Primary Health Properties PLC

Primary Health Properties PLC

Annual Results Presentation 2018

Interim Results

2020

Modernising Primary Care infrastructure in a

sustainable way for the 21st Century

Our growing portfolio

Agenda

PHP at a glance Continued progress in 2020

Key financial highlights and results Property Portfolio overview Debt summary

Dividend track record and investment highlights

Appendices

PHP at a glance

  • Leading investor in flexible, modern primary healthcare accommodation across UK and Ireland
  • Leading portfolio of 510 properties valued at £2.5 billion
  • FTSE 250 UK Real Estate Investment Trust ("REIT") with c.£2.0 billion market capitalisation
  • 90% of income funded by government bodies (GPs, NHS or HSE); WAULT of 12.5 years
  • 24 consecutive years of dividend growth; dividend fully covered by earnings
  • Strong capital base with a prudent balance of shareholder equity and debt finance
  • Continued improving rent review growth outlook; H1 20: £0.8m or 2.2% per annum (FY19: £1.6m or 1.9% per annum)
  • All share merger with MedicX completed March 2019 and businesses successfully integrated creating significant shareholder value and synergies

1 Based on a share price at 150 pence, the closing mid market price as at 27 July 2020

Primary Health Properties Interim Results Presentation 2020

3

Continued progress in 2020

  • £100m proceeds from September 2019 equity raise successfully deployed across 23 standing investments, 6 forward funded developments and 12 asset management projects totalling c. £107m
  • Acquisitions in Q4 2019 and H1 2020
    • Portfolio of 22 purpose built medical centres for £54.0m with good asset management opportunities
    • Bolton purpose built medical centre for £8.0m
    • Ireland forward funded developments at Arklow £16.9m (€18.7m) and Banagher £4.5m (€5.1m)
    • UK forward funded developments at Eastbourne £8.4m, Mountain Ash, Wales £4.9m, Epsom, Surrey £4.0m and Llanbradach, Wales £2.8m
  • Development projects successfully delivered at Athy, Bray and Rialto in Ireland with a total development cost of £43.8m (€48.3m) substantially de-risking forward funded development exposure
  • Rental collections continue to remain robust with 96% collected in both the UK and Ireland for the third quarter of 2020 (Q2 2020: over 99% collected in both UK and Ireland) with the balance expected to be received shortly. We have allowed a £1.1m of quarterly rents to be paid by monthly instalments, given short-term rent deferrals of £0.3m and concessions of £0.2m
  • Successful, oversubscribed £140m equity raise
  • Maximum targeted loan to value (LTV) ratio lowered from 55% to 50%
  • Headroom/liquidity: Over £400m of undrawn loan facilities and cash post all capital commitments
  • Rental growth from rent reviews continuing positive trend: H1 20: £0.8m/2.2% added to rent roll (FY19: £1.6m/1.9%; FY18: £1.1m/1.4%)
  • Covid -19 update: technology and digital driving digital consulting and triage in the future and realisation at the NHS that primary care can be used for many more things e.g. diagnostics, minor operations and treatments. More investment in healthcare likely across UK, Ireland and Western Europe.
  • Dedicated PHP team of over 50 staff all working well from home with site visits recommencing and offices re-open

Primary Health Properties Interim Results Presentation 2020

4

Key financial highlights

Performance

30 June 2020

30 June 2019

Change

Net rental income (£m)

64.8

53.8

+20.4%

Adjusted EPRA earnings (£m)

36.0

27.9

+29.0%

Adjusted EPRA earnings per share (pence)

3.0p

2.8p

+7.1%

Dividends paid (£m)

35.9

26.7

+34.5%

Dividend cover

100%

104%

-

Dividend per share (pence)

2.95p

2.8p

+5.4%

Position

30 June 2020

31 December 2019

Change

Investment property (£bn)

2.5

2.4

+0.4%

Adjusted EPRA NTA per share (pence)

109.1p

107.9p

+1.1%

Loan to value1

40.3%

44.2%

-3.9%

Management

30 June 2020

31 December 2019

Change

Average cost of debt

3.5%

3.5%

-

Growth on rent reviews

2.2% p.a.

1.9% p.a.

+0.3%

WAULT

12.5 years

12.8 years

-0.3 years

EPRA cost ratio

11.6%

12.0%

-0.4%

1. 30 June 2020 includes impact of £140m (£136.9m net of expenses) equity raise in July 2020

Primary Health Properties Interim Results Presentation 2020

5

Income Statement

30 June

30 June

Change

2020

2019

%

£m

£m

Net rental income

64.8

53.8

+20.4%

Administrative expenses

(5.7)

(5.0)

Performance incentive fee

(0.8)

(0.9)

Operating profit before financing costs

58.3

47.9

+21.7%

Net financing costs

(22.3)

(20.0)

Adjusted EPRA earnings

36.0

27.9

+29.0%

Revaluation surplus and profit on sales

10.5

17.7

-40.7%

Fair value loss on derivatives and convertible bond

(8.4)

(4.1)

Adjusted IFRS profit excluding MedicX exceptional adjustments

38.1

41.5

-8.2%

Amortisation of MedicX debt MtM at acquisition

1.5

1.0

Exceptional revaluation adjustment arising on merger with MedicX

-

(138.4)

Exceptional administrative costs arising on merger with MedicX

-

(10.2)

