TIDMPHP
RNS Number : 3021R
Primary Health Properties PLC
19 August 2010
Primary Health Properties PLC
Interim Report
Half year report for the period ending 30 June 2010
Primary Health Properties PLC, one of the UK's largest providers of modern
primary healthcare facilities, is pleased to announce its half year report for
the six months ended 30 June 2010.
Group Highlights
- Increased interim dividend of 8.75p for the period ended 30 June 2010 (30 June
2009: 8.50p)
- Operating profit before revaluation result and fair value loss on derivatives
rose from GBP3.2 m to GBP4.0 m
- Loan to Value ratio 55.9% at 30 June 2010 against covenant of 70%
- Basic net asset value increased to 251.4p per share (31 December 2009: 247.2p)
- Increased EPRA net asset value of 304.2p per share (31 December 2009: 279.9p)
- Continued success of our strategy of investing in modern purpose built
healthcare centres - acquisition of properties totalling GBP101.1 m during
period
- Increase in the value of the portfolio from GBP341.9 m to GBP460.8 m
- Property revaluation gain of GBP17.8 m (31 December 2009: GBP1.6 m)
- Annualised rental growth of approximately 3.0%, based on 33 rent reviews
- Increased rent roll at period end of GBP27.6 m
- Portfolio 100% let
- Portfolio, including commitments, valued at GBP487.8 m as at 30 June 2010 on
an initial yield of 5.8%
- White Paper proposals to enhance role of GPs should lead to increased demand
for modern primary healthcare facilities in the medium term
Harry Hyman, Managing Director of Primary Health Properties, commented:
"I am delighted to report PHP's financial performance has again been strong in
the first half of the year with rental growth continuing to be obtained against
a backdrop of full occupancy. This has contributed to increased operating
profit, pre-tax profit and the level of the interim dividend.
The first six months of the year has also seen PHP complete thirty three
acquisitions resulting in the amount of new business properties acquired since
the Company's Autumn 2009 Placing totalling well over GBP100 m at yields at or
above 6%. During the period the new coalition government also outlined proposals
in a White Paper which enhance greatly the role of the GP in NHS services. The
Group believes this will result in significantly increased demand for modern,
purpose built, premises.
PHP remains very well positioned to take advantage of further opportunities
across the UK through the acquisition of suitable investment properties or
funding new development and the Board believes that the primary care market
remains extremely attractive due to the inherent strength of the income stream."
-ends-
Enquiries:
Pelham Bell Pottinger
David Rydell / Victoria Geoghegan
Tel: 020 7861 3232
Primary Health Properties
Harry Hyman
Managing Director
Tel: 020 7451 7050
Overview
The Group has had an active first half. During the six months ended 30 June 2010
we completed the acquisition of 33 high quality fully let investments meeting
our acquisition criteria, entered into commitments on three new projects and
took delivery of three completed projects. This takes the amount of new
properties acquired written since our placing and open offer in the Autumn of
2009 to over GBP100 m at yields at or above 6%.
Trading performance
An analysis of the trading performance for the six months ended 30 June 2010 is
set out below:
+----------------------------------------+---------+--------+--------+
| | Six | Six | Year |
| | months | months | To 31 |
| | To 30 | To 30 | Dec |
| | June | June | 2009 |
| | 2010 | 2009 | GBPm |
| | GBPm | GBPm | |
+----------------------------------------+---------+--------+--------+
| Annualised rent roll * | 27.6 | 20.1 | 21.3 |
+----------------------------------------+---------+--------+--------+
| Operating profit before revaluation | 9.8 | 8.5 | 18.0 |
| result and financing | | | |
+----------------------------------------+---------+--------+--------+
| Net finance costs | (5.8) | (5.3) | (10.1) |
+----------------------------------------+---------+--------+--------+
| Operating profit before revaluation | 4.0 | 3.2 | 7.9 |
| result and fair value (loss)/gain on | | | |
| derivatives | | | |
+----------------------------------------+---------+--------+--------+
| REIT conversion charge re acquisitions | (1.6) | - | - |
+----------------------------------------+---------+--------+--------+
| Fair value (loss)/gain on derivatives | (5.0) | 3.0 | 1.3 |
| ** | | | |
+----------------------------------------+---------+--------+--------+
| Revaluation gain/(loss) on property | 17.8 | (8.0) | 1.6 |
| portfolio | | | |
+----------------------------------------+---------+--------+--------+
| Profit/(loss) after taxation | 15.2 | (1.8) | 10.8 |
+----------------------------------------+---------+--------+--------+
| Dividends paid | 5.4 | 2.9 | 5.8 |
+----------------------------------------+---------+--------+--------+
* On completed properties
** The derivative portfolio is revalued on a mark-to-model basis as opposed to
mark-to-market, as there is no secondary market in Interest Rate Swaps
The underlying profit attributable to the business before the revaluation
increase and the fair value result on derivatives was GBP4.0 m (30 June 2009:
GBP3.2 m) an increase of 25%. The results for the Group for the six months ended
30 June 2010 show a profit after taxation of GBP15.2 m compared with a loss
after taxation of GBP1.8 m for the comparable period to 30 June 2009. This is
after a revaluation surplus of GBP17.8 m (30 June 2009 deficit of GBP8.0 m),
reflecting a tightening of yields. The results also include a mark to model loss
on derivatives of GBP5.0 m (30 June 2009: gain of GBP3.0 m), reflecting the
downward movement in longer term interest rates. The property and derivative
revaluation results are unrealised and do not affect the operating cash flow of
the business.
Portfolio activity
Yields in the primary care property market have continued to tighten and in the
Board's view have stabilised at current levels. The portfolio of completed
properties as at 30 June 2010 was valued at GBP460.8 m representing a true
equivalent yield of 6.0% and an initial yield of 5.8%.This gave rise to a
property revaluation gain of GBP17.8 m compared to GBP1.6 m at 31 December 2009.
In addition to the acquisitions, work has continued to enhance the quality of
the estate. We commenced work on a number of projects including Ritchie Street,
Islington and The Old Fire Station, Woolston. We also received planning
permission for the addition of a pharmacy at Burton Latimer, which we intend to
commence work on in the second half of the year. These improvements have created
over GBP1 m of valuation enhancement based on the latest valuation yields and
will ultimately produce GBP63,000 per annum in extra rental income.
There were however unavoidable delays to the forecast delivery of our projects
at both Treharris and Connah's Quay. These delays resulted in some loss of
rental income but completion was achieved by 30 June 2010. We also took delivery
of a completed scheme at Sheffield and entered into new commitments at Oswestry
(GBP8.8 m), Blackpool (GBP4.1 m) and Allesley (GBP2.8 m).
The fully let investments acquired in the period were at the following
locations:
+------------------------------+------------------------------+
| Aldridge,?West Midlands | Horley, Surrey* |
+------------------------------+------------------------------+
| Basingstoke, Hampshire* | Kesgrave, Suffolk** |
+------------------------------+------------------------------+
| Bitterne, Southampton, | Lanark, Scotland |
| Hampshire* | |
+------------------------------+------------------------------+
| Burnley, Lancashire** | Leamington Spa, |
| | Warwickshire** |
+------------------------------+------------------------------+
| Chafford Hundred, Essex** | Leigh, Manchester |
+------------------------------+------------------------------+
| Chalford, Gloucestershire** | Lydney, Gloucestershire** |
+------------------------------+------------------------------+
| Castleford, Yorkshire* | Maywood, Bognor, Sussex* |
+------------------------------+------------------------------+
| Consett, County Durham** | Mitcham, Surrey* |
+------------------------------+------------------------------+
| Darlington, County Durham** | Portslade, Sussex* |
+------------------------------+------------------------------+
| Eastbourne, Sussex* | Restalrig, Edinburgh** |
+------------------------------+------------------------------+
| Fareham, Hampshire* | Southwick, Brighton, Sussex* |
+------------------------------+------------------------------+
| Farnborough, Hampshire* | St Marys, Southampton, |
| | Hampshire* |
+------------------------------+------------------------------+
| Farnham, Hampshire* | Stockton on Tees, County |
| | Durham |
+------------------------------+------------------------------+
| Flansham, Bognor, Sussex* | Stoneham, Southampton, |
| | Hampshire** |
+------------------------------+------------------------------+
| Hinckley, Leicestershire** | Watlington, Norfolk** |
+------------------------------+------------------------------+
| Hornchurch, Essex** | Wingate, County Durham** |
+------------------------------+------------------------------+
| Hornsea, East Yorkshire | |
+------------------------------+------------------------------+
* Purchased as part of the Health Investments Portfolio.
** Purchased as part of the Care Capital Portfolio.
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, NHS organisations, pharmacy operators and
others. Some 99% of rent comes directly or indirectly from GPs, NHS
organisations and pharmacy operators.
+------------------------+--------+
| GPs | 77.00% |
+------------------------+--------+
| HM Govt | 1.00% |
+------------------------+--------+
| NHS | 12.00% |
+------------------------+--------+
| Pharmacy | 9.00% |
+------------------------+--------+
| Other | 1.00% |
+------------------------+--------+
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
(15%) and small independents with five or less units (18%).
+------------------------+--------+
| Lloyds | 45.00% |
+------------------------+--------+
| Rowlands | 9.00% |
+------------------------+--------+
| Boots | 8.00% |
+------------------------+--------+
| Co-op | 5.00% |
+------------------------+--------+
| Large Independent (5 | 15.00% |
| units or more) | |
+------------------------+--------+
| Small Independent (5 | 18.00% |
| units or less) | |
+------------------------+--------+
Analysis of annualised rent by unexpired lease term
The table demonstrates that the Group has in excess of 76% of rental income from
leases with a life of 15 years or longer.
+----------------------+---------+
| Less than 5 years | 2.00% |
+----------------------+---------+
| 6-15 years | 22.00% |
+----------------------+---------+
| 15-20 years | 55.00% |
+----------------------+---------+
| More than 20 years | 21.00% |
+----------------------+---------+
Forthcoming rent reviews
The table shows the breakdown of our total rent roll of GBP27.6 m by the annual
amounts of rent falling due for review in each of the next three years. GBP1m of
rent is reviewed on a longer pattern and GBP0.685m is reviewed annually.
