TIDMPHP
RNS Number : 5492P
Primary Health Properties PLC
18 February 2021
Primary Health Properties PLC
Preliminary results for the year ended 31 December 2020
Continued strong performance throughout COVID-19 pandemic and
successful management internalisation
Primary Health Properties PLC ("PHP", the "Group" or the
"Company"), a leading investor in modern primary health facilities,
announces its audited preliminary results for the year ended 31
December 2020.
Harry Hyman , Chief Executive, commented:
"We have continued to support the NHS in the UK, HSE in Ireland
and our GP occupiers throughout the COVID-19 pandemic which has
highlighted the demands on health systems around the world. Many of
our primary care facilities and occupiers are now in the front-line
of delivering Covid-19 vaccines. We continue to see demand for
extra space to help enable the redirection of activities out of
hospitals. The need for modern, integrated, local primary
healthcare facilities is becoming ever more pressing in order to
relieve the pressures being placed on hospitals and A&E
departments.
"In early 2021, we successfully completed the internalisation of
the Group's management structure which will immediately deliver
material financial and operational benefits driving further
earnings and dividend growth, enhancing shareholder returns, whilst
simultaneously broadening our appeal to a wider investment
community and underpinning the next stage of the Company's
growth."
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Year to Year to
31 December 31 December
Income statement metrics 2020 2019 Change
------------ ------------
Net rental income(1) GBP131.2m GBP115.7m +13.4%
Adjusted earnings(1,2) GBP73.1m GBP59.7m +22.4%
Adjusted earnings per share(1,2) 5.8p 5.5p +5.5%
IFRS profit before tax excluding MedicX
exceptional adjustments(1,5) GBP109.3m GBP75.9m +44.0%
IFRS profit/(loss) for the year (2019 includes GBP112.0m (GBP71.3m)
GBP123.9m of non-cash losses)(9)
IFRS earnings/(loss) per share(2) 8.8p (6.5p)
Dividends
Dividend per share(6) 5.9p 5.6p +5.4%
Dividends paid(6) GBP73.3m GBP59.4m
Dividend cover(1) 100% 101%
----------------------------------------------- ------------ ------------ --------
31 December 31 December
Balance sheet and operational metrics 2020 2019 Change
----------------------------------------------- ------------ ------------ --------
Adjusted NTA (NAV) per share(1,3) 112.9p 107.9p +4.6%
IFRS NAV per share(1,3) 107.5p 101.0p +6.4%
Property portfolio
Investment portfolio valuation(4) GBP2.576bn GBP2.413bn +2.0%
Net initial yield ("NIY") (1) 4.81% 4.86%
Contracted rent roll (annualised)(1,8) GBP135.2m GBP127.7m +1.6%
Weighted average unexpired lease 12.1 years 12.8 years
term ("WAULT")(1)
Occupancy 99.6% 99.5%
Rent-roll funded by government bodies(1) 90% 90%
Debt
Average cost of debt 3.5% 3.5%
Loan to value ratio(1) 41.0% 44.2%
Weighted average debt maturity - 6.5 years 7.2 years
drawn facilities
Total undrawn loan facilities and GBP361.5m GBP356.6m
cash(7)
----------------------------------------------- ------------ ------------ --------
(1) Definitions for net rental income, adjusted earnings,
adjusted earnings per share, earnings per share ("EPS"), dividend
cover, loan to value ("LTV"), IFRS profit before tax excluding
MedicX exceptional adjustments, net tangible assets ("NTA"), rent
roll, NIY, WAULT and net asset value ("NAV") are set out in the
Glossary of Terms.
(2) See note 8, earnings per share, to the financial
statements.
(3) See note 8, net asset value per share, to the financial
statements. From 1 January 2020 Adjusted EPRA NAV, EPRA NAV and
EPRA NNNAV have been replaced with four new metrics: adjusted net
tangible assets, EPRA net tangible assets ("NTA"), EPRA net
disposal value ("NDV") and EPRA net reinstatement value ("NRV")
which are considered to be alternative performance measures. The
Group has determined that adjusted net tangible assets is the most
relevant measure and hence is now reported in place of adjusted
EPRA NAV.
(4) Percentage valuation movement during the year based on the
difference between opening and closing valuations of properties
after allowing for acquisition costs and capital expenditure.
(5) The IFRS profit before tax excluding MedicX exceptional
adjustments is set-out in detail in the summarised results table on
page 14.
(6) See note 9, dividends, to the financial statements.
(7) After deducting the remaining cost to complete contracted
acquisitions, properties under development and asset management
projects.
(8) Percentage contracted rent roll increase during the year is
based on the annualised uplift achieved from all completed rent
reviews and asset management projects.
(9) GBP123.9m of non-cash losses are composed of GBP138.4m
exceptional revaluation loss arising on the merger with MedicX less
the GBP14.5m exceptional transactions costs.
DELIVERING EARNINGS AND DIVID GROWTH
-- Adjusted earnings per share increased by 5.5% to 5.8p (2019: 5.5p)
-- Notwithstanding the impact of Covid-19, average uplift of
1.8% per annum on rent reviews completed in the year, continuing
the trend in rental growth (FY 2019: 1.9%; FY 2018: 1.4%)
-- Additional annualised rental income on a like-for-like basis
of GBP2.0 million or 1.6%, from rent reviews and asset management
projects (FY 2019: GBP1.9 million or 1.5%; FY 2018: GBP1.3 million
or 1.8%)
-- Contracted annualised rent roll increased by 5.9% to GBP135.2
million (31 December 2019: GBP127.7 million)
-- 23 purpose-built medical centres acquired in the year for
GBP58.8 million with good asset management opportunities
-- Four forward funded developments acquired in the year with a
net development cost of GBP34.2 million at Arklow and Enniscorthy
in Ireland, Epsom, Surrey and Llanbradach, Wales
-- Post period end, successful completion of the internalisation
of the Group's management structure, at a cost including fees of
GBP35.7m, with shareholders representing 99.95% of the votes cast
voting in favour of the internalisation which is anticipated to
deliver annual cost savings of approximately GBP4.0 million.
-- Quarterly dividends totalling 5.9p per share distributed in
the year, a 5.4% increase over 2019 (5.6p per share)
-- First quarterly dividend of 1.55p per share declared, payable
on 26 February 2021, equivalent to 6.2p on an annualised basis.
This represents a further 5.1% increase over the 2020 dividend per
share and marks the start of the Company's 25(th) consecutive year
of dividend growth
-- The Company intends to make further dividend payments in May,
August and November 2021 and maintain its strategy of paying a
progressive dividend, in equal quarterly instalments, covered by
underlying earnings in each financial year
DELIVERING NET ASSET VALUE GROWTH
-- Adjusted Net Tangible Assets (NTA) per share increased by
4.6% to 112.9 pence (31 December 2019: 107.9 pence)
-- Property portfolio at 31 December 2020 valued at GBP2.576
billion (31 December 2019: GBP2.413 billion) reflecting a net
initial yield of 4.81% (31 December 2019: 4.86%). A revaluation
surplus was generated in the year of GBP51.4 million (2019: GBP49.8
million), representing growth of 2.0% (2019: 2.1%)
-- Portfolio in Ireland now comprises 18 assets, valued at
GBP198 million (EUR221 million), including two forward funded
developments currently under construction which, if valued as
complete, will increase the total asset value to approximately
GBP220 million (EUR246 million)
-- The Group completed the forward funded developments at Athy,
Bray, Rialto and Banagher in Ireland during the year and has six
developments currently on site with a net development cost of
GBP47.4 million. All sites in the UK and Ireland remain open and
construction continues to progress
-- Strong pipeline of targeted acquisitions and asset management
projects with a value of approximately GBP129 million, of which
GBP59 million is currently under offer, together with additional
pipeline from Nexus Developments
-- Post period end the development expertise of Nexus
Developments acquired as part of the internalisation transaction
together with control of an GBP80 million pipeline of direct
development opportunities of which two projects are at an advanced
stage. This is the first time that the Company will be developing
through utilising its own balance sheet
-- Progression of asset management projects with 24 either
completed or currently on-site, investing GBP8.1 million, creating
additional rental income of GBP0.3 million per annum and extending
the weighted average unexpired lease term (WAULT) for those leases
back to 20 years
-- The Group has a strong pipeline of over 80 incremental asset
management projects which have either been approved by the Board or
are in advanced negotiations. The pipeline of projects equates to
investing approximately GBP34 million in 2021 and 2022 generating
GBP1.1 million of additional income and extending the WAULT on
those leases back to 21 years
-- The portfolio's metrics continue to reflect the secure,
long-term and predictable income stream with occupancy at 99.6% (31
December 2019: 99.5%) and a WAULT of 12.1 years (31 December 2019:
12.8 years)
DELIVERING FINANCIAL MANAGEMENT
-- GBP140.0m (GBP136.9m net of expenses) over-subscribed equity
placing in July 2020 at 145p per share or 32.9% premium to reported
Adjusted NTA of 109.1p as at 30 June 2020
-- Following the equity placing the Company lowered the upper
range for the Group's loan to value ("LTV") ratio from 55% to
50%
-- At 31 December 2020 the Group's net debt stood at GBP1,055.7
million (31 December 2019: GBP1,067.3 million) and the LTV ratio
was 41.0% (31 December 2019: 44.2%)
-- The Group has undrawn loan facilities and cash on deposit
post capital commitments totalling GBP361.5 million (31 December
2019: GBP356.6 million) providing significant liquidity headroom.
Cash on deposit totals GBP103.6 million
-- Significant headroom in LTV and interest cover covenants in
the Group's various borrowing facilities
-- Low, average marginal cost of debt of 1.7% following
refinancing of revolving credit facilities with Barclays and
Lloyds
DELIVERING ROBUST RENTAL COLLECTION
-- Of PHP's contracted rental income, 90% is paid either
directly or indirectly by the UK and Irish governments, with the
balance mainly coming from pharmacies co-located at our
properties
-- Rental collections continue to remain robust and as at 17
February 2021 99% and 94% had been collected in both the UK and
Ireland respectively for the first quarter of 2021 and in-line with
collection rates experienced for 2020 which now stand at over 99%
for both countries. The balance of rent due for the first quarter
of 2021 is expected to be received shortly
-- The Group has allowed GBP4.8 million of annualised rents,
predominantly pharmacies, to be paid by monthly instalments, given
short-term rent deferrals of GBP1.2 million and concessions of
GBP0.5 million
DELIVERING STRONG TOTAL RETURNS
Year ended Year ended
31 December 2020 31 December
2019
-------------------------------- ---- ------------------ -------------
Increase in Adjusted NTA plus
dividends paid 10.1% 8.0%
Income return 5.2% 5.2%
Capital return 2.2% 2.5%
--------------------------------- --- ------------------ -------------
Total property return(1) 7.4% 7.7%
MSCI UK Monthly Property Index (0.8%) 2.2%
--------------------------------- --- ------------------ -------------
Out performance over MSCI 8.2% 5.5%
-------------------------------------- ------------------ -------------
(1) The de finitions for total property return is set out in the
Glossary of Terms.
Presentation and webcast:
A virtual briefing for analysts will be held today, 18 February
2021 at 9.30am, via a live webcast and conference call
facility.
The presentation will be accessible via a live conference
call:
UK Toll-free: 0800 358 9473
International dial in numbers:
https://event.sharefile.com/d-s7bae1d9235d495a8
Participant PIN code: 59260771#
A live listen-only webcast of the presentation will also be
available via this link:
https://webcasting.brrmedia.co.uk/broadcast/5ffed6e536bc5f2c49e14d10
If you would like to join the briefing, please contact Buchanan
via php@buchanan.uk.com to confirm your place.
For further information contact:
Harry Hyman Richard Howell
Primary Health Properties PLC Primary Health Properties PLC
T +44 (0) 20 7451 7050 T +44 (0) 20 7104 2004
harry.hyman@phpgroup.co.uk richard.howell@phpgroup.co.uk
--------------------------------------- ------------------------------
David Rydell/Steph Watson/Tilly Abraham
Buchanan
T +44 (0) 20 7466 5066
--------------------------------------- ------------------------------
Chairman's statement
I am delighted to present my third annual report, as Chairman of
PHP, for what has been an unprecedented year in the UK and around
the world as result of the COVID-19 pandemic. Despite the
uncertainty and volatility in the economic environment we have
continued to deliver a strong and robust operational and financial
performance over the course of 2020.
The Group's portfolio continues to demonstrate good resilience
despite the uncertainty caused by COVID-19. During the pandemic,
PHP has been actively working with the NHS in the UK, HSE in
Ireland, and its GP partners in both markets to help them better
utilise the Group's properties for deployment in the current global
health crisis with many of our primary care facilities and
occupiers now in the front-line of delivering COVID-19 vaccines .
We continue to maintain close relationships with our key
stakeholders and GP partners to ensure we are best placed to help
the NHS and HSE, and in particular primary care, evolve and deal
with the pressures placed on them by the COVID-19 pandemic.
The PHP team of over 50 staff have worked successfully from home
throughout the pandemic and the Group's Disaster Recovery plan has
and continues to operate as expected with systems and
communications maintained and none of our staff having been
furloughed. The Group has not utilised any of the Government's loan
or incentive scheme introduced during the pandemic and has
continued to pay all taxes due on the normal due date. I would like
to express on behalf of the Board our gratitude and thanks for the
team's commitment, dedication and professionalism over this past
year.
In July 2020, we successfully completed an over-subscribed
equity placing raising GBP140m (GBP136.9m net of expenses) to
capitalise on the Group's strong pipeline of standing investments,
forward funded developments and asset management projects. The
placing increased the Group's market capitalisation to around
GBP2bn and the property portfolio now stands at just under GBP2.6bn
across 513 assets, including 18 in Ireland. The July placing
followed the deployment of the GBP100m raised from the September
2019 equity raise by the first half of 2020 demonstrating the
Group's ability to successfully invest in opportunities that are
generating value for all of our stakeholders.
The net proceeds from the July placing further improved the
Group's already robust capital position providing significant
levels of liquidity and loan covenant headroom with GBP361.5m of
undrawn loan facilities and cash, helping to maintain an
appropriate loan to value ("LTV") ratio at 41.0% as at 31 December
2020. As previously announced with the July placing, the Company
lowered the upper range of the LTV ratio from 55% to 50%.
The Group continues to have a strong, active pipeline of
potential acquisitions both in the UK and Ireland totalling
approximately GBP129m, including GBP59m under offer, together with
the additional pipeline from Nexus Developments totalling GBP80m
noted below.
Rental collections continue to be robust and as at 17 February
2021 99% and 94% had been collected in both the UK and Ireland
respectively for the first quarter of 2021 and in-line with
collection rates experienced for 2020 which now stand at over 99%
for both countries.
Internalisation of Nexus
On 5 January 2021, the Group successfully completed the
internalisation of its management structure with shareholders
representing 99.95% of the votes cast voting in favour of the
internalisation which is anticipated to result in immediate annual
cost savings of approximately GBP4.0 million, equivalent to 0.3
pence per share. The assumption of Nexus's existing management and
overhead costs are anticipated to result in lower ongoing
administrative costs to the Company and the EPRA cost ratio, which
is already among the lowest in the sector, is therefore expected to
fall further. The total cost of the acquisition was GBP35.7m
comprising the fair value of the total consideration at completion
of GBP34.1m and related fees and expenses of GBP1.6m.
As outlined in the Circular posted to shareholders in December
2020, the Board believes that there are a number of compelling
financial and strategic benefits of the internalisation such as the
delinking of the Company's administrative costs from its gross
asset value which will provide further cost benefits and
longer-term earnings enhancement as the portfolio grows in the
future. The internalised structure is also more appropriate to a
UK-REIT of the scale of PHP, broadening the universe of potential
investors in the Company, in particular among those investors
unwilling or unable to invest in externally managed vehicles.
The acquisition also helps to secure the continuity of a
well-regarded and experienced management team, led by Harry Hyman
as Chief Executive, who have a deep understanding of both the
sector and the portfolio together with a fully operational
management platform with the transfer of the systems, structure and
proprietary market knowledge that Nexus had developed since
1996.
The acquisition also enabled PHP to acquire the development
expertise of Nexus Developments with a pipeline of GBP80m of direct
development opportunities, at varying stages of progression which
will allow PHP to bring forward future primary care developments
utilising its own balance sheet. The Board believes that momentum
is growing in the NHS, with increasing pressure on government, for
the approval of new medical centre developments and now PHP has its
own development capabilities will make it a more attractive partner
for such new development opportunities. This is the first time that
the Company will be developing through utilising its own balance
sheet and undertaking non-speculative developments on its balance
sheet should provide a greater yield on cost and potential
valuation uplift. The internalisation is expected to further
benefit the long-term future of the business and help to underpin
the next stage of the Company's growth.
Overview of results
In 2020, PHP's recurring Adjusted earnings increased by GBP13.4m
or 22.4% to GBP73.1m (2019: GBP59.7m) driven by a full year's
contribution from the merger with MedicX completed in March 2019,
acquisitions, continued rental growth from our asset management
activities and reductions in the average cost of finance in both
2019 and 2020. Using the weighted average number of shares in issue
in the year Adjusted earnings per share increased to 5.8p (2019:
5.5p), an increase of 5.5%.
A revaluation surplus of GBP51.4m (2019: GBP49.8m) was generated
in the year from the portfolio equivalent to 3.9p per share. The
valuation surplus was driven by net initial yield ("NIY")
compression in both the UK and Ireland for government backed
income, rental growth from rent reviews and asset management
projects, partly offset by a deterioration in the rental outlook
for pharmacies in the UK.
A loss on the fair value of interest rate derivatives and
convertible bonds together with the amortisation of the fair value
adjustment on the MedicX fixed rate debt at acquisition of GBP12.1m
(2019: loss of GBP31.1m) resulted in a profit before tax as
reported under IFRS of GBP112.4m (2019: loss GBP70.2m).
The Group has continued to selectively grow its portfolio in the
year, adding 23 assets and four forward-funded developments.
Rent reviews and asset management projects completed in the year
added GBP2.0m or 1.6% (2019: GBP1.9m or 1.5%) to the contracted
rent. However, we have seen a marginal reduction in the annualised
rate of growth on rent reviews in 2020 at 1.8% (2019: 1.9%) and the
outlook is becoming more muted for pharmacy rents as the
consequences of the COVID-19 crisis become more apparent.
The portfolio's average lot size continues to grow and is now
GBP5.0m, and we are maintaining our very strong metrics, with a
long weighted average unexpired lease term ("WAULT") of 12.1 years,
high occupancy at 99.6% and only 3.9% of our rent due to expire in
the next three years and 57.1% expiring in over 10 years.
Dividends and total shareholder return
The Company distributed a total of 5.9p per share in 2020, an
increase of 5.4% over 2019 of 5.6p per share. The total value of
dividends distributed in the year increased by 23.4% to GBP73.3m
(2019: GBP59.4m), which were covered by Adjusted earnings,
notwithstanding the additional shares issued in 2020 from the
GBP140.0m equity raise in July 2020. Dividends totalling GBP4.2m
were satisfied through the issuance of shares via the scrip
dividend scheme.
A dividend of 1.55p per share was declared on 6 January 2021,
equivalent to 6.2p on an annualised basis, which represents an
increase of 5.1% over the dividend distributed per share in 2020.
The dividend will be paid to shareholders on 26 February 2021 who
were on the register at the close of business on 14 January 2021.
The dividend will comprise entirely of a Property Income
Distribution ("PID") of 1.55p. Further dividend payments are
planned to be made on a quarterly basis in May, August and November
2021.
The Company intends to maintain its strategy of paying a
progressive dividend, which the Company intends to pay in equal
quarterly instalments, that is covered by underlying earnings in
each financial year.
The Company's share price started the year at 160.0p per share
and closed on 31 December 2020 at 152.8p, a decrease of 4.5%.
Including dividends, those shareholders who held the Company's
shares throughout the year achieved a Total Shareholder Return of
-0.8% (2019: 49.2%). This compares to the total return delivered by
UK real estate equities (FTSE EPRA Nareit UK Index) of -20.4% and
the wider UK equity sector (FTSE All-Share Index) of -9.8% in the
year.
Environmental, Social and Governance ("ESG") Committee
In October 2020, the NHS adopted a multi-year plan to become the
world's first carbon net zero national health system by 2045 and
with an ambition for an interim 80% reduction by 2036-2039. PHP is
committed to helping the NHS achieve this target and is
pro-actively engaging and working with our various healthcare
occupiers to help them achieve this. Consequently, the ESG
Committee, originally established by Nexus in 2019, became a full
Committee of the Board in 2020 following the appointment of two
Non-Executive Directors, Laure Duhot as Chair and Peter Cole, to
the Committee. The Committee also comprises the Executive Directors
and Senior Executives responsible for the implementation of ESG
policies, targets and monitoring actual performance.
The ESG Committee is responsible for considering and
implementing our commitment and approach to responsible business
addressing the key areas of the environment, social and governance
matters which are embedded into our investment, asset management,
development and corporate activities. We are committed to acting
responsibly, having a positive impact on our communities, improving
our responsible business disclosures, mitigating sustainability
risks and capturing environmental and stakeholder opportunities.
