TIDMPHP
RNS Number : 6464H
Primary Health Properties PLC
25 February 2010
Primary Health Properties PLC ('PHP' or the 'Group')
Annual Report for the year ended 31 December 2009
Primary Health Properties PLC, one of the UK's largest providers of modern
primary healthcare facilities, is pleased to announce its audited results for
the year ended 31 December 2009.
Group Financial Highlights
- Successful capital raisings of GBP60.7 million net of expenses
- Payment of 17p of dividends during the year
- 8.75p second interim dividend for 2009 declared and payable on 26 March 2010
- Operating profit before revaluation result and fair value gain/loss on
derivatives rose from GBP4.7million to GBP7.9million
- Loan to value ratio reduced to 49% at 31 December 2009 against covenant of 70%
- Basic net asset value increased to 247.2p per share (31 December 2008
(Adjusted): 226.7p)
- EPRA net asset value of 279.9p per share (31 December 2008 (Adjusted): 272.9p)
- Borrowing facilities not due for renewal until 2013
Group Operational Highlights
- Continued success of our strategy of investing in modern purpose built
healthcare centres
- Increase in the portfolio from GBP316.9million to GBP341.9million
- Rental growth of approximately 3.12% per annum
- Rent roll at year end of GBP21.3million
- Important decision achieved on rent review appeal process during the year
- Portfolio 100% let
- Portfolio including commitments valued at GBP371million as at 31 December 2009
on an initial yield of 6.0%
Harry Hyman, Executive Managing Director of PHP, commented:
"The Group's strategy of continued investment in modern purpose built healthcare
centres has yielded excellent financial results for the year. Whilst the
challenging economic environment continues to have a negative impact on the
value of commercial property, the niche primary care market in which PHP
operates still has good fundamentals.
Spending on healthcare is driven by demographics as well as the growth of the
economy. Primary care remains at the heart of the changes in healthcare in the
UK. There remains a stronger demand for larger purpose built primary care
centres and we are also still recording rental increases. The new procedure for
appeals has also started to yield positive results.
Given these continuing developments, our recent capital raisings and our
commitment to increasing the Group's portfolio on a prudent basis, we look
forward to providing a secure and attractive rate of return to our
Shareholders."
Enquiries:
Pelham Bell Pottinger Corporate and Financial
David Rydell/ Victoria Geoghegan
Tel: 020 7861 3925
Primary Health Properties PLC
Harry Hyman
Managing Director
Tel: 020 7451 7050
Operating and Financial Review
As reported during 2009, the challenging economic environment continued to have
a negative impact on the value of commercial property. However, the niche
primary care market in which we operate still has good fundamentals and there is
continued demand for the provision of modern primary health care facilities,
from both tenants and investors. The Group has an excellent portfolio of modern
properties with secure long leases and high quality tenants, backed by the
Government. Our buildings are all used in the delivery of primary care which is
in the front line of delivery of NHS services. Spending on healthcare through
the NHS remains at the heart of the Government's and the Opposition's policy
agendas. The medium term outlook for rental growth prospects is also enhanced by
the High Court judgment in March 2009 which will encourage a fairer, more robust
and more transparent system for reviewing rent.
The Board remains committed to increasing the Group's portfolio on a prudent
basis, actively managing assets through refurbishment, enhancement and
redevelopment, increasing revenue from existing leases and delivering returns
for shareholders. We believe that the business is well positioned and remain
confident in the prospects for the Group.
Trading performance
An analysis of the trading performance for the year ended 31 December 2009 is
set out below:
+-------------------------------------------+-----------+-------------+
| | | Restated |
+-------------------------------------------+-----------+-------------+
| | Year to | Year to |
+-------------------------------------------+-----------+-------------+
| | 31-Dec-09 | 31-Dec-08** |
+-------------------------------------------+-----------+-------------+
| | GBPm | GBPm |
+-------------------------------------------+-----------+-------------+
| Annualised rent roll* | 21.3 | 19.6 |
+-------------------------------------------+-----------+-------------+
| Operating profit before revaluation | 18.0 | 15.2 |
| result and financing | | |
+-------------------------------------------+-----------+-------------+
| Net financing costs | (10.1) | (10.5) |
+-------------------------------------------+-----------+-------------+
| Operating profit before revaluation | 7.9 | 4.7 |
| result and fair value gain/(loss) on | | |
| derivatives | | |
+-------------------------------------------+-----------+-------------+
| Fair value gain/(loss) on derivatives | 1.3 | (10.7) |
+-------------------------------------------+-----------+-------------+
| Revaluation gain/(loss) on property | 1.6 | (17.7) |
| portfolio | | |
+-------------------------------------------+-----------+-------------+
| Profit/(loss) before tax | 10.8 | (23.7) |
+-------------------------------------------+-----------+-------------+
| Dividends paid | 5.8 | 5.5 |
+-------------------------------------------+-----------+-------------+
*On completed properties
**Restated as described in note 2 to the financial statements
High Court verdict
On 31 March 2009, the Group announced that, in a landmark judgment in the High
Court, it had made a successful challenge to the dispute resolution procedures
to be followed when determining the level of rent to be reimbursed by the
Department of Health for GPs' leasehold premises.
The Board believes that this will lead to a fairer, more robust and more
transparent system for reviewing rent and is likely to improve the Group's
rental growth prospects over time.
Rental growth
The achieved increase on rental review of leases agreed in the year to 31
December 2009 was 9.37% over three years (equivalent to 3.12% per annum)
compared with 12.35% over three years (equivalent to 4.12% per annum) reported
in 2008. Rental growth, although not formally linked to inflation, is likely to
be subdued in a low inflation environment. However, the Joint Managers believe
that increased specification, where new buildings have a much higher
specification due to the need for higher energy efficiency and reduced carbon
footprint requirements in the NHS, is driving replacement costs higher which are
important criteria in justifying higher rent.
Analysis of annualised rent by tenant
The table shows the percentage of the Group's portfolio by rent roll derived
from each major tenant class: GPs, PCTs, Health Authorities, pharmacy operators
and others. Some 99% of rent comes directly or indirectly from GPs, PCTs, Health
Authorities and pharmacy operators.
+----------------------------------------+----------+
| GPs | 76% |
+----------------------------------------+----------+
| PCTs | 11% |
+----------------------------------------+----------+
| Pharmacy | 9% |
+----------------------------------------+----------+
| Health Authorities | 3% |
+----------------------------------------+----------+
| Other | 1% |
+----------------------------------------+----------+
Tenancy split by floor area
The table indicates tenancy split by floor area (psm).
+----------------------------------------+----------+
| GPs | 80% |
+----------------------------------------+----------+
| PCTs | 11% |
+----------------------------------------+----------+
| Pharmacy | 6% |
+----------------------------------------+----------+
| Health Authorities | 2% |
+----------------------------------------+----------+
| Other | 1% |
+----------------------------------------+----------+
Analysis of rental income by pharmacy operator
The table shows the breakdown of the 9% of total rent received from pharmacy
operators by well known brands (67%), large independents with over five units
(20%) and small independents with five or less units (13%).
+----------------------------------------+----------+
| Lloyds | 44% |
+----------------------------------------+----------+
| Rowlands | 12% |
+----------------------------------------+----------+
| Boots | 6% |
+----------------------------------------+----------+
| Co-op | 5% |
+----------------------------------------+----------+
| Large independent | 20% |
+----------------------------------------+----------+
| Small independent | 13% |
+----------------------------------------+----------+
Analysis of rental income by geographic region
The table shows the percentage split of rental income by geographic region.
+----------------------------------------+----------+
| South East | 25% |
+----------------------------------------+----------+
| West Midlands | 13% |
+----------------------------------------+----------+
| East Midlands | 12% |
+----------------------------------------+----------+
| North West | 11% |
+----------------------------------------+----------+
| Yorkshire & Humberside | 8% |
+----------------------------------------+----------+
| Scotland | 8% |
+----------------------------------------+----------+
| Wales | 8% |
+----------------------------------------+----------+
| London | 7% |
+----------------------------------------+----------+
| South West | 4% |
+----------------------------------------+----------+
| North | 3% |
+----------------------------------------+----------+
| East Anglia | 1% |
+----------------------------------------+----------+
Analysis of annualised rent by unexpired lease term
The table demonstrates that the Group has in excess of 75% of leases with a life
of 15 years or longer.
+----------------------------------------+----------+
| More than 20 years | 22% |
+----------------------------------------+----------+
| 15-20 years | 53% |
+----------------------------------------+----------+
| 6-15 years | 24% |
+----------------------------------------+----------+
| Less than 5 years | 1% |
+----------------------------------------+----------+
Security of income by term certain
The table shows that by year 10, the Group would still be receiving 94% of its
current income and by year 15, 72%, taking no account of any lease renewals or
rent reviews during the period.
+----------------------+--------------------------+
| | Percentage of total |
| | income |
+----------------------+--------------------------+
| Years from 31 | as at 31 December 2009 |
| December 2009 | |
+----------------------+--------------------------+
| 0.0 | 100 |
+----------------------+--------------------------+
| 0.5 | 100 |
+----------------------+--------------------------+
| 1.0 | 100 |
+----------------------+--------------------------+
| 1.5 | 100 |
+----------------------+--------------------------+
| 2.0 | 100 |
+----------------------+--------------------------+
| 2.5 | 100 |
+----------------------+--------------------------+
| 3.0 | 99 |
+----------------------+--------------------------+
| 3.5 | 99 |
+----------------------+--------------------------+
| 4.0 | 99 |
+----------------------+--------------------------+
| 4.5 | 99 |
+----------------------+--------------------------+
| 5.0 | 98 |
+----------------------+--------------------------+
| 5.5 | 98 |
+----------------------+--------------------------+
| 6.0 | 98 |
+----------------------+--------------------------+
| 6.5 | 98 |
+----------------------+--------------------------+
| 7.0 | 98 |
+----------------------+--------------------------+
| 7.5 | 98 |
+----------------------+--------------------------+
| 8.0 | 98 |
+----------------------+--------------------------+
| 8.5 | 98 |
+----------------------+--------------------------+
| 9.0 | 97 |
+----------------------+--------------------------+
| 9.5 | 97 |
+----------------------+--------------------------+
| 10.0 | 97 |
+----------------------+--------------------------+
| 10.5 | 97 |
+----------------------+--------------------------+
| 11.0 | 95 |
+----------------------+--------------------------+
| 11.5 | 93 |
+----------------------+--------------------------+
| 12.0 | 92 |
+----------------------+--------------------------+
| 12.5 | 91 |
+----------------------+--------------------------+
| 13.0 | 86 |
+----------------------+--------------------------+
| 13.5 | 84 |
+----------------------+--------------------------+
| 14.0 | 80 |
+----------------------+--------------------------+
| 14.5 | 78 |
+----------------------+--------------------------+
| 15.0 | 75 |
+----------------------+--------------------------+
Forthcoming rent reviews
The table shows the annual amounts of rent falling due for review in each of the
next three years.
