Interim Results
Primary Health Properties PLC
25 March 2002
Primary Health Properties PLC
25 March 2002
PRIMARY HEALTH PROPERTIES PLC
Modern accommodation for the Provision of Primary Health
Care Services
Interim Results for the six months ended
31 December 2001
Group Financial Highlights
*Interim dividend increased 20% to 4.5p (31 December 2000: 3.75p)
*Basic NAV increased 18% to 153.2p (31 December 2000: 130.1p)
*Portfolio increased 22% to £66.1m (31 December 2000: £54.4m)
*Basic earnings per share increased by 31% to 5.4p (31 December 2000: 4.1p)
*On 25 January 2002, the company placed 785,000 Ordinary shares with
institutions through Numis Securities Limited at a price of 148p per share,
raising £1.2 million before expenses.
Harry Hyman, Managing Director
Enquiries:
Primary Health Properties PLC
Harry Hyman
Managing Director
Tel: 01483 306912
Mobile: 07973 344768
Bell Pottinger Financial
David Rydell/Zoe Sanders - 020 7861 3887
Chairman's Statement
Group profit before tax for the six months to 31 December 2001 totalled £943,000
(2000: £720,000), an increase of 31%.
Profit after taxation was £849,000 (2000: £648,000), an increase of 31%,
yielding basic earnings per share of 5.4p (2000: 4.1p), an increase of 31%, and
fully diluted earnings per share of 5.0p (2000: 4.0p), an increase of 25%.
The Group undertakes a full valuation of its portfolio at each year-end. The net
asset value per share of the Group at 31 December 2001 was 153.2p (basic) (30
June 2001: 152.5p) after providing for the interim dividend of 4.5p declared by
the Board (2000: 3.75p). The interim dividend is payable on 30 April 2002 to
shareholders on the register at 5 April 2002.
The first half of our financial year has seen the continued development of our
portfolio of properties leased to users delivering services to the National
Health Service. At the period-end our paid out portfolio had increased to £65.8
million (£63.3 million of investment properties and £2.5 million of finance
leases) with an associated rent roll of £5.2 million representing a running
yield of some 9.5% on cost. Of the rent roll 70% was receivable from GPs, 16%
from NHS Trusts, 6% from Health Authorities and the residual 8% was largely from
retail pharmacy operators such as Lloyds Chemists.
During the period we have taken delivery of one completed property in Buckingham
Road, Bicester, Oxfordshire, which provides accommodation for a 5 GPs' Practice,
the local Primary Care Group and a physiotherapist. The property was acquired
for a total cost of £1.58 million and produces £126,450 p.a. giving a yield on
cost of approximately 8%.
Although the level of completed property purchases in the first half was only
£1.58 million, we also entered into new commitments during the period totalling
£3.8 million, representing two new Primary Care centres located at Stretford and
Swinton in Greater Manchester. We confidently expect to take delivery of around
£8.5 million of completed stock prior to the company's year-end 30 June 2002.
Excluding fixed uplifts we have a further £2.4 million of our rent roll where
reviews are currently outstanding. The review work carried out to date has
produced some excellent individual uplifts, and rent reviews across the board
have all been in excess of the Retail Price Index for the equivalent period. We
are now in a position to action all outstanding reviews and continue to increase
the existing rent roll, the results of which will increase our rent roll.
During the period medium-term interest rates have decreased considerably with
the 5 year swap rate falling to 5.64% (excluding margin) at the date of the
report. The Group has continued to review its short-term funding alternatives
and has benefited from its strategy to delay hedging arrangements. At the
period-end medium-term debt due under our 10 year facility was £36 million of
which £20 million was hedged at an average cost of 5.706% before margin leaving
us £16 million unhedged at a current rate of 4.0625% (LIBOR before a margin of
0.8%) . In addition the Group is fully drawn down on its £4 million 7.75% 2016
convertible loan stock.
Our pipeline of individual transactions remains strong. We look forward to
reporting further progress in due course.
Accounting policy changes
Financial Reporting Standard (FRS) 19 "Deferred tax" requires that deferred tax
should now be provided in full on all timing differences. The FRS does not
normally permit deferred tax to be recognised on the revaluation surplus. Our
accounting policy was to recognise deferred tax only to the extent that
liabilities or assets were expected to crystallise. FRS 19 has no effect on
actual tax payments. We have therefore changed our accounting policy to make
full provision for timing differences which, in our case, arise primarily from
capital allowances. As allowed by FRS 19 the Group has discounted the potential
deferred tax liability and considers there to be no material impact on the tax
charge for the period. Consequently, there is also no material impact on the
prior year and therefore no restatement has been made.
