23rd Mar 2006 07:02
Primary Health Properties PLC23 March 2006 Primary Health Properties PLC22 March 2006Embargoed for release at 7am on 23 March 2006 PRIMARY HEALTH PROPERTIES PLC ('PHP PLC') Modern accommodation for the Provision of Primary Health Care Services Interim Results for the six months ended 31 December 2005 Group Financial Highlights *Pre tax profits increased by 58% to £9,365,000 (2004: £5,915,000) *Dividend increased by 13% to 6.75p (2004: 6.0p) *Portfolio revaluation increased by £7.8m *Portfolio owned, leased and committed increased by 31% to £210m (2004: £160m) *Adjusted diluted earnings per share increased by 14% to 6.5p (2004: 5.7p) ** *Adjusted diluted NAV per share increased 8% to 345.8p (30 June 2005: 320.2p)*** ** Adjusted diluted earnings per share - excludes deferred tax and revaluation gains on property*** Adjusted diluted net asset value - excludes deferred tax. Harry Hyman, Managing Director, commented: "The Group has continued to make strong progress in the first half of the year,demonstrated by the 58% increase in pre-tax profits and the 13% increase ininterim dividend. We continue to actively manage the Group's portfolio. In theperiod, we have taken delivery of £12m of completed and fully let properties atfive locations across the UK and entered into new commitments totalling £10m ata further three locations. The Group welcomes the publication of the recent Government White Paper, "OurHealth, our Care, our Say: a New Direction for Community Services" as thisforesees a transfer of approximately 5% of the NHS budget into the primary carearena and an increasing role for PHP as an operator in the private sector." Enquiries: Bell Pottinger Corporate & FinancialDavid Rydell/Zoe Sanders/Kate Ruck KeeneTel: 020 7861 3232 Primary Health Properties PLCHarry HymanManaging DirectorTel: 01483 306912Mobile: 07973 344768 Chairman's Statement This is the first time that Group results have been prepared using InternationalFinancial Reporting Standards (IFRS). Accordingly, the Group's results for thecomparative periods have been restated. This change of accounting basis has hadno effect on the underlying business performance or strategy of the Group, butIFRS does represent a fundamental change in accounting and reporting. Thepublished interim report will include reconciliations (in the form of transitionstatements in the notes to the accounts) and describes for Shareholders the keyimpacts of the conversion from UK GAAP to IFRS. The commentary to be included inthe notes to the published interim financial statements explains the changes inaccounting policies that have been brought about as a result of the conversionto IFRS. The Group has made significant progress during the six months ended 31 December2005. Group profit before taxation, which under IFRS, includes the benefit ofrevaluation gains on investment properties, for the six months to 31 December2005, totalled £9,365,000 (2004: £5,915,000) - an increase of 58%. Dilutedearnings per share, which include the benefit of revaluation gains on investmentproperties, were 33.0p - an increase of 79% over the first half of last year(18.4p). Adjusted diluted earnings per share for the first half were 6.5p, 14% higherthan the interim period last year (5.7p). The Board proposes to pay an interim dividend of 6.75p per share, a rise of0.75p per share over last year's interim dividend. The dividend will be paid on22 May 2006 to Shareholders on the Register of Members on 18 April 2006. The Board has decided that the expense of a scrip dividend scheme is no longerjustified and have made alternative arrangements with the Registrar, Capita IRG,to offer a dividend reinvestment scheme for Shareholders who wish to reinvesttheir dividend as shares. A letter explaining this scheme, together with termsand conditions and an application form, will be posted to Shareholders with thepublished Interim Report. As a result of the regular six-monthly review of the property portfolio, thevalue of the portfolio has increased by £7.8m, with the diluted net asset valueper share increasing by 9% to 267.8p per share compared to 246.6p at 30 June2005. This increase reflects both higher rents and the tightening of yields inthe market. On an adjusted basis, adding back deferred tax and timingdifferences on revaluation gains and removing deferred tax on hedgingderivatives, the diluted net asset value was 345.8p (30 June 2005: 320.2p) (seenote 4 of the financial statements). During the six months ended 31 December 2005 we have taken delivery of £12m ofcompleted and fully let properties at Stockton on Tees, Cardiff, Hednesford,Haddenham, Stafford