During 2020 we have set a number of challenging targets and joined
Real Estate Balance to further develop gender diversity within PHP.
Further details can be found in the Annual Report and Responsible
Business section of our website.
Board changes
In November 2019 it was announced that, following the successful
merger and integration of the MedicX portfolio and team, Helen Mahy
would retire from the Board at the Company's Annual General Meeting
("AGM") on 1 April 2020.
In January 2020 it was announced that, following a review of the
skills, experience and knowledge of the Board and the consideration
of its size and composition as part of the Nomination Committee's
annual evaluation process, a Board of six, consisting of four
independent non-executive directors and two executive directors, is
the appropriate size for the Group going forward, given the
relative simplicity of the business model. Accordingly, a
replacement for Helen Mahy was not made and Dr Stephen Kell also
retired from the Board at the AGM.
Following the completion of the AGM Ian Krieger became the
Senior Independent Director and Peter Cole became Chairman of the
Remuneration Committee.
The Board is grateful to Helen and Stephen for their commitment
and dedication to the Company during their service, and for their
contribution to and support for the merger with MedicX in 2019.
Market update and outlook
Healthcare provision in the UK has been transformed in 2020, as
the NHS has responded to the requirements of dealing with the
COVID-19 pandemic. Despite a large number of consultations now
being carried out remotely we have also seen a large increase in
workload for GPs and wider primary care teams at our buildings with
many of our assets and occupiers now engaged in the delivery of
COVID-19 vaccines as well as dealing with the resultant backlog of
non-COVID-19 treatments that need to be addressed, with more
services expected to move away from hospitals and into primary care
facilities in the future. This trend will undoubtedly require
substantial investment into other areas, most notably primary care
that will be able to take on the non-urgent and peripheral
procedures. We will continue to actively engage with government
bodies, the NHS, HSE in Ireland and other key stakeholders to
establish and enact where we can support and help to alleviate
increased pressures and burdens currently being placed on
healthcare networks.
The NHS has, over time, been moving on from some of the
structures put in place by the Health and Social Care Act 2012.
These reforms, often referred to as the Lansley reforms, sought to
put in place market structures within the NHS to seek to drive
efficiencies through competition. In a recent draft White Paper,
the Government is now seeking to put in place Integrated Care
Systems ("ICS") with a target date of April 2022. The new proposals
focus more on collaboration, than competition, in achieving
population health goals. The 44 ICS that are proposed in England
and Wales will each be responsible for a single commissioning
budget for funds that were previously spread across various
separate pools, such as primary care, secondary care, acute
hospitals, mental health, ambulance services, social care and
public health. It is hoped that by bringing these budgets under a
single organisational structure that better health outcomes can be
achieved for local populations by offering the most effective and
efficient overall services for their needs. PHP believes that
primary care is extremely well placed to deliver more services in
the community, especially those based around health and
wellbeing.
The conclusion of Brexit for the UK is unlikely to have a direct
impact on the primary health centres we invest in, which perform a
vital role in the provision of healthcare across the UK and
Ireland. Demand for our properties is driven by demographics and in
particular populations that are growing, ageing and suffering from
more instances of chronic illness.
Despite the continued volatility in the economic and political
environment and the prolonged era of low interest rates, there
continues to be an unrelenting search for secure and reliable
income. Primary healthcare, with its strong fundamental
characteristics and government-backed income, has been a
significant beneficiary of this trend. The UK market for primary
healthcare property investment continues to be highly competitive
with strong yields and prices being paid by investors for assets in
the sector throughout 2020 and in particular in the second half of
the year.
We believe that our activities benefit not only our shareholders
but also our other stakeholders, including our occupiers, patients,
the NHS and HSE, suppliers, lenders and the wider communities in
both the UK and Ireland.
As the UK and Ireland prepare for the 'new normal' and how this
impacts the NHS and HSE respectively and those reliant on them, we
are ideally placed to support their needs, with the financial
strength, sector expertise and knowledge to enable them to succeed,
whilst simultaneously delivering long term value to shareholders
and wider stakeholders. Despite the unprecedented level of
uncertainty in the UK and around the world, the Board continues to
look forward with confidence to the future, particularly following
the internalisation of the Group's management and the acquisition
of a direct development capability in January 2021. The Board
believes that these transformational transactions will help drive
further earnings and asset growth for the benefit of all of the
Group's stakeholders.
Steven Owen
Chairman
17 February 2021
BUSINESS REVIEW
Investment and development activity
The majority of the investment activity in the year came from
the acquisition of 23 assets acquired in the UK for GBP58.8m as
well as four forward funded developments acquired with a net
development cost of GBP34.2m. The four forward funding developments
acquired consist of two in each of Ireland (GBP27.4m) and the UK
(GBP6.8m).
Investment pipeline
PHP continues to have a strong active pipeline of potential
acquisitions both in the UK and Ireland totalling approximately
GBP129m including GBP59m currently under offer .
Developments
During the year the developments at Athy, County Kildare, Bray,
County Wicklow, Rialto, Dublin and Banagher, County Offaly all in
Ireland were completed on time with a net development cost of
GBP46.3m (EUR51.8m).
The Group has six forward funded developments currently on site
with a net development cost of GBP47.4m:
Anticipated Area Net development Costs to
Asset PC date (Sq. m) cost complete
------------------------ ------------ --------- ---------------- --------------------
Ireland
Arklow, County Wicklow Q1 2022 5,333 GBP16.1m GBP11.8m (EUR13.2m)
(EUR18.0m)
Enniscorthy, County Q1 2022 4,633 GBP11.2m GBP11.1m (EUR12.4m)
Wexford (EUR12.6m)
UK
Mountain Ash, Wales Q1 2021 1,253 GBP4.9m GBP1.6m
Llanbradach, Wales Q2 2021 831 GBP2.8m GBP1.3m
Eastbourne, East Sussex Q2 2021 1,976 GBP8.4m GBP4.0m
Epsom, Surrey Q2 2021 667 GBP4.0m GBP2.3m
------------------------ ------------ --------- ---------------- --------------------
Total 14,693 GBP47.4m GBP32.1m
------------------------ ------------ --------- ---------------- --------------------
All sites in the UK and Ireland remain open and construction
continues to progress.
Following the acquisition of Nexus Developments in 2021 a
further potential development pipeline of GBP80m was acquired
including two projects (GBP10m) that are at an advanced stage and
currently seeking planning permission although none will be
progressed to construction until de-risked and pre-let.
Asset management
PHP's sector leading metrics remain strong and we continue to
focus on delivering the organic rental growth that can be derived
from our existing assets. This growth arises mainly from rent
reviews and asset management projects (extensions, refurbishments
and lease re-gears) which provide an important opportunity to
increase income, extend lease terms and avoid obsolescence whilst
ensuring that our premises meet the communities' healthcare
needs.
Rent reviews
During 2020, the Group concluded and documented 309 rent reviews
in the UK with a combined rental value of GBP40.0m resulting in an
uplift of GBP1.7m (2019: GBP1.6m) per annum or 4.3%, equating to
1.8% (2019: 1.9%) per annum which represents a marginal reduction
in the annualised rate of growth as the outlook is becoming more
muted for pharmacy rents as the consequences of the COVID-19 crisis
become more apparent.
In the year, an aggregate 1.3% per annum uplift (2019: 1.1%) was
achieved on 159 open market reviews (including 48 reviews where no
uplift was achieved). Uplifts of 2.3% per annum (2019: 3.0%) were
achieved on RPI-based reviews and 2.9% per annum (2019: 3.1%) on
fixed uplift reviews. In addition, a further 199 open market
reviews were agreed in principle, which will add another GBP1.1m to
the contracted rent roll when concluded and represents an uplift of
1.2% per annum.
69% of our rents are reviewed on an open market basis, typically
every three years and are impacted by land and construction
inflation. Over recent years, there have been significant increases
in these costs which is expected to result in further rental growth
in the future. The balance of the PHP portfolio has either
indexed/RPI (25%) or fixed uplift (6%) based reviews which also
provide an element of certainty to future rental growth within the
portfolio.
At 31 December 2020, the rent at 669 tenancies, representing
GBP90.4m of passing rent, was under negotiation and the large
number of outstanding reviews reflects the requirement for all
awards to be agreed with the District Valuer. A great deal of
evidence to support open market reviews comes from the completion
of historic rent reviews, delivery of new properties into the
sector and we continue to see positive momentum in the demand,
commencement and delivery for new, purpose-built premises which are
being supported by NHS initiatives to modernise the primary care
estate. We expect the COVID-19 pandemic will increase the future
provision of health services and continued re-focusing of services
away from over-burdened hospital settings. As technology continues
to drive digital consulting and triage in the future, the crisis
has highlighted the important role primary healthcare must play and
we continue to see more new properties being approved.
In Ireland, we concluded 11 indexed and fixed uplifts resulting
in GBP0.1m (EUR0.12m) of additional rental income equivalent to
1.1% per annum.
Asset Management Projects
We have continued to make good progress in the year to enhance
and extend existing assets within the portfolio with 24 projects
either completed or currently on-site. The projects require the
investment of GBP8.1m and will generate GBP0.3m of additional
rental income but, just as importantly, will extend the WAULT on
those premises back to an average 20 years.
PHP continues to work closely with its tenants and has a strong
pipeline of over 80 projects either Board approved or in advanced
negotiations. The pipeline of projects will require the investment
of approximately GBP34 million, generating an additional GBP1.1m of
rental income and extend the WAULT on those premises back to an
average 21 years.
The Company will continue to invest capital in a range of
physical extensions or refurbishments through asset management
projects which help avoid obsolescence and are key to maintaining
the longevity and security of our income through long-term tenant
retention, increased rental income and extended occupational lease
terms, adding to both earnings and capital values.
Sector leading portfolio metrics
The portfolio's annualised contracted rent roll at 31 December
2020 was GBP135.2m, an increase of GBP7.5m or 5.9% in the year (31
December 2019: GBP127.7m) driven predominantly by the acquisition
of 23 assets in the UK that contributed GBP3.1m. New forward funded
developments at Arklow and Enniscorthy in Ireland, Epsom, Surrey
and Llanbradach, Wales added a further GBP1.8m to the contracted
rent roll. The security and longevity of our income are important
drivers of our secure, long term predictable income stream and
enable our progressive dividend policy.
Security: PHP continues to benefit from secure, long term cash
flows with 90% of its rent roll funded directly or indirectly by
the NHS in the UK or HSE in Ireland. The portfolio also benefits
from an occupancy rate of 99.6%.
Longevity: The portfolio's WAULT at 31 December 2020 was 12.1
years (31 December 2019: 12.8 years). Only GBP5.3m or 3.9% of our
income expires over the next three years of which GBP4.2m is either
subject to a planned asset management initiative or terms have been
agreed to renew the lease. GBP77.2m or 57.1% expires in over 10
years. The table below sets out the current lease expiry profile of
our income:
Income subject to GBPm %
expiry
------------------- ------ -------
< 3 years 5.3 3.9%
4 - 5 years 9.1 6.7%
5 - 10 years 43.6 32.3%
10 - 15 years 41.1 30.4%
15 - 20 years 18.7 13.8%
> 20 years 17.4 12.9%
------------------- ------ -------
Total 135.2 100.0%
------------------- ------ -------
Valuation and returns
At 31 December 2020, the Group's portfolio comprised 513 assets
independently valued at GBP2.576bn (31 December 2019: GBP2.413bn).
After allowing for acquisition costs and capital expenditure on
forward funded developments and asset management projects, the
portfolio generated a valuation surplus of GBP51.4m or 2.0% (2019:
GBP49.8m or 2.1%). The valuation surplus was driven by net initial
yield compression in both the UK and Ireland for government backed
income, rental growth from rent reviews and asset management
projects, partly offset by a deterioration in the rental outlook
for pharmacies in the UK.
During the year the Group's portfolio NIY has contracted by 5bp
to 4.81% (31 December 2019: 4.86%) and the true equivalent yield
reduced to 4.84% at 31 December 2020 (31 December 2019: 5.04%).
At 31 December 2020, the portfolio in Ireland comprised 18
assets, including two assets currently under development, valued at
GBP197.7m or EUR221.1m (31 December 2019: 16 assets/GBP160.0m or
EUR189.2m). The costs to complete the developments are GBP22.8m
(EUR25.5m) and once complete the assets in Ireland will be valued
at approximately GBP220m (EUR246m).
The portfolio's average lot size has increased slightly to
GBP5.0m (31 December 2019: GBP4.9m) and 84.3% of the portfolio is
valued at over GBP3.0m. The Group now only has five assets valued
at less than GBP1.0m.
Number of Valuation Average
Properties GBPm lot size
% (GBPm)
-------------------- ----------- ---------- ------ ---------
> GBP10m 48 709.3 27.6 14.8
GBP5m - GBP10m 124 856.2 33.3 6.9
GBP3m - GBP5m 154 602.4 23.4 3.9
GBP1m - GBP3m 182 397.6 15.5 2.2
< GBP1m (including
land GBP1.5m) 5 6.1 0.2 0.9
-------------------- ----------- ---------- ------ ---------
Total(1) 513 2,571.6 100.0 5.0
-------------------- ----------- ---------- ------ ---------
(1) Excludes the GBP4.5m impact of IFRS 16 Leases with ground
rents recognised as finance leases.
The underlying valuation uplift of GBP51.4m, combined with the
portfolio's growing income, helped to deliver a total property
return of 7.4% in the year (2019: 7.7%) outperforming the MSCI UK
Monthly Property Index by 820bp.
Year ended Year ended
31 December 2020 31 December 2019
---------------- ------------------ ------------------
Income return 5.2% 5.2%
Capital return 2.2% 2.5%
----------------- ------------------ ------------------
Total return 7.4% 7.7%
----------------- ------------------ ------------------
FINANCIAL REVIEW
PHP's Adjusted earnings increased by GBP13.4m or 22.4% to
GBP73.1m in 2020 (2019: GBP59.7m). The increase reflects a full
year's contribution from the merger with MedicX in March 2019 which
contributed GBP20.9m (2019: GBP15.6m) with the balance driven by
rental growth and reduction in the Group's cost of finance.
Using the weighted average number of shares in issue in the year
the Adjusted earnings per share increased to 5.8p (2019: 5.5p), an
increase of 5.5%.
A revaluation surplus of GBP51.4m (2019: GBP49.8m) was generated
in the year from the portfolio driven by yield compression in both
the UK and Ireland for government backed income, rental growth from
rent reviews and asset management projects offset by a
deterioration in the rental outlook for pharmacies in the UK.
A loss on the fair value of interest rate derivatives and
convertible bonds together with the amortisation of the fair value
adjustment on the MedicX fixed rate debt at acquisition of GBP12.1m
(2019: loss GBP179.7m) contributed to the profit before tax as
reported under IFRS of GBP112.4m (2019: loss GBP70.2m).
The financial results for the Group are summarised as
follows:
Summarised results
Year ended Year ended
31 December 31 December
2020 2019
GBPm GBPm
---------------------------------------------------- ---- ------------- -------------
Net rental income 131.2 115.7
Administrative expenses (11.6) (10.5)
Performance incentive fee ("PIF") (1.6) (1.8)
----------------------------------------------- ---- ---- ------------- -------------
Operating profit before revaluation
gain and
net financing costs 118.0 103.4
Net financing costs (44.9) (43.7)
----------------------------------------------- ---- ---- ------------- -------------
Adjusted earnings 73.1 59.7
Revaluation surplus on property portfolio
and profit on sales 51.4 49.8
Fair value loss on interest rate derivatives
and convertible bond (15.2) (33.6)
----------------------------------------------------- --- ------------- -------------
Adjusted profit excluding MedicX
merger adjustments 109.3 75.9
Amortisation of MedicX debt MtM
at acquisition 3.1 2.5
Exceptional revaluation loss arising
on merger with MedicX - (138.4)
Exceptional item - contract termination
fee arising on merger with MedicX - (10.2)
IFRS profit/(loss) before tax 112.4 (70.2)
Corporation tax (0.1) -
Deferred tax provision (0.3) (1.1)
----------------------------------------------- ---- ---- ------------- -------------
IFRS profit/(loss) after tax 112.0 (71.3)
----------------------------------------------- ---- ---- ------------- -------------
Net rental income receivable in the year increased by 13.4% or
GBP15.5m to GBP131.2m (2019: GBP115.7m).
Operational costs have continued to be managed closely and
effectively. Overall administrative costs, excluding the
Performance Incentive Fee ("PIF"), have risen by GBP1.1m or 10.5%
to GBP11.6m (2019: GBP10.5m) reflecting the annualised effect of
the larger Group following the merger with MedicX. The Group's EPRA
cost ratio continues to be amongst the lowest in the sector at
11.9% for the year, a decrease against the 12.0% incurred during
the 2019 financial year reflecting the annualised effect of the
GBP4.0m cost saving synergies arising from the merger with
MedicX.
EPRA cost ratio Year ended
Year ended 31 December
31 December 2020 2019
GBPm GBPm
-------------------------------------- ------------------ -------------
Gross rent less ground rent and
service charge income 134.6 118.3
--------------------------------------- ------------------ -------------
Direct property expense 7.8 5.6
Administrative expenses 11.6 10.5
Performance incentive fee ("PIF") 1.6 1.8
Less: service charge costs (4.3) (2.8)
Less: ground rent (0.2) (0.2)
Less: other operating income (0.4) (0.7)
EPRA costs (including direct vacancy
costs) 16.1 14.2
--------------------------------------- ------------------ -------------
EPRA cost ratio 11.9% 12.0%
--------------------------------------- ------------------ -------------
Total expense ratio - administrative
expenses as a percentage of gross
asset value (annualised) 0.5% 0.4%
--------------------------------------- ------------------ -------------
Net finance costs in the year increased slightly to GBP44.9m
(2019: GBP43.7m) reflecting a full year's charge of the debt
acquired with the merger with MedicX in 2019, offset by the
reductions in the average cost of debt achieved from various
refinancing initiatives and conversion of convertible bonds in 2019
and 2020.
Performance incentive fee ("PIF")
Another period of strong performance in both 2019 and 2020
resulted in a PIF being earned by the Adviser, Nexus, for the year
as a whole and consequently a GBP1.6m provision has been provided
(2019: GBP1.8m).
Nexus is entitled to 11.25% of the "total return" above a hurdle
rate of 8.0%, based on the change in Adjusted EPRA Net Tangible
Assets (formerly Adjusted EPRA Net Asset Value) plus dividends paid
less equity raised, net of non-cash and other adjustments the Board
believe are appropriate, which is credited to a notional cumulative
account. If the hurdle is not achieved a sum equal to 11.25% of the
underperformance is deducted from the notional cumulative
account.
Controls are in place so that the PIF eligible for payment in
respect of any year is restricted to the lower of:
-- Half of the fee earned in respect of that year, unless it is
a shortfall in which case the full amount is applied, together with
the notional cumulative account balance (both positive and
negative) on the earned but unpaid PIF brought forward from
previous years;
-- 20% of the property management fee paid to Nexus in the year; and
-- GBP2.0m.
Half of any PIF payable is deferred to the following year in the
notional cumulative account, with performance against the hurdle
rate calculated each year and any payment subject to the account
being in a surplus position.
A PIF of GBP1.3m was paid to Nexus in the year in respect of
2019 and at 31 December 2020 the balance on the notional cumulative
PIF account was GBP8.1m (31 December 2019: GBP7.0m) of which
GBP1.5m (31 December 2019: GBP1.3m) will become payable on approval
of the Annual Report by the Board. The PIF incentive scheme will
partly carry on for up to a further two years as part of the new
remuneration arrangements following the internalisation of the
Adviser, Nexus post year-end. Any further payments are conditional
on performance in future years; further details can be found in the
Remuneration Committee Report included in the Annual Report.
Equity raise
In July 2020, the Group successfully completed an
over-subscribed equity issue raising GBP140.0m (GBP136.9m net of
expenses). The new ordinary shares were issued at 145p per share or
a 32.9% premium to reported Adjusted Net Tangible Assets (NTA) of
109.1p as at 30 June 2020. The placing price of 145p per Ordinary
Share represented a discount of 1.9 per cent to the intra-day price
on the day the placing price was agreed.
The net proceeds from the equity raise are being used to finance
the Group's pipeline of acquisitions and asset management projects
both in the UK and Ireland.
Shareholder value
The Adjusted NTA, formerly Adjusted EPRA NAV, per share
increased by 5.0p or 4.6% to 112.9p (31 December 2019: 107.9p per
share) during the year with the revaluation surplus of GBP51.4m or
3.9p per share being the main driver of the increase. Dividends
distributed in the year were covered by recurring Adjusted earnings
with no material impact on Adjusted NAV.
The total NAV return per share, including dividends distributed,
in the year was 10.9p or 10.1% (2019: 8.4p or 8.0%).
The table below sets out the movements in the Adjusted NTA and
EPRA Net Disposal Value (NDV) per share over the year under
review.
