TIDMPHP
RNS Number : 7956B
Primary Health Properties PLC
16 February 2022
Primary Health Properties PLC
Preliminary results for the year ended 31 December 2021
Successful management internalisation, refinancing and
operational performance drive earnings growth
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 2021.
Harry Hyman , Chief Executive, commented:
"2021 has been another strong year of progress for PHP, having
successfully completed the internalisation of our management
structure and refinanced a number of legacy loan facilities which
have delivered substantial annual cost savings. In addition, we
have a strong targeted pipeline and continue to see good organic
rental growth from rent reviews and asset management projects with
record levels of activity during the year.
"Throughout 2021 PHP has successfully worked with the NHS, HSE
and the Group's GP tenants to help them utilise our properties for
deployment in the front line of the COVID-19 pandemic, delivering
vaccines and boosters across the UK and Ireland. 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 and to catch up on the
back-log of missed procedures.
"Having successfully delivered 25 years of secure and reliable
growth for our shareholders, we have firmly established ourselves
as a sector leader and the Board looks forward to delivering
further earnings and dividend growth in 2022 and remains confident
in PHP's future outlook."
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Year to Year to
31 December 31 December
Income statement metrics 2021 2020 Change
------------ ------------
Net rental income(1) GBP136.7m GBP131.2m +4.2%
Adjusted earnings(1,2) GBP83.2m GBP73.1m +13.8%
Adjusted earnings per share(1,2) 6.2p 5.8p +6.9%
IFRS profit for the year GBP140.1m GBP112.0m +25.1%
IFRS earnings per share(2) 10.5p 8.8p
EPRA cost ratio 9.3% 11.9% -260 bps
Dividends
Dividend per share(5) 6.2p 5.9p +5.1%
Dividends paid(5) GBP82.4m GBP73.3m +12.4%
Dividend cover(1) 101% 100%
----------------------------------------- ------------ ------------ ----------
31 December 31 December
Balance sheet and operational metrics 2021 2020 Change
----------------------------------------- ------------ ------------ ----------
Adjusted NTA (NAV) per share(1,3) 116.7p 112.9p +3.4%
IFRS NTA per share(1,3) 112.5p 107.5p +4.7%
Total adjusted NTA return (1) 8.9% 10.1% -120 bps
Property portfolio
Investment portfolio valuation(4) GBP2.796bn GBP2.576bn +4.1%
Net initial yield ("NIY")(1) 4.64% 4.81%
Total property return 9.5% 7.4% +210 bps
Contracted rent roll (annualised)(1,7) GBP140.7m GBP135.2m +4.1%
Weighted average unexpired lease 11.6 years 12.1 years
term ("WAULT")(1)
Occupancy 99.7% 99.6%
Rent-roll funded by government bodies(1) 90% 90%
Debt
Average cost of debt 2.9% 3.5% -60 bps
Loan to value ratio(1) 42.9% 41.0%
Weighted average debt maturity - 8.2 years 6.5 years +1.7 years
drawn facilities(8)
Total undrawn loan facilities and GBP321.2m GBP361.5m
cash(6,8)
----------------------------------------- ------------ ------------ ----------
(1) Definitions for net rental income, adjusted earnings,
adjusted earnings per share, earnings per share ("EPS"), dividend
cover, loan to value ("LTV"), net tangible assets ("NTA"), rent
roll, NIY, WAULT, Total Adjusted NTA return and net asset value
("NAV") are set out in the Glossary of Terms.
(2) See note 9, earnings per share, to the financial
statements.
(3) See note 9, net asset value per share, to the financial
statements. Adjusted net tangible assets, EPRA net tangible assets
("NTA"), EPRA net disposal value ("NDV") and EPRA net reinstatement
value ("NRV") are considered to be alternative performance
measures. The Group has determined that adjusted net tangible
assets is the most relevant measure.
(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) See note 10, dividends, to the financial statements.
(6) After deducting the remaining cost to complete contracted
acquisitions, properties under development and asset management
projects.
(7) Percentage contracted rent roll increase during the year is
based on the annualised uplift achieved from all completed rent
reviews and asset management projects.
(8) Pro-forma including debt facilities secured post
year-end.
DELIVERING EARNINGS AND DIVID GROWTH
-- Adjusted earnings per share increased by 6.9% to 6.2p (2020: 5.8p)
-- Contracted annualised rent roll increased by 4.1% to GBP140.7
million (31 December 2020: GBP135.2 million)
-- Additional annualised rental income on a like-for-like basis
of GBP2.4 million or 1.8% from rent reviews and asset management
projects (FY 2020: GBP2.0 million or 1.6%; FY 2019: GBP1.9 million
or 1.5%)
-- Successful refinancing of a number of legacy loan facilities
with Aviva Investors reducing average cost of debt to 2.9% (31
December 2020: 3.5%) resulting in annualised interest cost savings
of approximately GBP5.0 million
-- Successfully completed the internalisation of the Group's
management structure which resulted in annual cost savings of
approximately GBP4.0 million, equivalent to 0.3 pence per share
-- EPRA cost ratio reduced to 9.3% (FY 2020: 11.9%) the lowest in the UK REIT sector
-- Quarterly dividends totalling 6.2 pence per share distributed
in the year, a 5.1% increase over 2020 (5.9 pence per share)
-- First quarterly dividend of 1.625 pence per share declared,
payable on 25 February 2022, equivalent to 6.5 pence on an
annualised basis and a 4.8% increase over the 2021 dividend per
share, marking the Company's 26(th) consecutive year of dividend
growth
DELIVERING NET ASSET VALUE GROWTH
-- Adjusted Net Tangible Assets ("NTA") per share increased by
3.4% to 116.7 pence (31 December 2020: 112.9 pence)
-- Property portfolio at 31 December 2021 valued at GBP2.8
billion (31 December 2020: GBP2.6 billion) reflecting a net initial
yield of 4.64% (31 December 2020: 4.81%)
-- Revaluation surplus, including profit on sales, was generated
in the year of GBP110.5 million (31 December 2020: GBP51.4
million), representing growth of 4.1% (2020: 2.0%)
-- Strong pipeline of targeted acquisitions, developments and
asset management projects with a value of approximately GBP337
million in the UK and GBP107 million (EUR127 million) in Ireland of
which GBP72 million and GBP80 million (EUR95 million) is in legal
due diligence in both countries
-- Portfolio in Ireland now comprises 20 assets, valued at GBP213 million (EUR253 million)
-- The portfolio's metrics continue to reflect the secure,
long-term and predictable income stream with occupancy at 99.7% (31
December 2020: 99.6%) and a WAULT of 11.6 years (31 December 2020:
12.1 years)
-- Strong progression of asset management projects with 30
completed in the year and a further nine currently on-site,
investing GBP15.0 million, creating additional rental income of
GBP0.4 million per annum and extending the weighted average
unexpired lease term (WAULT) back to over 20 years
DELIVERING FINANCIAL MANAGEMENT
-- LTV ratio 42.9% (31 December 2020: 41.0%), towards the lower
end of the Group's targeted range of between 40% to 50%
-- Weighted average debt maturity extended to 8.2 years (31 December 2020: 6.5 years)
-- Post period end EUR75 million private placement loan note
issued for a 12-year term at a fixed rate of 1.64% to finance
continued expansion in Ireland
-- Refinanced a number of legacy loan facilities with Aviva
Investors, with a new sustainability linked GBP200 million facility
for a 15-year term at a fixed rate of 2.52% and renewed existing
facilities with NatWest and Santander
-- Significant liquidity headroom with cash and collateralised
undrawn loan facilities totalling GBP321.2 million (2020: GBP361.5
million) after capital commitments
DELIVERING STRONG TOTAL RETURNS
Year ended Year ended
31 December 2021 31 December
2020
------------------------------- ------------------ -------------
Increase in Adjusted NTA plus
dividends paid 8.9% 10.1%
Income return 5.2% 5.2%
Capital return 4.3% 2.2%
------------------------------- ------------------ -------------
Total property return(1) 9.5% 7.4%
------------------------------- ------------------ -------------
(1) The de finition for total property return is set out in the
Glossary of Terms.
DELIVERING RESPONSIBLE BUSINESS AND ESG
-- Net Zero Carbon ("NZC") Framework published with the five key
steps the Group is taking to achieve the ambitious target of being
NZC by 2030 for all of PHP's operational, development and asset
management activities
-- Construction of PHP's first two NZC developments in
Lincolnshire and West Sussex about to commence in the first quarter
of 2022
-- All developments completed in the year achieved BREEAM rating
of Excellent or Very Good and all asset management projects
completed met EPC target of B or above
-- GBP300 million of sustainability linked loan facilities with
Aviva and NatWest raised in the year
-- GBP0.2 million distributed from the Community Impact Program
to charities and groups focused on social prescribing and wellbeing
linked to the patients and communities served by PHP's
properties
Presentation and webcast:
A virtual briefing for analysts will be held today, 16 February
2022 at 9.30am, via a live webcast and conference call
facility.
The presentation will be accessible via live video webcast and a
live conference call facility:
Webcast:
https://webcasting.brrmedia.co.uk/broadcast/61e13c18e3976b4d1b2d6e85
Tel : +44 (0)330 336 9601
Participant PIN code: 3760982
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
Chief Executive Officer Chief Financial Officer
Primary Health Properties PLC Primary Health Properties PLC
T: +44 (0) 20 7451 7050 T: +44 (0) 20 3824 1841
E: harry.hyman@phpgroup.co.uk E: richard.howell@phpgroup.co.uk
David Rydell/Steph Whitmore/Tilly
Abraham/Verity Parker
Buchanan
T: +44 (0) 20 7466 5066
E: php@buchanan.uk.com
--------------------------------- ---------------------------------
Chairman's statement
Despite the uncertainty and volatility in the economic
environment over the last two years we have continued to deliver a
strong and robust operational and financial performance and the
Group's portfolio has continued to demonstrate strong resilience
throughout this period. The security and longevity of our income
are important drivers of our predictable income stream and underpin
our progressive dividend policy and we have now entered our 26(th)
year of continued dividend growth.
Thankfully, the speed and effectiveness of the COVID-19 vaccine
rollout has allowed us to return to some semblance of normality
after the latest lockdown and we must offer our heartfelt thanks to
the brilliant people who devised, mass produced and administered
vast numbers of vaccines and boosters.
Since the start of the COVID-19 pandemic, we have seen a
significant increase in the digitalisation and adaptation of triage
in both the UK and Ireland with many initial consultations being
carried out online. However, we have not seen and do not expect to
see, any reduction in space requirements across our portfolio. This
is because of the increasing burden being placed on healthcare
systems in both the UK and Ireland as a consequence of the ongoing
COVID-19 pandemic, along with the long-term demographic trends of
populations that are growing, ageing and suffering from more
instances of chronic illness. Many services are now expected to
move away from hospitals and into primary care facilities which
will undoubtedly require substantial investment in the future to
enable non-urgent and periphery procedures to be dealt with in such
facilities.
PHP has continued to actively work 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 ongoing global
health crisis. Many of our primary care facilities and occupiers
have been and will be required to deliver COVID-19 vaccines and
boosters for many years to come and to deal with the backlog of
procedures missed over the last two years . We continue to maintain
close relationships with our key stakeholders and GP partners to
ensure we are best placed to help the NHS, HSE, and in particular
primary care, evolve and deal with the pressures placed on them as
the 'new normal' is established.
We recognise that the success of the Group depends on our people
and I would again like to warmly thank the Board and all of our
employees for their continued commitment, dedication and
professionalism in ongoing difficult circumstances.
Acquisition of Nexus and management internalisation
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 resulted in annual cost savings of
approximately GBP4.0 million, equivalent to 0.3 pence per share,
compared to the position if the business were still externally
managed. The assumption of Nexus's existing management and overhead
costs has resulted in lower ongoing administrative costs to the
Group and the EPRA cost ratio has fallen further to 9.3% (2020:
11.9%) in the year and is now the lowest in the UK REIT sector by
some margin.
Overview of results
PHP's recurring Adjusted earnings increased by GBP10.1 million
or 13.8% to GBP83.2m (2020: GBP73.1 million) and the increase in
the year was driven by cost savings arising from the
internalisation of the management structure, the refinancing of a
number of legacy loans with Aviva together with rental growth from
our investment, rent review and asset management activities.
A revaluation surplus and profit on sales of GBP110.5 million
(2020: GBP51.4 million) was generated in the year from the
portfolio, equivalent to 8.3 pence per share. The valuation surplus
was driven by net initial yield ("NIY") compression in the UK
together with rental growth from rent reviews and asset management
projects.
The acquisition of Nexus and the refinancing of a number of
legacy loans with Aviva resulted in exceptional costs of GBP37.0
million and GBP24.6 million respectively being expensed in the
year.
A gain 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 GBP9.5
million (2020: loss of GBP12.1 million) resulted in a profit before
tax as reported under IFRS of GBP141.6 million (2020: GBP112.4
million).
The Group has continued to selectively grow its portfolio in the
year, adding nine assets for GBP86.6 million and selling one for
GBP2.3 million. Rent reviews and asset management projects
completed in the year, or currently on-site, added GBP2.4 million
or 1.8% (2020: GBP2.0 million or 1.6%) to the contracted rent.
The Group's balance sheet remains robust with a loan to value
ratio of 42.9% (2020: 41.0%), which is at the lower end of the
targeted range of 40% to 50%, and has significant liquidity
headroom with cash and collateralised undrawn loan facilities
totalling GBP321.2 million (2020: GBP361.5 million).
Dividends
The Company distributed a total of 6.2 pence per share in 2021,
an increase of 5.1% over 2020 of 5.9 pence per share. The total
value of dividends distributed in the year increased by 12.4% to
GBP82.4 million (2020: GBP73.3 million), which were covered by
Adjusted earnings. Dividends totalling GBP8.0 million were
satisfied through the issuance of shares via the scrip dividend
scheme.
A dividend of 1.625 pence per share was declared on 6 January
2022, equivalent to 6.5 pence on an annualised basis, which
represents an increase of 4.8% over the dividend distributed per
share in 2021. The dividend will be paid to shareholders on 25
February 2022 who were on the register at the close of business on
13 January 2022. The dividend will comprise entirely of a normal
dividend of 1.625 pence.