GBP1.5million of rent is reviewed on a longer pattern and GBP685k, included in
the first column for 2010, is reviewed annually.
+----------------------------------------+-----------+
| 2010 | GBP6.093m |
+----------------------------------------+-----------+
| 2011 | GBP7.580m |
+----------------------------------------+-----------+
| 2012 | GBP6.163m |
+----------------------------------------+-----------+
| Longer pattern | GBP1.487m |
+----------------------------------------+-----------+
Analysis of portfolio by age of buildings
The table shows a breakdown of the portfolio by value and number of assets in
age groupings. The few older buildings have all been subject to extensive
refurbishment within the last 15 years. Approximately 75% of the portfolio
comprises purpose built health centres which are under nine years old and around
97% of the properties are under 15 years old.
+----------------------------------------+------------+------------+
| | Value of | Number |
| | | of |
+----------------------------------------+------------+------------+
| | properties | properties |
+----------------------------------------+------------+------------+
| | GBPm | |
+----------------------------------------+------------+------------+
| Under 3 years | 92.57 | 20 |
+----------------------------------------+------------+------------+
| 3-6 years | 103.34 | 37 |
+----------------------------------------+------------+------------+
| 6-9 years | 53.79 | 22 |
+----------------------------------------+------------+------------+
| 9-12 years | 50.47 | 20 |
+----------------------------------------+------------+------------+
| 12-15 years | 22.19 | 9 |
+----------------------------------------+------------+------------+
| 15-18 years | 0 | 0 |
+----------------------------------------+------------+------------+
| 18-21 years | 0 | 0 |
+----------------------------------------+------------+------------+
| Over 21 years | 10.37 | 4 |
+----------------------------------------+------------+------------+
Acquisitions and disposals
The Group purchased the following properties during the year ended 31 December
2009. There were no disposals during the year.
+----------------------------------+-------------+----------+--------------------+
| Property | Acquisition | | Occupational |
| | cost | | tenants |
+----------------------------------+-------------+----------+--------------------+
| | GBPm | | |
+----------------------------------+-------------+----------+--------------------+
| The Forest Surgery, Hugglescote | 2.7 | | GP practice and |
| | | | pharmacy |
+----------------------------------+-------------+----------+--------------------+
| Firdale Medical Centre, Sale | 4.2 | | GP practice and |
| | | | pharmacy |
+----------------------------------+-------------+----------+--------------------+
| Port Talbot Resource Centre, | 15.9 | | GP practice and |
| Port Talbot | | | pharmacy |
+----------------------------------+-------------+----------+--------------------+
Commitments
Commitments may be analysed as follows:
+-------------------------------+--------------+--------------+----------+--------------------------+
| Property | New | Total | | Occupational tenants |
| | commit-ments | out-standing | | |
| | in 2009 | commit-ments | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| | GBPm | GBPm | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| Cowbridge Medical Centre, | 6.9 | 5.6 | | GP practices and PCT |
| Vale of Glamorgan | | | | accommodation |
+-------------------------------+--------------+--------------+----------+--------------------------+
| The Sloane Practice Medical | 2.9 | 1.7 | | GP practice and pharmacy |
| Centre, Sheffield | | | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| The New Shefford Health | 5.5 | 5.2 | | GP practice and PCT |
| Centre, Shefford | | | | accommodation |
+-------------------------------+--------------+--------------+----------+--------------------------+
| Total new commitments | 15.3 | 12.5 | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| | | | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| Connahs Quay * | | 9.3 | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| Treharris * | | 4.3 | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
| Total commitments | | 26.1 | | |
+-------------------------------+--------------+--------------+----------+--------------------------+
* initial commitment in 2008.
Portfolio
The table below sets out the portfolio as at 31 December 2009.
+----------------------------------------+-----------+-----------+
| | 31-Dec-09 | 31-Dec-08 |
+----------------------------------------+-----------+-----------+
| | GBPm | GBPm |
+----------------------------------------+-----------+-----------+
| Investment properties | 338.4 | 314.4 |
+----------------------------------------+-----------+-----------+
| Properties in the course of | 3.5 | 2.5 |
| development | | |
+----------------------------------------+-----------+-----------+
| Total properties | 341.9 | 316.9 |
+----------------------------------------+-----------+-----------+
| Finance leases | 3.0 | 3.0 |
+----------------------------------------+-----------+-----------+
| Total owned and leased | 344.9 | 319.9 |
+----------------------------------------+-----------+-----------+
| Development loans | - | 0.3 |
+----------------------------------------+-----------+-----------+
| Total owned and leased (including | 344.9 | 320.2 |
| development loans) | | |
+----------------------------------------+-----------+-----------+
| Committed | 26.1 | 34.0 |
+----------------------------------------+-----------+-----------+
| Total owned, leased and committed | 371.0 | 354.2 |
+----------------------------------------+-----------+-----------+
| Closing annualised rent roll (on | 21.3 | 19.6 |
| completed properties) | | |
+----------------------------------------+-----------+-----------+
Property valuation
The freehold, leasehold and development properties of the Group have been
independently valued at fair value by Lambert Smith Hampton, Chartered Surveyors
and Valuers (LSH), as at 31 December 2009.
At the year end they reflected a 6.00% initial yield and a 6.24% true equivalent
yield compared with 5.97% initial yield and true equivalent yield of 6.16% at
the end of the previous year. This compares with 30 June 2009 which showed an
initial yield of 6.06% and a true equivalent yield of 6.25%.
Discounted cash flow property valuation
In addition to the market value exercise performed by LSH, the Joint Managers
monitor the value of the Group's completed investment portfolio based on a
discounted cash flow ("DCF") analysis. The DCF valuation of delivered assets as
at 31 December 2009 was GBP379million compared to the market value of
GBP342million, including properties in the course of development (31 December
2008: DCF valuation of GBP367million compared to the market value of
GBP316million). The difference of GBP37million represents an additional 60.2p of
net asset value per share as at 31 December 2009.
The assumptions used in the DCF analysis are:
- A discount rate of 7% (2008: 7%);
- An average annual increase in the individual property rents at review of
2% (2008: 3%);
- Capital growth in residual values of 1% (2008: 1%) per annum; and
- In the case of each property, the DCF analysis is over the remaining period of
the lease at 31 December 2009.
Comparative values using the discount rates below are as follows:
+----------------------------------------+-----------+
| ?Discount rate | Value |
+----------------------------------------+-----------+
| 6.50% | GBP399.0m |
+----------------------------------------+-----------+
| 7.50% | GBP359.8m |
+----------------------------------------+-----------+
Portfolio performance
The Investment Property Databank recently launched the IPD Healthcare Property
Index and our portfolio is a founder constituent of the index. This demonstrated
the robust nature of the sector when compared to the wider commercial property
market
+---------------------------------------+---------+
| Performance for year ended 31 | |
| December 2008 (latest available data) | |
+---------------------------------------+---------+
| PHP Portfolio total return | -0.5% |
+---------------------------------------+---------+
| IPD Healthcare Property Index total | -4.6% |
| return | |
+---------------------------------------+---------+
| IPD All Property Index total return | -22.1% |
+---------------------------------------+---------+
Net assets and EPRA NAV
Net assets have increased significantly as a result of the capital raisings
during the year.
+----------------------------------------+------------+-----------+
| | 31-Dec-09 | 31-Dec-08 |
+----------------------------------------+------------+-----------+
| Net assets | GBP151.92m | GBP78.29m |
+----------------------------------------+------------+-----------+
| Net asset value per share | 247.2p | 226.7p** |
+----------------------------------------+------------+-----------+
| EPRA net asset value per share* | 279.9p | 272.9p** |
+----------------------------------------+------------+-----------+
*EPRA net asset value is calculated as balance sheet net assets including the
valuation result on trading properties, excluding fair value adjustments for
debt and related derivatives ("EPRA" is the European Public Real Estate
Association).
**The NAV per share is based on the restated audited consolidated balance sheet
of the Group, as adjusted to illustrate the effect of the capital raisings which
occurred in 2009, as if those events had been completed on 31 December 2008.
Borrowings
At 31 December 2009, Group borrowings were GBP167million in aggregate. At the
year end date, aggregate facilities were GBP265million of which GBP255million
was on a term loan basis and GBP10million available on an overdraft basis.
Taking into account further commitments of GBP26.1million, there was
GBP71.9million of committed headroom available for the Group to continue with
its acquisition policies. The term facilities are not due for
renewal/replacement until 2013. The Board is satisfied with the pricing and term
of its existing facilities.
The capital raised during the year has initially been applied to reduce
borrowings.
The loan to value ratio at 31 December 2009 was 49% compared to a maximum
covenanted level of 70% as of March 2010. Interest cover was 2.2 times compared
to a minimum covenanted level of 1.3 times.
