PHP’s recent interim results showed strong underlying progress enhanced by a first-time contribution from MedicX (for three and a half months) and early achievement of the targeted merger operating synergies. Accelerating rental growth, ongoing asset management initiatives, a strong pipeline of acquisition opportunities and capital resources to fund these all bode well for future growth in recurring earnings and dividends.
H119 adjusted EPRA earnings increased by 63% to £27.9m and EPS by 13% to 2.8p. Of the total, PHP’s existing business contributed £20.3m (H118: £17.1m) and MedicX contributed £7.6m in the three and half months since the merger completed. Dividends increased by 3.7%, the 23rd year of growth, fully covered by adjusted EPRA earnings, and the company is well on target to meet its full year DPS target of 5.6p. Adjusted EPRA NAV per share was little changed at 115.2p and including dividends paid the adjusted EPRA NAV total return was 2.8% or a little more than 4% excluding c 1.4p of negative merger related effects. Our adjusted EPRA EPS forecasts are increased by c 2–4% for each of next three years. Our forecast DPS growth remains unchanged but with cover increased there is scope for a positive surprise.
The merger brought together two complementary high-quality portfolios and created a scale platform, well placed to profitably address the substantial investment needs of the primary healthcare sectors in both the UK and Ireland. In both countries there is broad political will to reform healthcare provision, placing more emphasis on primary care to meet the increasing healthcare needs of growing and ageing populations. The requirement for larger, more flexible, higherquality premises will provide significant investment opportunities for the enlarged group in coming years. The current pipeline of opportunities totals c £150m, including c £70m of properties that are in solicitors’ hands and subject to contract.
PHP offers an attractive and growing dividend, fully covered by earnings. Income visibility is strong, with revenues supported by secure, long-term income, substantially subject to upward-only review, with little exposure to the economic cycle, or fluctuations in occupancy. The complementary nature of the merger and added scale have enhanced future growth prospects.