The Company intends to maintain its strategy of paying a
progressive dividend, which the Company pays in equal quarterly
instalments, that is covered by underlying earnings in each
financial year. Further dividend payments are planned to be made on
a quarterly basis in May, August and November 2022 which are
expected to comprise a mixture of both property income distribution
and normal dividend.
Total shareholder returns
The Company's share price started the year at 152.8 pence per
share and closed on 31 December 2021 at 151.4 pence, a decrease of
0.9%. Including dividends, those shareholders who held the
Company's shares throughout the year achieved a Total Shareholder
Return of 3.1% (2020: -0.8%).
Over the three years since our merger with MedicX in 2019 we
have delivered a total shareholder return of 50.2%. This compares
to the total return delivered by UK real estate equities (FTSE EPRA
Nareit UK Index) of 28.5% and the wider UK equity sector (FTSE
All-Share Index) of 13.2% over the same period.
Environmental, Social and Governance ("ESG")
PHP has a strong commitment to responsible business and ESG
matters which are at the forefront of the Board's and our various
stakeholders' considerations and the Group has committed to
transitioning to net zero carbon ("NZC"). We are about to start
construction of PHP's first two NZC developments in the first
quarter of 2022 and have published with these results, for the
first time, a NZC Framework with the five key steps we are taking
to achieve an ambitious target of being NZC by 2030 for all of
PHP's operational, development and asset management activities and
to help our occupiers achieve NZC by 2040, five years ahead of the
NHS's target of becoming the world's first net zero carbon national
health system by 2045 and 10 years ahead of the UK and Irish
Governments' targets of 2050. Further details on our approach to
responsible business can be found in the Annual Report and
website.
Board changes
In December 2021, following a review of the composition and
diversity of the Board, it was announced that Ivonne Cant ú would
be appointed as an independent Non-executive director of the
Company with effect from 1 January 2022.
The Company also announced that Peter Cole, Non-executive
director and Chair of the Remuneration Committee, will not stand
for re-election at the Company's Annual General Meeting ("AGM")
scheduled for April 2022 and will accordingly retire from the Board
at that time. It is intended that Ivonne Cant ú will take over as
Chair of the Remuneration Committee following the AGM.
The Board is grateful to Peter for his commitment and dedication
to the Company and for chairing the Remuneration Committee,
particularly during the process of internalising the management in
2020 and the transition period in 2021.
Market update and outlook
PHP's mission is to support the NHS, HSE and other healthcare
providers, by being a leading investor in modern, primary care
premises. Never has this been more important as the NHS seeks to
work through the backlog of procedures created by the COVID-19
pandemic and the Government delivers its Levelling Up agenda. In
the longer term, the ageing demographic of western populations
means that health services will also be called upon to address more
ongoing, complex, chronic co-morbidities. PHP stands ready to play
its part in delivering the real estate infrastructure required to
meet this need in the community.
We will continue to actively engage with government bodies, the
NHS, HSE in Ireland and other key stakeholders to establish, enact
(where we can), support and help alleviate increased pressures and
burdens currently being placed on healthcare networks.
In July 2021, the UK Government published a draft Health and
Social Care Bill setting out a number of reforms in order to
implement the commitments of the NHS England Long Term Plan. This
included the introduction of regional Integrated Care Boards and
Partnerships tasked with co-ordinating NHS partners with local
government services and budgets such as social care and mental
health , in a geographic area, for the first time; the idea being
that services are then pushed to the most efficient, cost-effective
part of the system (whether primary care, hospital or care home)
for the best patient outcomes. We welcome these reforms and are
hopeful they will lead to better outcomes for patients and to
further development opportunities in primary care in the medium to
long-term.
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, long and reliable
income. Primary healthcare, with its strong fundamental
characteristics and government-backed income, has been a
significant beneficiary of this trend. The UK and Irish markets 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 2021.
We believe that our activities benefit not only our shareholders
but also our wider stakeholders, including our occupiers, patients,
the NHS and HSE, suppliers, lenders and the wider communities in
both the UK and Ireland.
We look forward to 2022 with confidence in our ability to create
further stakeholder value.
Steven Owen
Chairman
15 February 2022
BUSINESS REVIEW
Investment and pipeline
During 2021, the market was characterised by a lack of suitable
product, strong pricing and a very competitive market. However, we
continued to make strong progress in the second half of the year
selectively acquiring nine assets in 2021 for GBP86.6 million
(2020: 27 assets, GBP93.0 million) and selling one asset for GBP2.3
million.
Including standing investments, direct and forward funded
developments and asset management projects, we have continued to
generate and grow a strong pipeline totalling approximately GBP337
million in the UK and GBP107 million (EUR127 million) in Ireland of
which GBP72 million and GBP80 million (EUR95 million) is in legal
due diligence in both countries.
Pipeline Number UK Ireland
Investment 11 GBP87m GBP18m (EUR22m)
Direct development 21 GBP163m -
Forward funded development 12 GBP20m GBP89m (EUR105m)
Asset management 100+ GBP67m -
--------------------------- ------- -------- ------------------
Total pipeline 143+ GBP337m GBP107m (EUR127m)
--------------------------- ------- -------- ------------------
Net zero carbon ("NZC") direct developments
The acquisition of Nexus in January 2021, enabled PHP to acquire
the development expertise of Nexus Developments which at the time
of completion had a pipeline of approximately GBP80 million of
direct development opportunities at varying stages of
progression.
Over the course of 2021 the Group has continued to make good
progress, increase the number of live projects and is on schedule
to commence construction of PHP's first NZC developments in
Lincolnshire and West Sussex in the first quarter of 2022. The two
projects have an estimated capital value of GBP11 million and are
expected to generate a profit on cost of approximately 11%.
In addition to the above, the Group has a significantly advanced
pipeline of GBP42 million across five projects of direct
developments which will be progressed over the course of 2022
together with a wider medium-term pipeline at various stages of
progress across 14 projects with an estimated capital value of
GBP110 million.
PHP expects that all future direct developments will be
constructed to NZC standards.
Forward funded developments
During the year, four UK forward funded developments at Mountain
Ash, Wales, Llanbradach, Wales, Epsom, Surrey and at Eastbourne,
East Sussex were completed on time and on budget with a net
development cost of GBP20.1 million.
The Group now has two forward funded developments currently on
site at Arklow, County Wicklow (GBP15.1 million/EUR18.0 million)
and Enniscorthy, County Wexford (GBP10.6 million/EUR12.6 million)
which continue to progress on schedule, remain on site and are due
to reach practical completion in Q1 2022 as previously
indicated.
Rental growth
PHP's sector leading metrics remain good 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, avoid obsolescence and improve
the environmental performance of our assets whilst ensuring that
they continue to meet the communities' healthcare needs.
Rent reviews
During 2021, the Group concluded and documented 375 rent
reviews, including 74 reviews where no uplift was achieved, in the
UK with a combined rental value of GBP49.5 million resulting in an
uplift of GBP2.0 million (2020: GBP1.7 million) per annum or 4.0%
(2020: 4.3%) which equates to 1.7% (2020: 1.8%) per annum. The
positive rate of rental growth is broadly in line with the rate of
growth experienced in the last couple of years.
In the year, an aggregate 1.5% per annum uplift (2020: 1.3%) was
achieved on 159 open market reviews. Uplifts of 2.8% (2020: 2.3%)
per annum were achieved on RPI-based reviews and 2.7% (2020: 2.9%)
per annum on fixed uplift reviews. In addition, a further 236 open
market reviews have been agreed in principle, which will add
another GBP1.7 million to the contracted rent roll when concluded
and represents an uplift of 1.6% 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. In Ireland all rents are linked to the Irish Consumer
Price Index.
At 31 December 2021 the rent at 635 tenancies, representing
GBP84.9 million of passing rent (2020: 669 tenancies/GBP90.4
million 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.
In Ireland, we concluded 12 indexed based reviews adding a
further GBP0.1 million (EUR0.1 million) equivalent to 0.8% per
annum to the contracted rent roll.
Asset Management Projects
30 asset management projects have been completed in the year and
a further nine are currently on site which will increase rental
income by a further GBP0.4 million per annum, investing GBP15.0
million to enhance and extend existing assets within PHP's
portfolio.
PHP continues to work closely with its occupiers and has a
strong pipeline of over 100 similar projects which are being
progressed to further increase rental income and extend unexpired
occupational lease terms. The asset management pipeline will
require the investment of approximately GBP67 million, generating
an additional GBP1.3 million of rental income and extending the
WAULT on those premises back to an average of over 20 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 occupier
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
2021 was GBP140.7 million, an increase of GBP5.5 million or 4.1% in
the year (31 December 2020: GBP135.2 million) driven predominantly
by acquisitions in the UK and Ireland that contributed GBP4.1
million. Organic rental growth from rent reviews and asset
management projects added a further GBP2.4 million although these
gains were offset slightly by foreign exchange movements since the
start of the year.
The security and longevity of our income are important drivers
of our predictable income stream and underpin 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 99.7% (2020: 99.6%).
Rental collections : continue to remain robust and as at 15
February 2022 97% had been collected in both the UK and Ireland for
the first quarter of 2022. This is in-line with collection rates
experienced in both 2021 and 2020 which now stand at over 99% for
both countries. The balance of rent due for the first quarter of
2022 is expected to be received shortly.
Longevity: The portfolio's WAULT at 31 December 2021 was 11.6
years (31 December 2020: 12.1 years). Only GBP8.9 million or 6.3%
of our income expires over the next three years of which c. 70% is
either subject to a planned asset management initiative or terms
have been agreed to renew the lease. GBP73.1 million or 52.0%
expires in over 10 years. The table below sets out the current
lease expiry profile of our income:
Income subject to GBP million %
expiry
------------------- ------------ -------
< 3 years 8.9 6.3%
4 - 5 years 9.3 6.6%
5 - 10 years 49.4 35.1%
10 - 15 years 39.2 27.9%
15 - 20 years 17.3 12.3%
> 20 years 16.6 11.8%
------------------- ------------ -------
Total 140.7 100.0%
------------------- ------------ -------
Valuation and returns
At 31 December 2021, the Group's portfolio comprised 521 assets
independently valued at GBP2.796 billion (31 December 2020:
GBP2.576 billion). After allowing for acquisition costs and capital
expenditure on forward funded developments and asset management
projects, the portfolio generated a valuation surplus of GBP110.2
million or 4.1% (2020: GBP51.4 million or 2.0%). One asset was sold
in the year generating a profit on sale of GBP0.3 million. The
valuation surplus was driven mainly by NIY compression in the UK
for government backed, long-dated income together with rental
growth from rent reviews and asset management projects.
During the year the Group's portfolio NIY has contracted by
17bps to 4.64% (31 December 2020: 4.81%) and the true equivalent
yield reduced to 4.74% at 31 December 2021 (31 December 2020:
4.84%).
At 31 December 2021, the portfolio in Ireland comprised 20
assets, including two assets currently under development, valued at
GBP213.0 million or EUR253.4 million (31 December 2020: 18
assets/GBP197.7 million or EUR221.1 million). The costs to complete
the developments are GBP9.0 million (EUR10.7 million) and once
complete the assets in Ireland will be valued at approximately
GBP222.1 million (EUR264.2 million).
The portfolio's average lot size has increased to GBP5.4 million
(31 December 2020: GBP5.0 million) and 86.6% of the portfolio is
valued at over GBP3.0 million. The Group only has five assets
valued at less than GBP1.0 million.
Number of Valuation Average
Properties GBP million lot size
% (GBP million)
-------------------- ----------- ------------ ------ ---------------
> GBP10m 59 892.6 32.0 15.1
GBP5m - GBP10m 131 909.7 32.6 6.9
GBP3m - GBP5m 155 615.3 22.0 4.0
GBP1m - GBP3m 171 368.9 13.2 2.2
< GBP1m (including
land GBP1.5m) 5 4.9 0.2 0.7
-------------------- ----------- ------------ ------ ---------------
Total(1) 521 2,791.4 100.0 5.4
-------------------- ----------- ------------ ------ ---------------
(1) Excludes the GBP4.5m impact of IFRS 16 Leases with ground
rents recognised as finance leases.
The underlying valuation uplift and profit on sales of GBP110.5
million, combined with the portfolio's growing income, helped to
deliver a total property return of 9.5% in the year (2020:
7.4%).
Year ended Year ended
31 December 2021 31 December 2020
---------------- ------------------ ------------------
Income return 5.2% 5.2%
Capital return 4.3% 2.2%
----------------- ------------------ ------------------
Total return 9.5% 7.4%
----------------- ------------------ ------------------
FINANCIAL REVIEW
PHP's Adjusted earnings increased by GBP10.1 million or 13.8% to
GBP83.2 million in 2021 (2020: GBP73.1 million). The increase
reflects twelve months of cost saving synergies arising from the
acquisition of Nexus and internalisation of the management
structure at the start of the year, good organic rental growth from
rent reviews and asset management projects together with interest
cost savings arising from the reduction in the Group's cost of
finance following the refinancing of a number of legacy loan
facilities with Aviva.
Using the weighted average number of shares in issue in the year
the Adjusted earnings per share increased to 6.2 pence (2020: 5.8
pence), an increase of 6.9%.
A revaluation surplus and profit on sales of GBP110.5 million
(2020: GBP51.4 million) was generated in the year from the
portfolio driven by yield compression in the UK for government
backed income together with rental growth from rent reviews and
asset management projects.
The acquisition of Nexus at the start of the year resulted in an
exceptional termination payment and impairment of goodwill
totalling GBP35.3 million and represents the fair value of the
consideration paid of GBP34.1 million plus the fair value of the
net liabilities acquired of GBP1.2 million. In addition,
acquisition costs totalling GBP1.7 million have been expensed.
The refinancing of a number of legacy loan facilities with Aviva
Investors, with a new sustainability linked GBP200 million facility
for a 15-year term at a fixed rate of 2.52% resulted in an
exceptional early termination cost of GBP24.6 million.
A gain 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 GBP9.5
million (2020: loss GBP12.1 million) contributed to the profit
before tax as reported under IFRS of GBP141.6 million (2020:
GBP112.4 million).