Adjusted Net Tangible Asset 31 December 31 December
(NTA) per share (basic) 2020 pence 2019 pence
per share per share
------------------------------------------ --- ------------ ------------
Opening Adjusted NTA per share
(basic) 107.9 105.1
Adjusted earnings for the year 5.8 5.5
Dividends paid (5.9) (5.5)
Revaluation of property portfolio 3.9 4.1
Shares issued 2.7 0.8
Interest rate derivative cancellation (1.5) (0.7)
Net impact of MedicX merger - (1.4)
Closing Adjusted NTA per share
(basic) 11 2.9 107.9
Fixed rate debt and swap mark-to-market
value (9.9) (8.8)
Convertible bond fair value
adjustment ( 1.9) (1.8)
Deferred tax (0.3) (0.3)
----------------------------------------------- ------------ ------------
Closing EPRA NDV per share 100 .8 97.0
----------------------------------------------- ------------ ------------
Financing
As at 31 December 2020, total available loan facilities were
GBP1,456.8m (31 December 2019: GBP1,452.0m) of which GBP1,159.3m
(31 December 2019: GBP1,210.4m) had been drawn. Cash balances of
GBP103.6m (31 December 2019: GBP143.1m) resulted in Group net debt
of GBP1,055.7m (31 December 2019: GBP1,067.3m). Contracted capital
commitments at the balance sheet date totalled GBP39.6m (31
December 2019: GBP28.1m) and result in headroom available to the
Group of GBP361.5m (31 December 2019: GBP356.6m).
Capital commitments comprise forward funded development
expenditure of GBP32.1m and asset management projects on site of
GBP7.5m.
Debt metrics 31 December 31 December
2020 2019
---------------------------------------- ------------ ------------
Average cost of debt - fully drawn 3.1% 3.4%
Average cost of debt - drawn 3.5% 3.5%
Loan to value 41.0% 44.2%
Net rental income to net interest 2.9 times 2.7 times
cover
Weighted average debt maturity 7.6 years 8.2 years
- all facilities
Weighted average debt maturity 6.5 years 7.2 years
- drawn facilities
Total drawn secured debt GBP1,009.3m GBP1,060.4m
Total drawn unsecured debt GBP150.0m GBP150.0m
Total undrawn facilities and available GBP361.5m GBP356.6m
to the Group(1)
Unfettered assets GBP88.4m GBP32.3m
----------------------------------------- ------------ ------------
(1) - After deducting capital commitments.
In December 2020, new secured revolving credit facilities with
Barclays (GBP100m) and Lloyds (GBP50m) were entered into for an
initial three-year period with options to extend by a further year
at the first and second anniversaries of each facility. The Lloyds
facility also has the option to be increased by a further GBP50m to
GBP100m.
Average cost of debt
The Group's marginal cost of debt on its revolving credit
facilities is now just 1.7% following the refinancing's noted
above. As these facilities are drawn, following the deployment of
the cash proceeds from the equity raise in July, the Group's
average cost of drawn debt will continue to fall from the current
3.5% to 3.1%, assuming fully drawn. We continue to look at other
opportunities to reduce the Group's average cost of debt and
deliver further finance cost-saving synergies.
Convertible bonds
In July 2019, the Group issued for a six-year term new unsecured
convertible bonds with a nominal value of GBP150m and a coupon of
2.875% per annum. Subject to certain conditions, the new bonds will
be convertible into fully paid Ordinary Shares of the Company and
the initial exchange price was set at 153.25p per Ordinary Share.
The exchange price will be subject to adjustment if dividends paid
per share exceed 2.8p per annum and in accordance with the dividend
protection provisions the conversion price has been adjusted to
147.1p per Ordinary Share.
The conversion of the GBP150m convertible bond into new Ordinary
Shares would reduce the Group's loan to value ratio by 5.8% from
41.0% to 35.2% and result in the issue of 102.0 million new
Ordinary Shares.
Interest rate and currency exposure
The analysis of the Group's exposure to interest rate risk in
its debt portfolio as at 31 December 2020 is as follows:
Facilities Drawn
GBPm % GBPm %
------------------------------- --------------- ----------- ----------- -------
Fixed rate debt 1,001.2 68.7 1,001.2 86.4
Hedged by fixed rate interest
rate swaps 188.0 12.9 188.0 16.2
Floating rate debt - unhedged 267.6 18.4 (29.9) (2.6)
------------------------------- --------------- ----------- ----------- -------
Total 1,456.8 100.0 1,159.3 100.0
------------------------------- --------------- ----------- ----------- -------
The Group's drawn loan facilities are 100% fixed.
The Group now owns EUR221.1m or GBP197.7m (2019:
EUR189.2m/GBP160.0m) of Euro denominated assets in Ireland as at 31
December 2020 and the value of these assets and rental income
represented just 8% of the Group's total portfolio. In order to
hedge the risk associated with exchange rates, the Group has chosen
to fund its investment in Irish assets through the use of Euro
denominated debt, providing a natural asset to liability hedge,
within the overall Group loan to value limits set by the Board. At
31 December 2020 the Group had EUR163.6m (31 December 2019:
EUR161.2m) of drawn euro denominated debt.
Euro rental receipts are used to first finance Euro interest and
administrative costs and surpluses are used to fund further
portfolio expansion.
Interest rate swap contracts
In September 2020, we selectively used the premium over the
Adjusted NTA on the equity raise in July 2020 to cancel 4.5%/GBP70m
fixed rate swaps for a one-off payment of GBP18.5m. A further
GBP3.3m was used to re-coupon swaps with a nominal value of GBP188m
from a blended fixed rate of 0.77% to 0.05%. The one-off payments
total GBP21.8m, equivalent to 1.5p per share on an Adjusted NTA
basis, and results in total interest savings of GBP22.3m over the
period to July 2026.
Accounting standards require PHP to mark its interest rate swaps
to market at each balance sheet date. During the year there was a
loss of GBP12.9m (2019: loss GBP3.7m) on the fair value movement of
the Group's interest rate derivatives due primarily to reductions
in interest rates assumed in the forward yield curves used to value
the interest rate swaps. As at the 31 December 2020 the
mark-to-market ("MtM") liability of the swap portfolio was GBP0.1m
(31 December 2019: GBP13.5m).
Fixed rate debt mark-to-market ("MtM")
The MtM of the Group's fixed rate debt as at 31 December 2020
was GBP130.3m (31 December 2019: GBP94.5m) equivalent to 9.9p per
share (31 December 2019: 7.8p). The large increase in the MtM
during the year is due primarily to the historical reductions in
interest rates assumed in the forward yield curves used to value
the debt in the year. The MtM valuation is sensitive to movements
in interest rates assumed in forward yield curves.
Risk management and principal risks
Principal risks and uncertainties
The Board has undertaken a robust assessment of the principal
risks faced by the Group that may threaten its business model,
future performance, solvency or liquidity and its ability to meet
the overall objective of the Group of delivering progressive
returns to shareholders through a combination of earnings growth
and capital appreciation. These are set out below:
Risk Inherent Change to Commentary on Mitigation Residual risk
risk rating risk in risk rating
2020
-------------------- ----------------- ---------- ------------------- -------------------- ----------------------
Deliver progressive returns
----------------------------------------------------------------------------------------------------------------------
Potential Medium Unchanged The UK and Irish The commitment Medium
over-reliance Likelihood governments to primary care Policy risk
on the NHS is low continue is a stated and general
and HSE but impact to be committed objective economic conditions
PHP invests of occurrence to the development of both the UK are out of
in a niche may be of primary care and Irish the control
asset sector major. services and governments of the Board,
where changes initiatives and on a but proactive
in healthcare to develop new cross-party measures are
policy, models of care basis. taken to monitor
the funding increasingly focus Management engages developments
of primary on greater directly with and to consider
care, economic utilisation government and their possible
conditions of primary care. healthcare implications
and the Despite the UK's providers for the Group.
availability exit from the in both the UK
of finance European Union and in Ireland
may adversely the demand for to promote the
affect the health services need for continued
Group's will continue investment in
portfolio to grow modern premises.
valuation regardless, The attractiveness
and performance. driven by of long term,
demographics. secure income
Whilst the streams that
uncertainty characterise
surrounding the the sector leads
exit may lead to stability of
to fluctuations values.
in the value of
the Group's
assets,
there is no
evidence
of this at
present.
Future government
funding levels
in the UK may
be impacted by
any long term,
material change
to economic
performance
as a consequence
of Brexit.
A fundamental
change in
government
policy could
impact
how the private
sector regards
its investment
in this asset
class and its
willingness to
further deploy
private sector
resources to
improve
the quality of
primary care
facilities.
-------------------- ----------------- ---------- ------------------- -------------------- ----------------------
Foreign Medium Unchanged The Group now The Board has Low
exchange Likelihood has 18 investments and will continue PHP has implemented
risk of volatility in Ireland. Asset to fund its a hedging strategy
Income and is high values, funding investments in the form
expenditure but the and net income in Euros so as of a natural
that will potential is denominated to create a natural hedge so as
be derived impact in Euros. hedge between to manage exchange
from PHP's at present The UK's decision asset values and rate risk.
investments is relatively to leave the liabilities in
in Ireland low due European Ireland.
will be to the Union continues Management closely
denominated quantum to cause exchange monitors the Euros
in Euros of investment rate volatility to GBP currency
and may in Ireland, whilst the exit rates with its
be affected albeit process is Banks to formulate
unfavourably this quantum ongoing. a formal hedging
by fluctuations is increasing. strategy against
in currency Irish net cash
rates, impacting flows.
the Group's
earnings
and portfolio
valuation.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Grow property portfolio
--------------------------------------------------------------------------------------------------------------------
Competition High Unchanged In terms of The reputation Medium
The emergence Likelihood values, and track record The Group's
of new purchasers is high the Group has of the Group in position within
in the sector and impact benefited from the sector means the sector
and the of occurrence a flight to income it is able to and commitment
continuing could as a consequence source forward to and
low level be major. of the current funded developments understanding
of approvals wider economic and existing of the asset
of new centres uncertainty - standing class mean
in the UK investors have investments from PHP is aware
may restrict been attracted developers, of a high
the ability to the sector investors proportion
of the Group due to its long and of transactions
to secure term, secure, owner-occupiers. in the market
new investments. government-backed The Group has and potential
cash flows. Lack a number of formal opportunities
of supply, as pipeline agreements coming to market.
a consequence and long-standing Active management
of the low number development of the property
of new development relationships portfolio generates
approvals in the that provide an regular
UK, has also increased opportunities
contributed opportunity to increase
to the increase to secure income and
in values. developments lease terms
However, the same that come to market and enhance
increase in demand in the UK and value.
and lack of supply Ireland.
has meant that The Group has
the Group is a strong,
facing identified
increased pipeline of
competition investment
for viable opportunities
opportunities. in the UK and
Ireland.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Financing High Unchanged The Company Existing and new Medium
The Group Likelihood successfully equity and debt The Group takes
uses a mix of a restricted completed an providers are positive action
of shareholder supply equity keen to provide to ensure continued
equity and is moderate issue in July funds to the sector availability
external but the 2020, raising and specifically of resource,
debt to potential gross proceeds to the Group, maintain a
fund its impact of GBP140.0 attracted by the prudent ratio
operations. of such million. strength of its of debt and
A restriction a restriction In addition, in cash flows. equity funding
on the availability could December 2020 The Board monitors and refinance
of funds be major. the Group entered its capital debt facilities
would limit into two new structure in advance
the Group's revolving and maintains of their maturity.
ability credit facilities regular contact
to invest. of GBP100 million with existing
Furthermore, and GBP50 million and potential
a more general with Barclays equity investors
lack of and Lloyds and debt funders.
equity or respectively.
debt available The Lloyds
to the sector facility
could reduce also has a credit
demand for approved GBP50
healthcare million accordion.
assets and The Group's
therefore undrawn
impact values. facilities mean
it currently has
headroom of
GBP361.5
million.
All covenants
have been met
with regard to
the Group's debt
facilities and
these all remain
available for
their contracted
term.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Manage effectively and efficiently
--------------------------------------------------------------------------------------------------------------------
Lease expiry Medium Unchanged Lease terms for Management meets Medium
management Likelihood all property with occupiers Management
The bespoke of limited assets to discuss the employs an
nature of alternative will erode and specific property active asset
the Group's use value the importance and the tenant's management
assets can is moderate of active aspirations and programme and
lead to but the management needs for their has a successful
limited impact to extend the future occupation. track record
alternative of such use of a building 24 projects either of securing
use. Their values remains unchanged. completed or on enhancement
continued could site in the year, projects and
use as be serious. enhancing income securing new
fit-for-purpose and extending long term leases.
medical occupational lease
centres terms.
is key to In addition, there
delivering is a strong
the Group's pipeline
strategic of over 80 projects
objectives. that will be
progressed
in over the next
three years.
Only 3.9% of the
Group's income
expires in the
next three years
and management
is actively
managing
these lease
expiries.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
People Medium New Following the Succession planning Medium
Following Likelihood internalisation is in place for The remuneration
the internalisation and potential of management all key positions, committee has
of Management, impact in January 2021 and will be reviewed and
the inability could PHP now fully reviewed updated policies
to attract, be medium controls the regularly by the accordingly
retain and efficient Nomination following the
develop operation and Committee. internalisation
our people management of Remuneration of management
to ensure the Group, incentives to ensure retention
we have replacing are in place such and motivation
the appropriate the reliance on as bonuses and of Executive
skill base the previous LTIP for Executive Directors and
in place external Directors and Senior Management.
in order manager Nexus. Senior Management
for us to to incentivise
implement and motivate the
our strategy team.
Notice periods
are in place for
key employees.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
COVID-19 Medium New The Company has The Group has Medium
The outbreak The likelihood been relatively a niche investment The Group's
of COVID-19 of further unaffected, criterion with position within
during the deterioration properties 90% of government the sector
year has in economic held being backed income and commitment
had far outlook regarded through the form to and
reaching is high as critical of NHS/HSE and understanding
consequences but, if infrastructure GP long term of the asset
across the that occurred, in the response leases. class means
UK and Ireland the impact to the outbreak. Following PHP is well
on valuations could The Directors successful placed to weather
and the be medium. have assessed approval of various the COVID-19
recoverability the impact of COVID-19 vaccines, pandemic.
of our debtor the current our primary care
balances. uncertainty centres play a
Additionally, around COVID-19 key role in
the imposition on all major immunising
of lockdown aspects the population.
and other of the business, The Group's primary
restrictive focussing care facilities
measures specifically continues to be
has directly on operations of paramount
resulted and cash flows importance
in a significant of the Group. in the time of
macroeconomic The event has a pandemic.
downturn been considered The vast majority
throughout and a bad debt of users of primary
Europe, provision of care facilities
the likes GBP0.5 rely on face to
of which million (31 face appointments,
have not December which is continued
been seen 2019: GBP0.1 to be recommended
before. million) by the NHS for
has been provided the vast majority
in the financial of patients. Whilst
statements in the internal
respect of rents structure
totalling GBP0.7 of GP practices
million currently may adapt,
on some form of floorspace
rent payment will continue
concession to be required
and reflected for appointments,
in the balance virtual or other.
sheet as at 31
December 2020.
We continue to
carefully monitor
the impact on
property.
As tenants in
all sectors adapt
to lockdown
measures,
virtual GP
appointments
have increased
and will likely
continue to do
so as we move
through this
pandemic.
Leases and
floorspace
may be required
in reduced rates
by the NHS/HSE
and GPs in future
periods.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Diversified, long term funding
--------------------------------------------------------------------------------------------------------------------
Debt financing Medium Unchanged Negotiations with Existing lenders Medium
Without The likelihood lenders have remain keen to The Board regularly
appropriate of insufficient confirmed finance PHP and monitors the
confirmed facilities that the Group new entrants to facilities
debt facilities, is moderate enjoys the debt capital available to
PHP may but the confidence markets the Group and
be unable impact of the lending have increased looks to refinance
to meet of such markets both in available resource. in advance
current an event terms of the Management of any maturity.
and future would traditional regularly The Group is
commitments be serious. high street monitors the subject to
or repay lenders, composition the changing
or refinance as well as the of the Group's conditions
debt facilities bond markets. debt portfolio of debt capital
as they In December 2020 to ensure markets.
become due. the Group entered compliance
into two new with covenants
revolving and continued
credit facilities availability of
of GBP100 million funds.
and GBP50 million Management
with Barclays regularly
and Lloyds reports to the
respectively. Board on current
debt positions
and provides
projections
of future covenant
compliance to
ensure early
warning
of any possible
issues.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Interest Medium Unchanged Term interest The Group holds Low
rates The likelihood rate markets a proportion of The Group is
Adverse of volatility remained its debt in long currently well
movement in interest volatile during term, fixed rate protected against
in underlying rate markets the period and loans and mitigates the risk of
interest is high this volatility its exposure to interest rate
rates could and the is likely to interest rate rises but,
adversely potential continue movements on due to its
affect the impact in the near floating continued
Group's if not future. rate facilities investment
earnings managed Over the year, through the use in new properties
and cash adequately term interest of interest rate and the need
flows and could rates have reduced swaps. to maintain
could impact be major. which has impacted As at the balance available
property the mark-to-market sheet date 100% facilities,
valuations. ("MtM") valuations of drawn debt will be exposed
of the Group's is fixed or hedged. to future interest
interest rate MtM valuation rate levels.
derivative movements do not
portfolio, impact on the
increasing its Group's cash flows
"out of the money" and are not
status. included
In September 2020 in any covenant
the Group repaid test in the Group's
in full the AIB debt facilities.
interest rate
swaps and
re-couponed
both the HSBC
and RBS remaining
interest rate
swaps to
unprecedented
current market
rates. The
resulting
effect eliminated
the "out of the
money" status
of its interest
rate derivative
portfolio,
protecting
cash flows and
EPRA earnings
in future periods.
-------------------- ----------------- ---------- ------------------- -------------------- --------------------
Brexit
On 31 January 2020, the United Kingdom left the European Union
("EU"), and a trade deal with the EU was successfully negotiated on
30 December 2020 ("Brexit"). The Board continues to monitor the
UK's relationship with the EU but believes that following the
conclusion of Brexit, for the UK, it is unlikely to have a direct
impact on the primary health centres we invest in, which perform a
vital role in the provision of healthcare. The longer term impact
of Brexit will continue to be monitored to assess the potential
negative impact on the macro-economic environment, political
uncertainty and volatility in interest and exchange rates, as well
as its impact on our investment and occupier market, and our
ability to execute our investment strategy and our income
sustainability in the long term.
Climate change and environmental risk
In 2018, the Board added climate change and environmental issues
to the Risk Register. Whilst it is not yet regarded as a principal
risk and uncertainty and therefore is not included in the table
above, the Group's approach to the subject matter is considered in
more detail in the Responsible Business section of the Annual
Report.
COVID-19
The disruption from COVID-19 and the risks of a prolonged,
severe economic downturn is such that this risk is inextricably
interlinked with and likely to exacerbate the other principal risks
and uncertainties faced by the Group. Despite this, the risk of
Covid-19 to both the business model and the environment it operates
in the Board determined COVID-19 should be added to the principal
risks and uncertainties in 2020.
Emerging risks
The Board has also considered emerging risks and their potential
impact on the Group. During the year, development delivery risk has
been added to the Group's Risk Register. The Group enters into
forward funding arrangements with developers who then engage
contractors to build out the scheme, as well as developments on its
own balance sheet following the internalisation of the Management
structure in 2021. There is a risk that the developer or the
contractor or both could become insolvent causing delays and
losses. However, the likelihood, impact and mitigation factors mean
that, despite the Group's increasing exposure to this risk, it is
not yet considered a principal risk and therefore is not included
in the table above. The Board also considered, at its annual
strategy day, emerging risks affecting the current primary care
delivery model, in particular, the impact of digital technologies.
As part of the outcome of the Board's evaluation process it was
agreed to include a formal emerging risk review in conjunction with
the annual strategy review.
Viability statement
The Directors confirm that, as part of their strategic planning
and risk management processes, they have undertaken an assessment
of the viability of the Group, considering the current position and
the potential impact of the principal risks and prospects over a
three-year time horizon. Based on this assessment, the Directors
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period to 31 December 2023.
Although individually the Group's assets may have relatively
long unexpired lease terms and will all have a defined asset
management strategy, the Board has undertaken its detailed
financial review over a three-year period because:
-- the Group's financial review and budgetary processes cover a
three-year look forward period; and
-- occupational leases within the Group's property portfolio
typically have a three-yearly rent review pattern and so modelling
over this period allows the Group's financial projections to
include a full cycle of reversion, arising from open market, fixed
and index-linked rent reviews.
The Group's financial review and budgetary processes are based
on an integrated model that projects performance, cash flows,
position and other key performance indicators including earnings
per share, leverage rates, net asset values per share and REIT
compliance over the review period. In addition, the forecast model
looks at the funding of the Group's activities and its compliance
with the financial covenant requirements of its debt facilities.