Hedging
The amount of fixed rate cover in place at 31 December 2009 (including
GBP88million of callable swaps) was GBP183million. Basis rate swaps totalling
GBP200million were also in place during the year, but matured on 11 February
2010 and contributed GBP470,000 to the 2009 profits.
All swaps are taken out in order to mitigate exposure to interest rate risk, but
under accounting rules only certain swaps qualify as "effective" hedges and the
mark to market movement on these is matched against the hedged liability in the
Balance Sheet. Due to the rise in money market rates during the year to 31
December 2009, the value of the Group's "effective" interest rate swaps
increased by GBP7.7million (12.5p per share), partially offsetting losses
recorded in previous periods. This gain is included in the total comprehensive
income result. The revaluation of swaps regarded as ineffective for IAS39
purposes was also a gain of GBP1.3million (2008: loss of GBP10.7million), which
is included in the profit for the year. These gains were a significant factor in
the uplift in the net asset value from 226.7p to 247.2p. The revaluation gain on
ineffective swaps included a gain on the callable swaps of GBP1.7million (31
December 2008: loss of GBP11.1million). The mark to market value fluctuates
with movements in term interest rates, and in the case of the callable swaps,
with market volatility. The improvement in the value of all swaps reflects the
increase in medium term interest rates and, as in prior periods, the movement in
value does not affect cash flows.
Finance and interest rate hedging (assuming callable swaps are not called)
This table shows the level of bank borrowings economically hedged by interest
rate swaps for each financial year to 31 December 2027. Shown in GBPmillion.*
+------------+---------------+---------------+
| Year | Amount hedged | Rate (%) |
| | (GBPm) | |
+------------+---------------+---------------+
| 2009 | 188 | 4.79 |
+------------+---------------+---------------+
| 2010 | 202 | 4.79 |
+------------+---------------+---------------+
| 2011 | 208 | 4.80 |
+------------+---------------+---------------+
| 2012 | 212 | 4.80 |
+------------+---------------+---------------+
| 2013 | 190 | 4.79 |
+------------+---------------+---------------+
| 2014 | 178 | 4.80 |
+------------+---------------+---------------+
| 2015 | 180 | 4.79 |
+------------+---------------+---------------+
| 2016 | 164 | 4.75 |
+------------+---------------+---------------+
| 2017 | 158 | 4.69 |
+------------+---------------+---------------+
| 2018 | 168 | 4.69 |
+------------+---------------+---------------+
| 2019 | 168 | 4.69 |
+------------+---------------+---------------+
| 2020 | 168 | 4.69 |
+------------+---------------+---------------+
| 2021 | 131 | 4.66 |
+------------+---------------+---------------+
| 2022 | 80 | 4.58 |
+------------+---------------+---------------+
| 2023 | 80 | 4.58 |
+------------+---------------+---------------+
| 2024 | 80 | 4.58 |
+------------+---------------+---------------+
| 2025 | 80 | 4.58 |
+------------+---------------+---------------+
| 2026 | 50 | 4.61 |
+------------+---------------+---------------+
| 2027 | 20 | 4.76 |
+------------+---------------+---------------+
Finance and interest rate hedging
This table shows the level of bank borrowings covered by effective hedges for
each financial year to 31 December 2027. Shown in GBPmillion.*
+------------+---------------+---------------+
| Year |Amount hedged | Rate (%) |
| | (GBPm) | |
+------------+---------------+---------------+
| 2009 | 188 | 4.79 |
+------------+---------------+---------------+
| 2010 | 114 | 4.80 |
+------------+---------------+---------------+
| 2011 | 120 | 4.81 |
+------------+---------------+---------------+
| 2012 | 124 | 4.81 |
+------------+---------------+---------------+
| 2013 | 102 | 4.79 |
+------------+---------------+---------------+
| 2014 | 90 | 4.81 |
+------------+---------------+---------------+
| 2015 | 92 | 4.79 |
+------------+---------------+---------------+
| 2016 | 76 | 4.69 |
+------------+---------------+---------------+
| 2017 | 70 | 4.56 |
+------------+---------------+---------------+
| 2018 | 80 | 4.58 |
+------------+---------------+---------------+
| 2019 | 80 | 4.58 |
+------------+---------------+---------------+
| 2020 | 80 | 4.58 |
+------------+---------------+---------------+
| 2021 | 80 | 4.58 |
+------------+---------------+---------------+
| 2022 | 80 | 4.58 |
+------------+---------------+---------------+
| 2023 | 80 | 4.58 |
+------------+---------------+---------------+
| 2024 | 80 | 4.58 |
+------------+---------------+---------------+
| 2025 | 80 | 4.58 |
+------------+---------------+---------------+
| 2026 | 50 | 4.61 |
+------------+---------------+---------------+
| 2027 | 20 | 4.76 |
+------------+---------------+---------------+
*The tables above show the weighted average amount hedged throughout each
financial year for the period to 31 December 2027. The charts assume that the
term loans to the Group which expire in 2013 will be renewed.
Revenues and administration expenses
At a trading level, revenues for the year ended 31 December 2009 rose to
GBP21.3million as a result of new deliveries and favourable rent reviews.
Operating profit before revaluation result and fair value gain on derivatives
was GBP7.9million. Administration expenses were slightly lower during the year
mainly due to lower management fees.
Management fees and Performance incentive scheme
Details of management fees payable to the Joint Managers are shown in note 12.
There is no performance incentive fee payable to the Joint Managers for the year
ended 31 December 2009 (year ended 31 December 2008: GBPNil).
There is a deficit of some GBP57million (2008: deficit of GBP74million) to be
made up in the net asset value before any further performance incentive fee
becomes payable under the terms of the Management Agreement.
Capital raising
On 24 March 2009, the Group raised GBP3.7million gross (GBP3.3million net of
expenses), by way of a placing of 1,679,354 new ordinary shares of 50p each at a
price of 220p per placing share (the "Placing"). This Placing was taken up by
institutional and other investors. The proceeds were used for general working
capital purposes.
On 7 October 2009, PHP issued 26,086,956 new ordinary shares by way of a Firm
Placing and Placing and Open Offer at a price of 230p per share, raising
approximately GBP60million gross (GBP57.4million net of expenses). The net
proceeds of the fundraising have been used initially to reduce the Group's net
indebtedness. The Group intends to make selected acquisitions of medical
properties to expand its property portfolio which will be funded, in part, by
redrawing those elements of the Group's bank facilities that can be redrawn.
Interim dividend
Interim dividends per ordinary share were paid during the year ended 31 December
2009 on 15 April 2009 (8.5p) and 20 November 2009 (8.5p). In order to accelerate
dividend payments to Shareholders instead of a final dividend, the Board
announced on 11 February 2010 the payment of a second interim cash dividend of
8.75p per ordinary share in respect of the year ended 31 December 2009 to
Shareholders on the register of members on 19 February 2010 for payment on 26
March 2010, and in the current tax year. The Group's policy is to pay a minimum
of 90% of the profits of its tax exempt business in dividends in accordance with
UKREIT Regulations.
Scrip Dividend Scheme
At the Company's general meeting held on 6 October 2009, Shareholders granted
authority to the Directors to implement the Scrip Dividend Scheme in respect of
future cash dividends. Shareholders will be offered the opportunity to receive
the second interim cash dividend in respect of the year ended 31 December 2009
in new ordinary shares and a circular and scrip mandate form will be posted on 2
March 2010. The final date for the receipt of the scrip mandate forms (if
Shareholders have not already signed one for future dividends and wish to take
shares instead of the interim cash dividend) is 16 March 2010.
On 16 November 2009, 103,894 new ordinary shares of 50 pence each were allotted
and issued in lieu of the interim cash dividend for the six months ended 30 June
2009 under the Scrip Dividend Scheme. Admission to the Official List of the UK
Listing Authority of the new ordinary shares was effective on 20 November 2009.