+-------------------------+---------+
| 2010/11 | GBP9.0m |
+-------------------------+---------+
| 2011/12 | GBP8.1m |
+-------------------------+---------+
| 2012/13 | GBP9.5m |
+-------------------------+---------+
| Longer Pattern | GBP1.0m |
+-------------------------+---------+
Analysis of rental income by geographic region
This table demonstrates that the portfolio is broadly diversified across the UK.
+------------------------+--------+
| London | 5.00% |
+------------------------+--------+
| South West | 4.00% |
+------------------------+--------+
| South East | 29.00% |
+------------------------+--------+
| East Anglia | 2.00% |
+------------------------+--------+
| East Midlands | 11.00% |
+------------------------+--------+
| West Midlands | 11.00% |
+------------------------+--------+
| North West | 10.00% |
+------------------------+--------+
| Yorkshire & Humberside | 8.00% |
+------------------------+--------+
| North | 4.00% |
+------------------------+--------+
| Scotland | 7.00% |
+------------------------+--------+
| Wales | 9.00% |
+------------------------+--------+
Security of income by term certain
The table shows that by year 15, the Group would still be receiving 74% of its
current income, taking no account of any lease renewals or rent reviews during
the period. The total of the rents receivable during this period is GBP471.3 m.
+----------------------+------------+
| | Percentage |
| | of total |
| | income |
+----------------------+------------+
| 30/06/2010 | 100% |
+----------------------+------------+
| 31/12/2010 | 100% |
+----------------------+------------+
| 30/06/2011 | 100% |
+----------------------+------------+
| 31/12/2011 | 100% |
+----------------------+------------+
| 30/06/2012 | 99% |
+----------------------+------------+
| 31/12/2012 | 99% |
+----------------------+------------+
| 30/06/2013 | 99% |
+----------------------+------------+
| 31/12/2013 | 99% |
+----------------------+------------+
| 30/06/2014 | 99% |
+----------------------+------------+
| 31/12/2014 | 99% |
+----------------------+------------+
| 30/06/2015 | 98% |
+----------------------+------------+
| 31/12/2015 | 98% |
+----------------------+------------+
| 30/06/2016 | 98% |
+----------------------+------------+
| 31/12/2016 | 98% |
+----------------------+------------+
| 30/06/2017 | 97% |
+----------------------+------------+
| 31/12/2017 | 97% |
+----------------------+------------+
| 30/06/2018 | 97% |
+----------------------+------------+
| 31/12/2018 | 95% |
+----------------------+------------+
| 30/06/2019 | 95% |
+----------------------+------------+
| 31/12/2019 | 95% |
+----------------------+------------+
| 30/06/2020 | 95% |
+----------------------+------------+
| 29/12/2020 | 94% |
+----------------------+------------+
| 30/06/2021 | 93% |
+----------------------+------------+
| 31/12/2021 | 92% |
+----------------------+------------+
| 30/06/2022 | 92% |
+----------------------+------------+
| 31/12/2022 | 89% |
+----------------------+------------+
| 30/06/2023 | 86% |
+----------------------+------------+
| 31/12/2023 | 82% |
+----------------------+------------+
| 30/06/2024 | 80% |
+----------------------+------------+
| 31/12/2024 | 76% |
+----------------------+------------+
| 30/06/2025 | 74% |
+----------------------+------------+
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 77% of the portfolio by
value comprises health centres which are under nine years old. Approximately
97% of the properties are under 15 years old.
+---------------+----------------+
| Building Age | Number of |
| | Properties |
+---------------+----------------+
| Under 3 years | 22 |
+---------------+----------------+
| 3-6 years | 45 |
+---------------+----------------+
| 6-9 years | 35 |
+---------------+----------------+
| 9-12 years | 26 |
+---------------+----------------+
| 12-15 years | 15 |
+---------------+----------------+
| 15-18 years | 0 |
+---------------+----------------+
| 18-21 years | 0 |
+---------------+----------------+
| Over 21 years | 5 |
+---------------+----------------+
Tenancy split by floor area
The table indicates tenancy split by floor area (psm).
+--------------------+------------+
| GPs | 78.00% |
+--------------------+------------+
| HM Govt | 1.00% |
+--------------------+------------+
| NHS | 13.00% |
+--------------------+------------+
| Pharmacy | 6.00% |
+--------------------+------------+
| Other | 2.00% |
+--------------------+------------+
Acquisitions
The Group completed the purchases of the following previously committed
properties during the six months ended 30 June 2010.
+------------+-------------+----------------------------------+
| Property | Acquisition | Occupational tenants |
| | cost | |
| | GBPm | |
+------------+-------------+----------------------------------+
| Sheffield | 3.0 | GP?practice and pharmacy |
+------------+-------------+----------------------------------+
| Treharris | 4.6 | GP?practice, LHB accommodation |
| | | and a pharmacy |
+------------+-------------+----------------------------------+
| Connah's | 10.2 | Three GP?practices and LHB |
| Quay | | accommodation |
+------------+-------------+----------------------------------+
The Group purchased 33 investment properties during the period including the
Health Investment's portfolio of 14 health centres and the Care Capital
portfolio, which also comprises 14 health centres.
Health Investment's Portfolio
In June 2010, PHP entered into a contract to acquire the entire issued share
capital of Health Investments Limited ("HI") for a total consideration of some
GBP38.4 m. HI had around GBP28.3 m of debt, which was assumed as part of the
deal. The acquisition delivered 14 primary care properties with an average
valuation of approximately GBP2.8 m and a rent roll of GBP2.4 m. The properties
are principally in the South East and have an average lease length outstanding
of some 19 years. The debt acquired matches the profile of the leases and has
approximately 19 years to run at an average cost of 6% pa. The Group paid GBP7.3
m in cash and issued 1,005,153 ordinary shares at 290p each in part
consideration in addition to the assumption of the debt as announced on 23 June
2010. Following the issue of the ordinary shares, which were admitted to the
official list of the UKLA on 28 June 2010, the total numbers of ordinary shares
with voting rights is 62,571,174. The shares issued as consideration for the
HI?acquisition are subject to a six month lock in and subsequent 12 months
orderly market agreement.
Care Capital Portfolio
The Group acquired Sinclair Montrose Properties Limited ("SMP"), a wholly owned
subsidiary of Care Capital Group plc in February 2010. This acquisition included
a portfolio of 14 modern medical centres. The consideration was approximately
GBP23.5 m including the repayment of debt secured on the portfolio. The total
rent roll including outstanding rent reviews on this portfolio is GBP1.4 m p.a.
and the unexpired lease term 17.8 years.
Other Corporate Acquisitions
In addition to HI and SMP the Group completed three other corporate acquisitions
(Abstract, Anchor Meadow and Charter Medinvest), for a total consideration of
GBP16.7 m. These acquisitions added four properties to the portfolio with an
average valuation of GBP4.6 m and a rent roll of GBP1.1 m. The properties are
spread throughout the UK and had an average lease length outstanding of some
18.3 years.
All of the corporate transactions have been treated as asset acquisitions (see
note 3).
Commitments
Three new commitments totalling GBP15.7 m were entered into during the six
months ended 30 June 2010 as shown below:
+------------------------------+--------+----------+----------+
| | New in | Total | Tenants |
| | 2010 | out | |
| | GBPm | standing | |
| | | GBPm | |
+------------------------------+--------+----------+----------+
| Oswestry | 8.8 | 6.6 | GP |
| | | | Practice |
+------------------------------+--------+----------+----------+
| Blackpool | 4.1 | 4.1 | GP |
| | | | Practice |
+------------------------------+--------+----------+----------+
| Allesley | 2.8 | 2.4 | GP |
| | | | Practice |
+------------------------------+--------+----------+----------+
| Total new commitments | 15.7 | 13.1 | |
+------------------------------+--------+----------+----------+
| Pre-existing commitments | | | |
+------------------------------+--------+----------+----------+
| Shefford | | 5.3 | GP |
| | | | Practice |
+------------------------------+--------+----------+----------+
| Cowbridge | | 5.6 | GP |
| | | | Practice |
+------------------------------+--------+----------+----------+
| Total commitments at 30 June | | 24.0 | |
| 2010 | | | |
+------------------------------+--------+----------+----------+
Tenants are in place for 100% of the space of the new commitments.
Disposals
There were no disposals during the period.
Rental growth
Rental growth achieved on rent reviews concluded in the year ended 31 December
2009 averaged 3.12% p.a. (equivalent to approximately 10.0% for a typical three
year review pattern). The experience in the first half of 2010 is that rental
growth has averaged 3.1% p.a. (equivalent to approximately 10.0% for a typical
three year review pattern). This performance is in line with our direct
competitors and constitutes an out performance of the wider property market
which has experienced declining or stable rents across a number of its sectors.
The portfolio is 100% let and tenants are in place for all properties under
construction.
Portfolio
The table below sets out the portfolio as at 30 June 2010.
+--------------------------------+---------+--------+---------+
| | 30 June | 30 | 31 Dec |
| | 2010 | June | 2009 |
| | GBPm | 2010 | GBPm |
| | | GBPm | |
+--------------------------------+---------+--------+---------+
| Investment properties | 455.9 | 314.2 | 338.4 |
+--------------------------------+---------+--------+---------+
| Properties in the course of | 4.9 | 1.5 | 3.5 |
| development | | | |
+--------------------------------+---------+--------+---------+
| Total properties | 460.8 | 315.7 | 341.9 |
+--------------------------------+---------+--------+---------+
| Finance leases | 3.0 | 3.0 | 3.0 |
+--------------------------------+---------+--------+---------+
| Total owned and leased | 463.8 | 318.7 | 344.9 |
+--------------------------------+---------+--------+---------+
| Committed | 24.0 | 34.2 | 26.1 |
+--------------------------------+---------+--------+---------+
| Total owned, leased and | 487.8 | 352.9 | 371.0 |
| committed | | | |
+--------------------------------+---------+--------+---------+
| Closing annualised rent roll | 27.6 | 20.1 | 21.3 |
| (on 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, as at 30 June 2010.
During the six months ended 30 June 2010 there has been a further tightening of
yields resulting in a valuation gain of GBP17.8 m during the period. The
valuation reflected an initial yield at 30 June of 5.78% and a true equivalent
yield of 6.00%. This compares with yields of 6.00% and 6.24% respectively at the
end of the previous year.