The model uses a number of key parameters in generating its
forecasts that reflect the Group's strategy, operating processes
and the Board's expectation of market developments in the review
period. In undertaking its financial review, these parameters have
been flexed to reflect severe, but realistic, scenarios both
individually and collectively. Sensitivities applied are derived
from the principal risks faced by the Group that could affect
solvency or liquidity. Given the significant impact of COVID-19 on
the macro-economic conditions in the year, additional
stress-testing has been carried out on the Group's ability to
continue in operation under extremely unfavourable operating
conditions including a scenario where 15% of all rent is not
collected for the three-year forecast period. The sensitivities
applied are as follows:
-- declining attractiveness of the Group's assets or extenuating
economic circumstances impacts investment values - valuation
parameter stress tested to provide for a one-off 10%/GBP261 million
fall in June 2021 valuation;
-- 15% tenant default rate;
-- rental growth assumptions amended to see nil uplifts on open market reviews;
-- variable rate interest rates rise by an immediate 2% effective from 1 January 2021; and
-- tightly controlled NHS scheme approval restricts investment
opportunity - investment quantum flexed to remove non-committed
transactions.
We have assessed the impact of these assumptions on the Group's
key financial metrics over the assessment period including
profitability, net debt, loan to value ratios and available
financial headroom which are as follows:
Key metrics 31 December Viability
31 December 2023 2020 scenario
----------------------------- ----------- -----------
Loan to value ratio 41.0% 47.9%
Net debt GBP1,055.7m GBP1,139.2m
Adjusted net assets GBP1,485.3m GBP1,172.6m
Available financial headroom GBP361.5m GBP296.2m
----------------------------- ----------- -----------
In making its assessment, the Board has made a number of
specific assumptions that overlay the financial parameters used in
the Group's models. The Board has assumed that, in addition to the
specific impact of new debt facilities, the Group will be able to
refinance or replace other debt facilities that mature within the
review period in advance of their maturity and on terms similar to
those at present.
Harry Hyman
Chief Executive Officer
17 February 2021
Group statement of comprehensive income
for the year ended 31 December 2020
2020 2019
Notes GBPm GBPm
------------------------------------------------------ ----- ------ -------
Rental income 139.0 121.3
Direct property expenses (7.8) (5.6)
------------------------------------------------------ ----- ------ -------
Net rental income 3 131.2 115.7
Administrative expenses 4 (13.2) (12.3)
Exceptional item - contract termination fee - (10.2)
------ -------
Revaluation gain on property portfolio 10 51.3 48.4
Profit on sale of land and property 10 0.1 1.4
Exceptional revaluation loss arising on merger
with MedicX 10 - (138.4)
------ -------
Total revaluation gain/(loss) 51.4 (88.6)
------------------------------------------------------ ----- ------ -------
Operating profit 169.4 4.6
Finance income 5 1.2 1.4
Finance costs 6a (43.0) (42.6)
Fair value loss on derivative interest rate
swaps and amortisation of hedging reserve 6b (12.9) (5.4)
Fair value gain/(loss) and issue costs on convertible
bond 6c (2.3) (28.2)
------------------------------------------------------ ----- ------ -------
Profit/(loss) before taxation 112.4 (70.2)
Taxation charge 7 (0.4) (1.1)
------------------------------------------------------ ----- ------ -------
Profit/(loss) after taxation 1 112.0 (71.3)
------------------------------------------------------ ----- ------ -------
Other comprehensive income:
Items that may be reclassified subsequently
to profit and loss
Fair value gain on interest rate swaps treated
as cash flow hedges and amortisation of hedging
reserve 22 4.0 1.7
Exchange gain/(loss) on translation of foreign
balances 2.2 (1.9)
------------------------------------------------------ ----- ------ -------
Other comprehensive income/(loss) net of tax
1 6.2 (0.2)
------------------------------------------------------ ----- ------ -------
Total comprehensive income/(loss) net of tax
1 118.2 (71.5)
------------------------------------------------------ ----- ------ -------
IFRS earnings/(loss) per share
Basic 8 8.8p (6.5)p
Diluted 8 8.7p (6.5)p
------------------------------------------------------ ----- ------ -------
Adjusted earnings per share 2
Basic 8 5.8p 5.5p
Diluted 8 5.7p 5.4p
------------------------------------------------------ ----- ------ -------
1 Wholly attributable to equity shareholders of Primary Health Properties PLC.
2 See Glossary of Terms.
The above relates wholly to continuing operations.
Group balance sheet
at 31 December 2020
2020 2019
Notes GBPm GBPm
---------------------------------------- ----- --------- ---------
Non-current assets
Investment properties 10 2,576.1 2,413.1
Derivative interest rate swaps 16 - 0.5
---------------------------------------- ----- --------- ---------
2,576.1 2,413.6
---------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 11 17.4 16.7
Cash and cash equivalents 12 103.6 143.1
---------------------------------------- ----- --------- ---------
121.0 159.8
---------------------------------------- ----- --------- ---------
Total assets 2,697.1 2,573.4
---------------------------------------- ----- --------- ---------
Current liabilities
Deferred rental income (27.0) (25.2)
Trade and other payables 13 (34.7) (34.7)
Borrowings: term loans and overdraft 14a (6.4) (6.1)
---------------------------------------- ----- --------- ---------
(68.1) (66.0)
---------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings: term loans and overdraft 14a (623.6) (682.7)
Borrowings: bonds 14b (582.9) (575.1)
Derivative interest rate swaps 16 (0.1) (13.5)
Head lease liabilities 15 (4.5) (4.5)
Deferred tax liability (3.5) (3.1)
---------------------------------------- ----- --------- ---------
(1,214.6) (1,278.9)
---------------------------------------- ----- --------- ---------
Total liabilities (1,282.7) (1,344.9)
---------------------------------------- ----- --------- ---------
Net assets 1,414.4 1,228.5
---------------------------------------- ----- --------- ---------
Equity
Share capital 18 164.4 152.0
Share premium 19 466.7 338.1
Merger and other reserve 20 400.8 398.6
Special reserve 21 - 65.4
Hedging reserve 22 (20.1) (24.1)
Retained earnings 23 402.6 298.5
---------------------------------------- ----- --------- ---------
Total equity 1 1,414.4 1,228.5
---------------------------------------- ----- --------- ---------
Net asset value per share
IFRS net assets - basic and diluted 8 107.5p 101.0p
Adjusted net tangible assets2 - basic 8 112.9p 107.9p
Adjusted net tangible assets2 - diluted 8 115.4p 111.1p
---------------------------------------- ----- --------- ---------
1 Wholly attributable to equity shareholders of Primary Health Properties PLC.
2 See Glossary of Terms.
These financial statements were approved by the Board of
Directors on 17 February 2021 and signed on its behalf by:
Steven Owen
Chairman
Registered in England Number: 3033634
Group cash flow statement
for the year ended 31 December 2020
2020 2019
Notes GBPm GBPm
--------------------------------------------------------- ----- ------- -------
Operating activities
Profit/(loss) on ordinary activities after tax 112.0 (71.3)
Taxation charge 7 0.4 1.1
Finance income 5 (1.9) (1.4)
Finance costs 6a 43.7 42.6
Fair value loss on derivatives 6b 12.9 5.4
Fair value loss and issue costs on convertible
bond 6c 2.3 28.2
--------------------------------------------------------- ----- ------- -------
Operating profit before financing costs 169.4 4.6
Adjustments to reconcile Group operating profit
before financing to net cash flows from operating
activities:
Revaluation gain on property portfolio 10 (51.3) (48.4)
Profit on sale of land and property 10 (0.1) (1.4)
Effect of exchange rate fluctuations on operations (0.3) -
Exceptional revaluation loss arising on merger
with MedicX - 138.4
Fixed rent uplift (1.5) (1.7)
Tax paid (0.2) (0.1)
Decrease/(increase) in trade and other receivables 4.2 (5.2)
(Decrease)/increase in trade and other payables (1.3) 7.8
--------------------------------------------------------- ----- ------- -------
Cash generated from operations 118.9 94.0
--------------------------------------------------------- ----- ------- -------
Net cash flow from operating activities 118.9 94.0
--------------------------------------------------------- ----- ------- -------
Investing activities
Payments to acquire and improve investment properties (102.9) (49.9)
Receipts from disposal of properties 0.1 2.5
MedicX merger transaction costs - (14.5)
Cash acquired as part of MedicX merger - 5.8
Interest received on development loans 1.9 0.3
--------------------------------------------------------- ----- ------- -------
Net cash flow used in investing activities (100.9) (55.8)
--------------------------------------------------------- ----- ------- -------
Financing activities
Proceeds from issue of shares 140.0 100.0
Cost of share issues (3.2) (2.4)
Term bank loan drawdowns 14 17.8 132.8
Term bank loan repayments 14 (76.2) (160.5)
Proceeds from bond issue - 213.2
Bond repayment - (75.0)
Bond issue and loan arrangement fees (2.0) (5.7)
Termination of derivative financial instruments (21.8) (8.0)
Swap interest paid (0.1) (0.9)
Non-utilisation fees (1.9) (1.7)
Interest paid (42.0) (36.9)
Bank interest received 0.4 0.2
Equity dividends paid net of scrip dividend 9 (69.1) (54.4)
--------------------------------------------------------- ----- ------- -------
Net cash flow from financing activities (58.1) 100.7
--------------------------------------------------------- ----- ------- -------
(Decrease)/increase in cash and cash equivalents
for the year (40.1) 138.9
Effect of exchange rate fluctuations on Euro-denominated
loans and cash equivalents 0.6 (1.7)
Cash and cash equivalents at start of year 143.1 5.9
--------------------------------------------------------- ----- ------- -------
Cash and cash equivalents at end of year 12 103.6 143.1
--------------------------------------------------------- ----- ------- -------
Group statement of changes in equity
for the year ended 31 December 2020
Merger
Share Share and other Special Hedging Retained
capital premium reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ------- --------- ------- ------- -------- -------
1 January 2020 152.0 338.1 398.6 65.4 (24.1) 298.5 1,228.5
Profit for the year - - - - - 112.0 112.0
Other comprehensive income
Fair value movement on interest
rate swaps - - - - - - -
Reclassification to profit
and loss - amortisation
of hedging reserve - - - - 4.0 - 4.0
Exchange loss on translation
of foreign balances - - 2.2 - - - 2.2
-------------------------------- ------- ------- --------- ------- ------- -------- -------
Total comprehensive income - - 2.2 - 4.0 112.0 118.2
Shares issued on conversion
of convertible bonds - - - - - - -
Shares issued as part of
capital raise 12.1 127.9 - - - - 140.0
Share issue expenses - (3.2) - - - - (3.2)
Dividends paid - - - (61.2) - (7.9) (69.1)
Scrip dividend in lieu of
cash 0.3 3.9 - (4.2) - - -
-------------------------------- ------- ------- --------- ------- ------- -------- -------
31 December 2020 164.4 466.7 400.8 0 (20.1) 402.6 1,414.4
-------------------------------- ------- ------- --------- ------- ------- -------- -------
Merger
Share Share and other Special Hedging Retained
capital premium reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ------- ------- --------- ------- ------- -------- -------
1 January 2019 96.1 220.6 2.5 124.8 (25.8) 369.8 788.0
Loss for the year - - - - - (71.3) (71.3)
Other comprehensive income
Fair value movement on interest
rate swaps - - - - (1.3) - (1.3)
Reclassification to profit
and loss - amortisation
of hedging reserve - - - - 3.0 - 3.0
Exchange loss on translation
of foreign balances - - (1.9) - - - (1.9)
-------------------------------- ------- ------- --------- ------- ------- -------- -------
Total comprehensive income - - (1.9) - 1.7 (71.3) (71.5)
Shares issued on conversion
of convertible bonds 3.0 25.4 - - - - 28.4
Shares issued as part of
MedicX merger 42.6 - 398.0 - - - 440.6
Shares issued as part of
capital raise 9.8 90.2 - - - - 100.0
Share issue expenses - (2.6) - - - - (2.6)
Dividends paid - - - (54.4) - - (54.4)
Scrip dividend in lieu of
cash 0.5 4.5 - (5.0) - - -
-------------------------------- ------- ------- --------- ------- ------- -------- -------
31 December 2019 152.0 338.1 398.6 65.4 (24.1) 298.5 1,228.5
-------------------------------- ------- ------- --------- ------- ------- -------- -------
Notes to the financial statements
1. Corporate information
The Group's financial statements for the year ended 31 December
2020 were approved by the Board of Directors on 17 February 2021
and the Group Balance Sheet was signed on the Board's behalf by the
Chairman, Steven Owen. Primary Health Properties PLC is a public
limited company incorporated in England and Wales and domiciled in
the United Kingdom. The Company's Ordinary Shares are admitted to
the Official List of the UK Listing Authority, a division of the
Financial Conduct Authority, and traded on the London Stock
Exchange.
2. Accounting policies
2.1 Basis of preparation
The Group's financial statements have been prepared on the
historical cost basis, except for investment properties, including
investment properties under construction and land and derivative
financial instruments that have been measured at fair value. The
Group's financial statements are prepared on the going concern
basis (see pages 59 and 60 for further details) and presented in
Sterling rounded to the nearest million.
Statement of compliance
The consolidated financial statements for the Group have been
prepared under International Financial Reporting Standards
("IFRSs") as adopted by the European Union and applied in
accordance with the Companies Act 2006 and Article 4 of the IAS
Regulation.
2.2 Standards adopted during the year
The accounting policies adopted are consistent with those of the
previous financial year, except for the following new and amended
IFRSs effective for the Group as of 1 January 2020. Their adoption
has not had any material impact on the disclosures or on the
amounts reported in these financial statements:
Amendments to IAS 1 and IAS 8 Definition of material
The Group has adopted the amendments to IAS 1 and IAS 8 for the
first time in the current year. The amendments relate to the
definition of material. Within IAS 1, the concept of using
immaterial information to obscure material information has been
included in the new definition. The threshold for materiality
influencing users has been changed from "could influence" to "could
reasonably be expected to influence". The definition of material in
IAS 8 has been replaced by a reference to the definition of
material in IAS 1. There has been no impact on the Group for the
period beginning 1 January 2020.
Amendments to references to the conceptual framework in IFRS
standards
The Group has adopted the amendments included in Amendments to
references to the conceptual framework in IFRS standards for the
first time in the current year. The amendments include
consequential amendments to affected Standards so that they refer
to the new framework. The standards which are amended are IFRS 2,
IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38,
IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC-32. There is no
impact on the Group for the period beginning 1 January 2020.
2.3 Summary of significant accounting policies
Basis of consolidation
The Group's financial statements consolidate the financial
statements of Primary Health Properties PLC and its wholly owned
subsidiary undertakings. Subsidiaries are consolidated from the
date of their acquisition, being the date on which the Group
obtained control, and continue to be consolidated until the date
that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain
benefit from its activities and is achieved through direct or
indirect ownership of voting rights; through currently exercisable
or convertible potential voting rights; or by way of contractual
agreement. The financial statements of the subsidiary undertakings
are prepared for the accounting reference period ending 31 December
each year using consistent accounting policies. All intercompany
balances and transactions, including unrealised profits arising
from them, are eliminated on consolidation.
The individual financial statements of Primary Health Properties
PLC and each of its subsidiary undertakings will be prepared under
FRS 101. The use of IFRS at Group level does not affect the
distributable reserves available to the Group.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being investment property in the United
Kingdom and Ireland leased principally to GPs, government
healthcare organisations and other associated healthcare users.
Foreign currency transactions
Each Group company presents its individual financial statements
in its functional currency. The functional currency of all UK
subsidiaries (with the exception of PHP Euro Private Placement
Limited and MXF Properties Ireland Limited which are Euro) is
Sterling and the functional currency of Primary Health Properties
ICAV and its Irish domiciled subsidiaries is Euro.
Transactions in currencies other than an individual entity's
functional currency (foreign currencies) are recognised at the
applicable exchange rate ruling on the transaction date. Exchange
differences resulting from settling these transactions, or from
retranslating monetary assets and liabilities denominated in
foreign currencies, are included in the Group Statement of
Comprehensive Income.
Foreign operations
In preparing the Group's consolidated financial statements, the
assets and liabilities of foreign entities are translated into
Sterling at exchange rates prevailing on the balance sheet date.
The income, expenses and cash flows of a foreign entity are
translated at the average exchange rate for the period, unless
exchange rates fluctuate significantly during the period, in which
case the exchange rates at the date of transactions are used.
The exchange rates used to translate foreign currency amounts in
2020 are as follows:
Group Balance Sheet: GBP1 = EUR1.1185 (2019: EUR1.1825). Group
Statement of Comprehensive Income: GBP1 = EUR1.105 (2019:
EUR1.1787).
Investment properties and investment properties under
construction
The Group's investment properties are held for long term
investment. Investment properties and those under construction are
initially measured at cost, including transaction costs. Subsequent
to initial recognition, investment properties and investment
properties under construction are stated at fair value based on
market data and a professional valuation made as of each reporting
date. The fair value of investment property does not reflect future
capital expenditure that will improve or enhance the property and
does not reflect future benefits from this future expenditure.
Gains or losses arising from changes in the fair value of
investment properties and investment properties under construction
are included in the Group Statement of Comprehensive Income in the
year in which they arise.
Investment properties are recognised on acquisition upon
completion of contract, which is when control of the asset passes
to the Group. Investment properties cease to be recognised when
control of the property passes to the purchaser, which is upon
completion of the sales contract. Any gains and losses arising are
recognised in the Group Statement of Comprehensive Income in the
year of disposal.
The Group may enter into a forward funding agreement with
third-party developers in respect of certain properties under
development. In accordance with these agreements, the Group will
make monthly stage payments to the developer based on certified
works on site at that time. Interest is charged to the developer on
all stage payments made during the construction period and on the
cost of the land acquired by the Group at the outset of the
development and taken to the Group Statement of Comprehensive
Income in the year in which it accrues.
Property acquisitions and business combinations
Where a property is acquired through the acquisition of
corporate interests, the Board considers the substance of the
assets and activities of the acquired entity in determining whether
the acquisition represents the acquisition of a business. The basis
of the judgement is set out in Note 2.4(b).
Where such acquisitions are not judged to be an acquisition of a
business, they are not treated as business combinations. Rather,
the cost to acquire the corporate entity is allocated between the
identifiable assets and liabilities of the entity based on their
relative fair values on the acquisition date. Accordingly, no
goodwill or additional deferred taxation arises.
Gains on sale of properties
Gains on sale of properties are recognised on the completion of
the contract, and are calculated by reference to the carrying value
at the end of the previous reporting period, adjusted for
subsequent capital expenditure and sale costs.
Net rental income
Rental income arising from operating leases on investment
properties is accounted for on a straight line basis over the lease
term. An adjustment to rental income is recognised from the rent
review date of each lease in relation to unsettled rent reviews.
Such adjustments are accrued at 100% (2019: 100%) of the additional
rental income that is expected to result from the review. For
leases which contain fixed or minimum deemed uplifts, the rental
income is recognised on a straight line basis over the lease term.
Incentives for lessees to enter into lease agreements are spread
evenly over the lease terms, even if the payments are not made on
such a basis. Rental income is measured at the fair value of the
consideration receivable, excluding discounts, rebates, VAT and
other sales taxes or duty.
Net rental income is the rental income receivable in the period
after payment of direct property costs.
Interest income
Revenue is recognised as interest accrues, using the effective
interest method (that is, the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset).
Financial instruments under IFRS 9
Trade receivables
Trade receivables are recognised and carried at amortised cost
as the Group's business model is to collect the contractual cash
flows due from tenants. Provision is made based on the expected
credit loss model which reflects the Group's historical credit loss
experience over the past three years but also reflects the lifetime
expected credit loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and short term
deposits, including any bank overdrafts, with an original maturity
of three months or less, measured at amortised cost.
Trade and other payables
Trade payables are recognised and carried at their invoiced
value inclusive of any VAT that may be applicable.
Bank loans and borrowings
All loans and borrowings are initially measured at fair value
less directly attributable transaction costs. After initial
recognition, all interest-bearing loans and borrowings are
subsequently measured at amortised cost, using the effective
interest method.
The interest due within the next twelve months is accrued at the
end of the year and presented as a current liability within trade
and other payables.
Borrowing costs
Borrowing costs that are separately identifiable and directly
attributable to the acquisition or construction of an asset that
necessarily takes a substantial period of time to get ready for its
intended use or sale are capitalised as part of the cost of the
respective assets. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and
other costs the Group incurs in connection with the borrowing of
funds.
Convertible bond
The convertible bond is designated as "at fair value through
profit or loss" and so is presented on the Group Balance Sheet at
fair value with all gains and losses, including the write-off of
issuance costs, recognised in the Group Statement of Comprehensive
Income. The fair value of the convertible bond is assessed in
accordance with level 1 valuation techniques as set out within
"Fair value measurements" within these accounting policies. The
interest charge in respect of the coupon rate on the bond has been
recognised within the underlying component of net financing costs
on an accruals basis. Refer to Note 16 for further details. The
amount of the change in fair value of the financial liability
designated at fair value through profit or loss that is
attributable to changes in credit risk will be recognised in other
comprehensive income.
De-recognition of financial assets and liabilities
Financial assets
A financial asset (or where applicable a part of a financial
asset or part of a group of similar financial assets) is
de-recognised where:
-- the rights to receive cash flows from the asset have expired;
-- the Group retains the right to receive cash flows from the
asset, but has assumed an obligation to pay them in full without
material delay to a third party under a "pass-through"
arrangement;
-- the Group has transferred its right to receive cash flows
from the asset and either: (a) has transferred substantially all
the risks and rewards of the asset; or (b) has neither transferred
nor retained substantially all the risks and rewards of the asset,
but has transferred control of the asset; or
-- when the cash flows are significantly modified.