and Gateshead, and entered into new commitments totalling£10m during the period at Clowne, Luton and Mawsley. The table below sets out the portfolio as at 31 December 2005: 31 December 30 June 31 December 2005 2005 2004 £m £m £mInvestment properties 180.2 160.0 139.2Properties in the course of development 3.2 2.2 2.4Total investment properties 183.4 162.2 141.6Development loans 1.8 2.2 1.7Finance leases 2.5 2.5 2.5Total owned and leased 187.7 166.9 145.8Deposit paid 0.2 0.4 0.1Committed 22.0 19.7 14.1Total owned, leased and committed 209.9 187.0 160.0 Although there have been reports of funding delays within the NHS we have astrong forward pipeline of transactions. The Group welcomes the publication ofthe recent Government White Paper, 'Our Health, our Care, our Say: a NewDirection for Community Services' and notes that this foresees a transfer ofapproximately 5% of the NHS budget into the primary care arena and an increasingrole for the private sector. The annualised rent roll has increased from £10.0m at 30 June 2005 to £11.1m at31 December 2005, representing both new deliveries and rental increases. Rentalincreases secured during the period amounted to £48,000. On balance, wecontinue to obtain satisfactory rent reviews We have continued to monitor our exposure to interest rates and, during theperiod, have entered into new swaps. The gearing of the Group was 53% as at 31December 2005 and from 2 January 2006 we have covered 81% of our exposure tointerest rates for the current financial year. We have broadly similar hedgingin place for the next nine years. The share save scheme has 36 members representing 68,257 shares. Further detailscan be found on the Company's website www .phpgroup.co.uk. Since the end of 2005 the Group has continued to purchase new properties. It hasalso disposed of James Pringle House, Charlotte Street, London W1 and ScotswoodHouse, Newcastle for a total net consideration of £7.3m. Both properties hadleases with less than 10 years to run and were not used as primary care centres,one being a sexual health clinic and the other being the headquarters of anambulance service. The disposals increase the weighted average lease length ofthe portfolio and will enable the proceeds to be applied to the core business ofthe Group. The portfolio now has some 78 properties with a further 11 contracted fordelivery. The portfolio has performed extremely well and we believe that thecombination of the high-quality property portfolio, long lease lengths andstrong covenant quality make a desirable portfolio for future income and capitalappreciation. The Group notes the Budget statement issued by HM Treasury today and we will beconsidering the implications for the Group. G A ElliotChairman22 March 2006 GROUP INCOME STATEMENT (unaudited)for the six months ended 31 December 2005 Six months ended Year ended Six months ended 31 December 30 June 31 December 2005 2005 2004 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Rental income 5,303 9,339 4,444Finance lease income 140 274 136 Rental and related income 5,443 9,613 4,580 Net valuation gain on property portfolio 7,837 16,602 4,694Administrative expenses (1,308) (2,207) (1,154) 6,529 14,395 3,540 Operating profit before financing costs 11,972 24,008 8,120 Finance income 161 278 162Finance costs (2,768) (4,899) (2,367) Profit before tax 9,365 19,387 5,915 Current taxation - - -Deferred taxation (1,639) (6,713) (1,897) Profit for the period* 7,726 12,674 4,018 Earnings per share - basic 34.1p 59.1p 19.4p - diluted 33.0p 55.4p 18.4p Adjusted earnings per share - basic 6.7p 13.0p 5.9p - diluted 6.5p 12.3p 5.7p * wholly attributable to equity shareholders of Primary Health Properties plc ("PHP Plc")All activities are continuing. GROUP BALANCE SHEETas at 31 December 2005 At 31 December At 30 June At 31 December 2005 2005 2004 £'000 £'000 £'000 (unaudited) (audited) (unaudited)Non current assetsInvestment properties 183,430 162,311 141,561Development loans 1,758 2,310 1,762Net investment in finance leases 2,510 2,523 2,536 187,698 167,144 145,859 Current assetsTrade and other receivables 1,678 1,655 1,453Cash and cash equivalents 2,236 1,112 3,340 3,914 2,767 4,793 Total assets 191,612 169,911 150,652 Current liabilities:Deferred income (2,347) (2,184) (2,050)Corporation tax payable (681) (681) (681)Trade and other payables (3,472) (3,315) (3,712) (6,500) (6,180) (6,443) Non current liabilitiesTerm Loan (102,000) (88,800) (84,460)Deferred tax (18,930) (17,860) (13,044)Derivatives (1,896) - - (122,826) (106,660) (97,504) Total liabilities (129,326) (112,840) (103,947) Net assets 62,286 57,071 46,705 EquityShare capital 