Discounted cash flow property valuation
In addition to the market value exercise performed by Lambert Smith Hampton, the
Joint Managers monitor the value of the Group's completed investment portfolio
based on a discounted cash flow analysis. On this basis, the valuation of
delivered assets as at 30 June 2010 is GBP508.6 m compared to the market value
of GBP460.8 m (31 December 2009: GBP368.0 m compared to the market value of
GBP341.9 m). The difference of GBP47.8 m represents an additional 77.6p of net
asset value per share. In this calculation current passing rent until expiry
totalling GBP623 m contributed 67% of the discounted cash flow valuation.
The assumptions used in the discounted cash flow analysis are:
- A discount rate of 7% (31 December 2009: 7%);
- An average annual increase in the individual property rents at review of 2.5%
(31 December 2009: 2.5%);
- Capital growth in residual values of 1% per annum (2009: 1%); and
- In the case of each property, the DCF analysis is over the remaining period of
the lease at 30 June 2010.
Comparative values using the discount rates below are as follows:
+------------------------------+------------------------------+
| Discount rate | Value |
+------------------------------+------------------------------+
| 6.50% | GBP536.0 m |
+------------------------------+------------------------------+
| 7.50% | GBP483.2 m |
+------------------------------+------------------------------+
Net assets and EPRA?NAV
+--------------------------------+----------+----------+----------+
| | 30 June | 30 | 31 Dec |
| | 2010 | June | 2009 |
| | | 2010 | |
+--------------------------------+----------+----------+----------+
| Net assets | GBP157.3 | GBP85.9 | GBP151.9 |
| | m | m | m |
+--------------------------------+----------+----------+----------+
| EPRA net assets* | GBP190.3 | GBP102.2 | GBP172.0 |
| | m | m | m |
+--------------------------------+----------+----------+----------+
| Net asset value per share | 251.4p | 243.7p | 247.2p |
+--------------------------------+----------+----------+----------+
| EPRA net asset value per | 304.2p | 289.9p | 279.9p |
| share* | | | |
+--------------------------------+----------+----------+----------+
| | | | |
+--------------------------------+----------+----------+----------+
* 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).
Sector performance
The IPD Healthcare Index for 2009 was released in May 2010 and showed an overall
return of 5.4% against the IPD All Property return of 3.5%. Primary care assets,
including PHP's portfolio, make up almost half of the index and produced an
overall return of 8.8%. Based on the IPD index, Healthcare has outperformed All
Properties over the past three years with an annualised return of +3.9% versus
-0.8%.
Borrowings
As at 30 June 2010 Group borrowings were GBP257.7 m including GBP28.3 m of fixed
interest facilities taken on as part of the HI acquisition and GBP3.0 m of
variable interest facilities as part of the Abstract acquisition (see Note 12).
As required by International Accounting Standards the reported debt in the
balance sheet is shown net of amortised borrowing costs. Excluding these
acquired facilities the aggregate facilities are GBP265 m of which GBP255 m was
on a term loan basis and GBP10 m on an overdraft basis. These term facilities
are not due for renewal/replacement until 2013. The secured facilities from
Aviva acquired with HI are amortising over 19 years, which matches the average
length of the underlying leases on the properties acquired.
The Group has agreed heads of terms for a new GBP25 m facility with ING
Commercial Finance Ltd. This five year term loan is currently being documented
and it will enable the Group to continue with its policy of acquisitions and the
forward funding of new developments.
The Group is also examining other options to refinance both its existing
facilities and provide expansion finance.
The loan to value ratio as at 30 June 2010 was 55.9% (adjusted for the final
payment made for Connah's Quay in July the ratio was 57.9%) compared to a
covenant requirement of 70%, whilst interest cover was 2.0x compared to a
covenant requirement of 1.3x.
Hedging
The amount of fixed rate cover in place at 30 June 2010 (including GBP88 m of
callable swaps (2009: GBP88 m) was GBP203.0 m (2009: GBP193 m). Basis rate swaps
totalling GBP200 m matured on 11 February 2010. The callable swaps were not
called on 11 August 2010. The next date on which they may be called is 11
November 2010.
All swaps are taken out to mitigate exposure to interest rate risk, but under
accounting rules only certain swaps qualify as "effective" hedges and the mark
to model movement on these is matched against the hedged liability in the
Balance Sheet.
The mark-to-model value of the Group's "effective" interest rate swaps decreased
by GBP7.8 m in the period to 30 June 2010 (six months to 30 June 2009: gain of
GBP9.1 m), reflecting the continued decline in medium term interest rates and
ongoing volatility. There is no cash flow impact from these mark to model
adjustments. This loss is charged directly to reserves but is included in the
condensed statement of comprehensive income result on page 30. The revaluation
of swaps regarded as ineffective for IAS39 purposes was a loss of GBP5.0 m (six
months to 30 June 2009: gain of GBP3.0 m), which is included in the profit for
the period. The mark-to-model value fluctuates with movements in term interest
rates and, in the case of the callable swaps, with market volatility.
Finance and interest rate hedging
This table shows the level of bank borrowings covered by effective hedges for
each financial year to 1 January 2027. Shown in GBPmillion.*
+--------------+--------------------+------------------+
| Year | Amount Hedged | Rate |
+--------------+--------------------+------------------+
| 01/01/2010 | 113,333,333 | 4.80% |
+--------------+--------------------+------------------+
| 01/01/2011 | 120,000,000 | 4.81% |
+--------------+--------------------+------------------+
| 01/01/2012 | 124,150,000 | 4.81% |
+--------------+--------------------+------------------+
| 01/01/2013 | 102,483,333 | 4.79% |
+--------------+--------------------+------------------+
| 01/01/2014 | 90,000,000 | 4.81% |
+--------------+--------------------+------------------+
| 01/01/2015 | 91,666,667 | 4.79% |
+--------------+--------------------+------------------+
| 01/01/2016 | 75,833,333 | 4.69% |
+--------------+--------------------+------------------+
| 01/01/2017 | 70,000,000 | 4.56% |
+--------------+--------------------+------------------+
| 01/01/2018 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2019 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2020 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2021 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2022 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2023 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2024 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2025 | 80,000,000 | 4.58% |
+--------------+--------------------+------------------+
| 01/01/2026 | 50,000,000 | 4.62% |
+--------------+--------------------+------------------+
| 01/01/2027 | 20,000,000 | 4.76% |
+--------------+--------------------+------------------+
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 1 January 2027. Shown in GBPmillion.*
+------------+---------------------------+------------------+
| Year | Amount Hedged | Rate |
+------------+---------------------------+------------------+
| 01/01/2010 | 201,750,000 | 4.80% |
+------------+---------------------------+------------------+
| 01/01/2011 | 208,000,000 | 4.80% |
+------------+---------------------------+------------------+
| 01/01/2012 | 212,150,000 | 4.80% |
+------------+---------------------------+------------------+
| 01/01/2013 | 190,483,333 | 4.79% |
+------------+---------------------------+------------------+
| 01/01/2014 | 178,000,000 | 4.81% |
+------------+---------------------------+------------------+
| 01/01/2015 | 179,666,667 | 4.79% |
+------------+---------------------------+------------------+
| 01/01/2016 | 163,833,333 | 4.75% |
+------------+---------------------------+------------------+
| 01/01/2017 | 158,000,000 | 4.69% |
+------------+---------------------------+------------------+
| 01/01/2018 | 168,000,000 | 4.69% |
+------------+---------------------------+------------------+
| 01/01/2019 | 168,000,000 | 4.69% |
+------------+---------------------------+------------------+
| 01/01/2020 | 168,000,000 | 4.69% |
+------------+---------------------------+------------------+
| 01/01/2021 | 131,333,333 | 4.66% |
+------------+---------------------------+------------------+
| 01/01/2022 | 80,000,000 | 4.58% |
+------------+---------------------------+------------------+
| 01/01/2023 | 80,000,000 | 4.58% |
+------------+---------------------------+------------------+
| 01/01/2024 | 80,000,000 | 4.58% |
+------------+---------------------------+------------------+
| 01/01/2025 | 80,000,000 | 4.58% |
+------------+---------------------------+------------------+
| 01/01/2026 | 50,000,000 | 4.62% |
+------------+---------------------------+------------------+
| 01/01/2027 | 20,000,000 | 4.76% |
+------------+---------------------------+------------------+
* The tables above show the weighted average amount hedged throughout each
financial year for the period to 31 December 2027. The tables assume that the
term loans to the Group, which expire in 2013 will be renewed.
Revenue and Expenditure
Total revenue in the six months ending 30 June 2010 was GBP12.0m, an increase of
12.6% over the comparative period (6 months ended 30 June 2009: GBP10.7m). Total
expenditure excluding finance costs was GBP2.2m (6 months ended 30 June 2009:
GBP2.2m).
Dividend
On 26 March 2010 the Group paid an ordinary cash dividend of 8.75p per Ordinary
Share in respect of the six months ended 31 December 2009. The Board proposes to
pay an interim dividend of 8.75p per share payable to Ordinary Shareholders on
the register at 24 September 2010 on 29 October 2010 in respect of the six
months ended 30 June 2010. No property income distributions ("PIDs") have been
paid since 1 January 2007 when the Board advised that dividends would either be
cash, PIDs or a combination of the two. Shareholders will be offered the
opportunity to receive the interim cash dividend in respect of the six months
ended 30 June 2010 in new ordinary shares through a scrip dividend and a
circular is expected to be posted to shareholders on 1 October 2010.
Key performance indicators ("KPIs")
1. Objective
To create sustainable long-term rental income and capital growth for
shareholders
Metric
- Sustained real growth in EPS
- Annual revenue to exceed budget target
- Sustained dividend growth
Performance
- Adjusted EPS fell from 9.2p to 6.4p largely due to the delay in investing the
capital raised in 2009
- Turnover rose to GBP12.0 m (30 June 2009: GBP10.6 m) but was GBP900,000 below
budget due to late deliveries
- Proposed dividend of 8.75p (30 June 2009: 8.50p)
2. Objective
To maximise the returns from the investment portfolio
Metric
- Out-performance versus IPD benchmark
Performance
- Basic NAV grew from 247.2p to 251.4p
- EPRA NAV increased from 249.9p to 304.2p
- Performance was better than the IPD benchmark
- Rental growth of 3.12% p.a.