The financial results for the Group are summarised as
follows:
Summarised results Year ended Year ended
31 December 31 December
2021 2020
GBP million GBP million
------------------------------------------------ ------------- -------------
Net rental income 136.7 131.2
Administrative expenses (10.5) (13.2)
Operating profit before revaluation gain
and net financing costs 126.2 118.0
Net financing costs (43.0) (44.9)
------------------------------------------------ ------------- -------------
Adjusted earnings 83.2 73.1
Revaluation surplus on property portfolio
and profit on sales 110.5 51.4
Termination payment and impairment of goodwill (35.3) -
on acquisition of Nexus
Nexus acquisition costs (1.7) -
Exceptional item - early termination cost (24.6) -
on refinancing of Aviva debt
Fair value gain/(loss) on interest rate
derivatives and convertible bond 1.6 (15.2)
Amortisation of MedicX debt MtM at acquisition 7.9 3.1
------------------------------------------------ ------------- -------------
IFRS profit before tax 141.6 112.4
Corporation tax (0.1) (0.1)
Deferred tax provision (1.4) (0.3)
------------------------------------------------ ------------- -------------
IFRS profit after tax 140.1 112.0
------------------------------------------------ ------------- -------------
Net rental income receivable in the year increased by 4.2% or
GBP5.5 million to GBP136.7 million (2020: GBP131.2 million).
Following the internalisation of the management structure,
operational costs have continued to be managed closely and
effectively. Overall property and administrative costs, excluding
service charge costs recoverable, have fallen by GBP3.1 million or
18.6% to GBP13.6 million (2020: GBP16.7 million). The Group's EPRA
cost ratio is now the lowest in the sector at 9.3%, a decrease
against the 11.9% incurred during the 2020 financial year
reflecting the cost savings of approximately GBP4.0 million per
annum, arising from the internalisation of the management structure
partially offset by larger performance related pay, due to the
strong performance in the year, additional staff and cost inflation
on administrative costs.
EPRA cost ratio Year ended Year ended
31 December 31 December
2021 2020
GBP million GBP million
---------------------------------------------- ------------- -------------
Gross rent less ground rent, service charge
and other income 139.6 134.6
---------------------------------------------- ------------- -------------
Direct property expense 8.9 7.8
Less: service charge costs recovered (5.8) (4.3)
---------------------------------------------- ------------- -------------
Non-recoverable property costs 3.1 3.5
Administrative expenses 10.5 13.2
Less: ground rent (0.2) (0.2)
Less: other operating income (0.4) (0.4)
EPRA costs (including direct vacancy costs) 13.0 16.1
---------------------------------------------- ------------- -------------
EPRA cost ratio 9.3% 11.9%
---------------------------------------------- ------------- -------------
Total expense ratio (administrative expenses
as a percentage of gross asset value) 0.4% 0.5%
---------------------------------------------- ------------- -------------
Despite net debt increasing in the year by GBP143.8 million as a
result of continued investment, net finance costs in the year
decreased to GBP43.0 million (2020: GBP44.9 million) reflecting the
reductions in the average cost of debt achieved from various
refinancing initiatives in both 2021 and 2020.
Shareholder value and total accounting return
The Adjusted Net Tangible Assets ("NTA"), per share increased by
3.8 pence or 3.4% to 116.7 pence (31 December 2020: 112.9 pence per
share) during the year with the revaluation surplus and profit on
sales of GBP110.5 million or 8.3 pence per share being the main
reason for the increase although this was partially offset by the
GBP37.0 million or 2.4 pence per share cost of the Nexus
acquisition and internalisation of the management structure and
GBP24.6 million or 1.9 pence per share early termination cost on
refinancing a number of Aviva legacy loans. Dividends distributed
in the year were covered by recurring Adjusted earnings with no
impact on NTA.
The total adjusted NTA (NAV) return per share, including
dividends distributed, in the year was 10.0 pence or 8.9% (2020:
10.9 pence or 10.1%). Over the three years since our merger with
MedicX in 2019 we have delivered a total NAV return of 27.9%.
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 2021 pence 2020 pence
per share per share
------------------------------------------ --- ------------ ------------
Opening Adjusted NTA per share 112.9 107.9
Adjusted earnings for the year 6.2 5.8
Dividends paid (6.2) (5.9)
Revaluation of property portfolio 8.3 3.9
Net impact of Nexus acquisition (2.4) -
Net impact of Aviva refinancing (1.9) -
Shares issued 0.2 2.7
Foreign exchange movements (0.3) -
Interest rate derivative transactions (0.1) (1.5)
Closing Adjusted NTA per share 116.7 112.9
Fixed rate debt and swap mark-to-market
value (4.1) (9.9)
Convertible bond fair value
adjustment (1.6) (1.9)
Deferred tax (0.3) (0.3)
----------------------------------------------- ------------ ------------
Closing EPRA NDV per share 110.7 100.8
----------------------------------------------- ------------ ------------
Financing
In October 2021, the Group refinanced a number of legacy loan
facilities with Aviva Investors with a new GBP200 million facility
for a 15-year term at a fixed rate of 2.52% and renewed its
existing GBP100 million facility with NatWest. Sustainability KPIs
have been incorporated into both facilities based around PHP's
existing environment targets and the Group will benefit from a
margin reduction, conditional on achieving these targets.
Post year-end, the Group issued a new EUR75 million (GBP63
million) secured private placement loan note to MetLife for a
12-year term at a fixed rate of 1.64%. The loan notes have the
option to be increased by a further EUR75 million to EUR150 million
over the next three years at the lender's discretion. The proceeds
will be used to finance the Group's continued investment in
Ireland.
Post year-end, the Group also renewed its existing revolving
credit facility with Santander (GBP50 million) for an initial
three-year term with options to extend by a further year at both
the first and second anniversaries of the facility.
Including the facilities secured post year-end, the Group has
GBP1,550.5 million (31 December 2020: GBP1,456.8 million) of debt
facilities available to it, of which GBP1,232.9 million (31
December 2020: GBP1,159.3 million) had been drawn.
Cash balances of GBP33.4 million (31 December 2020: GBP103.6
million) resulted in Group net debt of GBP1,199.5 million (31
December 2020: GBP1,055.7 million). Contracted capital commitments
at the balance sheet date totalled GBP29.8 million (31 December
2020: GBP39.6 million) and result in headroom available to the
Group of GBP321.2 million (31 December 2020: GBP361.5 million).
Capital commitments comprise investment expenditure of GBP10.7
million, forward funded development expenditure of GBP9.0 million
and asset management projects on site of GBP10.1 million.
The Group's key debt metrics are summarised in the table
below:
Debt metrics(1) 31 December 31 December
2021 2020
---------------------------------------- ------------ ------------
Average cost of debt - fully drawn(1) 2.7% 3.1%
Average cost of debt - drawn(1) 2.9% 3.5%
Loan to value 42.9% 41.0%
Loan to value - excluding convertible
bond 37.5% 35.2%
Net rental income to net interest 3.2 times 2.9 times
cover
Weighted average debt maturity 7.3 years 7.6 years
- all facilities(1)
Weighted average debt maturity 8.2 years 6.5 years
- drawn facilities(1)
Total drawn secured debt GBP1,082.9m GBP1,009.3m
Total drawn unsecured debt GBP150.0m GBP150.0m
Total undrawn facilities and available GBP321.2m GBP361.5m
to the Group(1,2)
Unfettered assets(1) GBP104.9m GBP88.4m
----------------------------------------- ------------ ------------
(1) - Pro-forma including debt facilities secured post
year-end.
(2) - After deducting capital commitments.
Average cost of debt
The Group's marginal cost of debt on its revolving credit
facilities is just 1.8% following the refinancing's noted above. As
these facilities are drawn the Group's average cost of drawn debt
will continue to fall from the current 2.9% to 2.7%, assuming fully
drawn.
The Group still has GBP386 million of legacy loans, acquired
with the merger of MedicX in 2019, at a blended fixed rate of 4.2%
and a weighted average maturity of 9.7 years. Excluding these
facilities, the Group's average cost of debt is 2.3% and we
continue to look at further opportunities to reduce the Group's
average cost of debt and deliver further finance cost-saving
synergies.
Interest rate exposure
The analysis of the Group's exposure to interest rate risk in
its debt portfolio as at 31 December 2021 is as follows:
Facilities(1) Drawn
GBP million % GBP million %
---------------------------------- ------------------- ---------- ------------ -------
Fixed rate debt(1) 1,075.5 69.4 1,075.5 87.2
Hedged by fixed rate interest
rate swaps 188.0 12.1 188.0 15.3
Hedged by fixed to floating rate
interest rate swaps (200.0) (12.9) (200.0) (16.2)
---------------------------------- ------------------- ---------- ------------ -------
Total fixed rate debt 1,063.5 68.6 1,063.5 86.3
Hedged by interest rate caps 200.0 12.9 200.0 16.2
Floating rate debt - unhedged 287.0 18.5 (30.6) (2.5)
---------------------------------- ------------------- ---------- ------------ -------
Total 1,550.5 100.0 1,232.9 100.0
---------------------------------- ------------------- ---------- ------------ -------
(1) - Pro-forma including debt facilities secured post
year-end.
Interest rate swap contracts
Following the refinancing of a number of legacy loan facilities
with Aviva Investors with a new GBP200 million facility the Group
swapped the 2.52% fixed rate back to variable rate, 3-month SONIA
plus a spread of 160bps, for a limited three-year period to take
advantage of the shorter dated variable interest rates and to
offset the short-term over-hedged position regarding fixed rate
debt. To mitigate the risk of further interest rate rises we
purchased 1.25% caps with a nominal value of GBP200 million to
cover the same period at a cost of GBP1.8 million or 0.1 pence per
share.
Accounting standards require PHP to mark its interest rate swaps
to market at each balance sheet date. During the year there was a
gain of GBP2.7 million (2020: loss GBP8.5million) on the fair value
movement of the Group's interest rate derivatives due primarily to
increases in interest rates assumed in the forward yield curves
used to value the interest rate swaps. As at 31 December 2021 the
mark-to-market ("MtM") value of the swap and cap portfolio was an
asset of GBP4.4 million (31 December 2020: liability of GBP0.1
million).
Currency exposure
The Group now owns EUR253.4 million or GBP213.0 million (31
December 2020: EUR221.1 million / GBP197.7 million) of Euro
denominated assets in Ireland as at 31 December 2021 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 2021 the Group had
EUR186.5 million (31 December 2020: EUR163.6 million) 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.
Fixed rate debt mark-to-market ("MtM")
The MtM of the Group's fixed rate debt as at 31 December 2021
was GBP58.9 million (31 December 2020: GBP130.3 million) equivalent
to 4.4 pence per share (31 December 2020: 9.9 pence). The large
decrease in the MtM during the year is due to the refinancing of
various legacy loans with Aviva Investors and increases in interest
rates assumed in the forward yield curves used to value the debt
during the year. The MtM valuation is sensitive to movements in
interest rates assumed in forward yield curves.
Convertible bonds
In July 2019, the Group issued for a six-year term new unsecured
convertible bonds with a nominal value of GBP150 million 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 153.25 pence per
Ordinary Share. The exchange price is subject to adjustment if
dividends paid per share exceed 2.8 pence per annum and in
accordance with the dividend protection provisions the conversion
price has been adjusted to 142.29 pence per Ordinary Share.
The conversion of the GBP150 million convertible bond into new
Ordinary Shares would reduce the Group's loan to value ratio by
5.4% from 42.9% to 37.5% and result in the issue of 105.4 million
new Ordinary Shares.
RISK MANAGEMENT AND PRINCIPAL RISKS
The Board believes the Group has strong long term prospects,
being well positioned to address the need for better primary
healthcare buildings in the UK and Ireland.
Risk management overview
Effective risk management is a key element of the Board's
operational processes. Risk is inherent in any business, and the
Board has determined the Group's risk appetite, which is reviewed
on an annual basis. Group operations have been structured in order
to accept risks within the Group's overall risk appetite, and to
oversee the management of these risks to minimise exposure and
optimise the returns generated for the accepted risk. The Group
aims to operate in a low risk environment, appropriate for its
strategic objective of generating progressive returns for
shareholders. Key elements of maintaining this low risk approach
are:
-- Investment focuses on the primary health real estate sector
which is traditionally much less cyclical than other real estate
sectors.
-- The majority of the Group's rental income is received
directly or indirectly from government bodies in the UK and
Ireland.
-- The Group benefits from long initial lease terms, largely
with upwards-only review terms, providing clear visibility of
income.
-- The Group has a very small (GBP0.7 million) exposure as a
direct developer of real estate, which means that the Group is not
materially exposed to risks that are inherent in property
development.
-- The Board funds its operations so as to maintain an appropriate mix of debt and equity.
-- Debt funding is procured from a range of providers,
maintaining a spread of maturities, currencies and a mix of terms
so as to fix or hedge the majority of interest costs.
-- The structure of the Group's operations includes rigorous,
regular review of risks and how these are mitigated and managed
across all areas of the Group's activities. The Group faces a
variety of risks that have the potential to impact on its
performance, position and longer term viability. These include
external factors that may arise from the markets in which the Group
operates, government and fiscal policy and general economic
conditions and internal risks that arise from how the Group is
managed and chooses to structure its operations.
Approach to risk management
Risk is considered at every level of the Group's operations and
is reflected in the controls and processes that have been put in
place across the Group. The Group's risk management process is
underpinned by strong working relationships between the Board and
the management team which enables the prompt assessment and
response to risk issues that may be identified at any level of the
Group's business.
The Board is responsible for effective risk management across
the Group and retains ownership of the significant risks that are
faced by the Group. This includes ultimate responsibility for
determining and reviewing the nature and extent of the principal
risks faced by the Group and assessing the Group's risk management
processes and controls. These systems and controls are designed to
identify, manage and mitigate risks that the Group faces but will
not eliminate such risks and can provide reasonable but not
absolute assurance.
The management team assists the Board in its assessment and
monitoring of operational and financial risks and PHP has in place
robust systems and procedures to ensure risk management is embedded
in its approach to managing the Group's portfolio and operations.
PHP has established a Risk Committee that is formed of members of
its senior management team and chaired by the CFO who is
experienced in the operation and oversight of risk management
processes, with independent standing invitees attending throughout
the year.