Key performance indicators ("KPIs")
+------------------+----------------------+---------------------------------+
| Objective | Metric | Performance |
+------------------+----------------------+---------------------------------+
| To create | - Sustained real | - Adjusted EPS rose from 14.0p |
| sustainable long | growth in EPS | to 18.4p |
| term rental | - Annual revenue to | - Turnover rose to GBP21.3m |
| income and | exceed budget target | - Dividend grew for 10th year |
| capital growth | - Sustained dividend | to 17p per share 3.0% higher |
| for shareholders | growth | than in 2008 |
| | | - Successful establishment of |
| | | robust rent appeal process |
+------------------+----------------------+---------------------------------+
| To maximise the | - Out-performance | - Basic NAV grew from 226.7p to |
| returns from the | versus the IPD | 247.2 p. |
| investment | benchmark | - performance was better than |
| portfolio | | the IPD benchmark |
| | | - rental increases the |
| | | equivalent of 3.12% per annum |
| | | were achieved in 2009 |
+------------------+----------------------+---------------------------------+
| To generate long | - Growth in NAV | - Basic NAV grew from 226.7p to |
| term value for | - Growth in | 247.2p |
| shareholders | dividends | - Dividend grew from 16.5p to |
| | | 17p |
+------------------+----------------------+---------------------------------+
| To manage our | - Maintain | - GBP60.7m of capital raised, |
| balance sheet | appropriate balance | reducing gearing to 49% |
| effectively | between debt and | |
| | equity within | |
| | covenanted levels | |
+------------------+----------------------+---------------------------------+
| To identify new | - Future commitments | - New commitments of GBP15.3m |
| units to | | were entered into during the |
| purchase | - Deliveries | year |
| | | - Deliveries during the year |
| | | were GBP21.1m |
| | | - Board approval was given to |
| | | new purchases of GBP34.5m |
| | | completed in the period between |
| | | the year end and the date of |
| | | this report |
+------------------+----------------------+---------------------------------+
| To complete and | Growth in annualised | - New deliveries added GBP1.3m |
| let properties | rent roll | of rent to the rent roll |
| under the course | | - The portfolio was 100% let at |
| of development | | the year end |
+------------------+----------------------+---------------------------------+
| To maintain good | - Long average lease | - Weighted average lease length |
| quality leases | term | of 17.3 years |
| | - Maintain a minimal | - Portfolio 100% let |
| | percentage of voids | - 90% of income effectively |
| | | paid for by the NHS |
+------------------+----------------------+---------------------------------+
Principal risks and uncertainties
In common with most businesses, the Group is affected by a number of risks and
uncertainties, not all of which are wholly within the Group's control. These
principal risks and uncertainties are summarised below. The Board has reviewed
and agreed policies for managing each of the risks:
+-------------+-----------------------------+------------------------------+
| ?Risk | Impact/Risk | Mitigation |
| description | | |
+-------------+-----------------------------+------------------------------+
| Capital | - Unable to counteract the | - Capital raisings |
| adequacy | impact of fluctuating | strengthened the Group's |
| | property values on the | balance sheet |
| | Group's balance sheet | - Liquidity and gearing are |
| | - Inability to invest in | kept under constant review |
| | suitable property on | |
| | favourable terms to enable | |
| | expansion | |
+-------------+-----------------------------+------------------------------+
| Liquidity | - Inability to fund | - Board approves an annual |
| risk | operations and capital | plan setting out expected |
| | expenditure programme | financial requirements |
| | - Restrictive covenant | - Majority of borrowing |
| | regime | matures in more than 12 |
| | - Limited market debt | months |
| | capacity | - Covenant and LTV ratio |
| | - Inability to raise | actively monitored |
| | sufficient new funding | - Commitments not wholly |
| | - Breach of covenants and | taken up |
| | LTVs | |
+-------------+-----------------------------+------------------------------+
| Interest | - Increased borrowing costs | - Borrowings on a variable |
| rate risk | - Market risk exposure | basis but interest rate risk |
| | through interest rates and | is mitigated through use of |
| | availability of credit | swaps |
| | | - All borrowing is in |
| | | Sterling |
+-------------+-----------------------------+------------------------------+
| Tax risk | - Increased taxes payable | - On-going monitoring and |
| | as a result of government | management of the criteria |
| | policy changes | to meet UK-REIT status |
| | - Compliance with the Real | |
| | Estate Investment Trust | |
| | (REIT) taxation regime | |
+-------------+-----------------------------+------------------------------+
| Occupier | - Downturn in primary care | - No sign of policy changes |
| market | market and demand for | from any of the major |
| conditions | specialist portfolios | political parties |
| | - Government changes | -100% of the portfolio let |
| | primary care initiative and | - Demographics increasing |
| | policies | demand for healthcare |
| | - Threat of voids in the | facilities |
| | portfolio | - Effectively upwards only |
| | - Prolonged downturn in | rent reviews and weighted |
| | tenant demand | average lease length of some |
| | | 17.3 years |
+-------------+-----------------------------+------------------------------+
| Market | - Risk of falling property | - Target ranges for balance |
| cycles | values | sheet gearing |
| | | - Secure income under UK |
| | | lease structure |
+-------------+-----------------------------+------------------------------+
| Property | - Asset value concentration | - No sign of policy changes |
| risks | - Poor performance of | regarding primary care |
| | single asset having a | - Multi-asset portfolio with |
| | material impact on the | long leases |
| | portfolio | - Primarily let to the NHS |
| | - Loss of value | - Properties predominately |
| | - Property deterioration | leased on tenant repairing |
| | | leases. Properties |
| | | regularly inspected and |
| | | adequately insured |
+-------------+-----------------------------+------------------------------+
| | | |
+-------------+-----------------------------+------------------------------+
| Retention | - As the Group has no | - Contractual arrangements |
| of Joint | employees, operations would | in place which are regularly |
| Managers | be adversely affected if | reviewed by the Management |
| | the services of the Joint | Engagement Committee |
| | Managers were not available | |
+-------------+-----------------------------+------------------------------+
Environmental matters
PHP specialises in the ownership of freehold or long leasehold interests in
modern purpose-built healthcare facilities, the majority of which are leased to
general practitioners and other associated healthcare users.
The Board views the assessment of environmental risk as an important element of
its due diligence process when it acquires land or purpose built properties.
Before purchase, an environmental desk top study is carried out and energy
efficiency certificates are obtained. PHP has engaged an Environmental
Consultant, Collier & Madge, to help specifically in this process. PHP's
ability to influence the energy efficiency of buildings is limited where ready
built properties are acquired and let on FRI terms. However, the buildings
acquired are generally specified to meet the NHS's exacting standards.
PHP is committed to the principles of continuous improvement in managing
environmental issues, including the proper management and monitoring of waste,
the reduction of pollution and emissions and compliance with environmental
legislation and codes of practice. PHP considers environmental matters as part
of the assessment of the suitability of purchasing new state of the art medical
centres to expand the portfolio, either through forward purchase development
agreements or through open market purchases and if appropriate, environmental
issues are included in the leases entered into by the medical practitioners.
Relationships
Other than Shareholders, the Group's performance and value are influenced by
other stakeholders, principally its lessees (the PCTs, the GPs and healthcare
users), the property developers, the District Valuers, lenders and the Joint
Managers. The Group's approach to these relationships is based on the principle
of mutual understanding of aims and objectives and the highest standards of
ethics and business practice.
Social and community issues
The Group provides purpose built healthcare properties for use by GPs, PCTs,
pharmacies and healthcare users thus indirectly benefiting the communities in
which they are based.
Annual General Meeting
The Annual General Meeting is convened on 27 April 2010 at 10.30am at the
registered office of the Company, Ground Floor, Ryder Court, 14 Ryder Street,
London SW1Y 6QB. The Circular to Shareholders and the Notice of Annual General
Meeting will be posted separately.
Outlook
Spending on healthcare is driven by demographics as well as the growth of the
economy. Primary care remains at the heart of the changes going on in healthcare
in the UK. There remains a strong demand for larger purpose built primary care
centres. We also see evidence of more institutional and corporate interest in
the sector.
The underlying property portfolio remains attractive, particularly in today's
market. It currently offers 100% occupancy with some 90% of the rent roll
effectively being paid for by the Government and has an unexpired lease length
of almost 18 years. We are also still recording rental increases. The new
procedure for appeals has started to yield positive results.
Since the year end, we have completed the acquisition of GBP34.5million of
properties being the Anchor Meadow Medical Centre, Aldridge, for GBP5.5million,
a portfolio of fourteen medical properties from Care Capital Plc for GBP24.2
million and two medical centres for GBP4.8million developed by the Abstract
Group. These acquisitions will add approximately GBP2.1million to the annual
rent roll. We have further deals totalling GBP10million in an advanced stage of
negotiation, which we expect to announce shortly.
Given these continuing developments, a more positive outlook for commercial
property generally and following our recent capital raisings, we look forward to
providing a secure and attractive rate of return to our Shareholders.
Graeme Elliot
Chairman
24 February 2010
Group Statement of Comprehensive Income for the year ended 31 December 2009
+-------------------------------------------+-------+-----------+---------------+
| | | 31-Dec-09 | 31-Dec-08 |
+-------------------------------------------+-------+-----------+---------------+
| | Notes | GBP000 | GBP000 |
| | | | |
+-------------------------------------------+-------+-----------+---------------+
| | | | (restated)*** |
+-------------------------------------------+-------+-----------+---------------+
| Rental income | | 20,994 | 19,312 |
+-------------------------------------------+-------+-----------+---------------+
| Finance lease income | | 338 | 379 |
+-------------------------------------------+-------+-----------+---------------+
| Rental and related income | | 21,332 | 19,691 |
+-------------------------------------------+-------+-----------+---------------+
| Direct operating expenses arising from | | (210) | (250) |
| investment property that generated rental | | | |
| income | | | |
+-------------------------------------------+-------+-----------+---------------+
| Administrative expenses: recurring | | (3,460) | (3,522) |
+-------------------------------------------+-------+-----------+---------------+
| Administrative expenses: non-recurring | | 372 | (794) |
+-------------------------------------------+-------+-----------+---------------+
| Operating profit before net valuation | | 18,034 | 15,125 |
| gain/(loss) on property portfolio | | | |
+-------------------------------------------+-------+-----------+---------------+
| Net valuation gain/(loss) on property | | 1,615 | (17,707) |
| portfolio | | | |
+-------------------------------------------+-------+-----------+---------------+
| Operating profit/(loss) before financing | | 19,649 | (2,582) |
| costs | | | |
+-------------------------------------------+-------+-----------+---------------+
| Finance income | | 86 | 2,024 |
+-------------------------------------------+-------+-----------+---------------+
| Finance costs | | (10,267) | (12,526) |
+-------------------------------------------+-------+-----------+---------------+
| Fair value gain/(loss) on derivatives | | 1,318 | (10,655) |
+-------------------------------------------+-------+-----------+---------------+
| Profit/(loss) on ordinary activities | | 10,786 | (23,739) |
| before taxation | | | |
+-------------------------------------------+-------+-----------+---------------+
| Current taxation | | - | - |
+-------------------------------------------+-------+-----------+---------------+
| Conversion to UK-REIT charge | | - | (160) |
+-------------------------------------------+-------+-----------+---------------+
| Taxation charge | | - | (160) |
+-------------------------------------------+-------+-----------+---------------+
| Profit/(loss) for the year* | | 10,786 | (23,899) |
+-------------------------------------------+-------+-----------+---------------+
| Other comprehensive income being movement | | 7,657 | (16,350) |
| in cash flow hedging reserve | | | |
+-------------------------------------------+-------+-----------+---------------+
| | | | |
+-------------------------------------------+-------+-----------+---------------+
| Total comprehensive income for the year | | 18,443 | (40,249) |
| net of tax* | | | |
+-------------------------------------------+-------+-----------+---------------+
| | | | |
+-------------------------------------------+-------+-----------+---------------+
| Earnings per share (basic and diluted)** | 5 | 26.6p | (62.0p) |
+-------------------------------------------+-------+-----------+---------------+
| Adjusted earnings per share (basic and | 5 | 18.4p | 14.0p |
| diluted)*** | | | |
+-------------------------------------------+-------+-----------+---------------+
The above relates wholly to continuing operations.