Where the Group has transferred its rights to receive cash flows
from an asset and has neither transferred nor retained
substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the
extent of the Group's continuing involvement in the asset.
Continuing involvement that takes the form of a guarantee over the
transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that
the Group could be required to repay.
Financial liabilities
A financial liability is de-recognised when the obligation under
the liability is discharged or cancelled or expires.
Where an existing financial liability is replaced by another
from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an
exchange or modification is treated as a de-recognition of the
original liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in
profit or loss.
When the exchange or modification of an existing financial
liability is not accounted for as an extinguishment, any costs or
fees incurred adjust the liability's carrying amount and are
amortised over the modified liability's remaining term and any
difference in the carrying amount after modification is recognised
as a modification gain or loss.
Tax
Taxation on the profit or loss for the period not exempt under
UK REIT regulations comprises current and deferred tax. Taxation is
recognised in the Group Statement of Comprehensive Income except to
the extent that it relates to items recognised as direct movements
in equity, in which case it is also recognised as a direct movement
in equity.
Current tax is the expected tax payable on any non-REIT taxable
income for the period, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax
payable in respect of previous years.
Fair value measurements
The Group measures certain financial instruments such as
derivatives, and non-financial assets such as investment property,
at fair value at the end of each reporting period. Also, fair
values of financial instruments measured at amortised cost are
disclosed in the financial statements.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to
sell the asset or transfer the liability takes place either:
-- in the principal market for the asset or liability; or
-- in the absence of a principal market, in the most
advantageous market for the asset or liability.
The Group must be able to access the principal or the most
advantageous market at the measurement date.
The fair value of an asset or liability is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into
account a market participant's ability to generate economic
benefits using the asset in its highest and best use or by selling
it to another market participant that would use the asset in its
highest and best use.
The Group uses valuation techniques at three levels that are
appropriate in the circumstances and for which sufficient data is
available to measure fair value, maximising the use of relevant
observable inputs and minimising the use of unobservable inputs
significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable.
Level 3: Valuation techniques for which the lowest input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
reassessing categorisation at the end of each reporting period.
Hedge accounting
At the inception of a transaction the Group documents the
relationship between hedging instruments and hedged items, as well
as its risk management objectives and strategy for undertaking
various hedging transactions. The Group also documents its
assessment, both at inception and on an ongoing basis.
For cash flow hedging, the Group monitors the hedging instrument
to check it continues to meet the criteria of IAS 39, having
applied the practical expedient on transition, for being described
as "highly effective" in offsetting changes in the fair values or
cash flows of hedged items.
For net investment hedge relationships, the Group monitors the
hedging instrument to check it continues to meet the criteria of
IAS 39 for being described as "highly effective".
i) Derivative financial instruments ("derivatives")
The Group uses interest rate swaps to help manage its interest
rate risk.
All interest rate derivatives are initially recognised at fair
value at the date the derivative is entered into and are
subsequently remeasured at fair value. The fair values of the
Group's interest rate swaps are calculated by Chatham (formally
JCRA), an independent specialist which provides treasury management
services to the Group.
The method of recognising the resulting gain or loss depends on
whether the derivative is designated as an effective hedging
instrument:
-- where a derivative is designated as a hedge of the
variability of a highly probable forecast transaction, such as an
interest payment, the element of the gain or loss on the derivative
that is an "effective" hedge is recognised directly in equity. When
the forecast transaction subsequently results in the recognition of
a financial asset or a financial liability, the associated gains or
losses that were recognised directly in the cash flow hedging
reserve are reclassified into the Group Statement of Comprehensive
Income in the same period or periods during which the asset
acquired or liability assumed affects the Group Statement of
Comprehensive Income, i.e. when interest income or expense is
recognised; and
-- the gain or loss on derivatives that do not meet the strict
criteria for being "effective" and so do not qualify for hedge
accounting and the non-qualifying element of derivatives that do
qualify for hedge accounting are recognised in the Group Statement
of Comprehensive Income immediately. The treatment does not alter
the fact that the derivatives are economic hedges of the underlying
transaction.
For swaps that have been cancelled which previously qualified
for hedge accounting, the remaining value within the cash flow
hedging reserve at the date of cancellation is recycled to the
Group Statement of Comprehensive Income on a straight line basis
from the date of cancellation to the original swap expiry date
where the hedged transaction is still expected to occur. If the
swaps have been cancelled and the hedged transaction is no longer
expected to occur, the amount accumulated in the hedging reserve is
reclassified to profit and loss immediately.
Leases - Group as a lessor
The vast majority of the Group's properties are leased out under
operating leases and are included within investment properties.
Rental income, including the effect of lease incentives, is
recognised on a straight line basis over the lease term.
Where the Group transfers substantially all the risks and
benefits of ownership of the asset, the arrangement is classified
as a finance lease and a receivable is recognised for the initial
direct costs of the lease and the present value of the minimum
lease payments. Finance income is recognised in the Group Statement
of Comprehensive Income so as to achieve a constant rate of return
on the remaining net investment in the lease. Interest income on
finance leases is restricted to the amount of interest actually
received.
2.4 Significant accounting estimates and judgements
The preparation of the Group financial statements requires
management to make a number of estimates and judgements that affect
the reported amounts of assets and liabilities and may differ from
future actual results. The estimates and judgements that are
considered most critical and that have a significant inherent risk
of causing a material adjustment to the carrying amounts of assets
and liabilities are:
a) Estimates
Fair value of investment properties
Investment properties include: (i) completed investment
properties; and (ii) investment properties under construction.
Completed investment properties comprise real estate held by the
Group or leased by the Group under a finance lease in order to earn
rental income or for capital appreciation, or both.
The fair market value of a property is deemed by the independent
property valuer appointed by the Group to be the estimated amount
for which a property should exchange, on the date of valuation, in
an arm's length transaction. Properties have been valued on an
individual basis, assuming that they will be sold individually over
time. Allowances are made to reflect the purchaser's costs of
professional fees and stamp duty and tax.
In accordance with RICS Appraisal and Valuation Standards,
factors taken into account are current market conditions, annual
rentals, state of repair, ground stability, contamination issues
and fire and health and safety legislation. Refer to Note 10 of the
financial statements which includes further information on the fair
value assumptions and sensitivities.
In determining the fair value of investment properties under
construction the valuer is required to consider the significant
risks which are relevant to the development process including, but
not limited to, construction and letting risks. The valuer takes
into account any pre-lets and whether construction risk remains
with the respective developer or contractor.
Fair value of derivatives
In accordance with IFRS 9, the Group values its derivative
financial instruments at fair value. Fair value is estimated by
JCRA (now part of Chatham) on behalf of the Group, using a number
of assumptions based upon market rates and discounted future cash
flows. The derivative financial instruments have been valued by
reference to the mid-price of the yield curve prevailing on 31
December 2020. Fair value represents the net present value of the
difference between the cash flows produced by the contracted rate
and the valuation rate. Refer to Note 17 of the financial
statements.
b) Judgements
Hedge effectiveness
The Group has a number of interest rate swaps that mature after
the Group's bank facilities, to which they relate, are due to
expire. In accordance with IAS 39, in order to apply hedge
accounting in relation to these interest rate swaps, the Group has
determined that it is highly probable that these bank facilities
will be renegotiated on or before expiry and that variable interest
rate debt finance will be in place until the expiry date of the
swaps.
The Group is exposed to foreign exchange rate movements due to
operations in Ireland. In accordance with IAS 39, in order to apply
hedge accounting with the euro denominated cash flows, the Group
has determined that it is highly probably that there will be
corresponding euro bank drawdowns and that these will be
renegotiated on or before expiry.
Property acquisitions during the year
The Directors have reviewed the acquisitions during the year on
an individual basis in accordance with the requirements of IFRS
3(R). They consider that they all meet the criteria of asset
acquisitions rather than business combinations and have accounted
for them as such. Although corporate entities were acquired, they
were special purpose vehicles for holding properties rather than
separate business entities. This judgement was made due to the
absence of business processes inherent in the entities
acquired.
2.5 Standards issued but not yet effective
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRSs that have
been issued but are not yet effective and in some cases have not
yet been adopted by the EU:
-- Amendments to IAS 1 - Classification of liabilities as current or non-current
-- Annual improvements to IRFS standards 2018-2020
A number of new standards and amendments to standards and
interpretations are effective for annual periods beginning on or
after 1 January 2021, but are not yet applicable to the Group and
have not been applied in preparing these consolidated financial
statements. None of these are expected to have a significant effect
on the consolidated financial statements of the Group.
3. Rental and related income
Revenue comprises rental income receivable on property
investments in the UK and Ireland, which is exclusive of VAT.
Revenue is derived from one reportable operating segment and
GBP128.2 million and GBP10.8 million of rental income is derived
from the UK and Ireland respectively. Details of the lease income
are given below.
Group as a lessor
a) The future minimum lease payments under non-cancellable
operating leases receivable by the Group are as follows:
Less than One to Two to Three to Four to More than
one year two years three years four years five years five years Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----- --------- ---------- ------------ ----------- ----------- ----------- -------
2020 134.4 133.6 131.2 126.0 121.3 935.5 1,582.0
----- --------- ---------- ------------ ----------- ----------- ----------- -------
2019 126.9 126.8 126.2 124.0 119.3 992.1 1,615.3
----- --------- ---------- ------------ ----------- ----------- ----------- -------
b) The rental income earned on operating leases is recognised on
a straight line basis over the lease term.
The Group leases medical centres to GPs, NHS organisations, the
HSE in Ireland and other healthcare users, typically on long term
occupational leases which provide for regular reviews of rent on an
effectively upwards-only basis.
4. Group operating profit is stated after charging:
2020 2019
GBPm GBPm
--------------------------------------------------------- ----- -----
Administrative expenses including:
Advisory fees (Note 4a) 9.1 8.3
Performance Incentive Fees (Note 4b) 1.6 1.8
Directors' fees (Note 4c) 0.4 0.5
--------------------------------------------------------- ----- -----
Audit fees
Fees payable to the Company's auditor and its associates
for the audit of the Company's annual accounts 0.3 0.2
Fees payable to the Company's auditor and its associates
for the audit of the Company's subsidiaries 0.2 0.2
--------------------------------------------------------- ----- -----
Total audit fees 0.5 0.4
--------------------------------------------------------- ----- -----
Total audit and assurance services 0.5 0.4
--------------------------------------------------------- ----- -----
Non-audit fees
Advisory services - 0.2
--------------------------------------------------------- ----- -----
Total non-audit fees - 0.2
--------------------------------------------------------- ----- -----
Total fees 0.5 0.6
--------------------------------------------------------- ----- -----
Please refer to the Audit Committee Report in the Annual Report
for analysis of non-audit fees.
a) Advisory fees
The advisory fees calculated and payable for the period to 31
December were as follows:
2020 2019
GBPm GBPm
-------------------------------- ----- -----
Nexus Tradeco Limited ("Nexus") 9.1 8.3
-------------------------------- ----- -----
Further details on the Advisory Agreement can be found in the
Corporate Governance section of the Annual Report.
As at 31 December 2020 GBP0.8 million was payable to Nexus
(2019: GBP0.7 million).
Further fees paid to Nexus in accordance with the Advisory
Agreement of GBP0.4 million (2019: GBP0.1 million) in respect of
capital projects were capitalised in the year.
Service charge management fees paid to Nexus in the year in
connection with the Group's properties totalled GBP0.4 million
(2019: GBP0.3 million).
b) Performance Incentive Fee ("PIF")
Information about the Performance Incentive Fee is provided in
the Corporate Governance section of the Strategic Review in the
Annual Report.
A PIF of GBP1.3 million was paid to Nexus in the period in
respect of 2019 and at 31 December 2020 the balance on the notional
cumulative PIF account was GBP8.1 million (2019: GBP7.0 million),
of which GBP1.5 million (2019: GBP1.3 million) will become payable
on approval of the Annual Report by the Board. The balance is
conditional on performance in future years and the restrictions
noted in the Financial Review.
c) Remuneration of Directors
Further information about the remuneration of individual
Directors is provided in the Directors' Remuneration Report in the
Annual Report.
5. Finance income
2020 2019
GBPm GBPm
------------------------------------ ----- -----
Interest income on financial assets
Bank interest 0.4 0.2
Development loan interest 0.8 1.2
------------------------------------ ----- -----
1.2 1.4
------------------------------------ ----- -----
6. Finance costs
2020 2019
GBPm GBPm
-------------------------------------------------------------- ----- -----
Interest expense and similar charges on financial liabilities
a) Interest
Bank loan interest 26.1 27.0
Swap interest 0.1 0.8
Bond interest 16.0 12.1
Bank facility non-utilisation fees 1.9 1.8
Bank charges and loan arrangement fees 2.7 3.4
-------------------------------------------------------------- ----- -----
46.8 45.1
Interest capitalised (0.7) -
-------------------------------------------------------------- ----- -----
46.1 45.1
-------------------------------------------------------------- ----- -----
Amortisation of MedicX debt MtM on acquisition (3.1) (2.5)
-------------------------------------------------------------- ----- -----
43.0 42.6
-------------------------------------------------------------- ----- -----
2020 2019
GBPm GBPm
------------------------------------------- ------ -----
b) Derivatives
Net fair value loss on interest rate swaps (8.5) (2.4)
Amortisation of cash flow hedging reserve (4.4) (3.0)
------------------------------------------- ------ -----
(12.9) (5.4)
------------------------------------------- ------ -----
The fair value loss on derivatives recognised in the Group
Statement of Comprehensive Income has arisen from the interest rate
swaps for which hedge accounting does not apply. A fair value loss
on derivatives which do meet the hedge effectiveness criteria under
IAS 39 of GBP0.4 million (2019: loss of GBP1.3 million) is
accounted for directly in equity. An amount of GBP4.4 million
(2019: GBP3.0 million) has been amortised from the cash flow
hedging reserve in the year resulting from early termination of
effective swap contracts (see Note 22).
Details of the fair value loss on hedges which meet the
effectiveness criteria for hedge accounting under IAS 39 are set
out in Note 22.
2020 2019
GBPm GBPm
------------------------------------------------------- ----- ------
c) Convertible bond
Fair value loss on convertible bond fully redeemed
in the year - (1.8)
Fair value loss on convertible bond issued in the year - (22.7)
Fair value loss on existing convertible bond (2.3) -
Convertible bond issue costs - (3.7)
------------------------------------------------------- ----- ------
(2.3) (28.2)
------------------------------------------------------- ----- ------
On 15 July 2019, PHP Finance (Jersey No.2) Limited (the
"Issuer"), a wholly owned subsidiary of the Group, issued GBP150
million of 2.875% convertible bonds (the "Bonds") for a six-year
term and if not previously converted, redeemed or purchased and
cancelled, the Bonds will be redeemed at par on maturity in July
2025.
The fair value movement in the convertible bonds is recognised
in the Group Statement of Comprehensive Income within profit before
taxation and is excluded from the calculation of EPRA earnings and
EPRA NAV. Refer to Note 14 for further details about the
convertible bonds.
2020 2019
GBPm GBPm
----------------------------------------------- ------ ------
Net finance costs
Finance income (Note 5) 1.2 1.4
Finance costs (as per above) (46.8) (45.1)
----------------------------------------------- ------ ------
(45.6) (43.7)
Interest capitalised 0.7 -
----------------------------------------------- ------ ------
(44.9) (43.7)
Amortisation of MedicX debt MtM on acquisition 3.1 2.5
----------------------------------------------- ------ ------
(41.8) (41.2)
----------------------------------------------- ------ ------
7. Taxation
a) Taxation charge in the Group Statement of Comprehensive
Income
The taxation charge is made up as follows:
2020 2019
GBPm GBPm
--------------------------------- ----- -----
Current tax
UK corporation tax - -
Irish corporation tax 0.1 0.2
Deferred tax on Irish activities 0.3 0.9
--------------------------------- ----- -----
Total tax 0.4 1.1
--------------------------------- ----- -----
The UK corporation tax rate of 19% (2019: 19%) and the Irish
corporation tax rate of 20% (2019: 20%) have been applied in the
measurement of the Group's UK and Ireland related activities tax
liability at 31 December 2020.
b) Factors affecting the tax charge for the year
The tax assessed for the year is lower than (2019: lower than)
the standard rate of corporation tax in the UK. The differences are
explained below:
2020 2019
GBPm GBPm
--------------------------------------------------------- ------ ------
Profit/(loss) on ordinary activities before taxation 112.4 (70.2)
--------------------------------------------------------- ------ ------
Theoretical tax at UK corporation tax rate of 19% (2019:
19%) 21.4 (13.3)
REIT exempt income (25.7) (23.0)
Transfer pricing adjustment 4.1 4.8
Non-taxable items 0.7 31.5
Irish corporation tax 0.7 0.2
Deferred tax on Irish activities (0.8) 0.9
--------------------------------------------------------- ------ ------
Taxation charge (Note 7a) 0.4 1.1
--------------------------------------------------------- ------ ------
The UK REIT rules exempt the profits of the Group's property
rental business from corporation tax.
c) Basis of taxation
The Group elected to be treated as a UK REIT with effect from 1
January 2007. The UK REIT rules exempt the profits of the Group's
property rental business from corporation tax. Gains on properties
are also exempt from tax, provided they are not held for trading or
sold in the three years post completion of development. The Group
will otherwise be subject to corporation tax at 19% (2019:
19%).
Acquired companies are effectively converted to UK REIT status
from the date on which they become a member of the Group.
As a UK REIT, the Company is required to pay Property Income
Distributions ("PIDs") equal to at least 90% of the Group's rental
profit calculated by reference to tax rules rather than accounting
standards.
To remain as a UK REIT there are a number of conditions to be
met in respect of the principal company of the Group, the Group's
qualifying activities and the balance of its business. The Group
remains compliant as at 31 December 2020.
The Group's activities in Ireland are conducted via Irish
companies, a Guernsey company and an Irish Collective Asset Vehicle
("ICAV"). The Irish companies pay Irish corporation tax on trading
activities and deferred tax is calculated on the increase in
capital values. The Guernsey company pays tax on its net rental
income. The ICAV does not pay any Irish corporation tax on its
profits but a 20% withholding tax is paid on distributions to
owners.
8. Earnings per share
Performance measures
In the tables below, we present earnings per share and net
assets per share calculated in accordance with IFRS, together with
our own adjusted measure and certain measures defined by the
European Public Real Estate Association ("EPRA"), which have been
included to assist comparison between European property companies.
Two of the Group's key financial performance measures are adjusted
earnings per share and adjusted net tangible assets per share.
Adjusted earnings, which is a tax adjusted measure of revenue
profit, is the basis for the calculation of adjusted earnings per
share. We believe adjusted earnings and adjusted earnings per share
provide further insight into the results of the Group's operational
performance to stakeholders as they focus on the net rental income
performance of the business and exclude capital and other items
which can vary significantly from year to year.
Earnings per share
2020 2019
------------------------------ ------------------------------
IFRS Adjusted EPRA IFRS Adjusted EPRA
earnings earnings earnings earnings earnings earnings
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- --------- --------- -------- --------- ---------
Profit/(loss) after taxation 112.0 112.0 112.0 (71.3) (71.3) (71.3)
Adjustments to remove:
Revaluation gain on property
portfolio - (51.3) (51.3) - (48.4) (48.4)
Profit on sale of land
and property - (0.1) (0.1) - (1.4) (1.4)
Fair value movement on
derivatives - 12.9 12.9 - 5.4 5.4
Fair value movement and
issue costs on convertible
bond - 2.3 2.3 - 28.2 28.2
Taxation charge - 0.4 0.4 - 1.1 1.1
Exceptional revaluation
loss arising on acquisition
of MedicX - - - - 138.4 138.4
Exceptional items - contract
termination fee - - - - 10.2 -
Amortisation of MtM loss
on debt acquired - (3.1) - - (2.5) -
------------------------------- -------- --------- --------- -------- --------- ---------
Basic earnings/(loss) 112.0 73.1 76.2 (71.3) 59.7 52.0
Dilutive effect of convertible
bond 6.6 4.3 4.3 - 2.0 2.0
------------------------------- -------- --------- --------- -------- --------- ---------
Diluted earnings/(loss) 118.6 77.4 80.5 (71.3) 61.7 54.0
------------------------------- -------- --------- --------- -------- --------- ---------
Number of shares
2020 weighted average 2019 weighted average
------------------------- -------------------------
million million million million million million
------------------------------- ------- ------- ------- ------- ------- -------
Ordinary Shares 1,266.4 1,266.4 1,266.4 1,092.0 1,092.0 1,092.0
Dilutive effect of convertible
bond 102.0 102.0 102.0 - 46.5 46.5
------------------------------- ------- ------- ------- ------- ------- -------
Diluted Ordinary Shares 1,368.4 1,368.4 1,368.4 1,092.0 1,138.5 1,138.5
------------------------------- ------- ------- ------- ------- ------- -------
Profit/(loss) per share attributable to shareholders:
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
-------- ------ -------- ------ ------ -------- ------
Basic 8.8 5.8 6.0 (6.5) 5.5 4.8
Diluted 8.7 5.7 5.9 (6.5) 5.4 4.7
-------- ------ -------- ------ ------ -------- ------
In the year ended 31 December 2019 the effect of the convertible
bond has been excluded from the diluted loss and weighted average
diluted number of shares when calculating IFRS diluted loss per
share because they are not dilutive.