3. Objective
To generate long term value for shareholders
Metric
- Growth in NAV
- Growth in dividends
Performance
- Basic NAV increased from 247.2p to 251.4p
- EPRA NAV increased from 249.9p to 304.2p
- Proposed dividend of 8.75p (30 June 2009: 8.50p)
4. Objective
To manage our balance sheet effectively
Metric
- Maintain appropriate balance between debt and equity within covenanted levels
Performance
- Gearing increased to 55.9% following purchases but has been offset by
valuation increases and shares issued as part of HI purchase and is well within
covenant
5. Objective
To identify new units to purchase
Metric
- Future commitments
- Deliveries
Performance
- Deliveries during the period were GBP17.8 m
- New commitments of GBP15.7 m were entered into during the period
- High quality, fully let investments totalling over GBP101.1 m were acquired
6. Objective
To complete and let properties under the course of development
Metric
- Growth in annualised rent roll
Performance
- New deliveries added GBP1.1 m of rent to the rent roll
-The portfolio was 100% let at the period end
7. Objective
To maintain good quality leases
Metric
- Long average lease term
- Maintain a minimal percentage of voids
Performance
- Weighted average lease length of 17.3 years
- Portfolio 100% let
- 90% of income effectively paid for by the NHS
Principal risks and uncertainties
Other than the impact of the White Paper referred to below, there have been no
changes to the principal risks and uncertainties of the Group which remain as
disclosed on page 11 of the Annual Financial Report for the year ended 31
December 2009 and the Directors consider that the principal risks and
uncertainities are likely to remain unchanged for the remainder of the year.
The White Paper
The Group welcomes the initiatives announced on Monday 12 July by Secretary of
State for Health Andrew Lansley in the Department of Health's White Paper
"Equity and excellence: Liberating the NHS". The White Paper proposes the
creation of a regulated market in the purchasing and provision of care via the
creation of several hundred GP consortia which would be overseen by a new
independent Board and a new economic regulator.
The proposals in the White Paper and subsequent Government guidance notes
foresee Primary Care Trusts ("PCTs") obligations for primary care being taken
over by the NHS National Commissioning Board, which will have the status of a
Special Health Authority. The existing contractual obligations of the PCTs,
including rent reimbursements, are covered by the Residual Liabilities Act 1996
and will pass to another NHS body as PCTs are phased out.
The Group believes that the greatly enhanced role of the GP in the provision of
NHS services will result in significantly increased demand for modern purpose
built premises benefiting a modern health service environment in the medium
term.
There may also be opportunities for PHP to acquire assets all or part of which
are directly owned by PCTs at present.
Outlook
The role of primary care in the delivery of healthcare within the NHS is
envisaged to significantly expand with the publication of the Government's White
Paper. The Paper's aim is to shift a substantial proportion of care from
hospitals to community settings and facilities and there is likely to be strong
demand for new primary care developments. Within our existing portfolio the
performance has been consistently strong with rental growth continuing to be
obtained against a backdrop of full occupancy.
We are well positioned to take advantage of opportunities across the UK through
the acquisition of suitable investment properties or funding new developments.
We continue to believe that the primary care market remains extremely attractive
due to the inherent strength of the income stream.
Graeme Elliot
Chairman
18 August 2010
Acquisition Activity
The Quay Health Centre, Fron Road, Connahs Quay
This new centre was developed by Haven Health Properties. The GBP10.2 m building
provides 3,500 sqm of accommodation across three floors to 16,500 patients, and
is now the main facility for the provision of Primary Care services for Connah's
Quay, North Wales. All three of the town's Medical Practices now operate from
the centre, and are complemented by an extensive range of Community based
healthcare services run by North East Wales NHS Trust, together with a café
operated by the council. The centre benefits from approximately 110 on-site car
parking spaces.
Whitely Surgery, Yew Tree Drive, Fareham
The Whiteley Surgery, Fareham, comprises 900 sqm of accommodation over two
storeys, and is let to a doctor's surgery and a pharmacy. There is also a
complementary therapies suite within the centre, run by the doctors, which
provides additional services including Physiotherapy, Osteopathy, Podiatry and
Reflexology. The centre has been fitted out to a high standard internally and
provides approximately 30 on-site car parking spaces. Completed in November
2006, the centre was brought into the PHP portfolio as part of the GBP38.4 m
Health Investments acquisition completed in June 2010.
Treharris Primary Care Centre, Fox Street, Treharris
This new, three storey Primary Care Centre was delivered in May 2010 by Haven
Health Properties at a cost of approximately GBP4.6 m. The centre provides 1,500
sqm of accommodation for a range of services including General Medical, NHS
Dental, Community Health and Voluntary. There is also an adjacent satellite
building comprising a local Pharmacy and further offices let to the Local Health
Board. The centre is the new hub for medical services and serves approximately
15,000 patients.
Commitments
Shefford, Bedfordshire
A new two storey development in Shefford (approximately 5 miles south of
Bedford) to replace the existing under-sized Shefford Health Centre. The new
centre will provide approximately 2,200 sqm of accommodation for both the
existing practice and Bedfordshire PCT, serving over 15,000 patients. The new
centre will provide a number of enhanced community services usually performed in
a secondary care environment, including Diagnostic services, Minor Surgery and
Counselling amongst other specialist services.
The centre is being developed by Brackley Investments, and will cost PHP in the
region of GBP5.3 m once completed in February 2011.
Blackpool, Lancashire
A development of a new three storey medical centre and pharmacy extending to
approximately 1,500 sqm, to provide accommodation for the practice of Dr. Ward &
Partners. The proposed centre replaces the existing GP accommodation, currently
split between two outdated converted houses, whilst also providing a new base
for PCT community staff including district nurses, health visitors and midwives.
A dental training suite is also to be provided to allow the PCT to work with the
Deanery to deliver an enhanced level of dental training within Blackpool. The
centre will serve more than 12,000 patients.
The centre is being developed by Brackley Investments and will cost PHP
approximately GBP4.1 m once completed in September 2011.
Condensed Group statement of comprehensive income
for the six months ended 30 June 2010
+-----------------------------------+-------+-------------+-------------+-----------+
| ? | | Six | Six | |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | months | months | Year |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | ended | ended | ended |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | 30-Jun | 30-Jun | 31-Dec |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | 2010 | 2009 | 2009 |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | GBP000 | GBP000 | GBP000 |
+-----------------------------------+-------+-------------+-------------+-----------+
| | Notes | (unaudited) | (unaudited) | (audited) |
+-----------------------------------+-------+-------------+-------------+-----------+
| ?Rental income | | 11,829 | 10,512 | 20,994 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Finance lease income | | 170 | 149 | 338 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Rental and related income | | 11,999 | 10,661 | 21,332 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Direct property expenses | | -203 | -105 | -210 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Administrative expenses: | | -2,037 | -2,069 | -3,460 |
| recurring | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| non-recurring | | - | - | 372 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Operating profit before net | | | | |
| valuation gain/(loss) on property | | | | |
| portfolio | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | 9,759 | 8,487 | 18,034 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Net valuation gain/(loss) on | 2 | 17,821 | -8,033 | 1,615 |
| property portfolio | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| Operating profit before financing | | 27,580 | 454 | 19,649 |
| | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| Finance income | 6 | 46 | 53 | 86 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Finance costs | 7 | -5,848 | -5,356 | -10,267 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Fair value (loss)/gain on | 7 | -5,037 | 3,001 | 1,318 |
| derivatives | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| Profit/(loss) on ordinary | | 16,741 | -1,848 | 10,786 |
| activities before tax | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| Current taxation credit | 8 | 29 | - | - |
+-----------------------------------+-------+-------------+-------------+-----------+
| Conversion to UK-REIT charge | 8 | -1,586 | - | - |
+-----------------------------------+-------+-------------+-------------+-----------+
| Taxation expense | | -1,557 | - | - |
+-----------------------------------+-------+-------------+-------------+-----------+
| Profit/(loss) for the period * | | 15,184 | -1,848 | 10,786 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Other comprehensive income, net of tax, | | | |
| being: | | | |
| Movement in cash flow hedging reserve | | | |
+-------------------------------------------+-------------+-------------+-----------+
| | | -7,773 | 9,098 | 7,657 |
+-----------------------------------+-------+-------------+-------------+-----------+
| Unrealised gain on fixed asset | | 128 | - | - |
| investment ** | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| Total comprehensive income for | | 7,539 | 7,250 | 18,443 |
| the period net of taxation* | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| ?Earnings per share | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| - basic and diluted | 5 | 24.7p | (5.4p) | 26.6p |
+-----------------------------------+-------+-------------+-------------+-----------+
| Adjusted earnings per share **** | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
| - basic and diluted | 5 | 6.4p | 9.2p | 18.4p |
+-----------------------------------+-------+-------------+-------------+-----------+
| | | | | |
+-----------------------------------+-------+-------------+-------------+-----------+
The above relates wholly to continuing operations.
* Wholly attributable to equity shareholders of Primary Health Properties PLC.
** See note 4 for more details
*** There is no difference between basic and fully diluted EPS
**** Adjusted for large one-off items and movements in fair value of properties
and derivatives.
