Primary Health Properties (PHP) CMD 2024 summary

Strategic vision and growth drivers

• Aims to be the leading owner, manager, and developer of primary care properties, focusing on government-backed secure income in the UK and Ireland, with a mission to maintain 85-95% government-backed income and potential expansion into other healthcare markets.

• Confident in achieving above-inflation rental growth, targeting 3% annualized growth over the next five years, supported by asset management and risk-controlled development.

• Significant opportunities identified in both the UK and Ireland, with Ireland targeted to grow to 15% of the portfolio and €250 million investment planned over five years, leveraging long-term leases and CPI-linked rent reviews.

• Political, economic, social, and technological drivers, including NHS reforms, government health policy shifts, and demographic trends, are fueling demand for modern primary care facilities.

• The UK government’s 10-year plan and Ireland’s Sláintecare reforms are increasing investment in primary care infrastructure, with 50% of UK primary care centers no longer fit for purpose, creating a £3–5bn development opportunity.

Growth and development initiatives

• Asset management and risk-controlled development are central, with a disciplined approach to project selection, a strong pipeline, and a target yield on cost of 6% and profit on cost of 10%+.

• Pipeline includes large-scale projects in Ireland such as Youghal PCC (€15m), Enniscorthy ECC (€20m), and Donnybrook PCC (€40m+), with increasing lot sizes and rents.

• Asset management initiatives have delivered lease extensions, higher rents, and improved building quality, with recent projects achieving average rent uplifts of 10–15% and a pipeline of 39 projects targeting £2 million additional income in 2-3 years.

• Joint ventures and expansion into adjacent healthcare sectors and community diagnostics are being explored for future growth, with a focus on maintaining government-backed or quasi-government-backed income.

• In Ireland, the model benefits from CPI-linked rents, longer leases, and larger, multifunctional assets, with a strong relationship with the HSE and private sector growth through partnerships like Laya Healthcare.

Financial guidance and operational performance

• Portfolio has grown from £1.2 billion to £2.8 billion since 2017, with disciplined investment focused on accretive transactions and recycling lower-growth assets.

• Rental growth is underpinned by open market reviews and CPI-linked leases, with 8% rental growth achieved in the latest period, a 3% annualized growth target, and £2.4m additional rent YTD from reviews.

• 95% of debt is fixed or hedged, with average cost of debt stable at 3.3% (forecast to rise to 3.5% in 2025) and leverage at 48%, providing significant headroom.

• £301m undrawn headroom after capital commitments, with strong investor demand for future refinancing and convertible bond issuance.

• Dividend growth remains a core commitment, supported by strong earnings, cost discipline, and a 28-year track record of progressive dividends and sector-leading EPRA cost ratio.