Enlarged PHP announces 43.9% leap in rental income

Primary Health Properties (PHP) has announced a 43.9% leap in net rental income in the first half of 2019 following its ‘transformational’ merger with MedicX in March.

The healthcare REIT reported a £16.4m increase in net rental income for the six months ended 30 June 2019 compared to the first half of 2018. The majority of the increase – £13.5m – was derived from the MedicX merger. However, it also included £2m from acquisitions and £0.9m from completed rent reviews.

Managing director Harry Hyman (pictured) said PHP’s all share merger with MedicX had brought together two highly complementary portfolios providing a ‘much stronger’ platform for future growth.

As well as delivering a 22.7% total shareholder return during the period, Hyman said the enlarged group had resulted in operating synergies of £4m a year as well as further finance cost savings.

Overall administrative expenses were up 19% to £5m, excluding a £0.9m performance incentive fee paid to Nexus, reflecting the increased size of the group and additional regulatory costs. Meanwhile, net finance costs increased to £20m from £15.5m in 2018, leaving adjusted EPRA earnings of £27.9m against £17.1m the previous year.

Excluding the merger, IFRS profit before tax rose by 7.2% to £41.5m. However, an exceptional revaluation loss of £138.4m and contract termination fee of £10.2m arising from the merger, pushed the group into an IFRS pre tax loss of £106.1m.

EPRA earnings per share jumped 12% to 2.8p while EPRA NAV per share edged up 0.1% against the previous six months to 105.2p.

Total dividends of 2.8p per share were distributed in the period (June 2018: 2.7p) while the total value of dividends leaped by 58.9% to £26.7m on the back of the additional shares issued on the merger and conversion of the remaining convertible bonds, which were fully covered by EPRA earnings.

‘We have continued to selectively grow the portfolio, particularly in Ireland, and further strengthened the balance sheet with a new £150m unsecured convertible bond issue which closed on 15 July 2019,’ said Hyman. ‘PHP’s high-quality portfolio and capital base has helped to deliver another period of strong earnings performance and we are on course to deliver our 23rd consecutive year of dividend growth. Continuing improvements to the rental growth outlook and further reductions in the cost of finance will help to maintain our strategy of paying a progressive dividend to our shareholders which is fully covered by earnings.’