IFRS profit/(loss) before tax

39.6

(106.1)

Adjusted EPRA earnings per share

3.0p

2.8p

+7.1%

IFRS earnings/(loss) per share

3.2p

(10.7p)

Primary Health Properties Interim Results Presentation 2020

6

Balance Sheet strengthened

Adjusted EPRA NTA per share (pence)

115.0

107.9

3.0

(2.95)

0.2

109.1

110.0

0.9

105.0

100.0

95.0

90.0

85.0

Opening

Adjusted

Dividends

Portfolio

Shares

Closing

NTA per

EPRA

paid

revaluation

issued

NTA per

share

earnings

share

30 June 2020

31 December 2019

Change

Adjusted EPRA net tangible assets

£1,329m

£1,313m

+1.2%

Adjusted EPRA net tangible asset value per share

109.1 p

107.9p

+1.1%

Primary Health Properties Interim Results Presentation 2020

7

Property portfolio overview

Key Figures1

30 June 2020

Total number of properties

510

Including properties in Ireland

17

Investment portfolio value (£bn)

2.51

Floor area (000's sqm)

674

Capital value (£ per sqm)

3,725

Contracted rent roll (£m)

133.3

Net initial yield (NIY)

4.86%

Average lot size (£m)

4.9

Average WAULT (years)

12.5

Occupancy

99.5%

Government backed rent

90%

Capital Value 1

Number

Value (£m)

%

> £10m

48

705

28%

£5m

- £10m

108

758

30%

£3m

- £5m

161

623

25%

£1m

- £3m

186

416

17%

< £1m (incl. land £1.6m)

7

8

0%

Total

510

2,510

100%

1. All data as at 30 June 2020

Primary Health Properties Interim Results Presentation 2020

8

Development pipeline

  • Six schemes currently on site with a net development cost of £41.5m

Eastbourne Primary Care Centre, East Sussex

Tenants

GP Practices x 2

Pharmacy

Purchase date:

December 2019

PC date:

Q2 2021

Acquisition cost:

£8.4m

Size:

1,976 sqm

Number of GPs:

11

Patients:

19,000

WAULT:

25 years

Rent review:

OMV

BREEAM rating:

Excellent

Arklow Primary Care Centre, Co. Wicklow, Ireland

Tenants

Health Service Executive (HSE) GP Practice

Pharmacy

TUSLA (Irish government)

Purchase date:

May 2020

PC date:

Q4 2021

Acquisition cost:

£16.2m (€18.0m)

Size:

5,333 sqm

WAULT:

28.8 years

Rent review:

Irish CPI

BER rating :

A3

Llanbradach Primary Care Centre, Wales

Banagher Primary Care Centre, Co. Offaly, Ireland

Tenants

GP Practices x 2

Purchase date:

January 2020

PC date:

Q1 2021

Acquisition cost:

£2.8m

Size:

664 sqm

Patients:

tba

No of GPs:

tba

WAULT:

25 years

Rent review:

OMV

BREEAM rating:

Very Good

Tenants

  • Health Service Executive (HSE)
  • GP Practice
  • Pharmacy

Purchase date:

December 2019

PC date:

Q4 2020

Acquisition cost:

£4.2m (€5.0m)

Size:

1,736 sqm

WAULT:

27 years

Rent review:

Irish CPI

BER rating:

A3

Primary Health Properties Interim Results Presentation 2020

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Investment

  • 23 assets acquired for £62m with good asset management opportunities
  • Strong active pipeline in UK and Ireland totalling £92m including £44m under offer

Lagan & Saltscar Surgery, Redcar

Tenants

GP Practices x 2

Purchase date:

May 2020

Acquisition cost:

£2.6m

Size:

785 sqm

Number of GPs:

8

WAULT:

6.1 years

Rent review:

OMV

Newmarket Medical Practice, Lincolnshire

Tenants

GP Practice x 1

Purchase date:

May 2020

Acquisition cost:

£2.2m

Size:

633 sqm

Number of GPs:

6

WAULT:

6.3 years

Rent review:

OMV

Waters Meeting Health Centre, Bolton

Crumlin Medical Centre, Wales

Tenants

  • NHS
  • GP Practices x 2
  • Pharmacy

Purchase date:

Dec. 2019

Acquisition cost:

£8.0m

Size:

2,295 sqm

Number of GPs:

8

WAULT:

9.7 years

Rent review:

OMV & RPI

Tenants

  • GP Practice x 1
  • Welsh Local Health Board

Purchase date:

May 2020

Acquisition cost:

£1.9m

Size:

602 sqm

Number of GPs:

3

WAULT:

11.6 years

Rent review:

OMV

Primary Health Properties Interim Results Presentation 2020

10

Asset Management - enhancing existing portfolio

  • 12 projects completed or on-site investing £4.1m, £0.12m additional rent and WAULT extended back to 21 years
  • Strong pipeline of over 80 projects either Board approved or advanced negotiations investing c. £36m, £1.1m of additional rent and WAULT extended back to 21 years

Derby Road, Nottingham

Buckley Medical Centre, Buckley, North Wales

Extension to provide 7 new consulting rooms increasing floor space by 20% to meet local demand. Energy efficiency improvements being made to the enlarged building.