The Audit Committee reviews the Group's systems of risk
management and their effectiveness on behalf of the Board. These
systems and processes have been in place for the year under review
and remained in place up to the date of approval of the Annual
Report and Accounts.
PHP has implemented a wide-ranging system of internal controls
and operational procedures that are designed to manage risk as
effectively as possible, but it is recognised that risk cannot be
totally eliminated. Staff employed by PHP are intrinsically
involved in the identification and management of risk. Strategic
risks are recorded in a risk register and are assessed and rated
within a defined scoring system.
The Risk Committee reports its processes of risk management and
rating of identified risks to the Audit Committee. The risk
register is reviewed and updated twice annually by the secretary
assisted by members of the Risk Committee, and assesses inherent
risks the business faces, as well as the residual risk after
specific safeguards, mitigation and/or management actions have been
overlaid. The risk register forms an appendix to the report which
details risks that have (i) an initial high inherent risk rating,
and (ii) higher residual risk ratings. The Audit Committee in turn
agrees those risks that will be managed by management and those
where the Board will retain direct ownership and responsibility for
managing and monitoring those risks.
The Board recognises that it has limited ability to control a
number of the external risks that the Group faces, such as
government policy, but keeps the possible impact of such risks
under review and considers them as part of its decision-making
process.
Principal risks and uncertainties
The Board has undertaken a robust assessment of the emerging and
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. A result of this assessment was to remove
COVID-19 as a principal risk in the year as a result of the impact
being less material than envisaged, and to introduce a new
principal risk, responsible business. The new principal risk is a
direct result of the greater scrutiny by both regulators and
investors, as well as recent political agendas that are expected to
impose that further environmental initiatives be mandated. These
are set out below:
Risk Inherent risk Change to Commentary on risk Mitigation Residual risk
rating risk in 2021 in the year rating
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Grow property portfolio
----------------------------------------------------------------------------------------------------------------------
Competition High Unchanged In terms of values, The reputation and Medium
The emergence of Likelihood is high the Group has track record of the The Group's
new purchasers in and impact of benefited from a Group in the sector position within the
the sector and the occurrence could be flight to income as means it is able to sector and
recent slowing in major. a consequence of source forward commitment to and
the level of the funded developments understanding of
approvals current wider and existing the asset class
of new centres in economic standing mean PHP is aware
the UK may restrict uncertainty - investments from of a high
the ability of the investors have been developers, proportion of
Group to secure new attracted to the investors and transactions in the
investments. sector due to its owner-occupiers. market and
long term, secure, As a result, the potential
government-backed Group has a number opportunities
cash flows. Lack of of formal pipeline coming to market.
supply, as a agreements and Active management
consequence of the long-standing of the property
low development portfolio generates
number of new relationships that regular
development provide an opportunities to
approvals in the increased increase income
UK, has also opportunity to and lease terms and
contributed to the secure developments enhance value.
increase in values. that come to market
However, the same in the UK and
increase in demand Ireland.
and lack of supply The Group has a
have meant that the strong, identified
Group is facing pipeline of
increased investment
competition for opportunities in
viable the UK and Ireland.
opportunities.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Financing High Unchanged The Company Existing and new Medium
The Group uses a Likelihood of a successfully debt providers are The Group takes
mix of shareholder restricted supply completed two debt keen to provide positive action to
equity and external is moderate but the refinances during funds to the sector ensure continued
debt to fund its potential impact of the year, entering and specifically to availability of
operations. A such a restriction into one the Group, resource, maintain
restriction could be major. new revolving attracted by the a prudent
on the availability credit facility of strength of its ratio of debt and
of funds would GBP100 million with cash flows. equity funding and
limit the Group's NatWest, as well as The Board monitors refinance debt
ability to invest. refinancing GBP200 its capital facilities in
Furthermore, a more million of legacy structure and advance of their
general lack of debt with Aviva. maintains regular maturity.
equity or debt The Company entered contact with
available to the into a new GBP50 existing and
sector could reduce million revolving potential
demand credit facility equity investors
for healthcare with Santander and and debt funders.
assets and EUR75 million Euro Management also
therefore impact private placement closely monitors
values. immediately post debt markets to
year formulate
end. its most
The Group's undrawn appropriate funding
facilities mean it structure.
currently has The terms of the
headroom of GBP321 completed revolving
million, after credit facilities
taking are three years
into account the with the option to
debt financings extend for a
completed in the further two years
first quarter of at the lender's
2022. discretion. The
All covenants have Aviva refinance was
been met with completed
regard to the for a 15-year term
Group's debt and Euro private
facilities and placement was
these all remain executed for a
available for their 12-year term,
contracted term. further increasing
PHP's average debt
profile to 7.3
years.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Manage effectively
and efficiently
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Lease expiry Medium Unchanged Lease terms for all Management meets Medium
management Likelihood of property assets with occupiers on Management employs
The bespoke nature limited alternative will erode and the an ongoing basis to an active asset
of the Group's use value is importance of discuss the management
assets can lead to moderate but the active management specific property programme and has a
limited alternative impact of such to and the successful track
use. Their values could extend the use of a tenant's record
continued be serious. building remains aspirations and of securing
use as unchanged. needs for their enhancement
fit-for-purpose future occupation. projects and
medical centres is 39 projects either securing new long
key to delivering completed or term leases.
the Group's started on site in
strategic the period,
objectives. enhancing income
and extending
occupational lease
terms.
In addition, there
is a strong
pipeline of over
100 projects that
will be progressed
in 2022
and coming years.
Only 12.9% of the
Group's income
expires in the next
five years and
management is
actively
managing these
lease expiries.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
People Medium Unchanged As the country's Succession planning Medium
The inability to Likelihood and post COVID-19 is in place for all The Remuneration
attract, retain and potential impact economic recovery key positions, and Committee has
develop our people could be medium. continues, and with will be reviewed reviewed and
to ensure we have inflation of 5% in regularly by the updated policies to
the appropriate the Nomination ensure retention
skill base in place year, the risk of Committee. and motivation
in staff retention has Remuneration of the management
order for us to increased in a very incentives are in team.
implement our competitive market. place such as
strategy. bonuses and the
LTIP for Executive
Directors
and senior
management to
incentivise and
motivate the team.
Notice periods are
in place for key
employees.
PHP continues to
outsource a PHP HR
professional that
has historically
looked after the
Nexus
employees and has
familiarity with
contracts and
procedures in
place.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Responsible High New All debt and equity Over the last 18 Low
business Likelihood is high investors now months PHP has The Group is
Due to the far and impact of prioritise ESG as a focused on its ESG committed to
greater scrutiny by occurrence could be standard agenda credentials, meeting its
regulators, debt major. item, with a implementing and obligations in line
providers and notable putting in with its
investors over the increase in its place the following Responsible
last occurrence noted to ensure we Business Framework
twelve months, during the year, continue to meet and feels it has
should this rate and is expected to investor introduced
continue there is a continue. expectations: sufficient
risk we do not meet There is a risk Put in place an ESG mitigants to
their criteria in that we may not policy, set up an continue to deliver
the short term. meet the hurdles ESG Committee that its objectives.
sought by debt and reviews the ESG
equity investors Risk Dashboard, as
should well as employed a
PHP not focus new ESG Director as
enough on these ESG part of its
agenda items, management team.
potentially Engaged external
impacting the experts GRESB and
funding of the Carbon Trust to
business review our current
significantly. ESG agenda and
Additionally, appropriateness
political and for a listed REIT.
regulatory changes Sustainability
to the energy targets and hurdles
efficiency and net are monitored to
carbon neutral ensure acquired
targets of assets or asset
corporates are management
expected to be schemes meet
mandated in the specific ESG
short term, notably criteria, with
in light of COP26. these same criteria
aligned to
investors and debt
providers.
Constant
communication with
debt and equity
providers,
resulting in GBP300
million of
sustainability
linked financing
for the two debt
refinances in the
year.
Community Impact
Fund introduced in
the year.
EPC rating
benchmarks are set
to ensure
compliance with
Minimum Energy
Efficiency
Standards
("MEES") that
could otherwise
impact the quality
and desirability of
our assets leading
to higher voids,
lost income and
reduced liquidity;
we consider
environmental and
climate
change risk
relating to our
assets and
commission reports.
We work with our
occupiers to
improve the
resilience of our
assets to climate
change as well
as with contractors
who are required to
conform to our
responsible
development
requirements.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Diversified, long term funding
----------------------------------------------------------------------------------------------------------------------
Debt financing Medium Unchanged Negotiations with Existing lenders Medium
Without appropriate The likelihood of lenders have remain keen to The Board regularly
confirmed debt insufficient confirmed that the finance PHP and new monitors the
facilities, PHP may facilities is Group enjoys the entrants to debt facilities
be unable to meet moderate but the confidence of the capital markets available to the
current and future impact of such an lending have Group and looks to
commitments or event would markets both in increased available refinance
repay or refinance be serious. terms of the resource. in advance of any
debt facilities as traditional high Management maturity. The Group
they become due. street lenders and regularly monitors is subject to the
the bond markets. the composition of changing conditions
The Company the Group's debt of debt capital
successfully portfolio to ensure markets.
completed two debt compliance
refinances during with covenants and
the year, entering continued
into one availability of
new revolving funds.
credit facility of Management
GBP100 million with regularly reports
N atWest , as well to the Board on
as refinancing current debt
GBP200 positions and
million of legacy provides
debt with Aviva. projections
The Company entered of future covenant
into a new GBP50 compliance to
million revolving ensure early
credit facility warning of any
with Santander and possible issues.
EUR75 million Euro
private placement
immediately post
year
end.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Interest rates Medium Unchanged Term interest rate The Group holds a Low
Adverse movement in The likelihood of markets remained proportion of its The Group is
underlying interest volatility in volatile during the debt in long term, currently well
rates could interest rate period and this fixed rate loans protected against
adversely affect markets is high and volatility is and mitigates its the risk of
the Group's the potential likely exposure to interest rate rises
earnings impact if to continue in the interest rate but, due to
and cash flows and not managed near future. movements on its continued
could impact adequately could be Over the year, term floating rate investment in new
property major. interest rates have facilities through properties and the
valuations. reduced which has the use of interest need to maintain
impacted the MtM rate swaps. available
valuations of the As at the balance facilities,
Group's debt. sheet date 100% of will be exposed to
In October 2021 the drawn debt is fixed future interest
Group entered into or hedged. rate levels.
GBP200 million of MtM valuation
interest rate movements do not
hedges, swapping impact on the
fixed Group's cash flows
rate for and are not
three-month included in any
floating rate for a covenant test in
three-year period, the Group's debt
as well as facilities.
mitigating downside
risk by capping
variable exposure.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Deliver progressive returns
----------------------------------------------------------------------------------------------------------------------
Potential Medium Unchanged The UK and Irish The commitment to Medium
over-reliance on Likelihood is low Governments primary care is a Policy risk and
the NHS and HSE but impact of continue to be stated objective of general economic
PHP invests in a occurrence may be committed to the both the UK and conditions are out
niche asset sector major. development of Irish Governments of the control of
where changes in primary care and on a the Board, but
healthcare policy, services cross-party basis. pro-active
the funding of and initiatives to Management engages measures are taken
primary develop new models directly with to monitor
care, economic of care government and developments and to
conditions and the increasingly healthcare consider their
availability of focusing on greater providers in both possible
finance may utilisation the UK and Ireland implications for
adversely affect of primary care. to promote the need the Group.
the Group's Despite the UK's for continued
portfolio valuation exit from the investment in
and performance. European Union and modern premises.
COVID-19 pandemic, This continued
we expect the investment provides
demand attractive long
for health services term, secure income
will continue to streams that
grow, driven by characterise
demographics. the sector leads to
However, future stability of
government values.
funding levels in
the UK and Ireland
may be impacted by
any long term,
material change to
economic
performance.
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 exchange Medium Unchanged The Group now has The Board has Low
risk Likelihood of 20 investments in funded and will PHP has implemented
Income and volatility high but Ireland. Asset continue to fund a hedging strategy
expenditure that the potential values, funding and its investments in in the form of a
will be derived impact at present net income are Ireland with Euros natural hedge so as
from PHP's is relatively low denominated so as to manage exchange
investments in due to in Euros. to create a natural rate risk.
Ireland will be quantum of The continued hedge between asset
denominated investment in impact of COVID-19 values and
in Euros and may be Ireland, albeit throughout the liabilities in
affected this is increasing. European Union Ireland.
unfavourably by continues to cause Management closely
fluctuations in exchange monitors the Euro
currency rates, rate volatility. to GBP currency
impacting the rates with its
Group's earnings banks to formulate
and portfolio a formal
valuation. hedging strategy
against Irish net
cash flows.
------------------- ------------------- ------------- ------------------- ------------------- -------------------
Viability Statement
In accordance with the 2018 UK Corporate Governance Code, the
Board has assessed the prospects of the Group over the longer term,
taking account of the Group's current position, business strategy,
principal risks and outlook.
The Board believes the Company has strong long term prospects,
being well positioned to address the need for better primary care
health centres in the UK and Ireland.
Emerging risks
In completing this assessment the Board continues to monitor
emerging risks and their potential impact on the Group. Development
delivery risk was added to the Risk Register during 2020, and
continues to be monitored, however the Board still believe the
current exposure to this risk is not yet considered a principal
risk and is therefore 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.
With respect to Brexit, the Board continues to monitor the
situation but, as disclosed in the Annual Report, does not consider
Brexit, in itself, to constitute a significant risk to the
business. With respect to COVID-19, whilst the Board also continues
to monitor the situation, it no longer feels that it in itself
constitutes a significant risk to the business, and so it has been
removed from the principal risks.
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 2024. 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 and 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 and are as follows:
-- declining attractiveness of the Group's assets or extenuating
economic circumstances impact investment values - valuation
parameter stress tested to provide for a one-off 10% / GBP283
million fall in June 2022;
-- 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 2022; 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 2024 2021 scenario
-------------------- ----------- ---------
Loan to value ratio 42.9% 49.2%
Net debt GBP1,200m GBP1,343m
Adjusted net assets GBP1,556m GBP1,337m
Available financial
headroom* GBP321m GBP203m
-------------------- ----------- ---------
*The above analysis takes into account the two debt facilities
completed immediately post year end.