Condensed Group balance sheet
at 30 June 2010
+----------------------+------------------+-------------+-------------+------------+
| | | At | At | At |
+----------------------+------------------+-------------+-------------+------------+
| | | 30-Jun | 30-Jun | 31-Dec |
+----------------------+------------------+-------------+-------------+------------+
| | | 2010 | 2009 | 2009 |
+----------------------+------------------+-------------+-------------+------------+
| | | GBP000 | GBP000 | GBP000 |
+----------------------+------------------+-------------+-------------+------------+
| | Notes | (unaudited) | (unaudited) | (audited) |
+----------------------+------------------+-------------+-------------+------------+
| | | | | (restated) |
+----------------------+------------------+-------------+-------------+------------+
| Non current assets | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Investment | 2,3 | 460,815 | 315,749 | 341,890 |
| properties | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Net investment in | | 3,025 | 2,991 | 3,014 |
| finance leases | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Fixed asset | 4 | 605 | - | - |
| investment | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Derivative interest | | 21 | - | 1,386 |
| rate swaps | | | | |
+----------------------+------------------+-------------+-------------+------------+
| | | 464,466 | 318,740 | 346,290 |
+----------------------+------------------+-------------+-------------+------------+
| Current assets | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Derivative interest | | - | - | 63 |
| rate swaps | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Trade and other | | 2,709 | 1,945 | 1,939 |
| receivables | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Net investment in | | 48 | 41 | 49 |
| finance leases | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Cash and cash | | 1,068 | 153 | 212 |
| equivalents | | | | |
+----------------------+------------------+-------------+-------------+------------+
| | | 3,825 | 2,139 | 2,263 |
+----------------------+------------------+-------------+-------------+------------+
| Total assets | | 468,291 | 320,879 | 348,553 |
+----------------------+------------------+-------------+-------------+------------+
| Current liabilities | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Derivative interest | | -17,182 | -10,462 | -12,208 |
| rate swaps | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Corporation tax | | -69 | -29 | -29 |
| payable | | | | |
+----------------------+------------------+-------------+-------------+------------+
| UK-REIT conversion charge payable | -1,866 | -1,490 | -1,455 |
+-----------------------------------------+-------------+-------------+------------+
| Deferred rental | | -6,335 | -4,677 | -4,638 |
| income | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Trade and other | 11 | -11,443 | -3,530 | -1,991 |
| payables | | | | |
+----------------------+------------------+-------------+-------------+------------+
| | | -36,895 | -20,188 | -20,321 |
+----------------------+------------------+-------------+-------------+------------+
| Non-current | | | | |
| liabilities | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Term loans | 12 | -256,792 | -207,216 | -166,139 |
+----------------------+------------------+-------------+-------------+------------+
| UK-REIT conversion charge payable | -1,422 | -1,708 | -856 |
+-----------------------------------------+-------------+-------------+------------+
| Derivative interest | | -15,873 | -5,825 | -9,322 |
| rate swaps | | | | |
+----------------------+------------------+-------------+-------------+------------+
| | | -274,087 | -214,749 | -176,317 |
+----------------------+------------------+-------------+-------------+------------+
| Total liabilities | | -310,982 | -234,937 | -196,638 |
+----------------------+------------------+-------------+-------------+------------+
| Net assets | | 157,309 | 85,942 | 151,915 |
+----------------------+------------------+-------------+-------------+------------+
| | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Equity | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Share capital | | 31,286 | 17,633 | 30,729 |
+----------------------+------------------+-------------+-------------+------------+
| Share premium | | 53,339 | 50,431 | 50,664 |
+----------------------+------------------+-------------+-------------+------------+
| Capital reserve | | 1,618 | 1,618 | 1,618 |
+----------------------+------------------+-------------+-------------+------------+
| Special reserve | | 44,442 | - | 44,442 |
+----------------------+------------------+-------------+-------------+------------+
| Cash flow hedging | | -15,039 | -5,825 | -7,266 |
| reserve | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Retained earnings | | 41,663 | 22,085 | 31,728 |
+----------------------+------------------+-------------+-------------+------------+
| Total equity* | | 157,309 | 85,942 | 151,915 |
+----------------------+------------------+-------------+-------------+------------+
| | | | | |
+----------------------+------------------+-------------+-------------+------------+
| Net asset value per | | | | |
| share | | | | |
+----------------------+------------------+-------------+-------------+------------+
| - basic | 13 | 251.4p | 243.7p | 247.2p |
+----------------------+------------------+-------------+-------------+------------+
| - EPRA net asset value per share ** | 304.2p | 289.9p | 279.9p |
+----------------------+------------------+-------------+-------------+------------+
* Wholly attributable to equity shareholders of Primary Health Properties
PLC.
** 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.
Condensed Group cash flow statement
for the six months ended 30 June 2010
+--------------------------------------------+-------------+-------------+-----------+
| | Six | Six | |
+--------------------------------------------+-------------+-------------+-----------+
| | months | months | Year |
+--------------------------------------------+-------------+-------------+-----------+
| | ended | ended | ended |
+--------------------------------------------+-------------+-------------+-----------+
| | 30-Jun | 30-Jun | 31-Dec |
+--------------------------------------------+-------------+-------------+-----------+
| | 2010 | 2009 | 2009 |
+--------------------------------------------+-------------+-------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+--------------------------------------------+-------------+-------------+-----------+
| | (unaudited) | (unaudited) | (audited) |
+--------------------------------------------+-------------+-------------+-----------+
| | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Operating activities | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Profit/(loss) before tax | 16,741 | -1,848 | 10,786 |
+--------------------------------------------+-------------+-------------+-----------+
| Less: Finance income | -46 | -53 | -86 |
+--------------------------------------------+-------------+-------------+-----------+
| Plus: Finance costs | 5,848 | 5,356 | 10,267 |
+--------------------------------------------+-------------+-------------+-----------+
| Plus: Fair value loss/(gain) on | 5,037 | -3,001 | -1,318 |
| derivatives | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Operating profit/(loss) before financing | 27,580 | 454 | 19,649 |
+--------------------------------------------+-------------+-------------+-----------+
| Adjustments to reconcile Group operating | | | |
| profit/(loss) to net cash flows from | | | |
| operating activities: | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Revaluation (gain)/loss on property | -17,821 | 8,033 | -1,615 |
+--------------------------------------------+-------------+-------------+-----------+
| Increase in trade and other receivables | -678 | -216 | -131 |
+--------------------------------------------+-------------+-------------+-----------+
| Increase/(decrease) in trade and other | 2,065 | -675 | -377 |
| payables* | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Cash generated from operations | 11,146 | 7,596 | 17,526 |
+--------------------------------------------+-------------+-------------+-----------+
| UK?REIT conversion charge instalment | -637 | -587 | -1,575 |
+--------------------------------------------+-------------+-------------+-----------+
| Taxation paid** | -193 | - | - |
+--------------------------------------------+-------------+-------------+-----------+
| Net cash flow from operating activities | 10,316 | 7,009 | 15,951 |
+--------------------------------------------+-------------+-------------+-----------+
| Investing activities | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire investment properties* | -12,612 | -6,919 | -23,413 |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire shares in AH?Medical | -476 | - | - |
| Properties PLC | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire Anchor Meadow Limited | -5,498 | - | - |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire Sinclair Montrose | -23,842 | - | - |
| Properties Limited | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire Abstract Integrated | -1,856 | - | - |
| Healthcare Limited | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire Charter Medinvest | -6,787 | - | - |
| Limited | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Payments to acquire Health Investments | -7,214 | - | - |
| Limited | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Interest received on developments | 41 | 7 | 46 |
+--------------------------------------------+-------------+-------------+-----------+
| Bank interest received | 2 | 2 | 4 |
+--------------------------------------------+-------------+-------------+-----------+
| Other interest received | 3 | 45 | 36 |
+--------------------------------------------+-------------+-------------+-----------+
| Net cash flow used in investing activities | -58,239 | -6,865 | -23,327 |
| | | | |
+--------------------------------------------+-------------+-------------+-----------+
| | | | |
+--------------------------------------------+-------------+-------------+-----------+
| ?Financing activities | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Proceeds from issue of shares (net of | - | 3,261 | 60,748 |
| expenses) | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Term bank loan drawdowns | 61,450 | 16,340 | 38,990 |
+--------------------------------------------+-------------+-------------+-----------+
| Term bank loan repayments | -2,250 | -13,390 | -77,290 |
+--------------------------------------------+-------------+-------------+-----------+
| Net swap interest paid | -4,043 | -1,840 | -6,541 |
+--------------------------------------------+-------------+-------------+-----------+
| Interest paid | -1,317 | -2,182 | -3,432 |
+--------------------------------------------+-------------+-------------+-----------+
| Equity dividends paid | -5,061 | -2,855 | -5,562 |
+--------------------------------------------+-------------+-------------+-----------+
| Net cash flow from financing activities | 48,779 | -666 | 6,913 |
+--------------------------------------------+-------------+-------------+-----------+
| Increase/(decrease) in cash and cash | 856 | -522 | -463 |
| equivalents for the period | | | |
+--------------------------------------------+-------------+-------------+-----------+
| | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Cash and cash equivalents at start of | 212 | 675 | 675 |
| period | | | |
+--------------------------------------------+-------------+-------------+-----------+
| Cash and cash equivalents at end of period | 1,068 | 153 | 212 |
| | | | |
+--------------------------------------------+-------------+-------------+-----------+
* The accrual for the Connah's Quay development has been recognised in investing
activities rather than operating activities as it relates to an investment
'property' rather than working capital.
** Taxation was paid in the period in order to settle the outstanding
liabilities in the acquired companies. All amounts payable were included in the
consideration calculation.