Completion date: March 2021

Capex:

£0.8m

Additional Rent:

£42,000 pa

New Lease:

21 years

Size:

1,016 sqm

Patients:

12,000 Number

of GPs:

7

Void space fitted out to provide further clinical space for the GPs and additional rental income for PHP. LED light fittings utilised throughout the refurbishment

Completion date: May 2020

Capex:

£0.1m

Additional Rent:

£5,000 pa

New Lease:

15 years

Size:

2,544 sqm

Patients:

10,500

Number of GPs:

7

Prospect Medical Group, Newcastle

Stokewood Surgery, Eastleigh

Refurbishment to include a first floor extension to increase the usable floorspace and provide 3 additional consulting rooms. Work includes the installation of LED energy efficient lights.

Completion date: October 2020

Capex:

£0.38m

Additional Rent:

£3,000 pa

New Lease:

25 years

Size:

907 sqm

Patients:

16,000

Number of GPs:

11

Surgery extended to meet local population growth. The energy performance has been improved through investment in green initiatives.

Completion date: April 2020

Capex: £0.1m

Additional Rent: £5,000 pa

New Lease:

19 years

Size:

620 sqm

Patients:

18,000

Number of GPs:

13

Primary Health Properties Interim Results Presentation 2020

11

High quality recurring income

Key characteristics of the portfolio

Weighted average

Strong tenant

UK leases have

31% of portfolio

Occupancy

covenant - 90% of

effectively upward

on fixed or

unexpired lease

rent roll paid

indexed uplifts.

rate of

only rent reviews

length of

directly/indirectly

69% OMV review,

99.5%

Irish leases linked

12.5 years

by Government

typically every

to Irish CPI

bodies

three years

...these characteristics result in highly visible cash flows and stable valuation yields

  • Contracted rent roll of over £133.3m p.a.
  • H1 20 - L4L rental growth from rent reviews and asset management projects of £0.9m or 0.7% (FY19: £1.9m or 1.5%) accounting for the majority of the revaluation surplus in the UK
  • Management expect rate of rental growth to improve in future years
  • Peers also reporting positive rental growth outlook
  • Only £3.0m or 2.3% of rent roll expiring in next three years: of which £2.6m is subject to a planned asset management initiative or terms have been agreed to renew the lease

Analysis of leases unexpired by rent roll

<3 years

12.7%

2.3%

7.4%

3-5 years

5-10 years

15.4%

30.4%

10-15 years

15-20 years

> 20 years

31.8%

Primary Health Properties Interim Results Presentation 2020

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Long leases with rental growth potential

  • Effectively upward only rent roll in UK
  • Total weighted average rental growth 2.2% p.a.
    • 69% reviewed to open market (ave. 1.6% p.a.)
    • 25% index linked (ave. 2.7% p.a.)
    • 6% on fixed uplift (ave 2.9% p.a.)

Drivers of rental growth

  • Increased development activity
  • Building cost inflation
  • Reducing the NHS carbon footprint
  • Building regulations and specification creep
  • Replacement cost

Rental growth history

4.5%

3.9%

4.0%

4.0%

3.4%

3.4%

3.5%

3.1%

3.2%

3.0%

3.0%

2.4%

2.5%

2.2%

1.8%

1.9%

2.2%

2.0%

1.4%

1.5%

0.9%

0.9%

1.1%

1.0%

0.5%

0.0%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

H1 2020

Primary Health Properties Interim Results Presentation 2020

13

Debt summary

  • Broad and diverse range of lending partners
  • Long weighted average debt maturity of 6.7 years
  • 99.5% of debt fixed or hedged for a weighted average maturity of 7.7 years
  • Total debt facilities of £1.46bn (90% secured/10% unsecured)
  • Drawn net debt £1.0bn post July 2020 equity raise
  • £403m of undrawn headroom after capital commitments
  • Group LTV 40.3% (34.3% excluding £150m convertible bond)
  • Average cost of debt 3.5% reduced from 4.0% on completion of MedicX merger
  • Marginal cost of debt 2.2%

Euro private placements £109m/€121m (8%)

Convertible bond

£150m (10%)

Aviva £519m (36%)

Sterling bonds and private placements £298m (20%)

RCFs £380m (26%)

Debt maturity profile

£'m 300

281.7

250

231.9

227.7

200

182.0

196.9

150

111.5

100

72.3

57.8

46.4

50

15.9

3.1

7.0

8.4

4.3

0.3

4.2

0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Primary Health Properties Interim Results Presentation 2020

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Strong track record of dividend growth

7.0

Implied PHP 2020 dividend yield2

5.90p

6.0

Share Price3

Yield

5.00p 5.125p 5.25p

5.40p

5.60p

5.0

150p

3.9%

4.25p

4.38p

4.50p

4.63p

4.75p

4.88p

Q4

4.13p

4.0

3.75p

3.38p

3.0

2.25p

2.50p

2.75p

3.00p

Q3

2.00p

2.0

1.75p

1.40p 1.50p

Q1-

  1. 0.80p

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Historic dividend cover

150%

100%

101%

100%

101%

101%

100%

100%

82%

56%

57%

84%

50%

0%

2011

2012

2013

2014

2015

2016

2017

2018

2019

H1 2020

Dividend cover

  • Q1-Q3,2020 dividend of 1.475p per quarter paid or declared (equivalent to 5.9p annualised) a 5.4% increase and 24th year of growth
  • H1 2020 dividend cover at 100%
  • Total dividends paid increased by 34.5% in H1 2020
  1. CAGR: 1997 to Q3 2020
  2. Based on Q1-Q3 2020 dividend of 1.475p declared per share annualised and is illustrative only
  3. Share price is the closing mid market price on 27 July 2020