*Wholly attributable to equity shareholders of Primary Health Properties PLC.
**There is no difference between basic and fully diluted EPS
***Adjusted for large one-off items and movements in fair value.
****Restated as described in note 2 to the financial statements.
Group Balance Sheet as at 31 December 2009
+-------------------------------------------+-------+-----------+------------+
| | | 31-Dec-09 | 31-Dec-08 |
+-------------------------------------------+-------+-----------+------------+
| | Notes | GBP000 | GBP000 |
| | | | |
+-------------------------------------------+-------+-----------+------------+
| | | | (restated) |
+-------------------------------------------+-------+-----------+------------+
| Non current assets | | | |
+-------------------------------------------+-------+-----------+------------+
| Investment properties | 4 | 341,890 | 316,862 |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Net investment in finance leases | | 3,014 | 2,989 |
+-------------------------------------------+-------+-----------+------------+
| Derivative interest rate swaps | | 1,386 | - |
+-------------------------------------------+-------+-----------+------------+
| | | 346,290 | 319,851 |
+-------------------------------------------+-------+-----------+------------+
| Current assets | | | |
+-------------------------------------------+-------+-----------+------------+
| Derivative interest rate swaps | | 63 | 454 |
+-------------------------------------------+-------+-----------+------------+
| Trade and other receivables | | 1,939 | 2,090 |
+-------------------------------------------+-------+-----------+------------+
| Net investment in finance leases | | 49 | 50 |
+-------------------------------------------+-------+-----------+------------+
| Cash and cash equivalents | | 212 | 675 |
+-------------------------------------------+-------+-----------+------------+
| | | 2,263 | 3,269 |
+-------------------------------------------+-------+-----------+------------+
| Total assets | | 348,553 | 323,120 |
+-------------------------------------------+-------+-----------+------------+
| Current liabilities | | | |
+-------------------------------------------+-------+-----------+------------+
| Derivative interest rate swaps | | (12,208) | (13,917) |
+-------------------------------------------+-------+-----------+------------+
| Corporation tax payable | | (29) | (29) |
+-------------------------------------------+-------+-----------+------------+
| UK-REIT conversion charge payable | | (1,455) | (1,559) |
+-------------------------------------------+-------+-----------+------------+
| Deferred rental income | | (4,638) | (4,275) |
+-------------------------------------------+-------+-----------+------------+
| Trade and other payables | | (1,991) | (3,817) |
+-------------------------------------------+-------+-----------+------------+
| | | (20,321) | (23,597) |
+-------------------------------------------+-------+-----------+------------+
| Non current liabilities | | | |
+-------------------------------------------+-------+-----------+------------+
| Term loans | | (166,139) | (204,088) |
+-------------------------------------------+-------+-----------+------------+
| Derivative interest rate swaps | | (9,322) | (14,923) |
+-------------------------------------------+-------+-----------+------------+
| UK-REIT conversion charge payable | | (856) | (2,226) |
+-------------------------------------------+-------+-----------+------------+
| | | (176,317) | (221,237) |
+-------------------------------------------+-------+-----------+------------+
| Total liabilities | | (196,638) | (244,834) |
+-------------------------------------------+-------+-----------+------------+
| Net assets | | 151,915 | 78,286 |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Equity | | | |
+-------------------------------------------+-------+-----------+------------+
| Share capital | | 30,729 | 16,794 |
+-------------------------------------------+-------+-----------+------------+
| Share premium | | 50,664 | 48,009 |
+-------------------------------------------+-------+-----------+------------+
| Capital reserve | | 1,618 | 1,618 |
+-------------------------------------------+-------+-----------+------------+
| Special reserve | | 44,442 | - |
+-------------------------------------------+-------+-----------+------------+
| Cashflow hedging reserve | | (7,266) | (14,923) |
+-------------------------------------------+-------+-----------+------------+
| Retained earnings | | 31,728 | 26,788 |
+-------------------------------------------+-------+-----------+------------+
| Total equity* | | 151,915 | 78,286 |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Net asset value per share | | 247.2p | 226.7p*** |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| EPRA net asset value per share** | | 279.9p | 272.9p*** |
+-------------------------------------------+-------+-----------+------------+
*Wholly attributable to equity Shareholders of Primary Health Properties PLC.
**EPRA net asset value is calculated as balance sheet net assets including the
valuation result on trading properties, excluding fair value adjustments for
debt and related derivatives.
***The NAV is based on the restated audited consolidated balance sheet of the
Group, as adjusted to illustrate the capital raisings which occurred in 2009, as
if those events had been completed on 31 December 2008.
Group Statement of Changes in Equity for the year ended 31 December 2009
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | Share | Share | Special | Capital | Cashflow | Retained | Total |
| | capital | premium | reserve | reserve | hedging | earnings | |
| | | | | | reserve | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| 1 January 2009 | 16,794 | 48,009 | - | 1,618 | (14,923) | 26,788 | 78,286 |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Profit for the year | - | - | - | - | - | 10,786 | 10,786 |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Income and expense | | | | | | | |
| recognised directly | | | | | | | |
| in equity: | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Transfer to Group | - | - | - | - | 3,148 | - | 3,148 |
| Statement of | | | | | | | |
| comprehensive Income | | | | | | | |
| on cash flow hedges | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Fair value gains on | - | - | - | - | 4,509 | - | 4,509 |
| cash flow hedges | | | | | | | |
| taken to equity | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Total comprehensive | - | - | - | - | 7,657 | 10,786 | 18,443 |
| income | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Proceeds from | 13,935 | 3,088 | 46,956 | - | - | - | 63,979 |
| capital raisings | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Expenses of capital | - | (433) | (2,514) | - | - | - | (2,947) |
| raisings | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Dividends paid: | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Second dividend for | - | - | - | - | - | (2,855) | (2,855) |
| the year ended 31 | | | | | | | |
| Dec 2008 (8.50p) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| First interim | - | - | - | - | - | (2,707) | (2,707) |
| dividend for the | | | | | | | |
| year ended 31 Dec | | | | | | | |
| 2009 (8.50p) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Scrip issue in lieu | - | - | - | - | - | (284) | (284) |
| of interim cash | | | | | | | |
| dividends (net of | | | | | | | |
| expenses) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| 31 December 2009 | 30,729 | 50,664 | 44,442 | 1,618 | (7,266) | 31,728 | 151,915 |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| 1 January 2008 | 16,794 | 48,009 | - | 1,618 | 1,427 | 56,229 | 124,077 |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Loss for the year | - | - | - | - | - | (23,004) | (23,004) |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Adjustment to | - | - | - | - | - | (895) | (895) |
| retained earnings | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Restated loss for | - | - | - | - | - | (23,899) | (23,899) |
| the year | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Income and expense | | | | | | | |
| recognised directly | | | | | | | |
| in equity: | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Transfer to | - | - | - | - | (1,535) | - | (1,535) |
| Group Statement of | | | | | | | |
| Comprehensive Income | | | | | | | |
| on cash flow hedges | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Fair value losses on | - | - | - | - | (14,815) | - | (14,815) |
| cash flow hedges | | | | | | | |
| taken to equity | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Total comprehensive | - | - | - | - | (16,350) | (23,899) | (40,249) |
| income | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Dividends paid: | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| Third dividend for | - | - | - | - | - | (2,771) | (2,771) |
| the period ended 31 | | | | | | | |
| Dec 2007 (8.25p) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| First interim | - | - | - | - | - | (2,771) | (2,771) |
| dividend for the | | | | | | | |
| year ended 31 Dec | | | | | | | |
| 2008 (8.25p) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
| 31 December 2008 | 16,794 | 48,009 | - | 1,618 | (14,923) | 26,788 | 78,286 |
| (restated) | | | | | | | |
+----------------------+---------+---------+---------+---------+----------+----------+-----------+
*Attributable to the equity holders of Primary Health Properties PLC.