Subsequent events
On 25 January 2002 the Company placed 785,000 Ordinary shares with institutions
through Numis Securities Limited at a price of 148p per share, raising £1.2
million before expenses. These funds will be used to further the development of
the Group's portfolio. The new shares will be entitled to the interim dividend
declared today of 4.5p per Ordinary share and an accrual for this has been made
in the interim financials statements. However, in accordance with Financial
Reporting Standard 14: Earnings Per Share, because the shares were issued after
the end of the period, no adjustment has been made in calculating earnings per
share either basic or fully diluted. Please see note 6 for further information.
The Company is setting up an equity savings plan with Capita-IRG plc.
G A Elliot
Chairman
25 March 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 December 2001
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
2001 2001 2000
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Turnover 2,665 4,626 2,208
Administrative expenses (549) (972) (478)
Operating profit 2,116 3,654 1,730
Interest receivable 61 115 69
Interest payable (1,234) (2,187) (1,079)
Profit on ordinary activities before tax 943 1,582 720
Taxation (94) (158) (72)
Profit on ordinary activities after tax 849 1,424 648
Interim dividend of 4.5p per share (742) (1,256) (589)
(2001: 8.0p interim and final
2000: 3.75p)
Retained profit for the period 107 168 59
Earnings per share - basic 5.4p 9.1p 4.1p
- diluted 5.0p 8.7p 4.0p
There were no recognised gains and losses other than those passing through the
profit and loss account. All activities are continuing.
CONSOLIDATED BALANCE SHEET
as at 31 December 2001
At 31 At 30 At 31
December June December
2001 2001 2000
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Tangible assets 63,598 61,059 51,923
Current assets
Debtors 381 539 316
Net investment in finance leases: amounts 2,484 2,490 2,492
falling due in more than 1 year
Cash at bank and in hand 1,612 338 958
4,477 3,367 3,766
Creditors: amounts falling due within one (4,022) (3,105) (3,467)
Year
Net current assets 455 262 299
Total assets less current liabilities 64,053 61,321 52,222
Creditors: amounts falling due after
more than one year
Convertible loan stock 2016 (4,000) (4,000) (4,000)
Term loan (36,000) (33,375) (27,800)
(40,000) (37,375) (31,800)
24,053 23,946 20,422
Share capital and reserves:
Called up share capital 7,850 7,850 7,850
Share premium account 5,810 5,810 5,810
Capital reserve 1,618 1,618 1,618
Revaluation reserve 8,287 8,287 4,872
Profit and loss account 488 381 272
Equity shareholders' funds 24,053 23,946 20,422
Net asset value - basic 153.20p 152.52p 130.08p
- fully diluted 142.71p 142.20p 125.24p
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 December 2001
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
2001 2001 2000
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Net cash inflow from operating activities 2,384 3,828 1,968
Returns on investments and servicing of finance
Interest received 9 43 39
Interest paid (1,216) (1,845) (743)
Net cashflow from return on investments and (1,207) (1,802) (704)
servicing of finance
Taxation
UK corporation tax paid - (9) (7)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (1,861) (8,789) (2,423)
Equity dividends paid (667) (1,154) (565)
Net cash outflow before financing (1,351) (7,926) (1,731)
Financing
Term bank loan 2008 2,625 7,875 2,300
Increase/(decrease) in cash 1,274 (51) 569
Reconciliation of net cash flow to movement in net
debt
Increase/(decrease) in cash in the period 1,274 (51) 569
Cash inflow from loans (2,625) (7,875) (2,300)
Movement in net debt in period (1,351) (7,926) (1,731)
Net debt at the beginning of the period (37,037) (29,111) (29,111)
Net debt at the end of the period (38,388) (37,037) (30,842)
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
2001 2001 2000
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Reconciliation of operating profit to net cash
inflow from operating activities
Operating profit 2,116 3,654 1,730
Decrease in operating debtors and prepayments 158 28 253
Increase/(decrease) in operating creditors and 110 146 (15)
accruals
Net cash inflow from operating activities 2,384 3,828 1,968
NOTES:
1. The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's 2001 Statutory Accounts except that
in the financial information for the six months ended 31 December 2001, the
Group has adopted FRS 19 "Deferred Tax". Financial Reporting Standard (FRS) 19
"Deferred tax" requires that deferred tax should now be provided in full on all
timing differences where transactions or events that result in an obligation to
pay more tax in the future or a right to pay less tax in the future have
occurred at the balance sheet date. The FRS does not normally permit deferred
tax to be recognised on the revaluation surplus. Our accounting policy was to
recognise deferred tax only to the extent that liabilities or assets were
expected to crystallise. FRS 19 has no effect on actual tax payments. We have
therefore changed our accounting policy to make full provision for timing
differences which, in our case, arise primarily from capital allowances. As
allowed by FRS 19 the Group has discounted the potential deferred tax liability
and considers there to be no material impact on the tax charge for the period.