Primary Health Properties Interim Results Presentation 2020

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Investment highlights

One of the UK's largest primary

health property investors

  • One of the UK's largest listed primary health property investors with 510 properties valued at £2.5 billion
  • FTSE 250 UK REIT with market capitalisation of c. £2.0 billion and improved share liquidity
  • Underlying investment characteristics and strong portfolio metrics continue to reflect the secure, long-term predictable income stream

Low risk, long-term,

Continued disciplined approach to acquisitions and asset management initiatives avoiding asset obsolescence

Continued opportunities in the UK and Ireland

low volatility market

90% of income funded by government bodies (NHS or HSE) on long lease terms - WAULT of 12.5 years

Positive yield gap between acquisition yield and funding costs

Strong, high-quality

Effectively upward-only or indexed rent reviews in UK with improving outlook

and growing cash flows

Rent reviews in Ireland indexed linked to Irish CPI

Simple and transparent cost structure enhancing earnings

Continued organic rental growth from rent reviews and asset management projects

Adding value and

Proactive approach to refinancing to access lower cost of funds over the medium term with 50bp of savings delivered post MedicX

reducing costs

merger

EPRA cost ratio the lowest in the UK REIT sector

Healthcare demand increasing due to ageing and growing populations in the UK and Ireland

Sector demand factors dictate

Unwavering political support in UK and Ireland and promotion of integrated care

continued development of

Historic underinvestment in primary care estate - in need of replacement and modernisation

healthcare premises

Covid-19 - will create more opportunities in the future, more investment in health care with more procedures and consultations

taking place in primary care facilities

Proven business model with

Proven track record of successfully identifying and investing in new assets on attractive terms to grow the portfolio

Consistently maintained high level of occupancy - currently 99.5%

strong management

Experienced management team with corporate, financial, property, investment and NHS experience

Primary Health Properties Interim Results Presentation 2020

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Our growing portfolio

Further background

on PHP

Positive yield gap

Illustrative yield gap on property investment

UK acquisitions

6.0%

5.0%

4.8%

4.0%

0.275%

0.25%

3.0%

2.6%

2.0%

1.7%

1.0%

0.0%

Valuation

Incremental

10 year Euribor

Average debt

Income return

yield*

mgt Fee

Swap Rate**

margin***

after costs

Ireland acquisitions

6.0%

+0.26%

5.1%

5.0%

0.275%

4.0%

3.5%

3.0%

1.6%

2.0%

1.0%

0.0%

Valuation

Incremental

10 yr Euribor

Average debt

Income return

yield*

mgt Fee

Swap Rate**

margin***

after costs

  • PHP portfolio valuation yield 30 June 2020 (used as proxy for market purchases)
  • Sourced from Chatham Financial - 27 July 2020
  • Company incremental margin on debt facilities

Primary Health Properties Interim Results Presentation 2020

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Primary health care opportunity in the UK

  • The UK population has been steadily getting older and this trend is projected to continue in the future.
  • By 2066, it is estimated there will be a further 8.6 million UK residents aged 65 years and over, an increase broadly equivalent to the size of the population of London today, taking the total number in this group to 20.4 million and making up 26% of the total population.
  • Meanwhile, the NHS is adopting a new service model where, amongst other targets, patients get joined-up care, including the right to online digital GP consultations.
  • At the same time, GP practices have been encouraged to form Primary Care Networks ("PCN's"), typically covering 30-50,000 people, to deliver integrated services at scale.
  • To encourage this, Practices will be funded to work together and create genuinely integrated teams of GPs, community health and social care staff.
  • Over the next five years, investment in primary medical and community services will grow faster than the overall NHS budget, with a ringfenced local fund worth at least an extra £4.5 billion a year in real terms by 2023/24
  • However many GP Premises in the UK remain unfit for their current purpose, let alone this expanded role.

Primary Health Properties Interim Results Presentation 2020

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Primary health care opportunity in the UK

  • Common challenges include lack of space in waiting rooms and consultation rooms, growing list sizes and lack of disabled access.
  • The Covid-19 crisis undoubtedly accelerated the intended transition away from face to face GP consultations, with various estimates suggesting c. 85% are currently being conducted remotely.
  • Nonetheless, PHP does not believe this level is sustainable for long periods of time. For example, it is estimated that c.10m people could be waiting for treatment by the end of the year.
  • PHP believes that primary health premises have a vital short term role to play in alleviating some of the immediate consequences of Covid-19.
  • This includes the delivery of some of the backlog of treatments, testing and, potentially, vaccination in due course as well as the resumption of more, but not all, consultations in a face to face format.
  • Over the medium to longer term, PHP believes its modern, purpose built premises and its program of active asset management, means its assets are well placed to benefit from the shift of services away from acute hospitals into the community setting.
  • This is in line with fundamental demographic trends and NHS plans, including funding, for primary care to deliver integrated services and 'operate at scale'.

