gross
assets between GBP1.75bn and GBP2.0bn.
In addition, the terms under which Nexus is entitled to a
performance incentive fee (PIF) have been amended. Nexus will
continue to be entitled to 11.25% of the 'total return' above a
hurdle rate of 8%, but this will now be based on the change in EPRA
net asset value (NAV) plus dividends paid, rather than the change
in IFRS NAV plus dividends paid. Changes in IFRS NAV include the
impact of changes in the mark to market valuation of the company's
derivatives and convertible bonds, which do not reflect the
performance of the underlying property portfolio.
New controls on the PIF have been introduced. The PIF in respect
of any year is now capped at the lower of 20% of the management fee
payable to Nexus in that year or GBP2.0m. Half of any PIF payment
will be deferred to the following year, with performance against
the hurdle rate (both positive and negative) carried forward in a
notional cumulative account with any future payment subject to the
account being in a surplus position. Furthermore, the payment of
any PIF is restricted if it would otherwise cause PHP's dividend
cover to fall below 98%. The Nexus team working on PHP's account,
other than Harry Hyman, will receive 25% of any PIF paid, to aid
staff motivation and retention. No PIF has been paid to Nexus since
2007 and the notional cumulative PIF deficit of GBP12.1m at the end
of 2016, entirely attributable to the aforementioned IFRS mark to
market adjustments, has been eliminated.
Outlook
The significant demand for quality, available healthcare is
increasingly driven by the growing and ageing population in both
the UK and Ireland and the need for modern, integrated, local
primary healthcare facilities is becoming more acute in order to
relieve the pressures being placed on hospitals and A&E
departments. We do not anticipate that the result of the
forthcoming UK General Election will have any material impact on
the important role primary healthcare will play in the future in
the provision of health services; away from over-burdened hospital
settings.
Harry Hyman, Managing Director of Primary Health Properties,
commented:
"PHP has made a good start to 2017, completing further
acquisitions and growing rental income. We have a strong pipeline
of potential assets both in the UK and Ireland helping us to
achieve our future growth targets.
PHP will continue to focus on growing earnings through selective
acquisitions, strategic asset management activity, careful debt
management and securing growth from rent reviews. This will enable
PHP to continue to pay an increased, fully covered dividend to
shareholders."
For further information contact:
Harry Hyman Richard Howell
Primary Health Properties Primary Health Properties
PLC PLC
T: 0207 451 7050 T: 0207 104 5599
harry.hyman@nexusgroup.co.uk richard.howell@nexusgroup.co.uk
------------------------------ ---------------------------------
David Rydell / Elizabeth
Snow / Eve Kirmatzis
Bell Pottinger
T: 0203 772 2582
------------------------------ ---------------------------------
Further information about PHP can be found on the Company's
website www.phpgroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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