11,339 11,326 10,826Share premium 12,022 11,952 9,566Capital reserve 1,618 1,618 1,618Cash flow hedging reserve (1,327) - -Retained earnings 38,634 32,175 24,695 Total equity * 62,286 57,071 46,705 Net asset value - basic 274.66p 251.94p 215.70p - fully diluted 267.83p 246.60p 212.62p Adjusted net asset value - basic 358.13p 330.78p 275.94p - fully diluted 345.80p 320.24p 268.72p * Wholly attributable to equity holders of Primary Health Properties PLC Group Statement of Changes in Net Equity (unaudited)for the six months ended 31 December 2005 Cash flow Share Share Capital hedging Retained capital premium reserve reserve earnings Total £'000 £'000 £'000 £'000 £'000 £'000 30 June 2005 11,326 11,952 1,618 - 32,175 57,071Opening adjustment to reserves for IAS 39 - - - (1,292) - (1,292) As restated 1 July 2005 11,326 11,952 1,618 (1,292) 32,175 55,779 Profit for the period - - - - 7,726 7,726Losses on cashflow hedges taken to equity - - - (50) - (50) Deferred tax on cashflow hedges taken toequity - - - 15 - 15 Total recognised income and expenses for theperiod - - (35) 7,726 7,691 Issue of shares 13 74 - - - 87Issue expenses - (4) - - - (4)Share based payment charge - - - - 92 92Dividends paid and declaredFinal dividend for the year ended 30 June2005 - - - - (1,359) (1,359) 31 December 2005 11,339 12,022 1,618 (1,327) 38,634 62,286 Group Statement of Changes in Net Equity (unaudited)for the year ended 30 June 2005 Share Share Capital Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 30 June 2004 9,074 7,459 1,618 21,553 39,704Profit for the period - - - 12,674 12,674 Total recognised income and expenses forthe period - - 12,674 12,674 Issue of shares 2,252 4,813 - - 7,065Issue expenses - (320) - - (320)Share based payment charge - - - 245 245Dividends paid and declaredFinal dividend for the year ended 30June 2004 - - - (998) (998) Interim dividend for the year ended 30June 2005 - - - (1,299) (1,299) 30 June 2005 11,326 11,952 1,618 32,175 57,071 Group Statement of Changes in Net Equity (unaudited)for the six months ended 31 December 2004 Share Share Capital Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 30 June 2004 9,074 7,459 1,618 21,553 39,704Profit for the period - - - 4,018 4,018 Total recognised income and expenses forthe period - - 4,018 4,018 Issue of shares 1,752 2,345 - - 4,097Issue expenses - (238) - - (238)Share based payment charge - - - 122 122Dividends paid and declaredFinal dividend for the year ended 30June 2004 - - - (998) (998) 31 December 2004 10,826 9,566 1,618 24,695 46,075 Group Cash Flow Statementfor the six months ended 31 December 2005 Six months ended Year ended Six months ended 31 December 2005 30 June 2005 31 December 2004 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Operating activitiesGroup operating profit before financing costs 11,972 24,008 8,120 Adjustments to reconcile group operating profit tonet cash flows from operating activitiesLess: Revaluation gains on property (7,837) (16,602) (4,694)Plus: Shares based payment expense 92 245 122Increase in trade and other receivables (196) (158) (177)Increase in trade and other payables 160 240 117 Cash generated from operations 4,191 7,733 3,488Interest received 114 300 11Interest paid (3,897) (4,275) (1,898) Net cash flow from operating activities 408 3,758 1,601 Investing activitiesPayments to acquire tangible fixed assets (10,459) (17,451) (8,741)Development loans advanced (749) (2,550) (1,171)Deposits paid - (393) (172) Net cash flow from investing activities (11,208) (20,394) (10,084) Financing activitiesOrdinary share issue (net of expenses) (4) 2,680 (204)Term bank loan 13,200 16,590 12,250Equity dividends paid (1,272) (2,231) (932) Net cash flow from financing activities 11,924 17,039 11,114 Increase in cash and cash equivalents for the period 1,124 403 2,631 Cash and cash equivalents at start of period 1,112 709 709 Cash and cash equivalents at end of period 2,236 1,112 3,340 NOTES: 1. The interim financial information has been prepared, for the firsttime, using International Financial Reporting Standards (IFRS) as adopted by theEuropean Commission. Similarly, the Group's results for comparative periods havebeen restated. The preliminary opening balance sheet and IFRS comparatives,together with current period numbers, have been prepared by management using itsbest knowledge of the expected standards and interpretations of theInternational Accounting Standards Board and facts and circumstances andaccounting policies that will be applied when the Group prepare the firstcomplete set of IFRS financial Statements for the year ended 30 June 2006. 