Primary Health Properties Interim Results Presentation 2020

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£140m Equity raise - use of proceeds

  • £100m proceeds from September 2019 equity raise successfully deployed

1

Funds deployed

Region

Number

Acq'n/dev't cost

across 23 standing

UK

27

£82m

£100m proceeds

investments, 6

successfully

forward funded

Ireland

2

£21m

deployed

developments and 12

(€23m)

asset management

projects

Asset management

12

£4m

Total funds deployed since September 2019

c. £107m

Total funding requirement of c.£128m over the next 18 months to fund a mix of future acquisition pipeline and asset management projects

2

Region

Number

Est. acq'n/dev't cost

Pipeline

Short-term pipeline of

UK

8

£48m

active opportunities,

include:

Ireland

3

£44m

(€49m)

3

Property

Number

Asset Management cost

Active management

Board approved

21

£11m

Asset management

of existing assets to

projects

create additional

Advanced pipeline

61

£25m

value

Funding requirement Estimated pipeline of c.£92m (including £44m

under offer)

Estimated capex on projects in FY20 and FY21

of c.£36m

  • Positive outlook of further medium-term pipeline opportunities

Primary Health Properties Interim Results Presentation 2020

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Strong track record of relative performance

  • IRR over period since inception of 13.4%1 (Average annual inflation (RPI) over period: 2.7%)

CAGR total shareholder returns

PHP TSR (absolute change) - 1yr / 3yr/ 5yr

PHP

Assura

EPRA UK

1 year

20.2%

26.4%

(10.1%)

3 years

16.1%

12.0%

(2.3%)

5 years

15.1%

13.1%

(1.6%)

10 years

13.9%

11.6%

8.2%

20 years

14.8%

-

5.2%

PHP 5 year relative TSR performance

PHP TPR vs MSCI UK Monthly Property Index

10%

7.7%

8.8%

8.8%

8%

6.8%

7.3%

6%

4%

2.2%

2%

0%

1 year to Dec.19

3 years to Dec.19

5 years to Dec.19

PHP

MSCI UK Monthly Property Index

Source: all data sourced from Thomson Reuters EIKON as at close 1 July 2020; IMSCI UK Monthly Property Index

1 IRR includes total dividends paid to 21 August 2020 of 87.38 pence and assumes the sale of the underlying ordinary shares at 155.6 pence, the closing mid market price as at 1 July 2020, having been issued at 25 pence (dividend and share issue price data adjusted where required to reflect four for one share sub-division in November 2015)

Primary Health Properties Interim Results Presentation 2020

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Balance sheet

£m

30 Jun. 20

31 Dec.19

Investment properties

2,514.3

2,413.1

Cash

64.0

143.1

Debt

(1,214.3)

(1,210.4)

Net debt

(1,150.3)

(1,067.3)

Other net current liabilities

(35.5)

(33.0)

Adjusted EPRA net tangible assets (NAV)

1,328.5

1,312.8

Convertible bond fair value adjustment

(23.0)

(22.7)

Fixed rate debt and swap MtM

(63.2)

(58.5)

Deferred tax

(3.3)

(3.1)

IFRS net assets

1,239.0

1,228.5

Fixed rate debt MtM adjustment

(92.0)

(49.0)

EPRA NDV (NNNAV)

1,147.0

1,179.5

Loan to value

45.8%

44.2%

Adjusted EPRA NTA per share (pence)

109.1p

107.9p

IFRS NAV per share (pence)

101.8p

101.0p

EPRA NDV per share (pence)

94.2p

97.0p

Number of shares (millions)

1,217.7

1,216.3

Primary Health Properties Interim Results Presentation 2020

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Spread of funding sources

Secured facilities 3

Provider

Barclays/

Santander

Lloyds

RBS

HSBC

Aviva

Secured

Aviva

Secured

AIB

bond

One Medical

bond

Tenor

Bullet

Bullet

Bullet

Bullet

Bullet

Bullet

Bullet

Amortising

Bullet

Expiry

Jan-2021

Jul-2021

Dec-2021

Mar-2022

Dec-2022

Dec-2022

Dec-2025

Nov-2028

Mar-2027

Facility

£115m

£31m

£30m

£100m

£100m

£25m

£70m

£25m

£100m

Drawn

£55m

£nil

£30m

£53m

£nil

£25m

£70m

£25m

£100m

Collateral2

£224m

£66m

£59m

£230m

£180m

£45m

£133m

£53m

£190m

Contracted rent

£11m

£3m

£3m

£12m

£9m

£3m

£7m

£3m

£10m

LTV Max

60%

65%

65%

55%

67.5%

70%

74%

65%

70%

LTV actual

25%

n/a

51%

23%

n/a

55%

53%

48%

53%

ICR Min

1.5x

1.75x

1.75x

1.5x

2.0x

1.6x

1.15x

1.1x

1.15x

ICR actual

5.6x

n/a

7.2x

6.2x

n/a

2.7x

3.1x

1.8x

3.3x

Valuation fall to breach

£132m

£66m

£13m

£133m

£180m

£10m

£39m

£14m

£47m

Income fall to breach

£7m

£3m

£2m

£9m

£9m

£1m

£5m

£1m

£5m

1. Excludes unsecured £5m overdraft facility

  1. Includes only assets mortgaged to the applicable facility
  2. All data as at 30 June 2020

Primary Health Properties Interim Results Presentation 2020

24

Spread of funding sources (continued)

Secured facilities 3

Unsecured

Cash4/

Total

Unfettered

facilities 1

assets

Provider

Aviva

Ignis

Standard

Aviva

Euro PP (€)

