Half Year 2026 Primary Health Properties PLC Earnings Call Transcript
Key Points
- Adjusted earnings per share increased by 9% to 3.8p, supporting a fully covered projected dividend for 2026 of 7.3p.
- Rental growth on rent reviews delivered a 6% uplift on settled reviews, with an annualized growth rate of 3.2%, slightly ahead of guidance.
- Over 90% of cost synergies from the Assura merger have been delivered, contributing to a reduced EPRA cost ratio of 8.7%.
- The planned private hospital joint venture with a global institutional investor is on track, expected to repay bridging facilities and reduce leverage.
- Refinancing of $1.2 billion in debt achieved with credit margins 40 basis points lower, reflecting scale benefits and improved access to capital.
- Portfolio fundamentals remain strong with 99% occupancy, a 10-year weighted average lease term, and 76% government-backed income.
- New development pipeline shows strong rental evidence, with rents rebased at higher levels (e.g., £280 per sqm), supporting future growth.
- The company has achieved 30 consecutive years of dividend growth, demonstrating a strong track record of shareholder returns.
- Net debt to EBITDA and interest cover are at elevated levels due to merger-related leverage, though expected to improve with deleveraging.
- The average cost of debt remains at 3.8%, with potential exposure to rising interest rates, though partially mitigated by rental growth.
- The LTV is currently above the target range, with a short-term expectation of low 50s, requiring continued capital recycling to reach below 50%.
- Valuation surplus was modest at £18 million, with yield expansion of just one basis point, indicating limited yield compression in the current market.
- The private hospital joint venture completion is still pending, with final terms and values not yet disclosed, creating some uncertainty.
- The company faces challenges in converting rental reversion into actual rental growth across the wider portfolio, requiring ongoing effort.
- The cost ratio, while low, is not the lowest in the sector, and further improvements may be limited without additional scale.
Thank you for joining us for PHP's interim results for the six months ended 30th of June 2026.
It's been another busy period for us, delivering a robust operational performance, translating into strong financial results and good earnings growth.
We've also made very good progress on our key strategic objectives and I'll walk you through those shortly.
First, moving on to the highlights of our results in the first half.
The operational activity in our portfolio remains a key driver for us. Rental growth on our rent reviews are a high volume aspect of our business, which supports both earnings and dividend growth.
And we are again encouraged by the rental uplifts we have achieved in the period.
This has been enhanced by the Asset Management and Risk Control Development activity, which is vital to set evidence for these rent reviews in the future.
This activity, along with our disciplined cost control over overheads and financing, and the positive contribution from the Asura merger has supported
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