Condensed Group statement of changes in equity
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | | Share | | | Cash | | |
| | | | | | flow | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | Share | Prem- | Capital | Special | hedging | Retained | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | capital | Ium | reserve | reserve | reserve | earnings | Total |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Six months ended 30 | | | | | | | |
| June 2010 | | | | | | | |
| (unaudited) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 1 January 2010 | 30,729 | 50,664 | 1,618 | 44,442 | -7,266 | 31,728 | 151,915 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Profit for the | - | - | - | - | - | 15,184 | 15,184 |
| period | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Income and expense | | | | | | | |
| recognised directly | | | | | | | |
| in equity: | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Transfer to Group | - | - | - | - | 2,365 | - | 2,365 |
| Statement of | | | | | | | |
| Comprehensive | | | | | | | |
| Income on cash flow | | | | | | | |
| hedges | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Fair value losses | - | - | - | - | -10,138 | - | -10,138 |
| on cash flow hedges | | | | | | | |
| taken to equity | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Unrealised gains at | - | - | - | - | - | 128 | 128 |
| fair value through | | | | | | | |
| equity | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Total Comprehensive | - | - | - | - | -7,773 | 15,312 | 7,539 |
| Income | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Dividends paid: | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Second interim | - | - | - | - | - | -5,061 | -5,061 |
| dividend for period | | | | | | | |
| ended 31.12.09 | | | | | | | |
| (8.75p) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Scrip dividends in | 54 | 262 | - | - | - | -316 | - |
| lieu of interim | | | | | | | |
| cash dividends | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Share consideration | 503 | 2,413 | - | - | - | - | 2,916 |
| for the HI | | | | | | | |
| acquisition | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 30 June 2010 | 31,286 | 53,339 | 1,618 | 44,442 | -15,039 | 41,663 | 157,309 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Six months ended 30 | | | | | | | |
| June 2009 | | | | | | | |
| (unaudited) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 1 January 2009 | 16,794 | 48,009 | 1,618 | - | -14,923 | 26,788 | 78,286 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Loss for the period | - | - | - | - | - | -1,848 | -1,848 |
| | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Income and expense | | | | | | | |
| recognised directly | | | | | | | |
| in equity: | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Transfer to Group | - | - | - | - | 3,301 | - | 3,301 |
| Statement of | | | | | | | |
| Comprehensive | | | | | | | |
| Income on cash flow | | | | | | | |
| hedges | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Fair value gains on | - | - | - | - | 5,797 | - | 5,797 |
| cash flow hedges | | | | | | | |
| taken to equity | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Total Comprehensive | - | - | - | - | 9,098 | -1,848 | 7,250 |
| Income | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Placing proceeds | 839 | 2,422 | - | - | - | - | 3,261 |
| (net of expenses) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Dividends paid: | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Second interim | - | - | - | - | - | -2,855 | -2,855 |
| dividend for period | | | | | | | |
| ended 31.12.08 | | | | | | | |
| (8.5p) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 30 June 2009 | 17,633 | 50,431 | 1,618 | - | -5,825 | 22,085 | 85,942 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Year ended 31 | | | | | | | |
| December 2009 | | | | | | | |
| (audited) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 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 | 13,883 | 2,856 | - | 46,956 | - | - | 63,695 |
| capital raisings | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Expenses of capital | - | -433 | - | -2,514 | - | - | -2,947 |
| raisings | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Dividends paid: | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Second interim | - | - | - | - | - | -2,855 | -2,855 |
| dividend for period | | | | | | | |
| ended 31.12.08 | | | | | | | |
| (8.50p) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| First interim | - | - | - | - | - | -2,707 | -2,707 |
| dividend for year | | | | | | | |
| ended 31.12.09 | | | | | | | |
| (8.50p) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| Scrip dividends in | 52 | 232 | - | - | - | -284 | -284 |
| lieu of interim | | | | | | | |
| cash dividend (net | | | | | | | |
| of expenses) | | | | | | | |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
| 31 December 2009 | 30,729 | 50,664 | 1,618 | 44,442 | -7,266 | 31,728 | 151,915 |
+---------------------+---------+--------+---------+---------+---------+----------+---------+
Condensed notes to the financial statements
1. Accounting policies
General information
The financial information set out in this report does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 December 2009 have been
filed with the Registrar of Companies. The auditors' report on these financial
statements was unqualified and did not contain a statement under section 498(2)
of the Companies Act 2006.
Basis of preparation/Statement of compliance
The half year report for the six months ended 30 June 2010 has been prepared in
accordance with IAS 34 'Interim Financial Reporting' and reflects the accounting
policies set out in the Group's financial statements at 31 December 2009 which
have been prepared in accordance with IFRS as adopted by the European Union. The
acquisitions during the six months ended 30 June 2010 have been treated as asset
acquisitions (See note 3).
The half year report does not include all the information and disclosures
required in the statutory financial statements and should be read in conjunction
with the Group's financial statements as at 31 December 2009.
Convention
The financial statements are presented in Sterling rounded to the nearest
thousand.
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, NHS organisations and other associated health care users.
Going concern
The Group's property portfolio is 100% let to tenants with strong covenants.
The Group's borrowing facilities are not due for renewal until 2013 and the loan
to value ratio was 55.9% at 30 June 2010, well below the banking covenant of
70%. The pipeline of properties remains strong. Having reviewed the Group's
current position, cash flow projections, loan facilities and covenant cover, the
Directors have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Thus they
continue to adopt a going concern basis in preparing the financial statements.
2. Investment and investment properties under construction
Properties have been independently valued at fair value by?Lambert Smith
Hampton, Chartered Surveyors and Valuers, as at 30 June 2010 in accordance with
IAS 40: Investment Property.
The revaluation gain for the six months ended 30 June 2010 amounted to GBP17.8
m. The revaluation gain for the year ended 31 December 2009 amounted to GBP1.6 m
and the loss for the six months ended 30 June 2009 amounted to GBP8.0 m.
Property additions (including capitalised interest costs of GBP0.2 m relating to
contracts) for the six months ended 30 June 2010 amounted to GBP101.1 m. There
were no properties disposed of in the six months to 30 June 2010. Commitments
at 30 June 2010 amounted to GBP24.0 m (31 December 2009: GBP26.1 m).
Property additions for the 12 months ended 31 December 2009 and the six months
ended 30 June 2009 amounted to GBP23.4 m and GBP6.9 m respectively. There were
no property disposals during these periods.
3. Property acquisitions
As referred to in the operating and financial review the Group has acquired 33
fully let investments through five corporate transactions and one property
acquisition during the six months to 30 June 2010. These acquisitions have been
treated as asset acquisitions.
+----------------------------+------------+------------+--------------+---------+
| | | Investment | Investment | |
+----------------------------+------------+------------+--------------+---------+
| | Investment | properties | properties | |
+----------------------------+------------+------------+--------------+---------+
| | properties | long | under | |
+----------------------------+------------+------------+--------------+---------+
| | freehold | leasehold | construction | Total |
| | | | | |
+----------------------------+------------+------------+--------------+---------+
| | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------------------+------------+------------+--------------+---------+
| As at 1st January 2010 | 280,739 | 57,655 | 3,496 | 341,890 |
+----------------------------+------------+------------+--------------+---------+
| Property additions | 190 | - | 17,643 | 17,833 |
+----------------------------+------------+------------+--------------+---------+
| Acquired Investment | 3,641 | - | - | 3,641 |
| Property, Lanark | | | | |
+----------------------------+------------+------------+--------------+---------+
| Anchor Meadow Limited | 5,498 | - | - | 5,498 |
+----------------------------+------------+------------+--------------+---------+
| Care Capital Limited | 23,841 | - | - | 23,841 |
+----------------------------+------------+------------+--------------+---------+
| Abstract Integrated | 4,856 | - | - | 4,856 |
| Healthcare Limited | | | | |
+----------------------------+------------+------------+--------------+---------+
| Charter Medinvest Limited | 6,787 | - | - | 6,787 |
+----------------------------+------------+------------+--------------+---------+
| Health Investment Limited | 22,662 | 15,986 | - | 38,648 |
+----------------------------+------------+------------+--------------+---------+
| Transfer from properties | 17,302 | - | -17,302 | - |
| in the course of | | | | |
| development | | | | |
+----------------------------+------------+------------+--------------+---------+
| Revaluations for the year | 20,437 | -3,661 | 1,045 | 17,821 |
+----------------------------+------------+------------+--------------+---------+
| As at 30 June 2010 | 385,953 | 69,980 | 4,882 | 460,815 |
+----------------------------+------------+------------+--------------+---------+
4. Fixed asset investment
The fixed asset investment is held as an available for sale ("AFS") asset in
accordance with IAS 39. The unrealized gain on the investment is recognized
through the statement of changes in equity. The fixed asset investment acquired
during the six months to 30 June 2010 at a cost of GBP476,000 represents
ordinary shares acquired in AH?Medical Properties PLC and has been valued at the
quoted price on 30 June 2010 of GBP605,000.
5. Earnings per share
The purpose of calculating an adjusted earnings per share is to provide a better
indication of dividend cover for the period by excluding large one-off items
affecting earnings per share during the period.