Euro PP (€)

Aviva

Aviva

Convertible

Life

bond

Tenor

Bullet

Bullet

Bullet

Bullet

Bullet

Bullet

Amortising

Amortising

Bullet

Expiry

Nov-2028

Dec-2028

Sept-2028

Aug-2024

Dec-2028

Sept 2031

Jan-2032

Sept-2033

Jul-2025

Aug-2029

Dec-2030

Facility

£75m

£50m

£78m

£111m

£46m

£63m

£21m

£261m

£150m

-

£1,451m

(€51m)

(€70m)

Drawn

£75m

£50m

£78m

£111m

£46m

£63m

£21m

£261m

£150m

(£200m)

£1,013m

(€51m)

(€70m)

Collateral2

£141m

£91m

£135m

£202m

£79m

£111m

£49m

£433m

-

£93m

£2,514m

Contracted rent

£7m

£5m

£7m

£11m

£4m

£6m

£3m

£23m

-

£6m

£133m

(€5m)

(€7m)

LTV Max

70%

74%

74%

65%

70%

70%

70%

75%

-

-

LTV actual

53%

55%

58%

55%

59%

57%

44%

60%

-

-

ICR Min

1.6x

1.15x

1.65x

1.2x

1.15x

1.15x

1.6x

1.4x

-

-

ICR actual

3.2x

2.4x

2.3x

1.9x

3.8x

3.8x

2.0x

2.4x

-

-

Valuation fall to breach

£34m

£24m

£30m

£31m

£13m

£23m

£18m

£84m

-

£293m

£1,184m

Income fall to breach

£4m

£3m

£2m

£4m

£3m

£5m

£1m

£6m

-

£6m

£76m

1. Excludes unsecured £5m overdraft facility

2. Includes only assets mortgaged to the applicable facility

  1. All data as at 30 June 2020
  2. Cash includes £140m (£136.9m net of expenses) equity raise proceeds completed post period end

Primary Health Properties Interim Results Presentation 2020

25

EPRA cost ratio

Six months ended

Year ended

30 June 2020

31 December 2019

£m

£m

Gross rent less ground rent and service charge income

66.2

118.3

Direct property expense

3.2

5.6

Administrative expenses

5.7

10.5

Performance incentive fee ("PIF")

0.8

1.8

Less: service charge costs

(1.7)

(2.8)

Less: ground rent

(0.1)

(0.2)

Less: other operating income

(0.2)

(0.7)

EPRA costs (including direct vacancy costs)

7.7

14.2

EPRA cost ratio

11.6%

12.0%

EPRA cost ratio excluding PIF

10.4%

10.5%

Administrative expenses as a percentage of gross asset value (annualised)

0.5%

0.4%

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0%

Primary Health Properties Interim Results Presentation 2020

26

Rent review results

  • £0.8m (2.2% p.a) increase from 127 rent reviews completed
  • 1.6% p.a. achieved on 44 open market value reviews
  • 2.7% p.a. achieved on 74 indexed linked reviews
  • 2.9% achieved on 9 fixed reviews
  • 708 open market value reviews outstanding with ERV £95.1m or uplift of £2.2m equivalent to 0.8% p.a.

Outstanding reviews focused by region

London and South East

34%

North

24%

Midlands

18%

South West

5%

Wales

13%

Scotland

5%

Ireland

1%

100%

OMV

Number of outstanding

6 months to 30 June 2020

Rent reviews

reviews (current rent)

completed

No

%

No

£m

Reviews relating to calendar years:

2012

-

-

3

0.4

2013

2

0.6%

7

1.1

2014

2

2.7%

6

0.8

2015

3

6.7%

40

4.9

2016

5

1.3%

66

8.8

2017

8

1.6%

73

11.7

2018

3

2.2%

165

22.1

2019

1

3.6%

218

28.7

H1 2020

-

-

130

16.6

24

2.4%

708

95.1

Nil increases

20

0.0%

Total OMV reviews

44

1.6%

Primary Health Properties Interim Results Presentation 2020

27

ESG 2020 Targets and Actions

  • Joined GRESb, a leading ESG benchmark for real assets, and undertaken major exercise collecting baseline data ahead of submission this year
  • In the UK, all new developments to have a BREEAM rating of 'Very good' or 'Excellent'
  • In Ireland, all new developments to have a BER(1) rating of A3 or better.
  • All future asset management to be assessed in line with BREEAM, with a focus on undertaking measures to mitigate energy usage and improve the EPC rating (80% of portfolio rated C or better)
  • Green lease clauses to be standard in all new lettings and lease renewals
  • Installation of EV charging points at 10 pilot sites which, if successful, can be rolled out more widely in the portfolio
  • ESG Policy published setting out our commitment and approach to responsible business
  • Manager culture statement also published and endorsed by the Board of PHP
  • Joined Real Estate Balance, an association that seeks to address gender imbalance in the real estate sector
  • Good governance practices adopted including transparency of our business to all stakeholders