Group Cash Flow Statement for the year ended 31 December 2009
+-------------------------------------------+-------+-----------+------------+
| | | Year | Year |
| | | ended | ended |
+-------------------------------------------+-------+-----------+------------+
| | | 31-Dec-09 | 31-Dec-08 |
+-------------------------------------------+-------+-----------+------------+
| | Notes | GBP000 | GBP000 |
| | | | |
+-------------------------------------------+-------+-----------+------------+
| | | | (restated) |
+-------------------------------------------+-------+-----------+------------+
| Operating activities | | | |
+-------------------------------------------+-------+-----------+------------+
| Profit/(loss) before tax | | 11,456 | (23,739) |
+-------------------------------------------+-------+-----------+------------+
| Less: Finance income | | (5,114) | (2,024) |
+-------------------------------------------+-------+-----------+------------+
| Plus: Finance costs | | 14,625 | 12,586 |
+-------------------------------------------+-------+-----------+------------+
| Plus: Fair value (gain)/loss on | | (1,318) | 10,655 |
| derivatives | | | |
+-------------------------------------------+-------+-----------+------------+
| Operating profit/(loss) before financing | | 19,649 | (2,522) |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Adjustments to reconcile Group operating | | | |
| profit/(loss) to net cash flows from | | | |
| operating activities: | | | |
+-------------------------------------------+-------+-----------+------------+
| Revaluation (gain)/loss on property | | (1,615) | 17,707 |
+-------------------------------------------+-------+-----------+------------+
| Plus: Goodwill impairment | | - | 90 |
+-------------------------------------------+-------+-----------+------------+
| (Increase)/decrease in trade and other | | (131) | 1,577 |
| receivables | | | |
+-------------------------------------------+-------+-----------+------------+
| (Decrease)/increase in trade and other | | (377) | 269 |
| payables | | | |
+-------------------------------------------+-------+-----------+------------+
| Cash generated from operations | | 17,526 | 17,121 |
+-------------------------------------------+-------+-----------+------------+
| UK-REIT conversion charge instalment | | (1,575) | (1,322) |
+-------------------------------------------+-------+-----------+------------+
| Net cash flow from operating activities | | 15,951 | 15,799 |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Investing activities | | | |
+-------------------------------------------+-------+-----------+------------+
| Payments to acquire investment properties | | (23,413) | (41,465) |
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Interest received on developments | | 46 | 262 |
+-------------------------------------------+-------+-----------+------------+
| Bank interest received | | 4 | 160 |
+-------------------------------------------+-------+-----------+------------+
| Other interest | | 36 | 20 |
+-------------------------------------------+-------+-----------+------------+
| Acquisition of SPCD companies | | - | (7,846) |
+-------------------------------------------+-------+-----------+------------+
| Net cash flow used in investing | | (23,327) | (48,869) |
| activities | | | |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Financing activities | | | |
+-------------------------------------------+-------+-----------+------------+
| Proceeds from issue of shares (net of | | 60,748 | - |
| expenses) | | | |
+-------------------------------------------+-------+-----------+------------+
| Term bank loan drawdowns | | 38,990 | 69,900 |
+-------------------------------------------+-------+-----------+------------+
| Term bank loan repayments | | (77,290) | (24,150) |
+-------------------------------------------+-------+-----------+------------+
| Net swap interest received | | - | 1,835 |
+-------------------------------------------+-------+-----------+------------+
| Net swap interest paid | | (6,541) | - |
+-------------------------------------------+-------+-----------+------------+
| Interest paid | | (3,432) | (12,160) |
+-------------------------------------------+-------+-----------+------------+
| Equity dividends paid | | (5,562) | (5,542) |
+-------------------------------------------+-------+-----------+------------+
| Net cash flow from financing activities | | 6,913 | 29,883 |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Decrease in cash and cash equivalents for | | (463) | (3,187) |
| the year | | | |
+-------------------------------------------+-------+-----------+------------+
| Cash and cash equivalents at start of | | 675 | 3,862 |
| year | | | |
+-------------------------------------------+-------+-----------+------------+
| | | | |
+-------------------------------------------+-------+-----------+------------+
| Cash and cash equivalents at end of year | | 212 | 675 |
+-------------------------------------------+-------+-----------+------------+
Notes to the Financial Statements
1 Corporate information
The Group's financial statements for the year ended 31 December 2009 were
approved by the Board of the Directors on 24 February 2010 and the Balance
Sheets were signed on the Board's behalf by the Chairman, G A Elliot. Primary
Health Properties PLC is a public limited company incorporated and domiciled in
England & Wales. The Company's Ordinary Shares are admitted to the Official List
of the UK Listing Authority, a division of the Financial Services Authority and
traded on the London Stock Exchange.
2 Accounting policies
Basis of preparation
The Group's financial statements have been prepared on a historical cost basis,
except for investment properties and derivative financial instruments that have
been measured at fair value.
The Group's financial statements are presented in Sterling rounded to the
nearest thousand.
Statement of compliance
The Group prepares consolidated financial statements under International
Financial Reporting Standards ("IFRS") as adopted by the European Union and
applied in accordance with the Companies Act 2006 and Article 4 of the IAS
Regulations.
Basis of consolidation
The Group's financial statements consolidate the financial statements of Primary
Health Properties PLC and its wholly owned subsidiary undertakings. Subsidiaries
are consolidated from the date of their acquisition, being the date on which the
Group obtained control and continue to be consolidated until the date that such
control ceases. Control comprises the power to govern the financial and
operating policies of the investee so as to obtain benefit from its activities
and is achieved through direct or indirect ownership of voting rights; currently
exercisable or convertible potential voting rights; or by way of contractual
agreement. The financial statements of the subsidiary undertakings are prepared
for the accounting reference period ending 31 December each year using
consistent accounting policies. All intercompany balances and transactions,
including unrealised profits arising from them, are eliminated.
The Parent Company financial statements of Primary Health Properties PLC and
each of its subsidiary undertakings will continue to be prepared under UK GAAP
and the use of IFRS at Group level does not affect the distributable reserves
available to the Group.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment in property in the United Kingdom leased
principally to GPs, Primary Care Trusts, Health Authorities and other associated
health care users.
Restatement
During the year it was established that a swap interest accrual of GBP895,000
had been omitted from the 31 December 2008 accounts. The prior year balances
have been restated to correct this error. The December 2008 trade and other
payables balances has been increased by GBP895,000 and the bank swap interest
income figure has been decreased by the same amount. As a result of the above
adjustment, the 31 December 2008 basic loss per share figure increased from
68.5p per share to 71.2p per share and the adjusted earnings per share figure
reduced from 18.8p to 16.2p. The retained earnings decreased from GBP27.7million
to GBP26.8million. In addition GBP457,000 of bank charges previously recognised
in administrative expenses has been reclassified as finance costs. There is no
impact on the financial statements for the year ended 31 December 2009. The
Directors have not presented a third column on the Group Balance Sheet because
the restatement does not have an impact on the opening 2008 reserves.
3 Capital raisings
On 24 March 2009, the Company issued 1,679,354 new ordinary shares of 50 pence
each at a price of 220 pence per new ordinary share of 50 pence each, via a
placing, raising GBP3.7m gross (GBP3.3m net of expenses). The Placing was taken
up by institutional and other investors.
On 7 October 2009, the Company issued 26,086,956 new ordinary shares by way of a
Firm Placing and Placing and Open Offer at a price of 230p per share raising
approximately GBP60million gross (GBP57.4million net of expenses). The net
proceeds of the fundraising have been used initially to reduce the Group's net
indebtedness
4 Investment properties, investment properties under construction
+-------------------------------+------------+-------------+--------------+----------+
| | Investment | Investment | Investment | Total |
| | properties | properties | properties | |
| | freehold | long | under | |
| | | leasehold | construction | |
+-------------------------------+------------+-------------+--------------+----------+
| | GBP000 | GBP000 | GBP000 | GBP000 |
+-------------------------------+------------+-------------+--------------+----------+
| As at 31 December 2009 | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| As at 1 January 2009 | 271,880 | 42,479 | 2,503 | 316,862 |
+-------------------------------+------------+-------------+--------------+----------+
| Additions | 205 | 112 | 23,096 | 23,413 |
+-------------------------------+------------+-------------+--------------+----------+
| Transfer from properties in | 21,138 | - | (21,138) | - |
| the course of development | | | | |
| upon completion | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| Revaluation for the year | 1,197 | 1,383 | (965) | 1,615 |
+-------------------------------+------------+-------------+--------------+----------+
| As at 31 December 2009 | 294,420 | 43,974 | 3,496 | 341,890 |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| As at 31 December 2008 | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| As at 1 January 2008 | 235,529 | 46,195 | 3,624 | 285,348 |
+-------------------------------+------------+-------------+--------------+----------+
| Additions | 12,496 | 4 | 28,594 | 41,094 |
+-------------------------------+------------+-------------+--------------+----------+
| Properties acquired during | 8,127 | - | - | 8,127 |
| the year through Northwich | | | | |
| and Shavington acquisitions | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| Transfer from properties in | 25,666 | - | (25,666) | - |
| the course of development | | | | |
| upon completion | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| Transfer from development | 4,049 | - | (4,049) | - |
| properties upon completion | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| Revaluation for the year | (13,987) | (3,720) | - | (17,707) |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| As at 31 December 2008 | 271,880 | 42,479 | 2,503 | 316,862 |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
| | | | | |
+-------------------------------+------------+-------------+--------------+----------+
Development loans have been reclassified as a current asset. This
reclassification has no impact on the gross asset value.
Properties have been independently valued at fair value by Lambert Smith Hampton
("LSH"), Chartered Surveyors and Valuers, as at the balance sheet date in
accordance with IAS 40: Investment Property. LSH confirm that they have valued
the properties in accordance with the Practice Statements in the RICS Appraisal
and Valuation Standards (Red Book). The Valuers are appropriately qualified and
have sufficient market knowledge and relevant experience of the location and
category of investment property and have had full regard to market evidence when
determining the values.
The properties are 100% let and therefore no assumptions are necessary about
rental levels for valuation purposes as these are based on actuals. The
valuations reflected a 6.0% initial yield and a 6.24% true equivalent yield.
Where properties are within three months of their reviews, an estimate is made
of the likely rent on review in line with market expectations and the knowledge
of the valuer.
In the year ended 31 December 2009 the Group has adopted the improvements to IAS
40. The amendment has been applied for investment properties under construction
from 1 January 2009. Consequently, investment properties under construction have
been valued at fair value by LSH. In determining the fair value, the Valuer is
required to consider the significant risks which are relevant to the development
process including, but not limited to, construction and letting risks. In the
case of the Group's portfolio under construction, where the sites are pre-let
and construction risk remains with the builder/developer, the valuers have used
the special assumptions that, as at the valuation date, the developments have
been completed satisfactorily, the agreements of leases have been completed and
the rents and other tenants lease obligations have commenced. A fair value
decrease of GBP965,000 in respect of investment property under construction has
been recognised in the Group Statement of Comprehensive Income. Prior year
figures have not been restated because any adjustment is deemed to be
immaterial. Historically, properties under construction or development were
included in the Group Balance Sheet at cost.
The historical cost of properties held by the Group, including properties in the
course of development, was GBP284.7million (restated 2008: GBP281.5million).