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
15 February 2022
Group statement of comprehensive income
for the year ended 31 December 2021
2021 2020
Notes GBPm GBPm
------------------------------------------------- ----- ------ ------
Rental income 145.6 139.0
Direct property expenses (8.9) (7.8)
------------------------------------------------- ----- ------ ------
Net rental income 3 136.7 131.2
Administrative expenses 4 (10.5) (13.2)
------ ------
Revaluation gain on property portfolio 11 110.2 51.3
Profit on sale of land and property 11 0.3 0.1
------ ------
Total revaluation gain 110.5 51.4
------------------------------------------------- ----- ------ ------
Operating profit 236.7 169.4
Finance income 5 0.8 1.2
Finance costs 6a (35.9) (43.0)
Exceptional early loan redemption finance cost 6a (24.6) -
Termination payment and goodwill impairment
on acquisition of Nexus 7 (35.3) -
Exceptional Nexus acquisition costs 7 (1.7) -
Fair value loss on derivative interest rate
swaps and amortisation of hedging reserve 6b (1.8) (12.9)
Fair value gain/(loss) on convertible bond 6c 3.4 (2.3)
------------------------------------------------- ----- ------ ------
Profit before taxation 141.6 112.4
Taxation charge 8 (1.5) (0.4)
------------------------------------------------- ----- ------ ------
Profit after taxation 1 140.1 112.0
------------------------------------------------- ----- ------ ------
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 23 4.5 4.0
Exchange (loss)/gain on translation of foreign
balances (3.4) 2.2
------------------------------------------------- ----- ------ ------
Other comprehensive income net of tax 1 1.1 6.2
------------------------------------------------- ----- ------ ------
Total comprehensive income net of tax 1 141.2 118.2
------------------------------------------------- ----- ------ ------
IFRS earnings per share
Basic 9 10.5p 8.8p
Diluted 9 9.8p 8.7p
------------------------------------------------- ----- ------ ------
Adjusted earnings per share 2
Basic 9 6.2p 5.8p
Diluted 9 6.1p 5.7p
------------------------------------------------- ----- ------ ------
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 2021
2021 2020
Notes GBPm GBPm
---------------------------------------- ----- --------- ---------
Non-current assets
Investment properties 11 2,795.9 2,576.1
Derivative interest rate swaps 17 5.2 -
Fixed assets 0.3 -
---------------------------------------- ----- --------- ---------
2,801.4 2,576.1
---------------------------------------- ----- --------- ---------
Current assets
Trade and other receivables 12 17.6 17.4
Cash and cash equivalents 13 33.4 103.6
Developments work in progress 0.7 -
---------------------------------------- ----- --------- ---------
51.7 121.0
---------------------------------------- ----- --------- ---------
Total assets 2,853.1 2,697.1
---------------------------------------- ----- --------- ---------
Current liabilities
Deferred rental income (28.3) (27.0)
Trade and other payables 14 (40.0) (34.7)
Borrowings: term loans and overdraft 15a (2.2) (6.4)
---------------------------------------- ----- --------- ---------
(70.5) (68.1)
---------------------------------------- ----- --------- ---------
Non-current liabilities
Borrowings: term loans and overdraft 15a (700.2) (623.6)
Borrowings: bonds 15b (572.8) (582.9)
Derivative interest rate swaps 17 (0.8) (0.1)
Head lease liabilities 16 (4.5) (4.5)
Deferred tax liability (4.4) (3.5)
---------------------------------------- ----- --------- ---------
(1,282.7) (1,214.6)
---------------------------------------- ----- --------- ---------
Total liabilities (1,353.2) (1,282.7)
---------------------------------------- ----- --------- ---------
Net assets 1,499.9 1,414.4
---------------------------------------- ----- --------- ---------
Equity
Share capital 19 166.6 164.4
Share premium account 20 474.9 466.7
Merger and other reserves 21 413.5 400.8
Special reserve 22 - -
Hedging reserve 23 (15.6) (20.1)
Retained earnings 24 460.5 402.6
---------------------------------------- ----- --------- ---------
Total equity 1 1,499.9 1,414.4
---------------------------------------- ----- --------- ---------
Net asset value per share
IFRS net assets - basic and diluted 9 112.5p 107.5p
Adjusted net tangible assets2 - basic 9 116.7p 112.9p
Adjusted net tangible assets2 - diluted 9 118.6p 115.4p
---------------------------------------- ----- --------- ---------
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 15 February 2022 and signed on its behalf by:
Richard Howell
Chief Financial Officer
Registered in England Number: 3033634
Group cash flow statement
for the year ended 31 December 2021
2021 2020
Notes GBPm GBPm
--------------------------------------------------------- ----- ------- -------
Operating activities
Profit on ordinary activities after tax 140.1 112.0
Taxation charge 8 1.5 0.4
Finance income 5 (0.8) (1.9)
Finance costs 6a 35.9 43.7
Exceptional early loan redemption finance cost 6a 24.6 -
Termination payment and goodwill impairment
on acquisition of Nexus 7 35.3 -
Exceptional Nexus acquisition costs 7 1.7 -
Fair value loss on derivatives 6b 1.8 12.9
Fair value loss on convertible bond 6c (3.4) 2.3
--------------------------------------------------------- ----- ------- -------
Operating profit before financing costs 236.7 169.4
Adjustments to reconcile Group operating profit
before financing to net cash flows from operating
activities:
Revaluation gain on property portfolio 11 (110.2) (51.3)
Profit on sale of land and property 11 (0.3) (0.1)
Long term incentive plan ("LTIP") 0.2 -
Effect of exchange rate fluctuations on operations - (0.3)
Fixed rent uplift (1.2) (1.5)
Tax paid (0.4) (0.2)
(Increase) in trade and other receivables (0.3) (1.3)
Increase in trade and other payables 15.9 4.2
--------------------------------------------------------- ----- ------- -------
Cash generated from operations 140.4 118.9
--------------------------------------------------------- ----- ------- -------
Net cash flow from operating activities 140.4 118.9
--------------------------------------------------------- ----- ------- -------
Investing activities
Payments to acquire and improve investment properties (129.6) (102.9)
Receipts from disposal of properties 0.3 0.1
Cash paid for acquisition of Nexus, including
fees 7 (18.2) -
Cash acquired as part of merger 7 0.4
Interest received on development loans 0.7 1.9
--------------------------------------------------------- ----- ------- -------
Net cash flow used in investing activities (146.4) (100.9)
--------------------------------------------------------- ----- ------- -------
Financing activities
Proceeds from issue of shares - 140.0
Cost of share issues (0.1) (3.2)
Term bank loan drawdowns 15 335.6 17.8
Term bank loan repayments 15 (252.8) (76.2)
Loan arrangement fees (2.7) (2.0)
Termination of derivative financial instruments (1.9) (21.8)
Exceptional early loan redemption finance cost 6a (24.6) -
Swap interest paid - (0.1)
Non-utilisation fees (1.8) (1.9)
Interest paid (40.9) (42.0)
Bank interest received - 0.4
Equity dividends paid net of scrip dividend 10 (74.4) (69.1)
--------------------------------------------------------- ----- ------- -------
Net cash flow from financing activities (63.6) (58.1)
--------------------------------------------------------- ----- ------- -------
(Decrease) in cash and cash equivalents for
the year (69.6) (40.1)
Effect of exchange rate fluctuations on Euro-denominated
loans and cash equivalents (0.6) 0.6
Cash and cash equivalents at start of year 103.6 143.1
--------------------------------------------------------- ----- ------- -------
Cash and cash equivalents at end of year 13 33.4 103.6
--------------------------------------------------------- ----- ------- -------
Group statement of changes in equity
for the year ended 31 December 2021
Merger
Share Share and other Special Hedging Retained
capital premium reserve reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------- ------- --------- ------- ------- -------- -------
1 January 2021 164.4 466.7 400.8 - (20.1) 402.6 1,414.4
Profit for the year - - - - - 140.1 140.1
Other comprehensive income
Amortisation of hedging
reserve - - - - 4.5 - 4.5
Exchange gain on translation
of foreign balances - - (3.4) - - - (3.4)
----------------------------- ------- ------- --------- ------- ------- -------- -------
Total comprehensive income - - (3.4) - 4.5 140.1 141.2
Shares issued on acquisition
of Nexus 1.5 - 16.1 - - - 17.6
Shares issued for other
acquisitions 0.1 0.9 - - - - 1.0
Share issue expenses - (0.1) - - - - (0.1)
Share-based awards ("LTIP") - - - - - 0.2 0.2
Dividends paid - - - - - (74.4) (74.4)
Scrip dividend in lieu of
cash 0.6 7.4 - - - (8.0) -
----------------------------- ------- ------- --------- ------- ------- -------- -------
31 December 2021 166.6 474.9 413.5 - (15.6) 460.5 1,499.9
----------------------------- ------- ------- --------- ------- ------- -------- -------
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 - (20.1) 402.6 1,414.4
-------------------------------- ------- ------- --------- ------- ------- -------- -------
Notes to the financial statements
1. Corporate information
The Group's financial statements for the year ended 31 December
2021 were approved by the Board of Directors on 15 February 2022
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 page 102 of the Annual Report 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 United Kingdom 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 2021.
First time application of IFRS 2 Share-based payments
The Group has applied IFRS 2, which had not been applicable in
prior years, for the first time in the current year. The standard
requires an entity to recognise share-based payment transactions
(such as granted shares, share options, or share appreciation
rights) in its financial statements, including transactions with
employees or other parties to be settled in cash, other assets, or
equity instruments of the entity.
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 IFRSs 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
2021 are as follows:
-- Group Balance Sheet: GBP1 = EUR1.1893 (2020: EUR1.1185).
-- Group Statement of Comprehensive Income: GBP1 = EUR1.1778 (2020: EUR1.105).
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.
All costs associated with the purchase and construction of
investment properties under construction are capitalised including
attributable interest and staff costs. Interest is calculated on
the expenditure by reference to the average rate of interest on the
Group's borrowings. When properties under construction are
completed the capitalisation of costs ceases and they are
reclassified as investment properties.
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. Where any excess
of the purchase price of business combinations over the fair value
of the assets, liabilities and contingent liabilities is acquired,
goodwill is recognised. This is recognised as an asset and is
reviewed for impairment immediately, and then at least annually.
Any impairment is recognised immediately in the income
statement.
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% (2020: 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 15b 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.
-- 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.
Employee costs
Defined contribution pension plans
Obligations for contributions to defined contribution pension
plans are charged to the income statement as incurred.
Share-based employee remuneration
The fair value of equity-settled share-based payments to
employees is determined with reference to the fair value of the
equity instruments at the date of grant and is expensed on a
straight line basis over the vesting period, based on the Group's
estimate of shares or options that will eventually vest. The fair
value of awards is equal to the market value at grant date.
Capitalised salaries
Certain internal staff and associated costs directly
attributable to the management of major projects are capitalised.
Internal staff costs are capitalised from the start of the project
until the date of practical completion.
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 11 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
Chatham (formerly JCRA) 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 2021. 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). Where corporate entities were acquired through special
purpose vehicles for holding properties rather than separate
business entities, these were accounted for as asset acquisitions.
Where business processes inherent in the entities were acquired,
these were accounted for as a business combination.
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 UK:
-- Amendments to IAS 1 Classification of liabilities as current or non-current.
-- IAS 8 Definition of accounting estimates.
-- IFRS 3 Reference to the conceptual framework.
-- Annual improvements to IFRS 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 2022, 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
GBP134.7 million and GBP10.9 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
----- --------- ---------- ------------ ----------- ----------- ----------- -------
2021 138.6 136.1 130.8 126.3 121.0 859.1 1,511.9
----- --------- ---------- ------------ ----------- ----------- ----------- -------
2020 134.4 133.6 131.2 126.0 121.3 935.5 1,582.0
----- --------- ---------- ------------ ----------- ----------- ----------- -------
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:
2021 2020
GBPm GBPm
--------------------------------------------------------- ----- -----
Administrative expenses including:
Advisory fees (Note 4a) 0.1 9.1
Staff costs (Note 4b) 5.2 -
Performance Incentive Fees (Note 4c) 1.0 1.6
Directors' fees 0.4 0.4
--------------------------------------------------------- ----- -----
Audit fees
Fees payable to the Company's auditor and its associates
for the audit of the Company's annual accounts 0.4 0.3
Fees payable to the Company's auditor and its associates
for the audit of the Company's subsidiaries 0.1 0.1
--------------------------------------------------------- ----- -----
Total audit fees 0.5 0.4
--------------------------------------------------------- ----- -----
Total audit and assurance services 0.5 0.4
--------------------------------------------------------- ----- -----
Non-audit fees
Fees payable to the Company's auditor and its associates
for the interim review 0.1 0.1
--------------------------------------------------------- ----- -----
Advisory services - -
--------------------------------------------------------- ----- -----
Total non-audit fees 0.1 0.1
--------------------------------------------------------- ----- -----
Total fees 0.6 0.5
--------------------------------------------------------- ----- -----
a) Advisory fees
On 5 January 2021 the Group completed the acquisition of Nexus
and internalised the management arrangements and consequently
payments ceased at this date with no further amounts payable in
relation to advisory fees to Nexus.
The advisory fees calculated and payable for the period to 31
December are as follows:
2021 2020
GBPm GBPm
-------------------------------- ----- -----
Nexus Tradeco Limited ("Nexus") 0.1 9.1
-------------------------------- ----- -----
As at 31 December 2021 GBPnil was payable to Nexus (2020: GBP0.8
million).
There were no other fees paid to Nexus during the year in
respect of capital projects and service charge management fees
(2020: GBP0.4 million and GBP0.4 million respectively).
The Group shares certain operational services with Nexus.
Amounts paid during the year in relation to these shared services
totalled GBP0.1 million, and amounts received during the year
totalled GBP0.2 million.