1 Building energy rating

Portfolio EPC ratings

  1. A
    4% 6%

D

16%

B

24%

C

50%

Primary Health Properties Interim Results Presentation 2020

28

Contact details

Harry Hyman

Richard Howell

Chris Santer

Managing Director

Finance Director

Chief Investment Officer

harry.hyman@

richard.howell@

chris.santer@

nexusgroup.co.uk

nexusgroup.co.uk

nexusgroup.co.uk

www.phpgroup.co.uk

Primary Health Properties Interim Results Presentation 2020

29

Disclaimer

Disclaimer

The information contained in this presentation in respect of Primary Health Properties PLC (the "Company") and communicated during any delivery of the presentation, including the talks given by the presenters, any question and answer session and any document or material distributed at or in connection with the presentation (together, the "Presentation") is only being made, supplied or directed in the United Kingdom and the Netherlands at persons who are qualified investors (within the meaning of Article 2(e) of the Prospectus Regulation (Regulation (EU) 2017/1129)) and, in the United Kingdom, (a) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 ("Order") (investment professionals), (b) who fall within Article 49(2)(a) to (d) of the Order (high net worth companies, unincorporated associations etc.) or (c) to those persons to whom it may otherwise be lawfully communicated (all such persons referred to above being "Relevant Persons"). Any investment or investment activity to which the Presentation relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Each recipient is deemed to confirm, represent and warrant to the Company that they are a Relevant Person. Persons who are not Relevant Persons must not attend or receive this Presentation. No person may rely on or act upon the matters communicated in this Presentation. Any person who is not a Relevant Person who has received any document forming part of this Presentation must return it immediately.

This Presentation may contain unpublished inside information with regard to the Company and/or its securities. Recipients of this Presentation should not deal or encourage any other person to deal in the securities of the Company whilst they remain in possession of such inside information and until the transaction described in this Presentation is announced. Dealing in securities of the Company when in possession of inside information could result in liability under the insider dealing restrictions set out in the Criminal Justice Act 1993 or the Market Abuse Regulation ("MAR"). This Presentation may contain information which is not generally available, but which, if available, would or would be likely to be regarded as relevant when deciding the terms on which transactions in the securities of the Company should be effected. Unreasonable behaviour based on such information could result in liability under the market abuse provisions of MAR.

This Presentation is not a prospectus or prospectus equivalent document and does not constitute, or form part of, nor is it intended to communicate, any offer, invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract for any such sale, issue, purchase or subscription. This Presentation does not constitute a recommendation regarding the Company's securities. Recipients of the Presentation should conduct their own investigation, evaluation and analysis of the business, data and property described in the Presentation.

The contents of the Presentation have not been examined or approved by the Financial Conduct Authority ("FCA") or London Stock Exchange plc (the "London Stock Exchange"), nor is it intended that the Presentation will be so examined or approved. The information and opinions contained in the Presentation are subject to updating, completion, revision, further verification and amendment in any way without liability or notice to any party. The contents of this Presentation have not been independently verified and accordingly, no reliance may be placed for any purpose whatsoever on the information or opinions contained or expressed in the Presentation or on the completeness, accuracy or fairness of such information and opinions. No undertaking, representation or warranty or other assurance, express or implied, is made or given as to the accuracy, completeness or fairness of the information or opinions contained or expressed in the Presentation and, save in the case of fraud, no responsibility or liability is accepted by any person for any loss, cost or damage suffered or incurred as a result of the reliance on such information or opinions. In addition, no duty of care or otherwise is owed by any such person to recipients of the Presentation or any other person in relation to the Presentation.

Primary Health Properties Interim Results Presentation 2020

30

Disclaimer (continued)

Past performance cannot be relied on as a guide for future performance. Certain statements, beliefs and opinions contained in this Presentation, particularly those regarding the possible or assumed future financial or other performance of the Company, industry growth or other trend projections are or may be forward looking statements, including the Company's expectations in relation to the unaudited financial results for the six months ended 30 June 2020. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company's ability to control or predict. Forward-looking statements are not guarantees of future performance. Any forward-looking statements made by or on behalf of the Company speak only as of the date they are made and no representation or warranty is given as to their completeness or accuracy or the basis on which they were prepared or that any of these statements or forward-looking statements will come to pass or that any forecast result will be achieved. Neither the Company, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this Presentation will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. The Company is not under any obligation (except as required by the Listing Rules, the Disclosure Guidance and Transparency Rules, MAR and the rules of the London Stock Exchange) and expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. No statement in this Presentation is intended as a profit forecast or a profit estimate and no statement in this Presentation should be interpreted to mean that earnings per Company share for the current or future financial years would necessarily match or exceed the historical published earnings per Company share.

The Presentation is confidential and should not be distributed, copied, published or reproduced (in whole or in part) or disclosed or passed by its recipients in any way to any other person for any purpose, other than with the consent of the Company. By accepting receipt of, attending any presentation or delivery of or electronically accessing the Presentation, you undertake to keep this Presentation and the information contained herein confidential and not to forward the Presentation to any other person, or to distribute a copy, reproduce or publish the Presentation, in whole or in part, for any purpose.

The content of this Presentation is exclusively the responsibility of the Company and neither Numis Securities Limited nor Peel Hunt LLP (the "Banks") shall have any liability whatsoever for any information, representation or statement contained in this Presentation. The Banks, which are authorised and regulated by the FCA, are acting exclusively for the Company in connection with the placing (the "Capital Raising") and no one else and will not be responsible to anyone other than the Company for providing the protections afforded to clients of the Banks nor for providing advice in relation to the Capital Raising or any other matter or arrangement referred to in this Presentation.

All data is sourced by the Company unless identified as otherwise. Numbers presented have been rounded up to the nearest one or two decimal places as appropriate.