Net assets per share
31 December 2020 31 December 2019
-------------------------- --------------------------
IFRS Adjusted EPRA IFRS Adjusted EPRA
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------- -------- ------- ------- -------- -------
Net assets attributable
to shareholders 1,414.4 1,414.4 1,414.4 1,228.5 1,228.5 1,228.5
Derivative interest rate
swaps liability 0.1 0.1 13.0 13.0
Deferred tax 3.5 3.5 3.1 3.1
Cumulative convertible
bond fair value movement 25.0 25.0 22.7 22.7
MtM on MedicX loans net
of amortisation 42.3 - 45.5 -
---------------------------- ------- -------- ------- ------- -------- -------
Net tangible assets ("NTA") 1,485.3 1,443.0 1,312.8 1,267.3
Real estate transfer
taxes 174.7 160.4
---------------------------- ------- -------- ------- ------- -------- -------
Net reinstatement value
("NRV") 1,617.7 1,427.7
Fixed rate debt and swap
mark-to-market value (88.0) (62.0)
Deferred tax (3.5) (3.1)
Cumulative convertible
bond fair value movement (25.0) (22.7)
Real estate transfer
taxes (174.7) (160.4)
---------------------------- ------- -------- ------- ------- -------- -------
Net disposal value ("NDV") 1,326.5 1,179.5
---------------------------- ------- -------- ------- ------- -------- -------
Ordinary Shares
million million million million million million
--------------------- ------- ------- ------- ------- ------- -------
Issued share capital 1,315.6 1,315.6 1,315.6 1,216.3 1,216.3 1,216.3
--------------------- ------- ------- ------- ------- ------- -------
Basic net asset value per share 1
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
---------------------------- ----- -------- ----- ----- -------- -----
Net tangible assets ("NTA") 107.5 112.9 109.7 101.0 107.9 104.2
Net reinstatement value
("NRV") 123.0 117.4
Net disposal value ("NDV") 100.8 97.0
---------------------------- ----- -------- ----- ----- -------- -----
1 The above are calculated on a "basic" basis without the
adjustment for the impact of the convertible bond which is shown in
the diluted basis table below.
Diluted net asset value per share 2
31 December 2020 31 December 2019
---------------------- ----------------------
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
---------------------------- ----- -------- ----- ----- -------- -----
Net tangible assets ("NTA") 110.4 115.4 112.4 101.0 111.1 107.6
Net reinstatement value
("NRV") 124.7 119.8
Net disposal value ("NDV") 104.2 102.7
---------------------------- ----- -------- ----- ----- -------- -----
2 The Company assesses the dilutive impact of the unsecured
convertible bond, issued by the Group on 15 July 2019, on its net
asset value per share with a current exchange price of 147.10 pence
(31 December 2019: 149.39 pence).
Conversion of the convertible bond would result in the issue of
102.0 million (31 December 2019: 100.4 million) new Ordinary
Shares. The IFRS net asset value and EPRA NDV would increase by
GBP175.0 million (31 December 2019: GBP172.7 million) and the EPRA
NTA, Adjusted NTA and EPRA NRV would increase by GBP150.0 million
(31 December 2019: GBP150.0 million). The resulting diluted net
asset values per share are anti-dilutive to all measures and are
set out in the table above.
During the year the Group has adopted the new EPRA Best Practice
Recommendations Guidelines as issued by EPRA in October 2019,
effective for periods beginning 1 January 2020. The Best Practice
Recommendations have replaced the previous EPRA NAV and EPRA NNNAV
metrics with three new metrics, EPRA NTA, EPRA NDV and EPRA NRV;
refer to the Glossary of Terms for further details.
9. Dividends
Amounts recognised as distributions to equity holders in the
year:
2020 2019
GBPm GBPm
----------------------------------------------------- ----- -----
Quarterly interim dividend paid 21 February 2020 16.9 -
Scrip dividend in lieu of quarterly cash dividend 21
February 2020 1.0 -
Quarterly interim dividend paid 22 May 2020 16.9 -
Scrip dividend in lieu of quarterly cash dividend 22
May 2020 1.1 -
Quarterly interim dividend paid 21 August 2020 16.4 -
Scrip dividend in lieu of quarterly cash dividend 21
August 2020 1.5 -
Quarterly interim dividend paid 20 November 2020 18.9 -
Scrip dividend in lieu of quarterly cash dividend 20
November 2020 0.6 -
Quarterly interim dividend paid 22 February 2019 - 9.9
Scrip dividend in lieu of quarterly cash dividend 22
February 2019 - 0.9
Quarterly interim dividend paid 24 May 2019 - 14.4
Scrip dividend in lieu of quarterly cash dividend 24
May 2019 - 1.5
Quarterly interim dividend paid 23 August 2019 - 15.8
Scrip dividend in lieu of quarterly cash dividend 23
August 2019 - 0.1
Quarterly interim dividend paid 22 November 2019 - 14.3
Scrip dividend in lieu of quarterly cash dividend 22
November 2019 - 2.5
----------------------------------------------------- ----- -----
Total dividends distributed in the year 73.3 59.4
----------------------------------------------------- ----- -----
Per share 5.9p 5.6p
----------------------------------------------------- ----- -----
On 6 January 2021, the Board declared an interim dividend of
1.55 pence per Ordinary Share with regard to the year ended 31
December 2020, payable on 26 February 2021. This dividend will
comprise wholly of a Property Income Distribution ("PID") of 1.55
pence and no ordinary dividend.
10. Investment properties and investment properties under
construction
Properties have been independently valued at fair value by
Lambert Smith Hampton UK, Jones Lang LaSalle and CBRE Chartered
Surveyors and Valuers, as at the balance sheet date in accordance
with accounting standards. The valuers have confirmed that they
have valued the properties in accordance with the Practice
Statements in the RICS Appraisal and Valuation Standards 2017 ("Red
Book"). There were no changes to the valuation techniques during
the year. The valuers are appropriately qualified and have
sufficient market knowledge and relevant experience of the location
and category of investment property and have had full regard to
market evidence when determining the values.
The COVID-19 pandemic has led to a heightened degree of
uncertainty surrounding the valuation of certain property
sub-sectors. Despite this, neither UK nor Irish valuers have
included a material uncertainty clause in the valuation report at
31 December 2020.
The properties are 99.6% let (2019: 99.5%). The valuations
reflected a 4.81% net initial yield (2019: 4.86%) and a 4.84%
(2019: 5.04%) true equivalent yield. Where properties have
outstanding rent reviews, an estimate is made of the likely rent on
review in line with market expectations and the knowledge of the
valuers.
In accordance with IAS 40, investment properties under
construction have also been valued at fair value by the valuers. In
determining the fair value, the valuer is required to value
development property as if complete, deduct the costs remaining to
be paid to complete the development and consider the significant
risks which are relevant to the development process including, but
not limited to, construction and letting risks and the impact they
may have on fair value. In the case of the Group's portfolio under
construction, where the sites are pre-let and construction risk
remains with the builder/developer, the valuer has deemed that the
residual risk to the Group is minimal. As required by the Red Book,
the valuers have deducted the outstanding cost to the Group through
to the completion of construction of GBP32.1 million (2019: GBP25.4
million) in arriving at the fair value to be included in the
financial statements.
In addition to the above, capital commitments have been entered
into amounting to GBP7.5 million (2019: GBP2.7 million) which have
not been provided for in the financial statements.
A fair value increase of GBP0.2 million (2019: GBP0.9 million)
in respect of investment property under construction has been
recognised in the Group Statement of Comprehensive Income, as part
of the total net valuation gain on property portfolio in the year
of GBP51.3 million (2019: GBP48.4 million).
Of the GBP2,571.6 million (2019: GBP2,408.6 million) valuation,
GBP2,373.9 million (92.3%) (2019: GBP2,248.6 million) relates to
investment properties in the UK and GBP197.7 million (7.7%) (2019:
GBP160.0 million) relates to investment properties in Ireland.
In line with accounting policies, the Group has treated the
acquisitions during the year as asset purchases rather than
business combinations as they were judged to be acquisitions of
properties rather than businesses.
Investment Investment Investment
properties properties
properties long under
freehold1 leasehold construction Total
GBPm GBPm GBPm GBPm
---------------------------------------------- ---------- ---------- ------------ -------
As at 1 January 2020 1,902.2 476.9 34.0 2,413.1
Property additions 66.3 0.4 33.3 100.0
Property disposals 0.1 - - 0.1
Impact of lease incentive adjustment 0.9 0.6 - 1.5
Transfer from properties under construction 46.8 - (46.8) -
Interest capitalised - - 0.7 0.7
---------------------------------------------- ---------- ---------- ------------ -------
Foreign exchange movements 7.0 0.4 2.0 9.4
---------------------------------------------- ---------- ---------- ------------ -------
2,023.3 478.3 23.2 2,524.8
Revaluations for the year 38.0 13.1 0.2 51.3
---------------------------------------------- ---------- ---------- ------------ -------
As at 31 December 2020 2,061.3 491.4 23.4 2,576.1
---------------------------------------------- ---------- ---------- ------------ -------
As at 1 January 2019 1,212.5 284.4 6.0 1,502.9
Acquisition of MedicX portfolio
---------------------------------------------- ---------- ---------- ------------ -------
Consideration (including transaction
costs) 728.3 197.2 17.2 942.7
Less: exceptional revaluation loss arising
on acquisition (107.0) (28.9) (2.5) (138.4)
---------------------------------------------- ---------- ---------- ------------ -------
Fair value of MedicX portfolio acquired 621.3 168.3 14.7 804.3
Property additions 26.3 - 31.2 57.5
Property disposals (1.1) - - (1.1)
Adoption of IFRS 16 - ground rents recognised
as finance leases - 4.5 - 4.5
Impact of lease incentive adjustment 1.0 2.5 - 3.5
Transfer from properties under construction 7.1 7.9 (15.0) -
Foreign exchange movements (3.1) - (3.8) (6.9)
---------------------------------------------- ---------- ---------- ------------ -------
1,864.0 467.6 33.1 2,364.7
Revaluations for the year 38.2 9.3 0.9 48.4
---------------------------------------------- ---------- ---------- ------------ -------
As at 31 December 2019 1,902.2 476.9 34.0 2,413.1
---------------------------------------------- ---------- ---------- ------------ -------
1 Includes development land held at GBP0.9 million (31 December 2019: GBP1.6 million).
Bank borrowings, bonds and interest rate swaps are secured on
investment properties with a value of GBP2,483 million (2019:
GBP2,376 million).
Right-of-use-assets
In accordance with IFRS 16 Leases, the Group has recognised a
GBP4.5 million head lease liability and an equal and opposite
finance leases asset which is included in non-current assets.
Fair value hierarchy
All of the Group's properties are level 3, as defined by IFRS
13, in the fair value hierarchy as at 31 December 2020 and 31
December 2019. There were no transfers between levels during the
year or during 2019. Level 3 inputs used in valuing the properties
are those which are unobservable, as opposed to level 1 (inputs
from quoted prices) and level 2 (observable inputs either directly,
i.e. as prices, or indirectly, i.e. derived from prices).
Valuation techniques used to derive level 3 fair values
The valuations have been prepared on the basis of fair market
value ("FMV") which is defined in the RICS Valuation Standards
as:
"The estimated amount for which a property should exchange on
the date of valuation between a willing buyer and a willing seller
in an arm's length transaction after proper marketing wherein the
parties had each acted knowledgeably, prudently and without
compulsion."
Valuation techniques: market comparable method
Under the market comparable method (or market comparable
approach), a property's fair value is estimated based on comparable
transactions and using certain unobservable inputs. These inputs
are detailed below.
Unobservable input: estimated rental value ("ERV")
The rent at which space could be let in the market conditions
prevailing at the date of valuation. ERV is also used in
determining expected rental uplift on outstanding rent reviews.
2020 2019
----------------------------- ---------------------- ----------------------
ERV - range of the portfolio GBP18,000-GBP1,242,000 GBP27,400-GBP1,286,558
per annum per annum
----------------------------- ---------------------- ----------------------
Unobservable input: equivalent yield
The equivalent yield is defined as the internal rate of return
of the cash flow from the property, assuming a rise to ERV at the
next review date, but with no further rental growth.
2020 2019
------------------------------------- ------------ -----------
True equivalent yield - range of the
portfolio 3.11%-19.51% 4.00%-7.87%
------------------------------------- ------------ -----------
Unobservable input: physical condition of the property
The properties are physically inspected by the valuer on a
three-year rotating basis.
Unobservable input: rental growth
The estimated average increase in rent based on both market
estimations and contractual situations.
Sensitivity of measurement of significant unobservable
inputs
-- A decrease in the estimated annual rent will decrease the
fair value. A 1% increase in annual rent would have approximately
GBP26 million increase in the investment property valuation.
-- A decrease in the equivalent yield will increase the fair
value. A 0.10% shift of equivalent yield would have approximately
GBP52 million impact on the investment property valuation.
-- A deterioration in the physical condition of the property will decrease the fair value.
-- An increase in the rental growth will increase the fair value.
11. Trade and other receivables
2020 2019
GBPm GBPm
-------------------------------------------------------- ----- -----
Trade receivables (net of provision for doubtful debts) 9.8 10.0
Prepayments and accrued income 7.1 5.9
Other debtors 0.5 0.8
-------------------------------------------------------- ----- -----
17.4 16.7
-------------------------------------------------------- ----- -----
The expected credit losses are estimated using a provision
matrix by reference to past default experience and an analysis of
the debtor's current financial position, adjusted for factors that
are specific to the debtor including an impact of COVID-19 on the
recoverability, general economic conditions of the industry and an
assessment of both the current as well as the forecast direction of
conditions at the reporting date. The Group has therefore not
recognised a loss allowance because historical experience has
indicated that the risk profile of trade receivables is deemed
low.
The Group's principal customers are invoiced and pay quarterly
in advance, usually on English, Scottish and Gale quarter days.
There is no significant concentration of credit risk with respect
to trade receivables, as the Group has a large number of
tenants.
12. Cash and cash equivalents
2020 2019
GBPm GBPm
------------------ ----- -----
Cash held at bank 103.6 143.1
------------------ ----- -----
103.6 143.1
------------------ ----- -----
Bank interest is earned at floating rates depending upon the
bank deposit rate. Short term deposits may be made for varying
periods of between one day and three months, dependent on available
cash and forthcoming cash requirements of the Group. These deposits
earn interest at various short term deposit rates.
13. Trade and other payables
2020 2019
GBPm GBPm
------------------------------------ ----- -----
Trade payables 0.7 0.2
Bank and bond loan interest accrual 8.0 8.0
Other payables 8.6 10.0
VAT 6.5 5.5
Accruals 10.9 11.0
------------------------------------ ----- -----
34.7 34.7
------------------------------------ ----- -----
14. Borrowings
a) Term loans and overdrafts
The table indicates amounts drawn and undrawn from each
individual facility as at 31 December:
Facility Amounts drawn Undrawn
------------ --------------- ------------
2020 2019 2020 2019 2020 2019
Expiry
date GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- ----- ----- ------- ------ ----- -----
Current
RBS overdraft Jun 2021 5.0 5.0 - - 5.0 5.0
Santander Jul 2021 30.6 - - - 30.6 -
Aviva HIL loan Jan 2032 1.0 0.9 1.0 0.9 - -
Aviva loan1 Sep 2033 2.0 2.0 2.0 2.0 - -
Aviva loan1 Jun 2040 0.7 0.6 0.7 0.6 - -
Aviva loan Aug 2029 2.7 2.6 2.7 2.6 - -
--------------- --------- ----- ----- ------- ------ ----- -----
42.0 11.1 6.4 6.1 35.6 5.0
------------------------- ----- ----- ------- ------ ----- -----
Non-current
Aviva HIL loan Jan 2032 19.4 20.4 19.4 20.4 - -
Aviva loan Dec 2022 25.0 25.0 25.0 25.0 - -
Aviva loan Nov 2028 75.0 75.0 75.0 75.0 - -
Aviva loan Aug 2024 50.0 50.0 50.0 50.0 - -
Aviva loan Aug 2029 57.3 60.0 57.3 60.0 - -
Barclays loan Dec 2023 100.0 115.0 - 55.0 100.0 60.0
HSBC loan Nov 2022 100.0 100.0 - - 100.0 100.0
Lloyds loan Oct 2023 50.0 30.0 28.8 28.3 21.2 1.7
RBS loan Mar 2022 100.0 100.0 59.4 55.7 40.7 44.3
Santander loan Jul 2021 - 30.6 - - - 30.6
Aviva loan1 Sep 2033 227.4 229.4 227.4 229.4 - -
Aviva loan1 Sep 2028 30.8 30.8 30.8 30.8 - -
Aviva loan1 Jun 2040 24.1 24.8 24.1 24.8 - -
--------------- --------- ----- ----- ------- ------ ----- -----
859.0 891.0 597.2 654.4 261.9 236.6
------------------------- ----- ----- ------- ------ ----- -----
Total 901.0 902.1 603.6 660.5 297.5 241.6
-------------------------- ----- ----- ------- ------ ----- -----
1 Acquired as part of the merger with MedicX.
2020 2019
GBPm GBPm
-------------------------------------------------------- ------ -------
Balance as at 1 January 688.8 361.4
-------------------------------------------------------- ------ -------
Changes from financing activities
Acquired as part of the merger with MedicX (net of
amortisation fees) - 315.3
Term bank loan drawdowns 17.8 132.8
-------------------------------------------------------- ------ -------
New loan facilities drawn 17.8 448.1
-------------------------------------------------------- ------ -------
Repayments of mortgages principal (3.6) (2.8)
Repayments of term bank loans (72.6) (157.7)
-------------------------------------------------------- ------ -------
Repayments of term loan borrowings (76.2) (160.5)
-------------------------------------------------------- ------ -------
Loan issue costs for new facilities/refinancing (1.9) (1.0)
-------------------------------------------------------- ------ -------
Total changes from financing cash flows (60.3) 286.6
-------------------------------------------------------- ------ -------
Other non-cash changes
MtM on loans net of amortisation (2.4) 38.9
Amortisation of loan issue costs 2.4 2.4
Exchange loss/(gain) on translation of foreign balances 1.5 (0.5)
-------------------------------------------------------- ------ -------
Total other changes 1.5 40.8
-------------------------------------------------------- ------ -------
Balance as at 31 December 630.0 688.8
-------------------------------------------------------- ------ -------
At 31 December 2020, total facilities of GBP1,456.8 million
(2019: GBP1,452.0 million) were available to the Group. This
included a GBP70 million secured bond, a GBP100 million secured
bond, a GBP150.0 million nominal value convertible bond, GBP45.6
million and GBP62.6 million Euro-denominated bonds, a GBP50 million
Ignis loan note, a GBP77.5 million Standard Life loan note and a
GBP5 million overdraft facility. Of these facilities, as at 31
December 2020, GBP1.159.3 million was drawn (2019: GBP1,210.4
million).
On 3 December 2020, the Barclays facility was cancelled and
replaced by a facility with Barclays for GBP100.0 million. The new
facility can be drawn in Sterling or Euros. It has a variable
interest rate of LIBOR plus 165bps, or SONIA plus 165bps plus a
credit spread adjustment, and an expiry date of 2 November
2023.
On 7 December 2020, the Lloyds facility was refinanced and
increased to GBP50.0 million, with a GBP50.0 million accordion
option at the discretion of the lender. The new facility can be
drawn in Sterling or Euros. It has a variable interest rate of
LIBOR plus 155bps, or SONIA plus 165bps plus a credit spread
adjustment, and an expiry date of 6 December 2023.
On 1 December 2020, the existing HSBC facility was extended for
another year to 30 November 2023.
Costs associated with the arrangement and extension of the
facilities, including legal advice and loan arrangement fees, are
amortised using the effective interest rate.
Any amounts unamortised as at the period end are offset against
amounts drawn on the facilities as shown in the table below:
2020 2019
GBPm GBPm
----------------------------------------------- ------ ------
Term loans drawn: due within one year 6.4 6.1
Term loans drawn: due in greater than one year 597.2 654.4
----------------------------------------------- ------ ------
Total terms loans drawn 603.6 660.5
Plus: MtM on loans net of amortisation 36.6 38.9
Less: unamortised borrowing costs (10.2) (10.6)
----------------------------------------------- ------ ------
Total term loans per the Group Balance Sheet 630.0 688.8
----------------------------------------------- ------ ------
The Group has been in compliance with all of the financial
covenants of the above facilities as applicable through the year.
Further details are shown in Note 17e.
