UK REIT, Primary Health Properties (PHP), has published its unaudited interim results for the six months ended June 2024, reporting an increase in its net rental income to £76.2 million (June 2023: £75.5 million).

Commenting on PHP’s interim results, CEO Mark Davies says the Group is encouraged by its continued improvement in open market value rental growth, together with its strong control on costs “which has resulted in one of the lowest EPRA cost ratios in the REIT sector and with the majority of PHP’s debt either fixed or hedged for a weighted average period of six years, it is clear that PHP’s competitive advantage is built on these strong fundamentals and leading position in the UK, combined with our large exposure in Ireland.”

With an investment property portfolio valuation of £2.75 billion (December 2023: £2.78 billion), the Group reported a net initial yield of 5.18% (December 2023: 5.05%) with a weighted average unexpired lease term of 9.8 years (December 2023: 10.2 years).

Its portfolio is currently 99.2% occupied with rent-roll funded by government bodies of 89%.

“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 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,” says Davies.

The Group’s headline earnings per share decreased by 10.5% to 3.4 pence (June 2023: 3.8 pence) and its earnings per share by –90% to 0.3 pence (June 2023: 3 pence) with its dividend per share having increased by 3% to 3.45 pence (June 2023: 3.35 pence) which remains fully covered by adjusted earnings at 100%. PHP’s net tangible assets per share decreased by 2.8% to 103.5 pence (December 2023: 106.5 pence).

PHP’s average cost of debt remained unchanged at 3.3% with its loan-to-value (LTV) ratio of 48% (December 2023: 47%) and a weighted average debt maturity (drawn facilities) of six years. It has undrawn loan facilities and cash of £307.6 million on hand (December 2023: £321.2 million).

“Growth in the immediate future will continue to be focused on increasing income from our existing portfolio and we are encouraged by the firmer tone of rental growth experienced over the last couple of years. We believe dynamics of inflation in recent years, including significantly increased building costs combined with demand for new primary care facilities, and the need to modernise the estate, will continue to drive future rental settlements.”

“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 an important focus of the Group’s business model.”