5 Earnings per share
The calculation of basic and diluted earnings per share is based on the
following:
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | Year to 31 December 2009 | Year to 31 December 2008 |
+----------------+--------------------------------------+--------------------------------------+
| | Net | Ordinary | Per | Net loss | Ordinary | Per |
| | profit | Shares | Share | attributable | Shares | Share |
| | attributable | | | to Ordinary | | |
| | to Ordinary | | | Shareholders | | |
| | Shareholders | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | GBP000 | (number)* | (pence) | GBP000 | (number)* | (pence) |
| | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Earnings per | 10,786 | 40,623,413 | 26.6 | (23,899) | 38,557,502 | (62.0) |
| share** | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
*Weighted average number of Ordinary Shares in issue during the period.
**There is no difference between basic and fully diluted EPS.
The adjusted earnings per share reflect the large/one-off items affecting
earnings per share during the year as follows:
Adjusted earnings per share:
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | Year to 31 December 2009 | Year to 31 December 2008 |
+----------------+--------------------------------------+--------------------------------------+
| | Net | Ordinary | Per | Net loss | Ordinary | Per |
| | profit | Shares | Share | attributable | Shares | Share |
| | attributable | | | to Ordinary | | |
| | to Ordinary | | | Shareholders | | |
| | Shareholders | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | GBP000 | (number)* | (pence) | GBP000 | (number)* | (pence) |
| | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| ?Basic | 10,786 | 40,623,413 | 26.6p | (23,899) | 38,557,502 | (71) |
| earnings per | | | | | | |
| share | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Adjustments to remove: | | | | | |
+-------------------------------+-------------+---------+--------------+-------------+---------+
| Performance | - | | | - | | |
| incentive | | | | | | |
| fee** | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Goodwill | - | | | 90 | | |
| impairment | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| UK-REIT | - | | | 160 | | |
| conversion | | | | | | |
| charge | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Other | (372) | | | 704 | | |
| non-recurring | | | | | | |
| items | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Net property | (1,615) | | | 17,707 | | |
| valuation | | | | | | |
| (gains)/losses | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Fair value | (1,318) | | | 10,655 | | |
| (gain)/loss on | | | | | | |
| derivatives*** | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
| Adjusted basic | 7,481 | 40,623,413 | 18.4p | 5,417 | 38,557,502 | 14.0p |
| and diluted | | | | | | |
| earnings per | | | | | | |
| share | | | | | | |
+----------------+--------------+-------------+---------+--------------+-------------+---------+
Fair value result on derivatives:
+-------------------------------------------+----------+----------+
| | 2009 | 2008 |
+-------------------------------------------+----------+----------+
| | GBP000 | GBP000 |
+-------------------------------------------+----------+----------+
| (Gain)/loss on interest rate swaps not | (1,709) | 11,109 |
| qualifying for hedge accounting | | |
+-------------------------------------------+----------+----------+
| Loss/(gain) on revaluation of basis rate | 391 | (454) |
| swaps | | |
+-------------------------------------------+----------+----------+
| Fair value (gain)/loss on derivatives, as | (1,318) | 10,655 |
| above | | |
+-------------------------------------------+----------+----------+
*Weighted average number of Ordinary Shares in issue during the year.
**The Performance Incentive Fee depends primarily on revaluation gains, which
are eliminated in calculating adjusted earnings per share. No fee was payable in
respect of 2009 or 2008.
***In view of the continuing volatility in the mark to market adjustment in
respect of the period end valuation of derivatives that flows through the Group
Statement of Comprehensive Income, the Directors believe that it is appropriate
to remove the gain or loss in the calculation of adjusted earnings.
6 Finance income
+-------------------------------------------+----------+------------+
| | Year | Year |
| | ended | ended |
+-------------------------------------------+----------+------------+
| | 31-Dec | 31-Dec |
+-------------------------------------------+----------+------------+
| | 2009 | 2008 |
+-------------------------------------------+----------+------------+
| | GBP000 | GBP000 |
+-------------------------------------------+----------+------------+
| | | (restated) |
+-------------------------------------------+----------+------------+
| Interest income on financial assets | | |
+-------------------------------------------+----------+------------+
| Bank interest | 4 | 164 |
+-------------------------------------------+----------+------------+
| Development loan interest | 46 | 262 |
+-------------------------------------------+----------+------------+
| Other interest | 36 | 63 |
+-------------------------------------------+----------+------------+
| Swap interest received | - | 1,535 |
+-------------------------------------------+----------+------------+
| | 86 | 2,024 |
+-------------------------------------------+----------+------------+
7 Finance costs
+-------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+-------------------------------------------+----------+----------+
| | 31-Dec | 31-Dec |
+-------------------------------------------+----------+----------+
| | 2009 | 2008 |
+-------------------------------------------+----------+----------+
| | GBP000 | GBP000 |
+-------------------------------------------+----------+----------+
| Interest expense on financial liabilities | | |
| | | |
+-------------------------------------------+----------+----------+
| Interest paid | | |
+-------------------------------------------+----------+----------+
| Swap interest paid | 6,473 | - |
+-------------------------------------------+----------+----------+
| Bank loan interest paid | 3,228 | 11,874 |
+-------------------------------------------+----------+----------+
| Other interest paid | (12) | 44 |
+-------------------------------------------+----------+----------+
| Notional UK-REIT interest | 103 | 151 |
+-------------------------------------------+----------+----------+
| Bank facility non utilization fees | 148 | 151 |
+-------------------------------------------+----------+----------+
| Bank charges and loan commitment fees | 327 | 306 |
+-------------------------------------------+----------+----------+
| | 10,267 | 12,526 |
+-------------------------------------------+----------+----------+
| Derivative fair value result | | |
+-------------------------------------------+----------+----------+
| Net fair value gain/(loss) on | 1,318 | (10,655) |
| derivatives | | |
+-------------------------------------------+----------+----------+
The fair value gain (31 December 2008: loss) on derivatives recognised in the
profit before tax for the year has arisen from the interest rate swaps for which
hedge accounting does not apply. A further fair value gain on hedges which meet
the effectiveness criteria under IAS39 of GBP7.7million (31 December 2008: loss
of GBP16.3million) is credited/ (charged) directly against equity and is shown
in other comprehensive income.
Due to underlying interest rates falling below the level at which the Group has
fixed its debt, bank swap interest became payable in the year ended 31 December
2009 while, as a result of the reduction in interest rates, bank loan interest
was substantially reduced.
Net finance costs are analysed as follows.
+-------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+-------------------------------------------+----------+----------+
| | 31-Dec | 31-Dec |
+-------------------------------------------+----------+----------+
| | 2009 | 2008 |
+-------------------------------------------+----------+----------+
| | GBP000 | GBP000 |
+-------------------------------------------+----------+----------+
| Finance income | 86 | 2,024 |
+-------------------------------------------+----------+----------+
| Finance costs | (10,267) | (12,526) |
+-------------------------------------------+----------+----------+
| Net finance costs | 10,181 | 10,502 |
+-------------------------------------------+----------+----------+
8 Taxation
Tax expense in the Group Income Statement
+-------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+-------------------------------------------+----------+----------+
| | 31-Dec | 31-Dec |
+-------------------------------------------+----------+----------+
| | 2009 | 2008 |
+-------------------------------------------+----------+----------+
| | GBP | GBP |
+-------------------------------------------+----------+----------+
| Current tax | | |
+-------------------------------------------+----------+----------+
| UK corporation tax | - | - |
+-------------------------------------------+----------+----------+
| Charge re conversion to UK-REIT status* | - | 160 |
+-------------------------------------------+----------+----------+
| | | |
+-------------------------------------------+----------+----------+
| Total tax charge in Group Income | - | 160 |
| Statement | | |
+-------------------------------------------+----------+----------+
*Conversion to a UK-REIT means that the Group is no longer subject to UK
corporation tax. This enabled the Group, in 2007, to release deferred tax
liabilities in respect of the property acquisitions made in the prior periods at
the expense of incurring a conversion charge and in 2008 additional legal costs.
9 Dividends
Amounts recognised as distributions to equity holders in the year:
+-------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+-------------------------------------------+----------+----------+
| | 31-Dec | 31-Dec |
+-------------------------------------------+----------+----------+
| | 2009 | 2008 |
+-------------------------------------------+----------+----------+
| | GBP000 | GBP000 |
+-------------------------------------------+----------+----------+
| Scrip dividend in lieu of interim cash | 284 | - |
| dividends | | |
+-------------------------------------------+----------+----------+
| First interim dividend for the year ended | 2,707 | 2,771 |
| 31 December 2009 (8.50p) paid 20 November | | |
| 2009 (2008: 8.25p) | | |
+-------------------------------------------+----------+----------+
| Second interim dividend for the year | 2,855 | 2,771 |
| ended 31 December 2008 (8.50p) paid 28 | | |
| March 2009 (2008: 8.25p) | | |
+-------------------------------------------+----------+----------+
| | 5,846 | 5,542 |
+-------------------------------------------+----------+----------+
| | | |
+-------------------------------------------+----------+----------+
| Per share | 17.0p | 16.5p |
+-------------------------------------------+----------+----------+
The 26,086,956 New Shares issued by way of the Firm Placing and Open Offer on 7
October 2009 were not entitled to receive the first interim dividend for the
year ended 31 December 2009.