The Group has entered into interest rate swaps to manage its
exposure to interest rate fluctuations. These are set out in Note
16.
b) Bonds
2020 2019
GBPm GBPm
---------------------------------------------------- ----- -----
Unsecured:
Convertible bond July 2025 at fair value 175.0 172.7
Less: unamortised costs - -
---------------------------------------------------- ----- -----
Total unsecured bonds 175.0 172.7
---------------------------------------------------- ----- -----
Secured:
Secured bond December 2025 70.0 70.0
Secured bond March 2027 100.0 100.0
EUR51 million secured bond (Euro private placement)
December 2028/30 45.6 43.2
EUR70 million secured bond (Euro private placement)
September 2031 62.6 59.2
Ignis loan note December 2028 50.0 50.0
Standard Life loan note September 2028 77.5 77.5
Less: unamortised bond issue costs (3.6) (4.0)
Plus: MtM on loans net of amortisation 5.8 6.5
---------------------------------------------------- ----- -----
Total secured bonds 407.9 402.4
---------------------------------------------------- ----- -----
Total bonds 582.9 575.1
---------------------------------------------------- ----- -----
There were no bond conversions during the year (2019: GBP28.3
million).
Secured bonds
On 18 December 2013, PHP successfully listed the floating rate
guaranteed secured bonds issued on 4 November 2013 (the "Secured
Bonds") on the London Stock Exchange. The Secured Bonds have a
nominal value of GBP70 million and mature on or about 30 December
2025. The Secured Bonds incur interest at an annualised rate of
220bps above six-month LIBOR, payable semi-annually in arrears.
On 21 March 2017, a GBP100 million Secured Bond was issued for a
ten-year term at a fixed coupon of 2.83% that matures on 21 March
2027. Interest is paid semi-annually in arrears.
On 20 December 2018, senior secured notes for a total of EUR51
million (GBP45.6 million) were issued at a blended fixed rate of
2.4793% and a weighted average maturity of 10.4 years. Interest is
paid semi-annually in arrears. The notes represent PHP's first
Euro-denominated transaction in the private placement market. The
secured notes were placed with UK and Irish institutional investors
in two tranches:
EUR40 million 2.46% senior notes due December 2028.
EUR11 million 2.633% senior notes due December 2030.
On 16 September 2019, new senior secured notes for a total of
EUR70 million (GBP62.6 million) were issued at a fixed rate of
1.509% and a maturity of twelve years. Interest is paid
semi-annually in arrears. The secured notes are guaranteed by the
Company and were placed with UK and Irish institutional
investors.
Ignis and Standard Life loan notes
On 14 March 2019, the loan notes were added to the portfolio as
a part of the MedicX acquisition. The Ignis loan note of GBP50.0
million incurs a fixed coupon of 3.99% payable semi-annually in
arrears and matures on 1 December 2028.
The Standard Life loan note matures on 30 September 2028 and is
split into two tranches, GBP50 million and GBP27.5 million at fixed
coupon rates of 3.84% and 3.00% respectively. Interest is payable
semi-annually in arrears.
Convertible bond
On 15 July 2019, PHP Finance (Jersey No.2) Limited (the
"Issuer"), a wholly owned subsidiary of the Group, issued GBP150
million of 2.875% convertible bonds (the "Bonds") for a six-year
term and if not previously converted, redeemed or purchased and
cancelled, the Bonds will be redeemed at par on maturity in July
2025. The net proceeds were partially used to repay the Company's
GBP75 million, 5.375% senior unsecured retail bonds at maturity and
otherwise for general corporate purposes.
Subject to certain conditions, the Bonds will be convertible
into fully paid Ordinary Shares of the Company and the initial
exchange price was set at 153.25 pence, a premium of 15% above the
volume weighted average price of the Company's shares on 18 June
2019, being 133.26 pence. Under the terms of the Bonds, the Company
will have the right to elect to settle exercise of any conversion
rights entirely in shares or cash, or with a combination of shares
and cash. The exchange price is subject to adjustment if dividends
paid per share exceed 2.8 pence per annum and other certain
circumstances and consequently the exchange price has been adjusted
to 147.10 pence as at 31 December 2020 (2019: 149.39 pence).
2020 2019
GBPm GBPm
--------------------------------------------------- ----- -----
Opening balance - fair value 172.7 -
Issued in the year - 150.0
Cumulative fair value movement in convertible bond 2.3 22.7
--------------------------------------------------- ----- -----
Closing balance - fair value 175.0 172.7
--------------------------------------------------- ----- -----
The fair value of the convertible bonds at 31 December 2020 and
31 December 2019 were established by obtaining quoted market
prices. The fair value movement is recognised in the Group
Statement of Comprehensive Income within profit before taxation and
is excluded from the calculation of EPRA earnings and EPRA NTA
(replacing EPRA NAV).
c) Total borrowings
2020 2019
GBPm GBPm
----------------------------------- ------- -------
Current liabilities:
Term loans and overdrafts 6.4 6.1
Bonds - -
----------------------------------- ------- -------
Total current liabilities 6.4 6.1
----------------------------------- ------- -------
Non-current liabilities:
Term loan and overdrafts 597.2 654.4
MtM on loans net of amortisation 36.6 38.9
Less: unamortised loan issue costs (10.2) (10.6)
----------------------------------- ------- -------
623.6 682.7
----------------------------------- ------- -------
Bonds 555.7 549.9
MtM on loans net of amortisation 5.8 6.5
MtM on convertible bond 25.0 22.7
Less: unamortised bond issue costs (3.6) (4.0)
----------------------------------- ------- -------
Total non-current bonds 582.9 575.1
----------------------------------- ------- -------
Total borrowings 1,212.8 1,263.9
----------------------------------- ------- -------
15. Head lease liabilities
The Group holds certain long leasehold properties which are
classified as investment properties. The head leases are accounted
for as finance leases. These leases typically have lease terms
between 25 years and perpetuity and fixed rentals.
2020 2019
GBPm GBPm
----------------------------- ----- -----
Due within one year 0.1 0.1
Due after one year 4.4 4.4
----------------------------- ----- -----
Closing balance - fair value 4.5 4.5
----------------------------- ----- -----
16. Derivatives and other financial instruments
It is Group policy to maintain the proportion of floating rate
interest exposure at between 20%-40% of total debt facilities. The
Group uses interest rate swaps to mitigate its remaining exposure
to interest rate risk in line with this policy. The fair value of
these contracts is recorded in the balance sheet and is determined
by discounting future cash flows at the prevailing market rates at
the balance sheet date.
2020 2019
GBPm GBPm
------------------------------------------------------- ----- ------
Fair value of interest rate swaps treated as cash flow
hedges under IAS 39 ("effective swaps")
Non-current liabilities - -
------------------------------------------------------- ----- ------
- -
------------------------------------------------------- ----- ------
Fair value of interest rate swaps not qualifying as
cash flow hedges under IAS 39 ("ineffective swaps")
Non-current assets - 0.5
Non-current liabilities (0.1) (13.5)
------------------------------------------------------- ----- ------
(0.1) (13.0)
------------------------------------------------------- ----- ------
Total fair value of interest rate swaps (0.1) (13.0)
------------------------------------------------------- ----- ------
Shown in the balance sheet as:
Total non-current assets - 0.5
Total non-current liabilities (0.1) (13.5)
------------------------------------------------------- ----- ------
Changes in the fair value of the contracts that do not meet the
strict IAS 39 criteria to be designated as effective hedging
instruments are taken to the Group Statement of Comprehensive
Income. For contracts that meet the IAS 39 criteria and are
designated as "effective" cash flow hedges, the change in fair
value of the contract is recognised in the Group Statement of
Changes in Equity through the cash flow hedging reserve. The result
recognised in the Group Statement of Comprehensive Income on
"effective" cash flow hedges in 2020 was a GBP4.0 million gain
(2019: GBP1.7 million gain), including the amortisation of the cash
flow hedging reserve of GBP4.4 million (2019: GBP3.0 million).
Floating to fixed interest rate swaps with a contract value of
GBP188 million (2019: GBP258 million) were in effect at 31 December
2020. Details of all floating to fixed rate interest rate swap
contracts held are as follows:
Fixed interest
per annum
Contract value Start date Maturity %
----------------- ------------- ------------ --------------
2020
September
GBP88.0 million 2020 March 2022 0.0397
September November
GBP100.0 million 2020 2024 0.0699
----------------- ------------- ------------ --------------
GBP188.0 million
----------------- ------------- ------------ --------------
2019
GBP50.0 million August 2007 August 2021 0.870
GBP38.0 million August 2007 August 2021 0.870
GBP10.0 million June 2020 June 2026 4.810
GBP10.0 million June 2020 June 2026 4.510
GBP10.0 million July 2020 July 2026 4.400
GBP10.0 million July 2020 July 2026 4.475
GBP10.0 million July 2020 July 2026 4.455
GBP20.0 million July 2020 July 2026 4.479
November
GBP100.0 million October 2019 2024 0.688
----------------- ------------- ------------ --------------
GBP258.0 million
---------------------------------------------- --------------
On 4 September 2020, the six AIB swaps with a nominal value of
GBP70 million were cancelled for a one-off payment of GBP18.5
million, equivalent to 1.40 pence per share on an adjusted net
tangible asset value basis.
On 7 September 2020, the HSBC GBP100.0 million swap was
cancelled for one-off payment of GBP2.6 million, equivalent to 0.2
pence per share on an adjusted net tangible asset value basis and a
new swap agreement was entered into with HSBC for a contract value
of GBP100.0 million with a fixed rate of 0.0699% effective until
November 2024.
On 10 September 2020, two RBS swaps, GBP38.0 million and GBP50.0
million with a fixed rate of 0.87% effective until August 2021,
were cancelled for a one-off payment of GBP0.7 million, equivalent
to 0.1 pence per share on an adjusted net tangible asset value
basis. A new swap agreement was entered into with RBS for a
contract value of GBP88.0 million with a fixed rate of 0.0397%
effective until March 2022.
The balance within the cash flow hedge reserve relating to
cancelled swaps will be amortised through the Group Statement of
Comprehensive Income over the remainder of the original contract
period (see Note 6b).
17. Financial risk management
In pursuing its investment objectives, the Group is exposed to a
variety of risks that could impact net assets or distributable
profits.
The Group's principal financial liabilities, other than interest
rate swaps, are loans and borrowings hedged by these swaps. The
main purpose of the Group's loans and borrowings is to finance the
acquisition and development of the Group's property portfolio. The
Group has trade and other receivables, trade and other payables and
cash and short term deposits that arise directly from its
operations.
A review of the Group's objectives, policies and processes for
managing and monitoring risk is set out in the Strategic Report.
This note provides further detail on financial risk management and
includes quantitative information on specific financial risks.
Financial risk factors
a) Interest rate risk
Interest rate risk is the risk that future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates. The Group's exposure to the risk of changes in
market interest rates relates primarily to the Group's long term
debt obligations with floating rates as the Group, generally, does
not hold significant cash balances, with short term borrowings
being used when required. To manage its interest rate risk, the
Group enters into interest rate swaps, in which the Group agrees to
exchange, at specified intervals, the difference between fixed and
variable rate interest amounts calculated by reference to an
agreed-upon principal amount. Note 16 provides details of interest
swap contracts in effect at the year end.
The sensitivity analysis below shows the impact on profit before
tax and equity of reasonably possible movements in interest rates
with all other variables held constant. It should be noted that the
impact of movement in the interest rate variable is not necessarily
linear.
The fair value is arrived at with reference to the difference
between the contracted rate of a swap and the market rate for the
remaining duration at the time the valuation is performed. As
market rates increase and this difference reduces, the associated
fair value also decreases.
Effect
on fair
Effect
value of on
profit Effect
financial before on
instruments taxation equity
GBPm GBPm GBPm
------------------------- ---------------------------- ----------- -------- ------
2020
London Interbank Offered
Rate Increase of 50 basis points 4.5 5.0 9.5
London Interbank Offered
Rate Decrease of 50 basis points (4.5) (5.0) (9.5)
------------------------- ---------------------------- ----------- -------- ------
2019
London Interbank Offered
Rate Increase of 50 basis points 7.5 9.0 16.5
London Interbank Offered
Rate Decrease of 50 basis points (7.5) (9.0) (16.5)
------------------------- ---------------------------- ----------- -------- ------
b) Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under financial instruments or customer contracts,
leading to a financial loss. The Group is exposed to credit risk
from its principal financial assets being cash and cash
equivalents, and trade and other receivables (see Note 11).
Trade receivables
Trade receivables, primarily tenant rentals, are recognised and
carried at amortised cost and presented in the balance sheet net of
allowances for doubtful receivables and are monitored on a
case-by-case basis. Impairment losses are recognised through the
expected credit loss model. Credit risk is primarily managed by
requiring tenants to pay rentals in advance.
The Group has policies in place to ensure that rental contracts
are entered into only with lessees with an appropriate credit
history, but the Group does not monitor the credit quality of
receivables on an ongoing basis.
Banks and financial institutions
One of the principal credit risks of the Group arises from
financial derivative instruments and deposits with banks and
financial institutions. The Board of Directors believes that the
credit risk on short term deposits and interest rate swaps is
limited because the counterparties are banks, which are committed
lenders to the Group, with high credit ratings assigned by
international credit rating agencies.
c) Liquidity risk
The liquidity risk is that the Group will encounter difficulty
in meeting obligations associated with its financial liabilities as
the majority of the Group's assets are property investments and are
therefore not readily realisable. The Group's objective is to
maintain a mixture of available cash and committed bank facilities
that are designed to ensure that the Group has sufficient available
funds for its operations and to fund its committed capital
expenditure. This is achieved by continuous monitoring of forecast
and actual cash flows.
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted payments
including interest.
Less than Three to One to More than
twelve
On demand three months months five years five years Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- ------------ -------- ---------- ---------- -------
2020
Interest-bearing loans
and borrowings - 10.8 32.7 543.5 885.5 1,472.5
Interest rate swaps (net) - 0.4 1.1 2.1 - 3.6
Trade and other payables 0.5 25.7 4.0 2.4 2.1 34.7
-------------------------- --------- ------------ -------- ---------- ---------- -------
0.5 36.9 37.8 548.0 887.6 1,510.8
-------------------------- --------- ------------ -------- ---------- ---------- -------
2019
Interest-bearing loans
and borrowings - 11.4 34.5 304.2 1,136.2 1,486.3
Interest rate swaps (net) - 0.4 2.9 20.9 1.0 25.2
Trade and other payables 2.1 23.6 4.0 2.6 3.4 35.7
-------------------------- --------- ------------ -------- ---------- ---------- -------
2.1 35.4 41.4 327.7 1,140.6 1,547.2
-------------------------- --------- ------------ -------- ---------- ---------- -------
The Group's borrowings have financial covenants which, if
breached, could result in the borrowings becoming repayable
immediately. Details of the covenants are given below under (e)
Capital risk management and are disclosed to the facility providers
on a quarterly basis. There have been no breaches during the year
(2019: none).
d) Market risk
Market risk is the risk that fair values of financial
instruments will fluctuate because of changes in market prices. The
Board of Directors has identified two elements of market risk that
principally affect the Group - interest rate risk and price
risk.
Interest rate risk
Interest rate risk is outlined above. The Board, with the
assistance of the Adviser, assesses the exposure to other price
risks when making each investment decision and monitors the overall
level of market risk on the investment portfolio on an ongoing
basis through a discounted cash flow analysis. Details of this
analysis can be found in the Strategic Report in the Annual
Report.
Price risk
The Group is exposed to price risk in respect of property price
risk including property rentals risk. Refer to Note 2.3. The Group
has no significant exposure to price risk in respect of financial
instruments other than the convertible bond and interest rate
derivatives (see also Note 16), as it does not hold any equity
securities or commodities.
Fair values
Set out below is a comparison by class of the carrying amount
and fair values of the Group's financial instruments that are
carried in the financial statements.
Book value Fair value Book value Fair value
2020 2020 2019 2019
GBPm GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------- ----------
Financial assets
Trade and other receivables 17.4 17.4 16.7 16.7
Effective interest rate swaps - - - -
Ineffective interest rate swaps - - 0.5 0.5
Cash and short term deposits 103.6 103.6 143.1 143.1
-------------------------------------- ---------- ---------- ---------- ----------
Financial liabilities
Interest-bearing loans and borrowings (1,159.3) (1,212.8) (1,210.4) (1,327.5)
Effective interest rate swaps - - - -
Ineffective interest rate swaps (net) (0.1) (0.1) (13.5) (13.5)
Trade and other payables (34.7) (34.7) (34.7) (34.7)
-------------------------------------- ---------- ---------- ---------- ----------
The fair value of the financial assets and liabilities is
included as an estimate of the amount at which the instruments
could be exchanged in a current transaction between willing
parties, other than a forced sale. The following methods and
assumptions were used to estimate fair values:
-- the fair values of the Group's cash and cash equivalents and
trade payables and receivables are not materially different from
those at which they are carried in the financial statements due to
the short term nature of these instruments;
-- the fair value of floating rate borrowings is estimated by
discounting future cash flows using rates currently available for
instruments with similar terms and remaining maturities. The fair
value approximates their carrying values, gross of unamortised
transaction costs;
-- the fair value of fixed rate debt is estimated using the mid
yield to maturity on the reporting date. The valuations are on a
clean basis, which exclude accrued interest from the previous
settlement date to the reporting date; and
-- the fair values of the derivative interest rate swap
contracts are estimated by discounting expected future cash flows
using market interest rates and yield curves over the remaining
term of the instrument.
Fair value hierarchy
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels are defined as
follows:
Level 1: Quoted (unadjusted) prices in active markets for
identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly.
Level 3: Techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
Fair value measurements at 31 December 2020 are as follows:
Level 1 Level 2 Level 3
1 (2) 3 Total
Recurring fair value measurements GBPm GBPm GBPm GBPm
---------------------------------- ------- ------- ------- -------
Financial assets
Derivative interest rate swaps - - - -
---------------------------------- ------- ------- ------- -------
Financial liabilities
Derivative interest rate swaps - (0.1) - (0.1)
Convertible bond (175.0) - - (175.0)
Fixed rate debt - (981.5) - (981.5)
---------------------------------- ------- ------- ------- -------
1 Valuation is based on unadjusted quoted prices in active
markets for identical financial assets and liabilities.
2 Valuation is based on inputs (other than quoted prices
included in level 1) that are observable for the financial asset or
liability, either directly (i.e. as unquoted prices) or indirectly
(i.e. derived from prices).
3 Valuation is based on inputs that are not based on observable market data.
Fair value measurements at 31 December 2019 are as follows:
Level 2 Level 3
Level 11 2 3 Total
Recurring fair value measurements GBPm GBPm GBPm GBPm
---------------------------------- -------- ------- ------- -------
Financial assets
Derivative interest rate swaps - 0.5 - 0.5
---------------------------------- -------- ------- ------- -------
Financial liabilities
Derivative interest rate swaps - (13.5) - (13.5)
Convertible bond (172.7) - - (172.7)
Fixed rate debt - (945.9) - (945.9)
---------------------------------- -------- ------- ------- -------
1 Valuation is based on unadjusted quoted prices in active
markets for identical financial assets and liabilities.
2 Valuation is based on inputs (other than quoted prices
included in level 1) that are observable for the financial asset or
liability, either directly (i.e. as unquoted prices) or indirectly
(i.e. derived from prices).
3 Valuation is based on inputs that are not based on observable market data.
The interest rate swaps whose fair values include the use of
level 2 inputs are valued by discounting expected future cash flows
using market interest rates and yield curves over the remaining
term of the instrument. The following inputs are used in arriving
at the valuation:
-- interest rates;
-- yield curves;
-- swaption volatility;
-- observable credit spreads;
-- credit default swap curve; and
-- observable market data.
e) Capital risk management
The primary objectives of the Group's capital management are to
ensure that it remains a going concern, operates within its
quantitative banking covenants and meets the criteria so as to
continue to qualify for UK REIT status.
The capital structure of the Group consists of shareholders'
equity and net borrowings. The type and maturity of the Group's
borrowings are analysed further in Notes 14 and 16 and the Group's
equity is analysed into its various components in the Group
Statement of Changes in Equity. The Board, with the assistance of
the Adviser, monitors and reviews the Group's capital so as to
promote the long term success of the business, to facilitate
expansion and to maintain sustainable returns for shareholders.
Under several of its debt facilities, the Group is subject to a
covenant whereby consolidated Group rental income must exceed Group
borrowing costs by the ratio 1.3:1 (2019: 1.3:1). No debt facility
has a Group loan to value covenant.
Facility-level covenants also operate with regard to specific
pools of property assets provided to lenders to secure individual
loan facilities. These range as follows:
-- interest cover(1) : 1.05 to 1.75 (2019: 1.15 to 1.75:1); and
-- loan to value(1) : 55% to 75% (2019: 55% to 75%).
UK REIT compliance tests include loan to property value and
gearing tests. The Group must satisfy these tests in order to
continue trading as a UK REIT. This is also an internal requirement
imposed by the Articles of Association.
1 See Glossary of Terms.
During the period the Group has complied with all of the
requirements set out above.
