Primary Health Properties to pay 40.276 cents quarterly dividend with strong rental growth

Primary Health Properties (PHP) will pay out a 40.276 cents (1.825 pence) per share cash first quarterly dividend to its South African shareholders, following a positive rental growth outlook for 2023, the JSE-listed UK-based private healthcare facilities group said Tuesday.

The 30th year of consecutive dividend growth had marked a transformational period, with the combination between PHP and Assura successfully delivered, creating a £6 billion healthcare REIT, the company remarked in a trading update for the 12 months to December 31, 2023.

Some 60% of £9 million of synergies identified at time of the deal had already been delivered in the 2 months since Competition and Markets Authority clearance, and integration moves forward "at pace", CEO Mark Davies said.

Rent reviews generated an additional £8.3m, a 6.8% increase over the previous passing rent, or 3.2% on an annualised basis, which supports a positive rental growth outlook. The annualised contracted rent roll stood at £342m.

The enlarged group was now "well placed" to take advantage of the improving rental growth outlook across primary care and private hospitals, with six developments and a pipeline of 51 asset management projects, he said.

"Good progress is being made to expand existing joint ventures and establish a joint venture for our private hospital portfolio, where we see exciting growth opportunities," he said.

The refinancing of Assura's debt facilities provided "significant undrawn liquidity headroom", after capital commitments, of £552m.

"Our immediate focus is to deliver the post-transaction objectives of reducing leverage back to our targeted range of 40% to 50%; deliver the £9m of annualised synergies and integrate the two businesses to achieve the best of both organisations," said Davies.

He said the NHS's 10-year Health Plan published in July 2023 was positive for PHP and he welcomed the UK government's commitment to strengthen the NHS and its emphasis on shifting more services to primary care facilities embedded in local communities, enhanced by the NHS Neighbourhood Rebuild programme announced in the Autumn Budget.

"This plays directly to our strengths and long-standing partnerships across the NHS and gives us a strong foundation to support this transition and deliver value to our shareholders," he said.

The acquisition of Assura was completed on October 20, 2023. Cost synergies so far were mainly through reduced people costs and elimination of duplicated professional fees.

Looking ahead the group would target a 80% to 90% government backed income target, with new or regeared leases typically in excess of 20 years, and organic rental growth greater than 3%. Risk controlled and capital light asset management and development projects would be a focus, as would a strong investment grade credit rating of BBB+ or better.

A portfolio review was underway and new joint ventures and further disposals would aim to reduce leverage back to the 40-50% target.

"We continue to make good progress regarding opportunities for both existing joint ventures within primary care real estate. We are also working with several highly credible counterparties regarding options for a potential joint venture for the private hospital portfolio," said Davies.

The enlarged group had sold four non-core assets for £8.3m, so far. In the UK, across both the PHP and Assura portfolios there were eight new asset management projects, 21 lease re-gears and 20 new lettings during the year.

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