2. The freehold and leasehold properties are included at valuation as at31 December 2005. 3. The calculation of diluted earnings per share as at 31 December 2005 is based on the following: Earnings per share for the six months to 31 December 2005 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 7,726 22,658,334 34.1 Option conversion* - 782,328 Diluted earnings per share 7,726 23,440,662 33.0 Adjusted earnings per share for the six months to 31 December 2005 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 7,726 22,658,334 34.1 Adjustments:Deferred tax 1,639Net valuation gains on valuation (7,837)of property Adjusted basic earnings per share 1,528 22,658,334 6.7Option conversion* - 782,328 Diluted earnings per share 1,528 23,440,662 6.5 Earnings per share for the year ended 30 June 2005 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 12,674 21,459,735 59.1 Option conversion* - 549,187Convertible Loan Stock Conversion** 42 926,276 Diluted earnings per share 12,716 22,935,198 55.4 Adjusted earnings per share for the year ended 30 June 2005 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 12,674 21,459,735 59.1 Adjustments:Deferred tax 6,713Net valuation gains on valuation (16,602)of property Adjusted basic earnings per share 2,785 21,459,735 13.0Option conversion* - 549,187Convertible Loan Stock Conversion** 42 926,276 Diluted earnings per share 2,827 22,935,198 12.3 Earnings per share for the six months ended 31 December 2004 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 4,018 20,704,623 19.4 Option conversion* - 411,003Convertible Loan Stock Conversion** 42 926,276 Diluted earnings per share 4,060 22,041,902 18.4 Adjusted earnings per share for the six months ended 31 December 2004 Ordinary shares (weighted average) Net profit attributable to Ordinary Shareholders £'000 number Per share pence Basic earnings per share 4,018 20,704,623 19.4 Adjustments:Deferred tax 1,897Net valuation gains on valuation (4,694)of property Adjusted basic earnings per share 1,221 20,704,623 5.9Option conversion* - 411,003Convertible Loan Stock Conversion** 42 926,276 Diluted earnings per share 1,263 22,041,902 5.7 * Excess of the total number of potential shares on option exercise over the number that could be issued at fair value as calculated in accordance with International Accounting Standard No.33: Earnings per share.** The total number of potential share as on conversion of the convertible Loan Stock. 4. Fully diluted net asset value has been calculated as follows: 31 December 2005 30 June 2005 31 December 2004 £'000 £'000 £'000 (unaudited) (audited) (unaudited)Net assets:Per Consolidated Balance Sheet 62,286 57,071 46,705Add - Receipts from the exercise of options 2,736 2,736 2,736 65,022 59,807 49,441 No. of shares No. of shares No. of sharesOrdinary shares:Issued share capital 22,677,718 22,652,776 21,652,776Add - New shares issued on exercise of options 1,600,000 1,600,000 1,600,000 24,277,718 24,252,776 23,252,776 Fully diluted net asset value per share 267.83p 246.60p 212.62p Calculations assume that the dilution takes place on the respective balancesheet dates. Fully diluted adjusted net asset value per share 31 December 2005 30 June 2005 31 December 2004 £'000 £'000 £'000 (unaudited) (audited) (unaudited) Net assets 62,286 57,071 46,705Adjustments to add back:Deferred tax on timing differences 5,045 4,561 4,054Deferred tax on revaluation gains 14,454 13,299 8,990Adjustments to remove:Deferred tax on derivatives (569) - - Adjusted net assets 81,216 74,931 59,749 Add - Receipts from the exercise of options 2,736 2,736 2,736 83,952 77,667 62,485 No. of shares No. of shares No. of sharesOrdinary shares:Issued share capital 22,677,718 22,652,776 21,652,776Add - New shares issued on exercise of options 1,600,000 1,600,000 1,600,000 24,277,718 24,252,776 23,252,776 Fully diluted net adjusted asset value pershare 345.80p 320.24p 268.72p Calculations assume that the dilution takes place on the respective balancesheet dates. 5. The financial information set out above does not constitute the Company'sstatutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2005 is based on the statutory accounts for the year adjusted for IFRS. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The Interim Report will be posted to Shareholders with details of the dividendreinvestment plan on 3 April 2006, and to those on the mailing list as soon aspracticable thereafter. It will also be available on request from the CompanySecretary, J O Hambro Capital Management Limited, Ground Floor, Ryder Court, 14Ryder Street, London, SW1Y 6QB. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Primary Health