Primary Health Properties has continued to take a hit from macroeconomic uncertainties, warning that future growth opportunities are held back by slow rental moves and high costs.
The investor in healthcare facilities posted pretax profit of £4.5m for the six months ended 30 June, an 84% fall on last year’s £38.8m.
A revaluation deficit on its property portfolio topped £40m this year versus £11.9m a year ago, following a net initial yield shift to 5.18% from 5.05%.
In addition, PHP incurred a combined loss of £1.8m, compared to a gain of £4.8m in H1 2023, from the fair value movements of interest rate derivatives and convertible bonds.
The value of the group’s portfolio slipped to £2.75bn across 516 assets, including 21 in Ireland. At the end of June last year, PHP’s portfolio was valued at £2.78bn.
Occupancy levels stood broadly in line year-on-year at more than 99%, helping keep rental income strong, with 89% of the company’s rent being funded directly or indirectly by the UK and Irish governments and a long weighted average unexpired lease term of 9.8 years.
Net rental income in H1 totalled £76.2m, up from £75.5m the year before. Contracted rent roll increased by 1.2% year-on-year to £152.6m.
The firm intends to focus on driving rental growth from both rent reviews and asset management activities. Rental reviews completed in the six months ended 30 June generated an extra £600,000, an uplift of 6.5% over the previous passing rent equivalent to 2.1% on an annualised basis.
Looking ahead, the company noted that increases in construction costs, together with historically suppressed levels of open-market rental growth in the sector, will be significant pull factors to future growth.
It will pay a dividend of 3.45p per share, up 3% on H1 2023.
Chief executive Mark Davies said: “As PHP approaches its 30-year anniversary of continuous dividend growth in 2026, the management team appreciates the importance of driving further earnings growth in the future and this continues to be a focus of the group’s business model.
“We welcome the new Labour government’s commitment to the NHS and, specifically in the first few days of taking power, the health secretary’s identification of increased investment in primary care. As reported in the media, there are commitments to reform GP services and wider community care in order to expand service delivery in these settings, relieving the pressures on the NHS. PHP is extremely well placed to facilitate and benefit from these objectives, creating new and modern facilities to deliver services with huge social impact.”
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