+----------------------------------+---------------+-------------+-------------+
| | Net | | |
| | profit/(loss) | | |
| | attributable | *Number of | Pence |
| | to Ordinary | Ordinary | per |
| | Shareholders | Shares | share |
+----------------------------------+---------------+-------------+-------------+
| | Six | Six | Six |
+----------------------------------+---------------+-------------+-------------+
| | Mths | mths | mths |
+----------------------------------+---------------+-------------+-------------+
| | Ended | ended | ended |
+----------------------------------+---------------+-------------+-------------+
| | 30-Jun | 30-Jun | 30-Jun |
+----------------------------------+---------------+-------------+-------------+
| | 2010 | 2010 | 2010 |
+----------------------------------+---------------+-------------+-------------+
| | GBP000 | | |
+----------------------------------+---------------+-------------+-------------+
| | (unaudited) | (unaudited) | (unaudited) |
+----------------------------------+---------------+-------------+-------------+
| | | | |
+----------------------------------+---------------+-------------+-------------+
| Basic profit/(loss) | 15,184 | 61,561,192 | 24.7 |
+----------------------------------+---------------+-------------+-------------+
| Adjusted profit/(loss) | | | |
+----------------------------------+---------------+-------------+-------------+
| Adjustments to remove: | | | |
+----------------------------------+---------------+-------------+-------------+
| Other non recurring items | - | | |
+----------------------------------+---------------+-------------+-------------+
| Net valuation (gains)/losses on | -17,821 | | |
| valuation of property | | | |
+----------------------------------+---------------+-------------+-------------+
| Fair value loss/(gain) on | 5,037 | | |
| derivatives ** | | | |
+----------------------------------+---------------+-------------+-------------+
| UK?REIT conversion charge | 1,586 | | |
+----------------------------------+---------------+-------------+-------------+
| Taxation | -29 | | |
+----------------------------------+---------------+-------------+-------------+
| Adjusted basic and diluted | 3,957 | 61,561,192 | 6.4 |
| earnings *** | | | |
+----------------------------------+---------------+-------------+-------------+
+----------------------------------+--------------+-------------+-------------+
| | Net loss | | |
| | attributable | | |
| | to Ordinary | *Number of | Pence |
| | Shareholders | Ordinary | per |
| | | Shares | share |
+----------------------------------+--------------+-------------+-------------+
| | Six | Six | Six |
+----------------------------------+--------------+-------------+-------------+
| | mths | mths | Mths |
+----------------------------------+--------------+-------------+-------------+
| | ended | ended | Ended |
+----------------------------------+--------------+-------------+-------------+
| | 30-Jun | 30-Jun | 30-Jun |
+----------------------------------+--------------+-------------+-------------+
| | 2009 | 2009 | 2009 |
+----------------------------------+--------------+-------------+-------------+
| | GBP000 | | |
+----------------------------------+--------------+-------------+-------------+
| | (unaudited) | (unaudited) | (unaudited) |
+----------------------------------+--------------+-------------+-------------+
| | | | |
+----------------------------------+--------------+-------------+-------------+
| Profit/(loss) | | | |
+----------------------------------+--------------+-------------+-------------+
| Basic profit/(loss) | -1,848 | 34,487,079 | -5.4 |
+----------------------------------+--------------+-------------+-------------+
| Adjusted profit/(loss) | | | |
+----------------------------------+--------------+-------------+-------------+
| Adjustments to remove: | | | |
+----------------------------------+--------------+-------------+-------------+
| Other non recurring items | - | | |
+----------------------------------+--------------+-------------+-------------+
| Net valuation (gains)/losses on | 8,033 | | |
| valuation of property | | | |
+----------------------------------+--------------+-------------+-------------+
| Fair value loss/(gain) on | -3,001 | | |
| derivatives ** | | | |
+----------------------------------+--------------+-------------+-------------+
| UK?REIT conversion charge | - | | |
+----------------------------------+--------------+-------------+-------------+
| Taxation | - | | |
+----------------------------------+--------------+-------------+-------------+
| Adjusted basic and diluted | 3,184 | 34,487,079 | 9.2 |
| earnings per share *** | | | |
+----------------------------------+--------------+-------------+-------------+
| | | | |
| | | | |
+----------------------------------+--------------+-------------+-------------+
+-----------------------------------+--------------+------------+-----------+
| | Net loss | | |
| | attributable | | |
| | to Ordinary | *Number of | Pence |
| | Shareholders | Ordinary | per |
| | | Shares | share |
+-----------------------------------+--------------+------------+-----------+
| | Year | Year | Year |
+-----------------------------------+--------------+------------+-----------+
| | ended | ended | Ended |
+-----------------------------------+--------------+------------+-----------+
| | 31-Dec | 31-Dec | 31-Dec |
+-----------------------------------+--------------+------------+-----------+
| | 2009 | 2009 | 2009 |
+-----------------------------------+--------------+------------+-----------+
| | GBP000 | | |
+-----------------------------------+--------------+------------+-----------+
| | (audited) | (audited) | (audited) |
+-----------------------------------+--------------+------------+-----------+
| | | | |
+-----------------------------------+--------------+------------+-----------+
| Profit/(loss) | | | |
+-----------------------------------+--------------+------------+-----------+
| Basic profit/(loss) | 10,786 | 40,623,413 | 26.6 |
+-----------------------------------+--------------+------------+-----------+
| Adjusted profit/(loss) | | | |
+-----------------------------------+--------------+------------+-----------+
| Adjustments to remove: | | | |
+-----------------------------------+--------------+------------+-----------+
| Other non recurring items | -372 | | |
+-----------------------------------+--------------+------------+-----------+
| Net valuation (gains)/losses on | -1,615 | | |
| valuation of property | | | |
+-----------------------------------+--------------+------------+-----------+
| Fair value loss/(gain) on | -1,318 | | |
| derivatives ** | | | |
+-----------------------------------+--------------+------------+-----------+
| UK?REIT conversion charge | - | | |
+-----------------------------------+--------------+------------+-----------+
| Taxation | - | | |
+-----------------------------------+--------------+------------+-----------+
| Adjusted basic and diluted | 7,481 | 40,623,413 | 18.4 |
| earnings per share *** | | | |
+-----------------------------------+--------------+------------+-----------+
* Weighted average number of Ordinary Shares in issue during the period. In
October 2009 the Group issued 26,086,956 New Shares by way of a Firm Placing and
Open Offer
** In view of the continuing volatility in the mark to model adjustment in
respect of the period end valuations of derivatives that flow through the
Condensed Group Statement of Comprehensive Income, the Directors believe that it
is appropriate to remove the (gains)/loss in the calculation of adjusted
earnings.
*** There is no difference between basic and fully diluted EPS.
6. Finance income
+-----------------------------------+-------------+-------------+-----------+
| | Six | Six | Year |
| | months | months | |
+-----------------------------------+-------------+-------------+-----------+
| | ended | ended | ended |
+-----------------------------------+-------------+-------------+-----------+
| | 30-Jun | 30-Jun | 31-Dec |
+-----------------------------------+-------------+-------------+-----------+
| | 2010 | 2009 | 2009 |
+-----------------------------------+-------------+-------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+-----------------------------------+-------------+-------------+-----------+
| | (unaudited) | (unaudited) | (audited) |
+-----------------------------------+-------------+-------------+-----------+
| | | | |
+-----------------------------------+-------------+-------------+-----------+
| Interest income on financial | | | |
| assets | | | |
+-----------------------------------+-------------+-------------+-----------+
| | | | |
+-----------------------------------+-------------+-------------+-----------+
| Not at fair value through profit | | | |
| or loss | | | |
+-----------------------------------+-------------+-------------+-----------+
| Bank interest | 2 | 2 | 4 |
+-----------------------------------+-------------+-------------+-----------+
| Development loan interest | 41 | 7 | 46 |
+-----------------------------------+-------------+-------------+-----------+
| Other interest | 3 | 44 | 36 |
+-----------------------------------+-------------+-------------+-----------+
| | 46 | 53 | 86 |
+-----------------------------------+-------------+-------------+-----------+
7. Finance costs
+------------------------------------+-------------+-------------+-----------+
| | Six | Six | Year |
| | months | months | |
+------------------------------------+-------------+-------------+-----------+
| | ended | ended | Ended |
+------------------------------------+-------------+-------------+-----------+
| | 30-Jun | 30-Jun | 31-Dec |
+------------------------------------+-------------+-------------+-----------+
| | 2010 | 2009 | 2009 |
+------------------------------------+-------------+-------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+------------------------------------+-------------+-------------+-----------+
| | (unaudited) | (unaudited) | (audited) |
+------------------------------------+-------------+-------------+-----------+
| | | | |
+------------------------------------+-------------+-------------+-----------+
| Interest expense on financial | | | |
| liabilities | | | |
+------------------------------------+-------------+-------------+-----------+
| | | | |
+------------------------------------+-------------+-------------+-----------+
| Not at fair value through profit | | | |
| or loss | | | |
+------------------------------------+-------------+-------------+-----------+
| (i) Interest paid | | | |
+------------------------------------+-------------+-------------+-----------+
| Bank loan interest paid | 1,292 | 2,002 | 3,228 |
+------------------------------------+-------------+-------------+-----------+
| Bank swap interest | 4,259 | 3,301 | 6,473 |
+------------------------------------+-------------+-------------+-----------+
| Other interest paid | 4 | 3 | -12 |
+------------------------------------+-------------+-------------+-----------+
| Notional UK-REIT interest | 28 | 50 | 103 |
+------------------------------------+-------------+-------------+-----------+
| Bank facility non utilisation fees | 65 | - | 148 |
+------------------------------------+-------------+-------------+-----------+
| Bank charges and loan commitment | 200 | - | 327 |
| fees | | | |
+------------------------------------+-------------+-------------+-----------+
| | 5,848 | 5,356 | 10,267 |
+------------------------------------+-------------+-------------+-----------+
| At fair value through profit or | | | |
| loss | | | |
+------------------------------------+-------------+-------------+-----------+
| (ii) Derivatives | | | |
+------------------------------------+-------------+-------------+-----------+
| Net fair value (loss)/gain on | -5,037 | 3,001 | 1,318 |
| derivatives | | | |
+------------------------------------+-------------+-------------+-----------+
The fair value loss on derivatives recognised in the Condensed Group Statement
of Comprehensive Income has arisen from the interest rate swaps for which hedge
accounting does not apply. A further fair value loss on hedges which meet the
hedge effectiveness criteria under IAS 39 of GBP7.8 m (31 December 2009: gain of
GBP7.7 m) is accounted for directly in equity.
+----------------------------------------+-------------+-------------+-----------+
| | Six | Six | Year |
| | months | months | |
+----------------------------------------+-------------+-------------+-----------+
| | ended | ended | Ended |
+----------------------------------------+-------------+-------------+-----------+
| | 30-Jun | 30-Jun | 31-Dec |
+----------------------------------------+-------------+-------------+-----------+
| | 2010 | 2009 | 2009 |
+----------------------------------------+-------------+-------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+----------------------------------------+-------------+-------------+-----------+
| | (unaudited) | (unaudited) | (audited) |
+----------------------------------------+-------------+-------------+-----------+
| Total net finance costs | 5,802 | 5,303 | 10,181 |
+----------------------------------------+-------------+-------------+-----------+
| Weighted average finance cost % | 4.80 | 4.80 | 4.79 |
+----------------------------------------+-------------+-------------+-----------+
8. Taxation
+-------------------------------------+-------------+-------------+-----------+
| | Six | Six | Year |
| | months | months | |
+-------------------------------------+-------------+-------------+-----------+
| | ended | ended | Ended |
+-------------------------------------+-------------+-------------+-----------+
| | 30-Jun | 30-Jun | 31-Dec |
+-------------------------------------+-------------+-------------+-----------+
| | 2010 | 2009 | 2009 |
+-------------------------------------+-------------+-------------+-----------+
| | GBP000 | GBP000 | GBP000 |
+-------------------------------------+-------------+-------------+-----------+
| Taxation in the Statement of | (unaudited) | (unaudited) | (audited) |
| Comprehensive Income: | | | |
+-------------------------------------+-------------+-------------+-----------+
| Current tax | | | |
+-------------------------------------+-------------+-------------+-----------+
| UK Corporation tax credit on non | -29 | - | - |
| property income | | | |
+-------------------------------------+-------------+-------------+-----------+
| Charge on conversion to UK-REIT | 1,586 | - | - |
| status | | | |
+-------------------------------------+-------------+-------------+-----------+
| Taxation expense in the Statement | | | |
| of | | | |
+-------------------------------------+-------------+-------------+-----------+
| Comprehensive Income | 1,557 | - | - |
+-------------------------------------+-------------+-------------+-----------+
The UK?REIT charge of GBP1.6 m has arisen on the conversion of the companies
acquired to UK-REIT status during the six months ended 30 June 2010 based on the
values of the individual properties held.