Refer to Note 7 for further information on the Nexus
acquisition.
b) Staff costs
2021 2020
GBPm GBPm
------------------------------------------------------- ----- -----
Wages and salaries 5.6 -
Less staff costs capitalised in respect of development
and asset management projects (1.3) -
Social security costs 0.5 -
Pension costs 0.1 -
Equity-settled share-based payments 0.3 -
------------------------------------------------------- ----- -----
5.2 -
------------------------------------------------------- ----- -----
The Group operates a defined contribution pension scheme for all
employees. The Group contribution to the scheme during the year was
GBP0.1 million (2020: GBPnil), which represents the total expense
recognised through the income statement. As at 31 December 2021,
there were no contributions (2020: GBPnil) due in respect of the
reporting period that had not been paid over to the plan.
The average monthly number of Group employees during the year
was 59 (2020: nil), and as at 31 December 2021 was 62 (2020:
nil).
The Executive Directors and Non-executive Directors are the key
management personnel. Full disclosure of Directors' emoluments, as
required by the Companies Act 2006, can be found in the
Remuneration Report in the Annual Report.
The Group's equity-settled share-based payments comprise the
following:
Scheme Fair value measure
--------------------------------- ------------------------
Long Term Incentive Plan ("LTIP") Face value at grant date
Save As You Earn ("SAYE") Face value at grant date
--------------------------------- ------------------------
The Group expenses an estimate of how many shares are likely to
vest based on the market price at the date of grant, taking account
of expected performance against the relevant performance targets
and service periods, which are discussed in further detail in the
Remuneration Report.
c) 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 GBP1.4 million was paid in the period in respect of
2020 and at 31 December 2021 the balance on the notional cumulative
PIF account was GBP9.2 million (2020: GBP8.1 million), of which
GBP1.3 million (2020: GBP1.5 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 on pages 23 to 27.
5. Finance income
2021 2020
GBPm GBPm
------------------------------------ ----- -----
Interest income on financial assets
Bank interest - 0.4
Development loan interest 0.8 0.8
------------------------------------ ----- -----
0.8 1.2
------------------------------------ ----- -----
6. Finance costs
2021 2020
GBPm GBPm
-------------------------------------------------------------- ----- -----
Interest expense and similar charges on financial liabilities
a) Interest
Bank loan interest 24.0 26.1
Swap interest (0.3) 0.1
Bond interest 15.5 16.0
Bank facility non-utilisation fees 1.9 1.9
Exceptional early loan redemption finance cost 24.6 -
Bank charges and loan arrangement fees 2.7 2.7
-------------------------------------------------------------- ----- -----
68.4 46.8
Interest capitalised - (0.7)
-------------------------------------------------------------- ----- -----
68.4 46.1
-------------------------------------------------------------- ----- -----
Amortisation of MedicX debt MtM on acquisition (7.9) (3.1)
-------------------------------------------------------------- ----- -----
60.5 43.0
-------------------------------------------------------------- ----- -----
The exceptional early loan redemption finance cost was an amount
paid in the year to terminate the Aviva facilities. The weighted
average interest rate on the loans redeemed was 4.99% with
associated early repayment costs of GBP24.6 million.
2021 2020
GBPm GBPm
-------------------------------------------------- ----- ------
b) Derivatives
Net fair value gain/(loss) on interest rate swaps 2.7 (8.5)
Amortisation of cash flow hedging reserve (4.5) (4.4)
-------------------------------------------------- ----- ------
(1.8) (12.9)
-------------------------------------------------- ----- ------
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. There was no fair
value gain or loss accounted for directly in equity on derivatives
which do meet the hedge effectiveness criteria under IAS 39 (2020:
loss of GBP0.4 million). An amount of GBP4.5 million (2020: GBP4.4
million) has been amortised from the cash flow hedging reserve in
the year resulting from early termination of effective swap
contracts (see Note 23).
Details of the fair value loss on hedges which meet the
effectiveness criteria for hedge accounting under IAS 39 are set
out in Note 23.
2021 2020
GBPm GBPm
------------------------------------------------------- ----- -----
c) Convertible bond
Fair value loss on convertible bond fully redeemed
in the year - -
Fair value loss on convertible bond issued in the year - -
Fair value gain/(loss) on existing convertible bond 3.4 (2.3)
Convertible bond issue costs - -
------------------------------------------------------- ----- -----
3.4 (2.3)
------------------------------------------------------- ----- -----
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 NTA (replacing EPRA NAV). Refer to Note 15 for further details
about the convertible bonds.
2021 2020
GBPm GBPm
----------------------------------------------- ------ ------
Net finance costs
Finance income (Note 5) 0.8 1.2
Finance costs (as per above) (68.4) (46.8)
----------------------------------------------- ------ ------
(67.6) (45.6)
Interest capitalised - 0.7
----------------------------------------------- ------ ------
(67.6) (44.9)
Amortisation of MedicX debt MtM on acquisition 7.9 3.1
----------------------------------------------- ------ ------
(59.7) (41.8)
----------------------------------------------- ------ ------
7. Business combination
On 5 January 2021 the Group's management function was
internalised by acquiring PHP Tradeco Holdings Limited (formerly
Nexus Tradeco Holdings Limited), which is the holding company of
its long-standing external property adviser, PHP Tradeco Limited
(formerly Nexus Tradeco Limited), and certain subsidiaries,
including the primary care development business ("Nexus"). Primary
Health Properties PLC acquired the entire issued ordinary share
capital of PHP Tradeco Holdings Limited at a total cost of GBP34.1
million, including a termination payment of GBP29.0 million.
The total cost was met by GBP16.5 million payment in cash, and
GBP17.6 million satisfied by the issue of 11,485,080 new Ordinary
Shares of 12.5 pence each in the share capital of PHP at the quoted
market price on completion of 152.8 pence per share.
The acquisition of PHP Tradeco Holdings Limited for a total fair
value of consideration of GBP5.1 million resulted in the transfer
of certain assets and liabilities and the fair value of the net
liabilities acquired was GBP1.2 million, resulting in a goodwill on
acquisition of GBP6.3 million.
The acquisition resulted in the termination of the advisory
agreement. The total cost of terminating the Nexus agreement and
goodwill on acquisition has been calculated to be GBP35.3 million
(fair value of consideration paid GBP34.1 million plus fair value
of net liabilities acquired GBP1.2 million) when taking into
account the consideration and the net assets with fair value
adjustments. The goodwill on acquisition of GBP35.3 million was to
affect the termination of the management agreement with Nexus and
reflects the termination notice period, approximately 2 years and
2.5 months under the management agreement totalling GBP29.0
million. The remaining GBP6.3 million represents a discretionary
payment on account of the acquisition of principally the management
team, assembled workforce, systems, operational platform and
know-how which were "re-branded" from Nexus to PHP.
Adjustments
Book to fair Total
value value fair value
GBPm GBPm GBPm
------------------------------------------------- ------ ----------- -----------
Cash consideration 16.5 - 16.5
Equity instruments 17.6 - 17.6
------------------------------------------------- ------ ----------- -----------
Total cost 34.1 - 34.1
------------------------------------------------- ------ ----------- -----------
Less: termination payment - - (29.0)
------------------------------------------------- ------ ----------- -----------
Fair value of consideration paid - - 5.1
------------------------------------------------- ------ ----------- -----------
Fair value of net assets acquired
Tangible fixed assets 0.1 - 0.1
Cash and cash equivalents 0.4 - 0.4
Trade and other debtors 1.2 - 1.2
------------------------------------------------- ------ ----------- -----------
Total assets 1.7 - 1.7
------------------------------------------------- ------ ----------- -----------
Trade creditors and other creditors (1.4) (1.1) (2.5)
Amounts due to HMRC (0.4) - (0.4)
------------------------------------------------- ------ ----------- -----------
Total liabilities (1.8) (1.1) (2.9)
------------------------------------------------- ------ ----------- -----------
Fair value of net assets acquired (0.1) (1.1) (1.2)
------------------------------------------------- ------ ----------- -----------
Termination payment and goodwill arising on
acquisition 35.3
------------------------------------------------- ------ ----------- -----------
Net cash flow arising on acquisition
Cash consideration 16.5
Acquisition costs 1.7
Less: cash and cash equivalent balances acquired (0.4)
------------------------------------------------- ------ ----------- -----------
17.8
------------------------------------------------- ------ ----------- -----------
Acquisition of the Nexus entities contributed GBPnil revenue and
a cost saving of GBP3.9 million to the Group's profit for the
period between the date of acquisition and the reporting date. If
the acquisition had completed on the first day of the financial
year, the impact on Group revenues for the year would have been
GBPnil and the impact on Group profit would have been a cost saving
of GBP4.0 million.
8. Taxation
a) Taxation charge in the Group Statement of Comprehensive
Income
The taxation charge is made up as follows:
2021 2020
GBPm GBPm
--------------------------------- ----- -----
Current tax
UK corporation tax - -
Irish corporation tax 0.1 0.1
Deferred tax on Irish activities 1.4 0.3
--------------------------------- ----- -----
Total tax 1.5 0.4
--------------------------------- ----- -----
The UK corporation tax rate of 19% (2020: 19%) and the Irish
corporation tax rate of 20% (2020: 20%) have been applied in the
measurement of the Group's UK and Ireland related activities tax
liability at 31 December 2021.
b) Factors affecting the tax charge for the year
The tax assessed for the year is lower than (2020: lower than)
the standard rate of corporation tax in the UK. The differences are
explained below:
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Profit on ordinary activities before taxation 141.6 112.4
--------------------------------------------------------- ------ ------
Theoretical tax at UK corporation tax rate of 19% (2020:
19%) 26.9 21.4
REIT exempt income (36.4) (25.7)
Transfer pricing adjustment 4.7 4.1
Termination payment and goodwill
impairment on acquisition of Nexus 7.0 -
Fair value (gain)/loss on convertible bond (0.6) 0.4
Non-taxable items (0.6) 0.2
Losses brought forward utilised (0.2) -
Irish corporation tax 0.7 0.7
Deferred tax on Irish activities - (0.8)
--------------------------------------------------------- ------ ------
Taxation charge (Note 8a) 1.5 0.4
--------------------------------------------------------- ------ ------
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% (2020:
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 2021.
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.
9. Earnings per share
Performance measures
In the tables below, we present earnings per share and net
assets per share calculated in accordance with IFRSs, 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
2021 2020
-------- --------- --------- -------- --------- ---------
IFRS Adjusted EPRA IFRS Adjusted EPRA
earnings earnings earnings earnings earnings earnings
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------- --------- --------- -------- --------- ---------
Profit after taxation 140.1 140.1 140.1 112.0 112.0 112.0
Adjustments to remove:
Revaluation gain on property
portfolio - (110.2) (110.2) - (51.3) (51.3)
Profit on sale of land
and property - (0.3) (0.3) - (0.1) (0.1)
Fair value movement on
derivatives - 1.8 1.8 - 12.9 12.9
Fair value movement and
issue costs on convertible
bond - (3.4) (3.4) - 2.3 2.3
Taxation charge - 1.5 1.5 - 0.4 0.4
Termination payment and
goodwill impairment on
acquisition of Nexus - 35.3 6.3 - - -
Exceptional Nexus acquisition
costs - 1.7 1.7 - - -
Early termination fees
on bank debt 24.6 24.6 - - -
MtM write off on early
termination of bank debt (4.7) - - - -
Amortisation of MtM loss
on debt acquired - (3.2) - - (3.1) -
------------------------------- -------- --------- --------- -------- --------- ---------
Basic earnings 140.1 83.2 62.1 112.0 73.1 76.2
Dilutive effect of convertible
bond 0.9 4.3 4.3 6.6 4.3 4.3
------------------------------- -------- --------- --------- -------- --------- ---------
Diluted earnings 141.0 87.5 66.4 118.6 77.4 80.5
------------------------------- -------- --------- --------- -------- --------- ---------
Number of shares
2021 weighted 2020 weighted
average average
------------- ------- ------- ------------- ------- -------
million million million million million million
------------------------------- ------------- ------- ------- ------------- ------- -------
Ordinary Shares 1,330.4 1,330.4 1,330.4 1,266.4 1,266.4 1,266.4
Dilutive effect of convertible
bond 105.4 105.4 105.4 102.0 102.0 102.0
------------------------------- ------------- ------- ------- ------------- ------- -------
Diluted Ordinary Shares 1,435.8 1,435.8 1,435.8 1,368.4 1,368.4 1,368.4
------------------------------- ------------- ------- ------- ------------- ------- -------
Profit/(loss) per share attributable to shareholders:
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
-------- ------ -------- ------ ------ -------- ------
Basic 10.5 6.2 4.7 8.8 5.8 6.0
Diluted 9.8 6.1 4.6 8.7 5.7 5.9
-------- ------ -------- ------ ------ -------- ------
Net assets per share
31 December 31 December
2021 2020
----------- -------- ------- ----------- -------- -------
IFRS Adjusted EPRA IFRS Adjusted EPRA
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ----------- -------- ------- ----------- -------- -------
Net assets attributable
to shareholders 1,499.9 1,499.9 1,499.9 1,414.4 1,414.4 1,414.4
Derivative interest rate
swaps liability (4.4) (4.4) 0.1 0.1
Deferred tax 4.4 4.4 3.5 3.5
Cumulative convertible
bond fair value movement 21.6 21.6 25.0 25.0
MtM on MedicX loans net
of amortisation 34.4 - 42.3 -
---------------------------- ----------- -------- ------- ----------- -------- -------
Net tangible assets ("NTA") 1,555.9 1,521.5 1,485.3 1,443.0
Real estate transfer
taxes 189.0 174.7
---------------------------- ----------- -------- ------- ----------- -------- -------
Net reinstatement value
("NRV") 1,710.5 1,617.7
Fixed rate debt and swap
MtM value (20.1) (88.0)
Deferred tax (4.4) (3.5)
Cumulative convertible
bond fair value movement (21.6) (25.0)
Real estate transfer
taxes (189.0) (174.7)
---------------------------- ----------- -------- ------- ----------- -------- -------
Net disposal value ("NDV") 1,475.4 1,326.5
---------------------------- ----------- -------- ------- ----------- -------- -------
Ordinary Shares
million million million million million million
--------------------- ------- ------- ------- ------- ------- -------
Issued share capital 1,332.9 1,332.9 1,332.9 1,315.6 1,315.6 1,315.6
--------------------- ------- ------- ------- ------- ------- -------
Basic net asset value per share 1
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
---------------------------- ----- -------- ----- ----- -------- -----
Net tangible assets ("NTA") 112.5 116.7 114.1 107.5 112.9 109.7
Net reinstatement value
("NRV") 128.3 123.0
Net disposal value ("NDV") 110.7 100.8
---------------------------- ----- -------- ----- ----- -------- -----
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 31 December
2021 2020
----------- -------- ----- ----------- -------- -----
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
---------------------------- ----------- -------- ----- ----------- -------- -----
Net tangible assets ("NTA") 114.7 118.6 116.2 110.4 115.4 112.4
Net reinstatement value
("NRV") 129.4 124.7
Net disposal value ("NDV") 113.0 104.2
---------------------------- ----------- -------- ----- ----------- -------- -----
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 142.29 pence
(31 December 2020: 147.10 pence).
