UK-based Primary Health Properties is optimistic about the British government’s commitment to reform the National Health Service (NHS) and is well placed to capitalise on the opportunities this will present.
The group said in a trading update on Wednesday that in the nine months ended September, it generated an additional £2.7m of extra rental income from its rent review and asset management activities, both in the UK and in Ireland.
The group released the trading update ahead of its capital markets day, which is being held on Wednesday.
An extra £2.4m of income was generated in the nine months from 241 reviews that have been settled, representing a 7.9% increase over the previous passing rent, equivalent to 3% on an annualised like-for-like basis, it said.
Importantly, the company continues to see an improving open market value (OMV) rent review outlook continuing the positive trend seen in recent years, it added.
The group, which listed on the JSE a year ago and has recently been included in several key SA indices, including the FTSE/JSE all share index and all property index, says it remains on course to generate in excess of £3m of extra income from rent reviews in 2024 driven by the improving OMV review outlook.
This will be partially offset by the effect of declining inflation on indexed-linked reviews.
A further £300,000 have been generated from asset management activities where the company has exchanged on four new projects, completed seven lease regears and six new lettings in the UK, together with a further six asset management initiatives in Ireland.
“There is a growing momentum driven by demand for space and a strong pipeline of a further 39 asset management projects which, in addition to extending lease lengths and increasing rents, will improve the environmental performance of the buildings we own,” said CEO Mark Davies.
The group has positively addressed the refinancing of debt maturities falling due in 2025 and has completed a new £170m facility with Barclays, with £70m of the proceeds being used to repay the variable rate bond ahead of maturity in December 2025.
The group has also agreed terms with Lloyds to extend its £100m facility for a further three years with an option to increase the size to £125m.
Net debt stood at £1.32bn at end-September and on a pro forma basis the loan to value ratio was 48.1%, within its target range.
“We welcome the new (UK) government’s commitment to reforming the NHS and specifically the need for increased investment in primary care which will add further resilience to the business model,” said Davies.
“As highlighted in the Lord Darzi report, the current primary care estate in the UK is not fit for purpose and there is an urgent need to provide more high-quality, multidisciplinary care in the community in modern facilities with digital infrastructure and diagnostics. In the future this will result in a shift in resources from hospitals towards primary care and community led health services that PHP has been successfully delivering for nearly 30 years,” he said.
“PHP is very well placed to capture the significant opportunity ahead,” said Davies.
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