10 Net asset value per share
There is no difference between the normal and adjusted net asset values as at 31
December 2009 and 31 December 2008, due to the release of all deferred tax
liabilities on conversion to UK-REIT status. Net asset values have been
calculated as follows:
+------------------------------------------+----------+------------+-----------+
| | 31-Dec | 31-Dec | 31-Dec |
+------------------------------------------+----------+------------+-----------+
| | 2009 | 2008 | 2008 |
+------------------------------------------+----------+------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------------+----------+------------+-----------+
| | | (restated) | (restated |
| | | | and |
| | | | adjusted) |
+------------------------------------------+----------+------------+-----------+
| ?Net assets per Group Balance Sheet | 151,915 | 78,286 | 139,319 |
+------------------------------------------+----------+------------+-----------+
| Derivative interest rate swaps (net) | 20,144 | 28,840 | 28,840 |
+------------------------------------------+----------+------------+-----------+
| Basis rate swaps | (63) | (454) | (454) |
+------------------------------------------+----------+------------+-----------+
| | | | |
+------------------------------------------+----------+------------+-----------+
| EPRA NAV | 171,996 | 106,672 | 167,705 |
+------------------------------------------+----------+------------+-----------+
+------------------------------------------+-------------+------------+-------------+
| | Number | Number | Number |
| | of | of | of |
+------------------------------------------+-------------+------------+-------------+
| | shares | shares | shares |
+------------------------------------------+-------------+------------+-------------+
| Ordinary Shares: | | | |
+------------------------------------------+-------------+------------+-------------+
| Issued share capital | 61,457,298 | 33,587,094 | 61,457,298 |
+------------------------------------------+-------------+------------+-------------+
| | | | |
+------------------------------------------+-------------+------------+-------------+
| Net asset value per Share | 247.2p | 233.1p | 226.7p |
+------------------------------------------+-------------+------------+-------------+
| | | | |
+------------------------------------------+-------------+------------+-------------+
| EPRA NAV per Share | 279.9p | 317.6p | 272.9p |
+------------------------------------------+-------------+------------+-------------+
EPRA NAV is calculated as Balance Sheet net assets including the valuation
result on trading properties but excluding fair value adjustments for debt and
related derivatives.
The restated and adjusted NAV is based on the restated audited consolidated
balance sheet of the Group, as adjusted to illustrate the effect of the capital
raisings which occurred in 2009, as if these events had been completed on 31
December 2008.
11 Related party transactions
Mr Hyman is a director of Nexus PHP Management Limited ("NPM") and Nexus Group
Holdings Limited. Mr Hambro is a director of J O Hambro Capital Management
Limited ("JOHCML"). Both NPM and JOHCML are Joint Managers and Messrs Hyman and
Hambro are therefore deemed to have an interest in the management agreement and
are related parties.
(a) Transactions in the year
In accordance with Listing Rule 11.10.(2) details of the transactions relating
to the participation of Mr Hyman and Mr Hambro in respect of their beneficial
and non beneficial holdings of shares in the issued share capital in the placing
of 1,679,354 new ordinary shares in March 2009 and in the Firm Placing of
19,033,667 new ordinary shares and Placing and Open Offer of 7,053,289 new
ordinary shares both in October 2009, are given below. These details were
released on the Regulatory News Service at the appropriate times and on the
Company's website.
+-----------------------------+----------+--------+-------------+-------+
| | Placing | Price | Firm | Price |
| | | per | Placing | per |
| | | share | and | share |
| | | | Placing | |
| | | | and Open | |
| | | | Offer | |
+-----------------------------+----------+--------+-------------+-------+
| | March | | October | |
+-----------------------------+----------+--------+-------------+-------+
| Name | 2009 | | 2009 | |
+-----------------------------+----------+--------+-------------+-------+
| Nexus Group Holdings | 82,000 | 220p | 456,332*** | 230p |
| Limited (non beneficial | | | | |
| holding of Harry Hyman) | | | | |
+-----------------------------+----------+--------+-------------+-------+
| | | | 869,565**** | 230p |
+-----------------------------+----------+--------+-------------+-------+
| | | | | |
+-----------------------------+----------+--------+-------------+-------+
| Connected person to Harry | 6,589* | 220p | 1,513 | 230p |
| Hyman | | | | |
+-----------------------------+----------+--------+-------------+-------+
| Connected person to Harry | 70,181** | 220p | | 230p |
| Hyman | | | | |
+-----------------------------+----------+--------+-------------+-------+
| | | | | |
+-----------------------------+----------+--------+-------------+-------+
| Total | 158,770 | | 1,327,410 | |
+-----------------------------+----------+--------+-------------+-------+
| | | | | |
+-----------------------------+----------+--------+-------------+-------+
| Harry Hyman (beneficial) | - | 220p | 9,394 | 230p |
+-----------------------------+----------+--------+-------------+-------+
| | | | | |
+-----------------------------+----------+--------+-------------+-------+
| J O Hambro Capital | 9,317 | 220p | 212,147 | 230p |
| Management Limited | | | | |
+-----------------------------+----------+--------+-------------+-------+
| James Hambro | 3,993 | 220p | 18,885 | 230p |
+-----------------------------+----------+--------+-------------+-------+
| | | | | |
+-----------------------------+----------+--------+-------------+-------+
| Total holding | 172,080 | | 1,567,836 | |
+-----------------------------+----------+--------+-------------+-------+
*T Walker-Arnott (Director of Nexus PHP Management Limited)
**B Kelly (Chairman of Nexus Group Holdings Limited)
***Open offer
****Firm placing
Nexus Group Holdings Limited (NGHL), as disclosed in the Company's prospectus
dated 18 September 2009, carried out its stated intention of selling all 869,565
ordinary shares it acquired in the Firm Placing at a price of 288 pence per
share and simultaneously entered into a contract for difference over the same
number of ordinary shares at a price of 288 pence per ordinary share.
(b) Management Agreement
Pursuant to the Management Agreement dated 14 March 1996 (as amended from time
to time and last updated by Deed of Variation on 23 November 2006) between the
Company and the Joint Managers (NPM and JOHCML) the Company appointed:
- NPM to provide property advisory and management services and the services of
the Managing Director of the Company
- Each Joint Manager has the continuing right to appoint and remove one person
as a Director of the Company and to receive the Director's fee (currently
GBP20,000 per annum)
- JOHCML to provide administration and accounting services and is the appointed
Company Secretary.
The Management Agreement is terminable by not less than two years' written
notice (other than in circumstances of default). The Management Agreement
contains no provisions to amend, alter or terminate the agreement on a change of
control of the Group following a takeover bid.
NPM and JOHCML are paid a monthly fee equal to 1% per annum of the first
GBP50million of the gross assets of the Group (0.55% per annum to NPM (less
GBP5,000) and 0.45% per annum to JOHCML (plus GBP5,000)) and thereafter at 0.75%
per annum of the gross assets (0.4125% to NPM and 0.3375% to JOHCML), subject to
a minimum payment of GBP120,000 per annum, the first GBP100,000 of which in each
year is paid to NPM for the provision of the services of the Managing Director.
NPM and JOHCML are entitled to a Performance Incentive Fee equal to 15% of any
performance in excess of an 8% per annum increase in the Company's "Total
Return" (as derived from the audited accounts for the immediately preceding
financial period prior to the date of payment) provided that if the Total Return
is less than 8% in any one year the deficit must be made up in subsequent years
before any subsequent Performance Incentive Fee is paid. No performance fee has
been payable in 2009 or 2008.
On the basis of the relevant audited accounts, the Total Return is determined by
calculating the change in the net asset value per ordinary share, on a fully
diluted basis, after any adjustment for any increase or reduction in the issued
share capital and adding back gross dividends paid per ordinary share.
In addition, the Company pays NPM a property management fee, agreed out of
pocket expenses and a fee for the preparation of the Group's taxation
provisions, being the reimbursement for the services of NPM's employees engaged
directly on the Group's activities.
12 Subsequent events
Since 31 December 2009, the Group has completed the acquisition of
GBP34.5milliion of properties being the Anchor Meadow Medical Centre, Aldridge
for GBP5.5 million, a portfolio of fourteen medical properties from the Care
Capital Plc for GBP24.2million and two medical centres developed by Abstract
Group for GBP4.8million. The details of the effect of these acquisitions on the
Group's assets and liabilities have not been disclosed as the Group is currently
in the process of determining the fair value of the net assets acquired.
Directors' Responsibility Statement under the Disclosure and Transparency Rules
The Directors confirm that, to the best of their knowledge and belief:
- the financial statements, prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the assets, liabilities,
financial position and profit of the Company and the undertakings included in
the consolidation as a whole;
- the management reports (which are incorporated into the Directors' Report)
contained in the Annual Report include a fair review of the development and
performance of the business and the position of the Company and the undertakings
included in the consolidation as a whole, together with a description of the
principal risks and uncertainties faced.
For and on behalf of the Board
Graeme Elliot
Chairman
24 February 2010
The Independent Auditors' Report which has been extracted from the Annual Report
for the year ended 31 December 2009 which will be printed and posted to
Shareholders as soon as practicable.
Independent Auditors' Report to the Members of Primary Health Properties PLC
We have audited the Group financial statements of Primary Health Properties PLC
for the year ended 31 December 2009 which comprise the Group Balance Sheet, the
Group Statement of Comprehensive Income, the Group Statement of Cash Flows, the
Group Statement of Changes in Equity and the related notes 1 to 29. The
financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities Statements (on page
26), the Directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit the Group financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's (APB's)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the Group financial statements:
- give a true and fair view of the state of the Group's affairs as at 31
December 2009 and of its profit for the year then ended;
- have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
- have been prepared in accordance with the requirements of the Companies Act
2006 and Article 4 of the IAS Regulations.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion:
- the information given in the Directors' Report for the financial year for
which the Group financial statements are prepared is consistent with the Group
financial statements;
- the information given in the Corporate Governance Statement set out on pages
27 to 32 with respect to internal controls and risk management systems in
relation to financial reporting is consistent with the financial statements and;
- the part of the Directors' Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
- certain disclosures of Directors' remuneration specified by law are not made;
or
- we have not received all the information and explanations we require for our
audit.
Under the Listing Rules we are required to review:
- the Directors' Statement, set out on pages 21 and 22, in relation to going
concern; and
- the part of the Corporate Governance Statement relating to the company's
compliance with the nine provisions of the June 2008 Combined Code specified for
our review.
Other matter
We have reported separately on the parent company financial statements of
Primary Health Properties PLC for the year ended 31 December 2009 and on the
information in the Directors' Remuneration Report that is described as having
been audited.
David Wilkinson
Senior Statutory Auditor
for and on behalf of
Ernst & Young LLP
Statutory Auditor
London
24 February 2010
This information is provided by RNS
The company news service from the London Stock Exchange
END
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