Conversion of the convertible bond would result in the issue of
105.4 million (31 December 2020: 102.0 million) new Ordinary
Shares. The IFRS net asset value and EPRA NDV would increase by
GBP171.6 million (31 December 2020: GBP175.0 million) and the EPRA
NTA, adjusted NTA and EPRA NRV would increase by GBP150.0 million
(31 December 2020: 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.
10. Dividends
Amounts recognised as distributions to equity holders in the
year:
2021 2020
GBPm GBPm
----------------------------------------------------- ----- -----
Quarterly interim dividend paid 26 February 2021 18.7 -
Scrip dividend in lieu of quarterly cash dividend 26
February 2021 1.8 -
Quarterly interim dividend paid 21 May 2021 17.7 -
Scrip dividend in lieu of quarterly cash dividend 21
May 2021 2.9 -
Quarterly interim dividend paid 20 August 2021 18.3 -
Scrip dividend in lieu of quarterly cash dividend 20
August 2021 2.4 -
Quarterly interim dividend paid 26 November 2021 19.7 -
Scrip dividend in lieu of quarterly cash dividend 26
November 2021 0.9 -
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
----------------------------------------------------- ----- -----
Total dividends distributed in the year 82.4 73.3
----------------------------------------------------- ----- -----
Per share 6.2p 5.9p
----------------------------------------------------- ----- -----
On 6 January 2022, the Board declared an interim dividend of
1.625 pence per Ordinary Share with regard to the year ended 31
December 2021, payable on 25 February 2022. This dividend will
comprise wholly of a ordinary dividend of 1.625 pence and no
Property Income Dividend ("PID").
11. 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 (the
"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 continues to provide some degree of
uncertainty surrounding the valuation of certain property
sub-sectors; however, the primary care real estate sector remains
robust, and as a result neither UK nor Irish valuers have included
a material uncertainty clause in the valuation report at 31
December 2021.
The properties are 99.7% let (2020: 99.6%). The valuations
reflected a 4.64% (2020: 4.81%) net initial yield and a 4.74%
(2020: 4.84%) 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 GBP9.0 million (2020: GBP32.1
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 GBP19.0 million (2020: GBP7.5 million) which have
not been provided for in the financial statements.
A fair value increase of GBP0.4 million (2020: GBP0.2 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 the property portfolio in the
year of GBP110.2 million (2020: GBP51.3 million).
Of the GBP2,791.4 million (2020: GBP2,571.6 million) valuation,
GBP2,578.4 million (92%) (2020: GBP2,373.9 million) relates to
investment properties in the UK and GBP213.0 million (8%) (2020:
GBP197.7 million) relates to investment properties in Ireland.
In line with accounting policies, the Group has assessed whether
the acquisitions during the year were asset purchases or business
combinations.
Investment Investment Investment
properties properties
properties long under
freehold
1 leasehold construction Total
GBPm GBPm GBPm GBPm
-------------------------------------------- ---------- ---------- ------------ -------
As at 1 January 2021 2,061.3 491.4 23.4 2,576.1
Property additions 52.4 48.1 22.4 122.9
Property disposals (2.0) - - (2.0)
Impact of lease incentive adjustment 0.7 0.4 - 1.1
Transfer from properties under construction 23.4 2.9 (26.3) -
Foreign exchange movements (9.7) (2.0) (0.7) (12.4)
-------------------------------------------- ---------- ---------- ------------ -------
2,126.1 540.8 18.8 2,685.7
Revaluations for the year 82.3 27.5 0.4 110.2
-------------------------------------------- ---------- ---------- ------------ -------
As at 31 December 2021 2,208.4 568.3 19.2 2,795.9
-------------------------------------------- ---------- ---------- ------------ -------
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
-------------------------------------------- ---------- ---------- ------------ -------
1 Includes development land held at GBP0.9 million (31 December 2020: GBP0.9 million).
Bank borrowings, bonds and interest rate swaps are secured on
investment properties with a value of GBP2,515.4 million (2020:
GBP2,483.2 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 lease 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 2021 and 31
December 2020. There were no transfers between levels during the
year or during 2020. 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.
2021 2020
----------------------------- ------------------------ ------------------------
GBP30,000 - GBP1,433,486 GBP18,000 - GBP1,242,000
ERV - range of the portfolio 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.
2021 2020
------------------------------------- -------------- --------------
True equivalent yield - range of the
portfolio 3.23% - 19.58% 3.11% - 19.51%
------------------------------------- -------------- --------------
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% decrease/increase in annual rent would have an
approximately GBP28 million decrease/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 an
approximately GBP60 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.
12. Trade and other receivables
2021 2020
GBPm GBPm
-------------------------------------------------------- ----- -----
Trade receivables (net of provision for doubtful debts) 11.6 9.8
Prepayments and accrued income 5.4 7.1
Other debtors 0.6 0.5
-------------------------------------------------------- ----- -----
17.6 17.4
-------------------------------------------------------- ----- -----
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 on the recoverability, general economic
conditions of the industry and an assessment of both the current
and 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.
13. Cash and cash equivalents
2021 2020
GBPm GBPm
------------------ ----- -----
Cash held at bank 33.4 103.6
------------------ ----- -----
33.4 103.6
------------------ ----- -----
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.
14. Trade and other payables
2021 2020
GBPm GBPm
------------------------------------ ----- -----
Trade payables 0.6 0.7
Bank and bond loan interest accrual 6.3 8.0
Other payables 9.1 8.6
VAT 6.6 6.5
Accruals 17.4 10.9
------------------------------------ ----- -----
40.0 34.7
------------------------------------ ----- -----
15. Borrowings
a) Term loans and overdrafts
The table indicates amounts drawn and undrawn from each
individual facility as at 31 December:
Amounts
Facility drawn Undrawn
-------- ----- ------- ----- ------- -----
2021 2020 2021 2020 2021 2020
Expiry
date GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------- -------- ----- ------- ----- ------- -----
Current
RBS overdraft Jun 2022 5.0 5.0 - - 5.0 5.0
Santander2 Jul 2021 - 30.6 - - - 30.6
Aviva HIL loan
1 Jan 2032 - 1.0 - 1.0 - -
Aviva MXF loan Sep 2033 2.2 2.0 2.2 2.0 - -
Aviva loan1 Jun 2040 - 0.7 - 0.7 - -
Aviva loan1 Aug 2029 - 2.7 - 2.7 - -
--------------- --------- -------- ----- ------- ----- ------- -----
7.2 42.0 2.2 6.4 5.0 35.6
------------------------- -------- ----- ------- ----- ------- -----
Non-current
Aviva HIL loan
1 Jan 2032 - 19.4 - 19.4 - -
Aviva AV loan Oct 2036 200.0 - 200.0 - - -
Aviva loan1 Dec 2022 - 25.0 - 25.0 - -
Aviva loan Nov 2028 75.0 75.0 75.0 75.0 - -
Aviva loan1 Aug 2024 - 50.0 - 50.0 - -
Aviva loan1 Aug 2029 - 57.3 - 57.3 - -
Barclays loan Dec 2023 100.0 100.0 - - 100.0 100.0
HSBC loan Nov 2024 100.0 100.0 25.5 - 74.5 100.0
Lloyds loan Dec 2024 50.0 50.0 38.7 28.8 11.3 21.2
RBS loan1 Mar 2022 - 100.0 - 59.4 - 40.7
NatWest loan Oct 2024 100.0 - 86.3 - 13.7 -
Aviva MXF loan Sep 2033 225.2 227.4 225.2 227.4 - -
Aviva MXF loan Sep 2028 30.8 30.8 30.8 30.8 - -
Aviva loan1 Jun 2040 - 24.1 - 24.1 - -
--------------- --------- -------- ----- ------- ----- ------- -----
881.0 859.0 681.5 597.2 199.5 261.9
------------------------- -------- ----- ------- ----- ------- -----
Total 888.2 901.0 683.7 603.6 204.5 297.5
-------------------------- -------- ----- ------- ----- ------- -----
1 Refinanced during 2021.
2 Facility has been renewed in January 2022. Refer to Note 27 for more details.
2021 2020
GBPm GBPm
-------------------------------------------------------- ------- ------
Balance as at 1 January 630.0 688.8
-------------------------------------------------------- ------- ------
Changes from financing activities
Term bank loan drawdowns 335.6 17.8
-------------------------------------------------------- ------- ------
New loan facilities drawn 335.6 17.8
-------------------------------------------------------- ------- ------
Repayments of mortgages principal (20.4) (3.6)
Repayments of term bank loans (232.4) (72.6)
-------------------------------------------------------- ------- ------
Repayments of term loan borrowings (252.8) (76.2)
-------------------------------------------------------- ------- ------
Loan issue costs for new facilities/refinancing (2.7) (1.9)
-------------------------------------------------------- ------- ------
Total changes from financing cash flows 80.1 (60.3)
-------------------------------------------------------- ------- ------
Other non-cash changes
MtM on loans net of amortisation (7.2) (2.4)
Amortisation of loan issue costs 2.2 2.4
Exchange (gain)/loss on translation of foreign balances (2.7) 1.5
-------------------------------------------------------- ------- ------
Total other changes (7.7) 1.5
-------------------------------------------------------- ------- ------
Balance as at 31 December 702.4 630.0
-------------------------------------------------------- ------- ------
At 31 December 2021, total facilities of GBP1,437.4 million
(2020: GBP1,456.8 million) were available to the Group. This
included a GBP70.0 million secured bond, a GBP100.0 million secured
bond, a GBP150.0 million nominal value convertible bond, GBP42.9
million and GBP58.8 million Euro-denominated bonds, a GBP50.0
million Ignis loan note, a GBP77.5 million Standard Life loan note
and a GBP5.0 million overdraft facility. Of these facilities, as at
31 December 2021, GBP1,232.9 million was drawn (2020: GBP1,159.3
million).
On 22 October 2021, the Group secured a new GBP200.0 million
15-year debt facility with Aviva Investors at a fixed rate of
2.52%. The proceeds of the loan have been used to repay a number of
legacy facilities with Aviva Investors totalling GBP177.0 million
at a blended fixed rate of 5.0% and weighted average term of just
under six years. As part of the refinancing a termination cost of
GBP24.6 million has been paid.
On 27 October 2021, the Group has renewed its existing GBP100.0
million revolving credit facility with NatWest for a further
three-year term with options to extend by a further year on the
first and second anniversaries of the new facility.
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:
2021 2020
GBPm GBPm
----------------------------------------------- ------ ------
Term loans drawn: due within one year 2.2 6.4
Term loans drawn: due in greater than one year 681.5 597.2
----------------------------------------------- ------ ------
Total terms loans drawn 683.7 603.6
Plus: MtM on loans net of amortisation 29.3 36.6
Less: unamortised borrowing costs (10.6) (10.2)
----------------------------------------------- ------ ------
Total term loans per the Group Balance Sheet 702.4 630.0
----------------------------------------------- ------ ------
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 18e.
The Group has entered into interest rate swaps to manage its
exposure to interest rate fluctuations. These are set out in Note
17.
b) Bonds
2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Unsecured:
Convertible bond July 2025 at fair value 171.6 175.0
Less: unamortised costs - -
---------------------------------------------------- ----- -----
Total unsecured bonds 171.6 175.0
---------------------------------------------------- ----- -----
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 42.9 45.6
EUR70 million secured bond (Euro private placement)
September 2031 58.8 62.6
Ignis loan note December 2028 50.0 50.0
Standard Life loan note September 2028 77.5 77.5
Less: unamortised bond issue costs (3.1) (3.6)
Plus: MtM on loans net of amortisation 5.1 5.8
---------------------------------------------------- ----- -----
Total secured bonds 401.2 407.9
---------------------------------------------------- ----- -----
Total bonds 572.8 582.9
---------------------------------------------------- ----- -----
There were no bond conversions during the year (2020:
GBPnil).
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 GBP70.0 million and mature on 3 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 GBP100.0 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 EUR51.0
million (GBP42.9 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:
-- EUR40.0 million 2.46% senior notes due December 2028.
-- EUR11.0 million 2.633% senior notes due December 2030.
On 16 September 2019, new senior secured notes for a total of
EUR70.0 million (GBP58.8 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, GBP50.0 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 GBP150.0
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
GBP75.0 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 142.29 pence as at 31 December 2021 (2020: 147.10 pence).
2021 2020
GBPm GBPm
--------------------------------------------------- ----- -----
Opening balance - fair value 175.0 172.7
Issued in the year - -
Cumulative fair value movement in convertible bond (3.4) 2.3
--------------------------------------------------- ----- -----
Closing balance - fair value 171.6 175.0
--------------------------------------------------- ----- -----
The fair value of the Bonds at 31 December 2021 and 31 December
2020 was 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
2021 2020
GBPm GBPm
----------------------------------- ------- -------
Current liabilities:
Term loans and overdrafts 2.2 6.4
Bonds - -
----------------------------------- ------- -------
Total current liabilities 2.2 6.4
----------------------------------- ------- -------
Non-current liabilities:
Term loan and overdrafts 681.5 597.2
MtM on loans net of amortisation 29.3 36.6
Less: unamortised loan issue costs (10.6) (10.2)
----------------------------------- ------- -------
700.2 623.6
----------------------------------- ------- -------
Bonds 549.2 555.7
MtM on loans net of amortisation 5.1 5.8
MtM on convertible bond 21.6 25.0
Less: unamortised bond issue costs (3.1) (3.6)
----------------------------------- ------- -------
Total non-current bonds 572.8 582.9
----------------------------------- ------- -------
Total borrowings 1,275.2 1,212.9
----------------------------------- ------- -------
16. 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.