Consequently, there is also no material impact on the prior year and therefore
no restatement has been made. The taxation charge is calculated by applying the
Directors' best estimate of the annual tax rate to the profits for the period,
together with refinements of estimations for prior years.
The Group has adopted the provisions of FRS19 taking into account the cashflow
impact of originating and reversing timing differences (discounted basis). This
has had no impact on either the current or previous years tax charges.
2. The freehold properties are included at valuation as at 30 June 2001 plus
additions at cost since that date. Tangible fixed assets consist of:
Six months Twelve months Six months
ended ended ended
31 December 30 June 31 December
2001 2001 2000
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Investment properties 63,343 61,028 51,903
Development loans 255 31 20
63,598 61,059 51,923
3. On 25 January 2002, the Company issued 785,000 Ordinary shares, by way of
placing at 148p.These Ordinary shares are entitled to receive the Interim
dividend of 4.5p per Ordinary share declared in respect of the six months to 31
December 2001. Accordingly, a provision has been made in the Interim financial
statements in respect of the 16,485,000 ordinary shares in issue. The earnings
per share and net asset value calculations are based on the issued share capital
of 15,700,000 Ordinary shares in issue as at 31 December 2001. In the earnings
per share and net asset value calculations the 785,000 Ordinary shares issued by
way of placing have not been included in accordance with Financial Reporting
Standard 14 "Earnings per Share".
4. Earnings per share
The calculation of earnings per share is based on earnings of£849,000 (2000:
£648,000) and 15,700,000 Ordinary shares (2000: 15,700,000). Diluted earnings
per share is calculated in accordance with Financial Reporting Standard No. 14:
Earnings per Share. It is based on earnings of £989,000 (2000: £788,000) and
19,649,513 Ordinary shares (2000: 19,463,707) being the weighted average number
of Ordinary shares in issue during the period.
Earnings: Weighted Average Number of Ordinary Shares:
£ Number
Profit on ordinary activities 849,000 Issued share capital* 15,700,000
after taxation Dilutive effect of options** 471,252
Interest saved on Dilutive effect of convertible
conversion of loan interest Loan stock*** 3,478,261
(including adjustment for
Tax) 140,000
989,000 19,649,513
* Weighted average number of Ordinary shares in issue at 31 December 2001
before the placing described in note 3 above.
** 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
Financial Reporting Standard No. 14: Earnings per share.
*** Excess of the total number of potential shares on conversion of the loan
stock over the number that could be issued at fair value as calculated in
accordance with Financial Reporting Standard No. 14: Earnings per share.
5. Fully diluted net asset value has been calculated as follows:
31 December 2001 30 June 2001 31 December 2001
£'000 £'000 £'000
Net assets:
Per consolidated balance sheet 24,053 23,946 20,422
Add - Loan stock conversion 4,000 4,000 4,000
- Receipts from subscriptions from 1,600 1,600 1,600
options
29,653 29,546 26,022
Ordinary shares:
Issued share capital 15,700 15,700 15,700
Add - New shares issued from options 1,600 1,600 1,600
granted
Loan stock conversion into shares 3,478 3,478 3,478
20,778 20,778 20,778
Calculations assume that the dilution takes place on the respective balance
sheet date.
6. The interim dividend of £742,000 has been calculated on the current issued
share Ordinary Share capital of 16,485,000 at 4.5p net per share. The
current issued Ordinary Share Capital includes 15,700,000 shares in issue as
at 31 December 2001 together with the 785,000 shares issued on
25 January 2002, which rank for the dividend accruing for the six months
ended 31 December 2001.
7. The financial information herein does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The financial information
for the year ended 30 June 2001 is based on the statutory accounts for the
year. Those accounts, upon which the auditors issued an unqualified opinion,
have been delivered to the Registrar of Companies.
Copies of the Interim report will be posted to shareholders and those on the
mailing list as soon as practicable after printing and will also be available on
request from the Company's registered office at Ground Floor, Ryder Court, 14
Ryder Street, London, SW1Y 6QB.
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