9. Dividends paid
+----------------------------------------+--------+----------+----------+
| | Six | Six | |
+----------------------------------------+--------+----------+----------+
| | months | months | Year |
+----------------------------------------+--------+----------+----------+
| | ended | ended | ended |
+----------------------------------------+--------+----------+----------+
| | 30-Jun | 30-Jun | 31-Dec |
+----------------------------------------+--------+----------+----------+
| | 2010 | 2009 | 2009 |
+----------------------------------------+--------+----------+----------+
| | GBP000 | GBP000 | GBP000 |
+----------------------------------------+--------+----------+----------+
| Second interim dividend for the period | 5,061 | 2,855 | 2,855 |
| ended 31 December 2009 (8.75p) paid 26 | | | |
| March 2010 (2009: 8.50p) | | | |
+----------------------------------------+--------+----------+----------+
| First interim dividend for the period | - | - | 2,707 |
| ended 31 December 2009: (8.50p) paid | | | |
| 20 November 2009 (2008: 8.25p) | | | |
+----------------------------------------+--------+----------+----------+
| Scrip dividend in lieu of interim cash | 316 | - | 284 |
| dividends | | | |
+----------------------------------------+--------+----------+----------+
| | 5,377 | 2,855 | 5,846 |
+----------------------------------------+--------+----------+----------+
The Board proposes to pay an interim cash dividend of 8.75p per Ordinary Share
for the six months to 30 June 2010, payable on 29 October 2010.
10. Performance incentive scheme
No performance incentive fee is payable to the Joint Managers for the period
ended 30 June 2010 (six months to 30 June 2009 and year ended 31 December 2009:
GBPnil). Under the terms of the management agreement there is a deficit of some
GBP55 m to be made up in the net asset value before any further performance
incentive fee becomes payable.
11. Trade and other payables
Trade and other payables include an accrual of GBP9.1 m for cash due to haven
Health for the delivery of the completed development at Connah's Quay.
12. Bank Borrowings Reconciliation
+----------------------------------------+-----------+----------+----------+
| | | | Total |
+----------------------------------------+-----------+----------+----------+
| | Drawn | Headroom | facility |
| | down | | |
+----------------------------------------+-----------+----------+----------+
| | GBP000 | GBP000 | GBP000 |
+----------------------------------------+-----------+----------+----------+
| As at 1 January 2010 | 167,300 | 97,700 | 265,000 |
+----------------------------------------+-----------+----------+----------+
| Net of prepaid loan arrangement fees | -1,161 | - | - |
+----------------------------------------+-----------+----------+----------+
| | 166,139 | 97,700 | 265,000 |
+----------------------------------------+-----------+----------+----------+
| Drawdowns during the period | 59,200 | -59,200 | - |
+----------------------------------------+-----------+----------+----------+
| | 255,339 | 38,500 | 265,000 |
+----------------------------------------+-----------+----------+----------+
| Natwest Bank facility acquired with | 3,000 | 350 | 3,350 |
| Abstract Integrated Healthcare Limited | | | |
+----------------------------------------+-----------+----------+----------+
| Aviva facility acquired with Health | 28,264 | - | 28,264 |
| Investments Limited** | | | |
+----------------------------------------+-----------+----------+----------+
| Movement in prepaid loan arrangement | -189 | - | - |
| fees | | | |
+----------------------------------------+-----------+----------+----------+
| | 256,792 | 38,850 | 296,614 |
+----------------------------------------+-----------+----------+----------+
* The Natwest Bank facility is due to be fully repaid in May 2011.
** The acquired Aviva facility are fixed term loans secured at fixed interest
rates.
13. Net asset value calculations
There is no difference between the normal and adjusted net asset values as at 30
June 2009,
31 December 2009 and 30 June 2010. Net asset values have been calculated as
follows:
+--------------------------------------+-------------+-------------+------------+
| | 30-Jun | 30-Jun | 31-Dec |
+--------------------------------------+-------------+-------------+------------+
| | 2010 | 2009 | 2009 |
+--------------------------------------+-------------+-------------+------------+
| | GBP000 | GBP000 | GBP000 |
+--------------------------------------+-------------+-------------+------------+
| | (unaudited) | (unaudited) | (audited) |
+--------------------------------------+-------------+-------------+------------+
| | | | |
+--------------------------------------+-------------+-------------+------------+
| Net assets per Group Balance Sheet | 157,309 | 85,942 | 151,915 |
+--------------------------------------+-------------+-------------+------------+
| | | | |
+--------------------------------------+-------------+-------------+------------+
| Derivative interest rate swaps | 33,034 | 15,914 | 20,144 |
| liability (net) | | | |
+--------------------------------------+-------------+-------------+------------+
| Basis swaps | - | 373 | -63 |
+--------------------------------------+-------------+-------------+------------+
| EPRA?net asset value | 190,343 | 102,229 | 171,996 |
+--------------------------------------+-------------+-------------+------------+
| | | | |
+--------------------------------------+-------------+-------------+------------+
| | Number | Number | Number |
+--------------------------------------+-------------+-------------+------------+
| | of shares | of | of |
| | | shares | shares |
+--------------------------------------+-------------+-------------+------------+
| Ordinary Shares: | | | |
+--------------------------------------+-------------+-------------+------------+
| Issued share capital | 62,571,174 | 35,266,448 | 61,457,298 |
+--------------------------------------+-------------+-------------+------------+
| | | | |
+--------------------------------------+-------------+-------------+------------+
| Basic net asset value per share | 251.4p | 243.7p | 247.2p |
+--------------------------------------+-------------+-------------+------------+
| EPRA?net asset value per share | 304.2p | 289.9p | 279.9p |
+--------------------------------------+-------------+-------------+------------+
14. Related party transactions
There have been no changes to the related party arrangements or transactions as
reported in the statutory Annual Financial Report for the year ended 31 December
2009. Note 4a) of the Annual Financial Report includes details of the management
fees payable. Management fees of GBP0.8 m payable in accordance with the Joint
Management Agreement described in the Annual Financial Report were paid to Nexus
PHP Management Limited (six months to 30 June 2009:
GBP0.8 m and 12 months to 31 December 2009: GBP1.4 m) and to J?O?Hambro Capital
Management Limited GBP0.7 m (six months to 30 June 2009: GBP0.7 m and 12 months
to 31 December 2009: GBP1.0 m).
The GP?surgery acquired at Lanark was purchased for a consideration of GBP3.4 m
from Alba Investment Properties Limited ("Alba"). Christopher Mills who is a
principal of J?O?Hambro Capital Management Limited is a related party to Alba
through investment in that company by North Atlantic Value Smaller Companies
Investment Trust plc of which Mr Mills is Chief Executive and Joint Investment
Manager and a substantial shareholder of the Joint Investment Manager. In
assessing the value of the property the Group used independent valuers and
neither J O?Hambro Capital Management Limited (the Joint Manager) nor Mr James
Hambro, Director, took any part in the acquisition process.
Independent review report to Primary Health Properties PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30 June
2010 which comprises the Condensed Group Statement of Comprehensive Income,
Condensed Group Balance Sheet, Condensed Group Cash Flow Statement, Condensed
Group Statement of Changes in Equity and the related notes 1 to 14. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE 2410") issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the Directors. The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority. As disclosed in note 1, the
annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards "IFRS" as adopted by the European
Union. The condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International Accounting
Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly report based on our review.
Scope of review
We conducted our review in accordance with ISRE 2410 (UK?and Ireland) issued by
the Auditing Practices Board for use in the United Kingdom. A review of interim
financial information consists of making enquiries primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK?and
Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 June 2010 is not prepared, in all material
respects, in accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
Ernst & Young LLP
London
18 August 2010
Directors' responsibility statement
The Directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union and that the
operating and financial review herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency rules of
the United Kingdom's Financial Services Authority namely:
- an indication of important events that have occurred during the first six
months and their impact on the condensed financial statements and a description
of the principal risks and uncertainties for the remaining six months of the
financial year; and
- material related party transactions in the first six months and any material
changes in the related party transactions described in the last Annual Financial
Report.
The Directors of Primary Health Properties PLC are listed in the Annual
Financial Report for the year ended 31 December 2009. A list of current
Directors is shown on page 41. Shareholder information is as disclosed in the
Annual Financial Report and is also available on the PHP website
www.phpgroup.co.uk.
Graeme Elliot
Chairman
18 August 2010
Corporate profile
Directors
Graeme Elliot (Chairman)
Alun Jones (Chairman of Audit Committee and Senior Independent Director)
Harry Hyman (Managing Director)
Mark?Creedy (Chairman of Management Engagement Committee)
Martin Gilbert (William Hemmings: alternate)
James Hambro
Dr Ian Rutter OBE (Chairman of Nomination and Remuneration Committees)
Company Secretary and Registered Office
J O Hambro Capital Management Limited
Ground Floor, Ryder Court
14 Ryder Street, London SW1Y 6QB
Tel: 020 7747 5678
Fax: 020 7747 5647
Joint Managers
Nexus PHP Management Limited
2nd Floor, Griffin House
West Street, Woking GU21 6BS
Tel: 01483 749 020
J O Hambro Capital Management Limited
Ground Floor, Ryder Court
14 Ryder Street, London SW1Y 6QB
Tel: 020 7747 5678
Registrars
Capita Registrars
Northern House, Woodsome Park
Fenay Bridge, Huddersfield
West?Yorkshire HD8 0GA
General enquiries: 0871 664 0300*
Email: ssd@capitaregistrars.com
Online dealing: www.capitadeal.com
Telephone dealing: 0871 664 0384*
Share service: www.capitaregistrars.com/php
CIRGT Shareholder helpline: 0871 664 0300*
* calls cost 10p per minute plus network charges
Stockbrokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square, London EC4M 7LT
KBC Peel Hunt Ltd
111 Old Broad Street, London EC2N 1PH
Solicitors
Nabarro LLP
Lacon House, 84 Theobald's Road
London WC1X 8RW
Tods Murray LLP
Edinburgh Quay, 133 Fountainbridge
Edinburgh EH3 9AG
Auditors
Ernst & Young LLP
1 More London Place, London SE1 2AF
Bankers
The Royal Bank of Scotland plc
280 Bishopsgate, London EC2M 3UR
Allied Irish Banks, p.l.c.
St Helen's, 1 Undershaft, London EC3A 8AB
Abbey National Treasury Services plc
2 Triton Square, Regent's Place
London NW1 3AN
Environmental consultant
Collier & Madge plc
One Great Cumberland Place
London W1H 7AL
Property valuer
Lambert Smith Hampton Group Limited
Interchange Place, Edmund Street Birmingham B3 2TA
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGUWCRUPUGBR
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