2020 2019
Group loan to value ratio GBPm GBPm
-------------------------------------------------------- ------- -------
Fair value of completed investment properties 2,548.2 2,374.6
Fair value of development properties 23.4 34.0
Ground rent recognised as finance leases 4.5 4.5
-------------------------------------------------------- ------- -------
2,576.1 2,413.1
-------------------------------------------------------- ------- -------
Interest-bearing loans and borrowings (with convertible
bond at nominal value) 1,159.3 1,210.4
Less cash held (103.6) (143.1)
-------------------------------------------------------- ------- -------
Nominal amount of interest-bearing loans and borrowings 1,055.7 1,067.3
-------------------------------------------------------- ------- -------
Group loan to value ratio 41.0% 44.2%
-------------------------------------------------------- ------- -------
18. Share capital
Ordinary Shares issued and fully paid at 12.5 pence each
2020 2019
-------------- --------------
Number Number
- 2020 - 2019
million GBPm million GBPm
----------------------------------------- ------- ----- ------- -----
Balance at 1 January 1,216.3 152.0 769.1 96.1
Scrip issues in lieu of cash dividends 2.7 0.3 4.0 0.5
Shares issued on merger with MedicX
Fund Limited - - 341.0 42.6
Share issue 9 July 2020 and 24 September
2019 96.6 12.1 78.1 9.8
Shares issued on bond conversions - - 24.1 3.0
----------------------------------------- ------- ----- ------- -----
Balance at 31 December 1,315.6 164.4 1,216.3 152.0
----------------------------------------- ------- ----- ------- -----
Issue of shares in 2020
Number
of shares
- Issue
Date of issue million price
------------------------------------- ----------------- --------- -------
Scrip issue in lieu of cash dividend 21 February 2020 0.6 158.2p
Scrip issue in lieu of cash dividend 22 May 2020 0.7 155.52p
Scrip issue in lieu of cash dividend 21 August 2020 0.9 154.22p
Share issue 9 July 2020 96.6 145.00p
Scrip issue in lieu of cash dividend 20 November 2020 0.5 147.6p
------------------------------------- ----------------- --------- -------
19. Share premium
2020 2019
GBPm GBPm
---------------------------------------------- ----- -----
Balance at 1 January 338.1 220.6
Scrip issue in lieu of cash dividend 3.9 4.5
Share issue 9 July 2020 and 24 September 2019 127.9 90.2
Shares issued on bond conversions - 25.4
Share issue expense (3.2) (2.6)
---------------------------------------------- ----- -----
Balance at 31 December 466.7 338.1
---------------------------------------------- ----- -----
20. Merger and other reserves
The merger and other reserves are made up of the capital reserve
which is held to finance any proposed repurchases of Ordinary
Shares, following approval of the High Court in 1998, the foreign
exchange translation reserve and the premium on shares issued for
the MedicX Fund Limited merger.
2020 2019
GBPm GBPm
---------------------------------------------------- ----- -----
Capital reserve
Balance at 1 January and 31 December 1.6 1.6
---------------------------------------------------- ----- -----
Foreign exchange translation reserve
Balance at 1 January (1.0) 0.9
Exchange differences on translating the net assets
of foreign operations 2.2 (1.9)
---------------------------------------------------- ----- -----
Balance at 31 December 1.2 (1.0)
---------------------------------------------------- ----- -----
Merger reserve
Balance at 1 January 398.0 -
Premium on shares issued for MedicX merger - 398.0
---------------------------------------------------- ----- -----
Balance at 31 December 398.0 398.0
---------------------------------------------------- ----- -----
Balance of merger and other reserves at 31 December 400.8 398.6
---------------------------------------------------- ----- -----
21. Special reserve
2020 2019
GBPm GBPm
------------------------------------- ------ ------
Balance at 1 January 65.4 124.8
Dividends paid (61.2) (54.4)
Scrip issue in lieu of cash dividend (4.2) (5.0)
------------------------------------- ------ ------
Balance at 31 December - 65.4
------------------------------------- ------ ------
The special reserve has arisen on previous issues of the
Company's shares. It represents the share premium on the issue of
the shares, net of expenses, from issues effected by way of a cash
box mechanism.
A cash box raising is a mechanism for structuring a capital
raising whereby the cash proceeds from investors are invested in a
subsidiary company of the Parent instead of the Parent itself. Use
of a cash box mechanism has enabled the share premium arising from
the issue of shares to be deemed to be a distributable reserve and
has therefore been shown as a special reserve in these financial
statements. Any issue costs are also deducted from the special
reserve.
As the special reserve is a distributable reserve, the dividends
distributed in the period have been distributed from this reserve
until the balance reduced to GBPnil. The remaining dividends
distributed in the period have been distributed from retained
earnings.
22. Cash flow hedging reserve
Information on the Group's hedging policy and interest rate
swaps is provided in Note 16.
The transfer to the Group Statement of Comprehensive Income and
the fair value movement on cash flow hedges which meet the
effectiveness criteria under IAS 39, taken to equity, can be
analysed as follows:
2020 2019
GBPm GBPm
----------------------------------------------------- ------ ------
Balance at 1 January (24.1) (25.8)
----------------------------------------------------- ------ ------
Fair value movement on cash flow hedges (0.4) (1.3)
Amortisation of cash flow hedging reserve 4.4 3.0
Net movement on cash flow hedges ("effective swaps")
and amortisation of cash flow hedging reserve 4.0 1.7
----------------------------------------------------- ------ ------
Balance at 31 December (20.1) (24.1)
----------------------------------------------------- ------ ------
On 4 September 2020, the six AIB swaps with a nominal value of
GBP70 million were cancelled for a one-off payment of GBP18.5
million, equivalent to 1.4 pence per share on an adjusted net
tangible asset value basis.
On 7 September 2020, the HSBC GBP100.0 million swap was
cancelled for one-off payment of GBP2.6 million, equivalent to 0.2
pence per share on an adjusted net tangible asset value basis and a
new swap agreement was entered into with HSBC for a contract value
of GBP100.0 million with a fixed rate of 0.0699% effective until
November 2024.
On 10 September 2020, two RBS swaps, GBP38.0 million and GBP50.0
million with a fixed rate of 0.87% effective until August 2021,
were cancelled for a one-off payment of GBP0.7 million, equivalent
to 0.1 pence per share on an adjusted net tangible asset value
basis. A new swap agreement was entered into with RBS for a
contract value of GBP88.0 million with a fixed rate of 0.0397%
effective until March 2022.
The balance within the cash flow hedge reserve relating to
cancelled swaps will be amortised through the Group Statement of
Comprehensive Income over the remainder of the original contract
period (see Note 6b).
23. Retained earnings
2020 2019
GBPm GBPm
----------------------------- ----- ------
Balance at 1 January 298.5 369.8
Retained profit for the year 112.0 (71.3)
Dividends paid (7.9) -
----------------------------- ----- ------
Balance at 31 December 402.6 298.5
----------------------------- ----- ------
24. Capital commitments
As at 31 December 2020, the Group has entered into forward
funding development agreements with third parties for the
development of primary healthcare properties in the UK and Ireland.
The Group has acquired the land and advances funds to the
developers as the construction progresses. Total consideration of
GBP32.1 million (2019: GBP25.4 million) remains to be funded with
regard to these properties.
As at 31 December 2020, the Group has capital commitments
totalling GBP7.5 million (2019: GBP2.7 million) being the cost to
complete asset management projects on site.
25. Related party transactions
The terms and conditions of the Advisory Agreement are described
in the Directors' Report and the Directors' Remuneration
Report.
Nexus, the Adviser, is a related party due to the Managing
Director being a shareholder and Director of Nexus.
Details of the amounts paid in relation to related party
transactions are provided in Note 4.
26. Subsequent events
On 5 January 2021 the Group's management function was
internalised by acquiring Nexus Tradeco Holdings Limited which is
the holding company of its longstanding external property adviser
Nexus Tradeco Limited and certain subsidiaries, including Nexus's
primary care development business (together "Nexus"). Primary
Health Properties PLC acquired the entire issued ordinary share
capital of Nexus Tradeco Holdings Limited for a total fair value
consideration of GBP35.7 million, including fees of GBP1.6m subject
to a completion net assets adjustment, made up of GBP16.6 million
paid in cash and GBP17.5 million satisfied by the issue of
11,485,080 new ordinary shares of 12.5 pence each in the share
capital of PHP at a price on completion of 152.8 pence per
share.
Annual Report
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 December 2020 or
2019 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies and those
for 2020 will be delivered in due course. The Auditor has reported
on those accounts and their reports were (i) unqualified, (ii) did
not include a reference to any matters to which the Auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under Section 498(2) or (3) of
the Companies Act 2006.
Full financial statements for the year ended 31 December 2020
will be published on the Group's website at www.phpgroup.co.uk and
will be posted to shareholders in early March 2021.
Copies of this announcement can be obtained from the Company
Secretary of Primary Health Properties PLC, 5th Floor, Greener
House, 66-68 Haymarket, London SW1Y 4RF.
Going concern
The Group's business activities together with the factors likely
to affect its future development, performance and position, along
with the financial position of the Group, its cash flows, liquidity
position and borrowing facilities are set out in the Strategic
Report.
The Group's property portfolio is 99.6% occupied with over 90 of
its income funded directly or indirectly from government sources
and the average WAULT across the Group's portfolio is 12.1
years.
As at 31 December 2020, the Group had GBP361.5 million of
headroom on its debt facilities, after commitments to fund on
properties under construction through the course of 2021 with a
further GBP103.6 million of cash. The weighted Group average
unexpired loan term was 6.5 years.
The Group's consolidated loan to value ratio, including drawn,
unsecured debt, is 41% with all banking covenants being met during
the year and subsequent to the year end. In summary, at a Group
level values would need to fall by 48% and Group income fall by
approximately 63% before the LTV ratio and income covenants across
the Group were at risk of being breached.
The Directors believe that the Group is well placed to manage
its business risks successfully. Having reviewed the Group's
business activities, financial development, performance and
position including its cash flows, liquidity position, borrowing
facilities and covenant cover, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence and meet its liabilities as they fall due for
a period of at least twelve months from the date of this report.
For this reason, the Directors continue to adopt the going concern
basis of accounting in preparing the financial statements.
Alternative Performance Measures ("APMs")
PHP uses Adjusted earnings, Adjusted NTA (formerly Adjusted EPRA
NAV) and Adjusted profit excluding MedicX merger adjustments
amongst other APMs to highlight the recurring performance of the
property portfolio and business. The APMs are in addition to the
statutory measures from the condensed financial statements. The
measures are defined and reconciled to amounts presented in the
financial statements in note 8. The Company has used EPRA earnings
and EPRA net tangible assets to measure performance and will
continue to do so. However, these APMs have also been adjusted to
remove the impact of the adjustments arising from the MtM on fixed
debt acquired on completion of the merger with MedicX in 2019. The
reasons for the Company's use of these APMs are set out in the
Glossary.
Directors' responsibility statement
Statement of Directors' responsibilities in respect of the Group
and Company financial statements
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by the European Union and Article 4 of the IAS
Regulation and have elected to prepare the Parent Company financial
statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and
applicable law), including FRS 101 Reduced disclosure framework.
Under company law the Directors must not approve the accounts
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that period.
In preparing the Parent Company financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that the Directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit of the
Company and the undertakings included in the consolidation taken as
a whole;
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's position,
performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 17 February 2021 and is signed on its behalf by:
For and on behalf of the Board
Steven Owen
Chairman
17 February 2021
Glossary of terms
Adjusted earnings is EPRA earnings excluding the exceptional
contract termination fee and amortisation of MtM adjustments for
fixed rate debt acquired on the merger with MedicX.
Adjusted earnings per share is adjusted earnings divided by the
weighted average number of shares in issue during the year.
Adjusted net tangible assets ("adjusted NTA") (which has
replaced the former adjusted EPRA net asset value alternative
performance measure) is EPRA net tangible asset value excluding the
MtM adjustment of the fixed rate debt, net of amortisation,
acquired on the merger with MedicX. The objective of the adjusted
NTA measure is to highlight the value of net assets on a long term
basis and excludes assets and liabilities that are not expected to
crystallise in normal circumstances and continues to be used as a
measure to determine the PIF payment.
Adviser is Nexus Tradeco Limited.
Annualised rental income on a like-for-like basis is the
contracted rent on a per annum basis assuming a consistent number
of properties between each year.
Building Research Establishment Environmental Assessment Method
("BREEAM") assesses the sustainability of buildings against a range
of criteria.
Clinical Commissioning Groups ("CCGs") are the groups of GPs and
other healthcare professionals that are responsible for designing
local health services in England with effect from 1 April 2013.
Company and/or Parent is Primary Health Properties PLC
("PHP").
Direct property costs comprise ground rents payable under head
leases, void costs, other direct irrecoverable property expenses,
rent review fees and valuation fees.
District Valuer ("DV") is the District Valuer Service, being the
commercial arm of the Valuation Office Agency ("VOA"). It provides
professional property advice across the public sector and in
respect of primary healthcare represents NHS bodies on matters of
valuation, rent reviews and initial rents on new developments.
Dividend cover is the number of times the dividend payable (on
an annual basis) is covered by EPRA earnings.
Earnings per Ordinary Share from continuing operations ("EPS")
is the profit attributable to equity holders of the Parent divided
by the weighted average number of shares in issue during the
year.
European Public Real Estate Association ("EPRA") is a real
estate industry body, which has issued Best Practice
Recommendations in order to provide consistency and transparency in
real estate reporting across Europe.
EPRA cost ratio is the ratio of net overheads and operating
expenses against gross rental income (with both amounts excluding
ground rents payable). Net overheads and operating expenses relate
to all administrative and operating expenses, net of any service
fees, recharges or other income specifically intended to cover
overhead and property expenses.
EPRA earnings is the profit after taxation excluding investment
and development property revaluations, gains/losses on disposals,
changes in the fair value of financial instruments and associated
close-out costs and their related taxation.
EPRA net assets ("EPRA NAV") are the balance sheet net assets
excluding own shares held, the MtM value of derivative financial
instruments and the convertible bond fair value movement.
EPRA NAV per share is the balance sheet net assets excluding own
shares held, the MtM value of derivative financial instruments and
the convertible bond fair value movement, divided by the number of
shares in issue at the balance sheet date.
EPRA NNNAV is adjusted EPRA NAV including the MtM value of fixed
rate debt and derivatives.
EPRA net reinstatement value ("EPRA NRV") is the balance sheet
net assets including real estate transfer taxes but excluding the
MtM value of derivative financial instruments, deferred tax and the
convertible bond fair value movement. The aim of the metric is to
reflect the value that would be required to recreate the Company
through the investment markets based on its current capital and
financing structure. Refer to Note 16.
EPRA NRV per share is the EPRA net reinstatement value divided
by the number of shares in issue at the balance sheet date. Refer
to Note 16.
EPRA net disposal value "EPRA NDV" (replacing EPRA NNNAV) is
adjusted EPRA NRV including deferred tax and the MtM value of fixed
rate debt and derivatives. The aim of the metric is to reflect the
value that would be realised under a disposal scenario. Refer to
Note 16.
EPRA net tangible assets ("NTA") (which has replaced the former
EPRA net asset value alternative performance measure) are the
balance sheet net assets but excluding the MtM value of derivative
financial instruments, deferred tax and the convertible bond fair
value movement. The aim of the metric is to reflect the fair value
of the assets and liabilities of the Group that it intends to hold
and does not intend in the long run to sell. Refer to Note 16.
EPRA NTA per share is the EPRA net tangible assets divided by
the number of shares in issue at the balance sheet date. Refer to
Note 16.
EPRA vacancy rate is, as a percentage, the ERV of vacant space
in the Group's property portfolio divided by ERV of the whole
portfolio.
Equivalent yield (true and nominal) is a weighted average of the
net initial yield and reversionary yield and represents the return
a property will produce based upon the timing of the income
received. The true equivalent yield assumes rents are received
quarterly in advance. The nominal equivalent assumes rents are
received annually in arrears.
Estimated rental value ("ERV") is the external valuer's opinion
as to the open market rent which, on the date of valuation, could
reasonably be expected to be obtained on a new letting or rent
review of a property.
Gross rental income is the gross accounting rent receivable.
Group is Primary Health Properties PLC ("PHP") and its
subsidiaries.
HSE or the Health Service Executive is the executive agency of
the Irish government responsible for health and social services for
people living in Ireland.
IFRS is International Financial Reporting Standards as adopted
by the European Union.
IFRS or Basic net asset value per share ("IFRS NAV") are the
balance sheet net assets, excluding own shares held, divided by the
number of shares in issue at the balance sheet date.
Interest cover is the number of times net interest payable is
covered by net rental income.
Interest rate swap is a contract to exchange fixed payments for
floating payments linked to an interest rate, and is generally used
to manage exposure to fluctuations in interest rates.
JCRA is J.C. Rathbone Associates Limited (now part of
Chatham).
London Interbank Offered Rate ("LIBOR") is the interest rate
charged by one bank to another for lending money.
Loan to value ("LTV") is the ratio of net debt to the total
value of property and assets.
Mark to market ("MTM") is the difference between the book value
of an asset or liability and its market value.
MedicX is MXF Fund Limited ("MedicX") and its subsidiaries.
MSCI (IPD) provides performance analysis for most types of real
estate and produces an independent benchmark of property
returns.
MSCI (IPD) Healthcare is the UK Annual Healthcare Property
Index.
MSCI (IPD) Total Return is calculated as the change in capital
value, less any capital expenditure incurred, plus net income,
expressed as a percentage of capital employed over the period, as
calculated by MSCI (IPD).
Net asset value ("NAV") is the value of the Group's assets minus
the value of its liabilities.
Net initial yield ("NIY") is the annualised rents generated by
an asset, after the deduction of an estimate of annual recurring
irrecoverable property outgoings, expressed as a percentage of the
asset valuation (after notional purchasers' costs).
Net rental income is the rental income receivable in the period
after payment of direct property costs. Net rental income is quoted
on an accounting basis.
NHSPS is NHS Property Services Limited, the company wholly owned
and funded by the Department of Health, which, as of 1 April 2013,
has taken on all property obligations formerly borne by Primary
Care Trusts.
Parity value is calculated based on dividing the convertible
bond value by the exchange price.
Property Income Distribution ("PID") is the required
distribution of income as dividends under the REIT regime. It is
calculated as 90% of exempted net income.
Real Estate Investment Trust ("REIT") is a listed property
company which qualifies for and has elected into a tax regime,
which exempts qualifying UK profits, arising from property rental
income and gains on investment property disposals, from corporation
tax, but which has a number of specific requirements.
Rent reviews take place at intervals agreed in the lease and
their purpose is usually to adjust the rent to the current market
level at the review date.
Rent roll is the passing rent, being the total of all the
contracted rents reserved under the leases.
Reversionary yield is the anticipated yield which the initial
yield will rise to once the rent reaches the ERV and when the
property is fully let. It is calculated by dividing the ERV by the
valuation.
Retail Price Index ("RPI") is the official measure of the
general level of inflation as reflected in the retail price of a
basket of goods and services such as energy, food, petrol, housing,
household goods, travelling fare, etc. RPI is commonly computed on
a monthly and annual basis.
RICS is the Royal Institution of Chartered Surveyors.
RPI linked leases are those leases which have rent reviews which
are linked to changes in the RPI.
Special reserve is a distributable reserve.
Total expense ratio ("TER") is calculated as total
administrative costs for the year divided by the average total
asset value during the year.
Total property return is the overall return generated by
properties on a debt-free basis. It is calculated as the net rental
income generated by the portfolio plus the change in market values,
divided by opening property assets plus additions.
GBPm
------------------------------- -------
Net rental income 131.2
Revaluation surplus and profit
on sales 51.4
------------------------------- -------
182.6
Opening property assets 2,413.1
Weighted additions in the
period 37.6
------------------------------- -------
2,450.7
Total property return 7.4%
------------------------------- -------
Total NAV return is calculated as the movement in adjusted net
tangible asset value for the period plus the dividends paid,
divided by opening EPRA net tangible asset value.
NAV
------------------------- -----
At 31 December 2019 107.9
------------------------- -----
At 31 December 2020 112.9
------------------------- -----
Increase/(decrease) 5.0
Add: Dividends paid
Q1 interim 1.475
Q2 interim 1.475
Q3 interim 1.475
Q4 interim 1.475
------------------------- -----
Total shareholder return 10.9
------------------------- -----
Total shareholder return is calculated as the movement in the
share price for the period plus the dividends paid, divided by the
opening share price.
Weighted average facility maturity is calculated by multiplying
each tranche of Group debt by the remaining period to its maturity
and dividing the result by total Group debt in issue at the year
end.
Weighted average unexpired lease term ("WAULT") is the average
lease term remaining to first break, or expiry, across the
portfolio weighted by contracted rental income.
Yield on cost is the estimated annual rent of a completed
development divided by the total cost of development, including
site value and finance costs expressed as a percentage return.
Yield shift is a movement (usually expressed in basis points) in
the yield of a property asset, or like-for-like portfolio over a
given period. Yield compression is a commonly used term for a
reduction in yields.
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END
FR TPMFTMTJBMBB
(END) Dow Jones Newswires
February 18, 2021 02:00 ET (07:00 GMT)
Primary Health Properties (LSE:PHP)
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Primary Health Properties (LSE:PHP)
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