2021 2020
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
----------------------------- ----- -----
17. Derivatives and other financial instruments
It is Group policy to maintain the proportion of floating rate
interest exposure at between 20% and 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.
2021 2020
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 5.2 -
Non-current liabilities (0.8) (0.1)
------------------------------------------------------- ----- -----
4.4 (0.1)
------------------------------------------------------- ----- -----
Total fair value of interest rate swaps 4.4 (0.1)
------------------------------------------------------- ----- -----
Shown in the balance sheet as:
Total non-current assets 5.2 -
Total non-current liabilities (0.8) (0.1)
------------------------------------------------------- ----- -----
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 2021 was a GBP4.5 million gain
(2020: GBP4.0 million gain), including the amortisation of the cash
flow hedging reserve of GBP4.5 million (2020: GBP4.4 million).
Interest rate swaps and caps with a contract value of GBP188.0
million (2020: GBP188.0 million) were in effect at 31 December
2021. Details of all floating to fixed rate interest rate swap
contracts held are as follows:
Fixed interest
Contract value Product Start date Maturity per annum %
------------------ ------------- --------------- -------------- --------------
2021
GBP88.0 million Swap September 2020 March 2022 0.0397
GBP100.0 million Swap October 2021 November 2024 0.0699
GBP(66.0) million Reverse swap October 2021 November 2024 2.5200
GBP66.0 million Cap October 2021 November 2024 1.2500
GBP(67.0) million Reverse swap October 2021 November 2024 2.5200
GBP67.0 million Cap October 2021 November 2024 1.2500
GBP(67.0) million Reverse swap October 2021 November 2024 2.5200
GBP67.0 million Cap October 2021 November 2024 1.2500
------------------ ------------- --------------- -------------- --------------
GBP188.0 million
2020
GBP88.0 million September 2020 March 2022 0.0397
GBP100.0 million September 2020 November 2024 0.0699
--------------------------------- --------------- ------------- --------------
GBP188.0 million
------------------------------------------------------------------ --------------
On 28 October 2021 the HSBC GBP100.0 million variable leg of the
LIBOR swap was converted to SONIA. The term and fixed rate were
unchanged at November 2024 expiry and 0.0699%.
On 27 October 2021 three new swap agreements were entered into
totalling GBP200.0 million. All are effective until 29 November
2024 and receive a fixed rate of 2.52%, with variable rates
payable. These included a GBP66.0 million swap agreement with HSBC
paying a variable of SONIA + 1.6275%, a GBP67.0 million swap
agreement with Barclays paying a variable of SONIA + 1.575% and a
GBP67.0 million swap agreement with NatWest paying a variable of
SONIA + 1.5849%. A one-off payment of GBP1.8 million across all
three new swap agreements was made to cap SONIA at 1.25% for the
length of the agreement, equivalent to 0.1 pence per share on an
adjusted net tangible asset value basis.
18. 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 17 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
------------------------- ---------------------------- ----------- -------- ------
2021
London Interbank Offered
Rate Increase of 50 basis points 5.5 6.0 11.5
London Interbank Offered
Rate Decrease of 50 basis points (5.5) (6.0) (11.5)
------------------------- ---------------------------- ----------- -------- ------
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)
------------------------- ---------------------------- ----------- -------- ------
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 12).
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 is 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
-------------------------- --------- ------------ -------- ---------- ---------- -------
2021
Interest-bearing loans
and borrowings - 9.8 29.7 514.6 1,001.4 1,555.5
Interest rate swaps (net) - - - - - -
Trade and other payables 1.6 29.6 3.2 2.9 2.0 39.3
-------------------------- --------- ------------ -------- ---------- ---------- -------
1.6 39.4 32.9 517.5 1,003.4 1,594.8
-------------------------- --------- ------------ -------- ---------- ---------- -------
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
-------------------------- --------- ------------ -------- ---------- ---------- -------
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
(2020: 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 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 17), 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
2021 2021 2020 2020
GBPm GBPm GBPm GBPm
-------------------------------------- ---------- ---------- ---------- ----------
Financial assets
Trade and other receivables 17.6 17.6 17.4 17.4
Effective interest rate swaps - - - -
Ineffective interest rate swaps 5.2 5.2 - -
Cash and short term deposits 33.4 33.4 103.6 103.6
-------------------------------------- ---------- ---------- ---------- ----------
Financial liabilities
Interest-bearing loans and borrowings (1,232.9) (1,275.1) (1,159.3) (1,212.9)
Effective interest rate swaps - - - -
Ineffective interest rate swaps (net) (0.8) (0.8) (0.1) (0.1)
Trade and other payables (40.0) (40.0) (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.
-- 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 2021 were 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 - 5.2 - 5.2
---------------------------------- ------- ------- ------- -------
Financial liabilities
Derivative interest rate swaps - (0.8) - (0.8)
Convertible bond (171.6) - - (171.6)
Fixed rate debt - 921.3 - 921.3
---------------------------------- ------- ------- ------- -------
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 2020 were 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.
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 15 and 17 and the Group's
equity is analysed into its various components in the Group
Statement of Changes in Equity. The Board 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 (2020: 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 cover1: 1.05 to 2.25 (2020: 1.05 to 1.75); and
-- loan to value1: 55% to 75% (2020: 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.
2021 2020
Group loan to value ratio GBPm GBPm
-------------------------------------------------------- ------- -------
Fair value of completed investment properties 2,772.2 2,548.2
Fair value of development properties 19.2 23.4
Ground rent recognised as finance leases 4.5 4.5
-------------------------------------------------------- ------- -------
2,795.9 2,576.1
-------------------------------------------------------- ------- -------
Interest-bearing loans and borrowings (with convertible
bond at nominal value) 1,232.9 1,159.3
Less cash held (33.4) (103.6)
-------------------------------------------------------- ------- -------
Nominal amount of interest-bearing loans and borrowings 1,199.5 1,055.7
-------------------------------------------------------- ------- -------
Group loan to value ratio 42.9% 41.0%
-------------------------------------------------------- ------- -------
19. Share capital
Ordinary Shares issued and fully paid at 12.5 pence each
2021 2020
------- ----- ------- -----
Number Number
- 2021 - 2020
million GBPm million GBPm
--------------------------------------- ------- ----- ------- -----
Balance at 1 January 1,315.6 164.4 1,216.3 152.0
Scrip issues in lieu of cash dividends 5.2 0.7 2.7 0.3
Share issue 9 July 2020 and 5 January
2021 11.5 1.4 96.6 12.1
Share issues on other acquisitions 0.6 0.1 - -
--------------------------------------- ------- ----- ------- -----
Balance at 31 December 1,332.9 166.6 1,315.6 164.4
--------------------------------------- ------- ----- ------- -----
Issue of shares in 2021
Number
of shares
- Issue
Date of issue million price
------------------------------------- ----------------- --------- -------
Share issue 5 January 2021 11.5 152.80p
Scrip issue in lieu of cash dividend 26 February 2021 1.2 148.52p
Scrip issue in lieu of cash dividend 21 May 2021 1.9 148.98p
Scrip issue in lieu of cash dividend 20 August 2021 1.5 159.50p
Share issue on other acquisition 9 September 2021 0.6 168.02p
Scrip issue in lieu of cash dividend 26 November 2021 0.6 154.90p
------------------------------------- ----------------- --------- -------
20. Share premium
2021 2020
GBPm GBPm
------------------------------------------- ----- -----
Balance at 1 January 466.7 338.1
Scrip issue in lieu of cash dividend 7.4 3.9
Share issue 9 July 2020 and 5 January 2021 - 127.9
Premium on shares issued for Nexus merger - -
Share issue on other acquisitions 0.9 -
Shares issued on bond conversions - -
Share issue expense (0.1) (3.2)
------------------------------------------- ----- -----
Balance at 31 December 474.9 466.7
------------------------------------------- ----- -----
21. 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 and the Nexus merger.
2021 2020
GBPm GBPm
---------------------------------------------------- ----- -----
Capital reserve
Balance at 1 January and 31 December 1.6 1.6
---------------------------------------------------- ----- -----
Foreign exchange translation reserve
Balance at 1 January 1.2 (1.0)
Exchange differences on translating the net assets
of foreign operations (3.4) 2.2
---------------------------------------------------- ----- -----
Balance at 31 December (2.2) 1.2
---------------------------------------------------- ----- -----
Merger reserve
Balance at 1 January 398.0 398.0
Shares issued on acquisition of Nexus 16.1 -
Balance at 31 December 414.1 398.0
---------------------------------------------------- ----- -----
Balance of merger and other reserves at 31 December 413.5 400.8
---------------------------------------------------- ----- -----
22. Special reserve
2021 2020
GBPm GBPm
------------------------------------- ----- ------
Balance at 1 January - 65.4
Dividends paid - (61.2)
Scrip issue in lieu of cash dividend - (4.2)
------------------------------------- ----- ------
Balance at 31 December - -
------------------------------------- ----- ------
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 previous periods have been distributed from this
reserve. The remaining dividends distributed in the period have
been distributed from retained earnings.
23. Cash flow hedging reserve
Information on the Group's hedging policy and interest rate
swaps is provided in Note 17.
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:
2021 2020
GBPm GBPm
----------------------------------------------------- ------ ------
Balance at 1 January (20.1) (24.1)
Fair value movement on cash flow hedges - (0.4)
Amortisation of cash flow hedging reserve - 4.4
Net movement on cash flow hedges ("effective swaps")
and amortisation of cash flow hedging reserve 4.5 4.0
----------------------------------------------------- ------ ------
Balance at 31 December (15.6) (20.1)
----------------------------------------------------- ------ ------
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).
24. Retained earnings
2021 2020
GBPm GBPm
------------------------------- ------ -----
Balance at 1 January 402.6 298.5
Retained profit for the year 140.1 112.0
Dividends paid (74.4) (7.9)
Scrip dividend in lieu of cash (8.0) -
Share-based awards ("LTIP") 0.2 -
------------------------------- ------ -----
Balance at 31 December 460.5 402.6
------------------------------- ------ -----
25. Capital commitments
As at 31 December 2021, 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
GBP9.0 million (2020: GBP32.1 million) remains to be funded with
regard to these properties.
As at 31 December 2021, the Group has capital commitments
totalling GBP10.0 million (2020: GBP7.5 million) being the cost to
complete asset management projects on site, and GBP10.7 million
(2020: GBPnil) being the cost to complete investments.
26. Related party transactions
On 5 January 2021 the Group completed the acquisition of Nexus
and internalised the management arrangements. Refer to Note 4a for
details on payments made and received in relation to shared
services with Nexus, and on fees payable to Nexus in prior periods.
Refer to Note 7 for further information on the acquisition of
Nexus.
27. Subsequent events
On 11 February 2022, the Group completed a EUR75.0 million
private placement for a term of twelve years at 1.64%.
On 6 January 2022, the Group refinanced a GBP50.0 million
revolving credit facility with Santander. The facility can be drawn
in Sterling and Euros and has an interest rate of 1.65% plus SONIA
or EURIBOR.
28. Audit exemptions taken for subsidiaries
The following subsidiaries are exempt from the requirements of
the Companies Act 2006 relating to the audit of individual accounts
by virtue of Section 479A of the Act.
Name Companies House registration number
-------------------------------------- -----------------------------------
Primary Health Investment Properties
(No. 8) Limited 11274227
Primary Health Investment Properties
(No. 9) Limited 11328330
PHP Euro Private Placement ML Limited 11714222
PHP Epsom Limited 12004850
GP Property One Limited 10801028
PHP SPV Limited 12256431
PHP Primary Properties (Haymarket)
Limited 08304612
Motorstep Limited 04532029
MXF Properties OM Holdings Limited 10946803
MXF Properties OM Group Limited 07039742
MXF Properties Bridlington Limited 07763871
PHP Liverpool Holding Company Limited 07342781
PHP Tradeco Holdings Limited 09642987
PHP Cardiff Group Limited 10253987
PHP (Spilsby) Limited 13735391
PHP Health Solutions Limited 06949900
PHP Liverpool Limited 08872347
PHP Tradeco Limited 07685933
PHP Property Management Services
Limited 02877191
PHP Primary Care Developments Limited 11862233
PHP Cardiff Limited 10254492
PHP Developments (Cardiff) Limited 04856121
-------------------------------------- -----------------------------------
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 15 February 2022.
For and on behalf of the Board
Steven Owen
Chairman
15 February 2022
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 PHP 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.
EPC is an Energy Performance Certificate
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 9.
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 9.
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 9.
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 9.
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 9.
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.
IFRSs are International Financial Reporting Standards as adopted
by the United Kingdom.
IFRS or Basic net asset value per share ("IFRS NAV") is 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.
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 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.
Net zero carbon refers to the point at which a process,
activity, system etc... produces net zero carbon emissions, through
emissions reduction, use of low or zero carbon energy and removal
or offsetting of residual emissions. In the context of buildings
and activities associated with the construction, refurbishment,
maintenance and operation of buildings, PHP refers to the UK Green
Building Council "Net zero carbon, a frame work definition"
(https://www.ukgbc.org/ukgbc-work/net-zero-carbon-buildings-a-framework-definition/).
This sets out the key requirements for buildings to achieve 'net
zero carbon - construction' and 'net zero carbon - operational
energy'.
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.
Sterling Overnight Interbank Average Rate ("SONIA") is the
effective overnight interest rate paid by banks for unsecured
transactions in the British Sterling market.
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 136.7
Revaluation surplus and profit
on sales 110.5
------------------------------- -------
247.2
Opening property assets 2,576.1
Weighted additions in the
period 33.1
------------------------------- -------
2,609.2
Total property return 9.5%
------------------------------- -------
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 2020 112.9
------------------------- -----
At 31 December 2021 116.7
------------------------- -----
Increase/(decrease) 3.8
Add: dividends paid
Q1 interim 1.550
Q2 interim 1.550
Q3 interim 1.550
Q4 interim 1.550
------------------------- -----
Total shareholder return 10.0
------------------------- -----
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 EAFASFDPAEAA
(END) Dow Jones Newswires
February 16, 2022 02:00 ET (07:00 GMT)
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Primary Health Properties (LSE:PHP)
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