Primary Health Properties Interim Results Presentation 2020

31

Disclaimer (continued)

United States

This document is for information purposes only. This document may not be, in whole or in part, by any medium or any form, distributed, copied, reproduced, published, disclosed or passed in any way to any other person without the consent of the Company. Any securities discussed herein have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "US Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States, and any such securities may not be offered or sold, exercised, resold, transferred or delivered, directly or indirectly, in or into the United States unless registered under the US Securities Act or offered in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. This document is not and does not contain or constitute an offer to issue or sell, or the solicitation of an offer to subscribe for or purchase, any securities in the United States, and there will be no public offer of securities in the United States. Any securities described herein have not been approved or disapproved by the US Securities and Exchange Commission, or any other securities commission or regulatory authority of the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of securities nor have they approved this document or confirmed the accuracy or adequacy of the information contained in this document. Any representation to the contrary is a criminal offence in the United States.

Subject to certain exceptions, neither this document nor any copy of it may be taken, transmitted or distributed, directly or indirectly, into the United States of America, its territories or possessions. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. By accepting receipt of or electronically accessing this Presentation or attending any presentation or delivery of this Presentation you agree to be bound by the foregoing limitations and conditions and, in particular, will be taken to have represented, warranted and undertaken that: (i) you are a "qualified institutional buyer" as defined in Rule 144A under the US Securities Act; and (ii) you have read and agree to comply with the contents of this notice.

Australia

This Presentation does not constitute an offer of securities for sale in Australia and does not constitute a Disclosure Document under Part 6D.2 of the Corporations Act 2001 of the Commonwealth of Australia (the "Corporations Act"). It does not and is not required to contain all the information which would be required under the Corporations Act to be included in such a Disclosure Document, and has not been lodged with the Australian Securities and Investments Commission.

This Presentation is intended solely for use by persons who are (i) either a "sophisticated investor" within the meaning of Section 708(8) of the Corporations Act or a "professional investor" within the meaning of Section 9 and Section 708(11) of the Corporations Act; and (ii) a "wholesale client" for the purposes of Section 761G(7) of the Corporations Act (and related regulations) who has complied with all relevant requirements in this respect, and has been prepared on that basis. No offer of securities may be made in Australia except to a person who is a sophisticated investor, a professional investor or a wholesale client (each as defined in the Corporations Act).

No financial product advice is provided in the documentation related to this offer and nothing in the documentation should be taken to constitute a recommendation or statement of opinion that it intended to influence you in making a decision to participate in the offer. Any information contained in the documentation should be seen as general information only and does not take into account the objectives, financial situation or needs of any particular person. The Banks are not licensed to provide financial product advice in relation to the offer of securities, in marketing and providing financial services to eligible Australian wholesale clients pursuant to this documentation.

Primary Health Properties Interim Results Presentation 2020

32

Disclaimer (continued)

Before acting on the information contained in this documentation, or making a decision to participate in the offer, you should read the documentation in full and consider seeking professional financial product advice from an independent person licensed by the Australian Securities and Investments Commission to give such advice.

Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. Neither a prospectus nor Product Disclosure Statement has been or will be issued in relation to this offer. No cooling-off regime applies to the financial products offered to you pursuant to this Presentation or any accompanying documentation.

Other jurisdictions

The distribution of this Presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this Presentation or any part of it comes should inform themselves about, and observe, any such restrictions. The Presentation does not constitute or form part of, nor is it intended to communicate, any offer, invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, any contract whatsoever relating to any securities.

This Presentation is not for publication, release or distribution, directly or indirectly, in whole or in part, in or into the United States of America, Australia, Canada, Japan, the Republic of South Africa or any jurisdiction where it would be unlawful to do so.

The relevant clearances have not been, and will not be, obtained from and the securities will not be registered under the applicable securities laws of Canada, Australia, Japan or the Republic of South Africa or any of their respective states, provinces or territories. Accordingly, the Company's securities will not, directly or indirectly, be offered or sold within Canada, Australia, Japan, the Republic of South Africa or any other country outside the United Kingdom where it would be unlawful to do so or offered or sold to any resident, national or citizen of Canada, Australia, Japan, the Republic of South Africa or any other country outside the United Kingdom where it would be unlawful to do so.

By accepting receipt of or electronically accessing this Presentation or attending any presentation or delivery of this Presentation you agree to be bound by the foregoing limitations and conditions and, in particular, will be taken to have represented, warranted and undertaken that: (i) you are a Relevant Person (as defined above); (ii) if you are in Canada, you are both an "accredited investor" within the meaning of section 1.1 of National Instrument 45-106 of the Canadian Securities Administrators or subsection 73.3(1) of the Securities Act (Ontario), as applicable, and also a "permitted client" within the meaning of section 1.1 of National Instrument 31-103 of the Canadian Securities Administrators; and (iii) you have read and agree to comply with the contents of this notice.

Securities legislation in certain provinces or territories of Canada may provide a Canadian purchaser with remedies for rescission or damages if any "offering memorandum" within the meaning of such legislation (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for the particulars of these rights or consult with a legal advisor.

Primary Health Properties Interim Results Presentation 2020

33

Disclaimer (continued)

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the securities referred to in this Presentation will be subject to a product approval process, which is expected to determine that the securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, recipients of this Presentation should note that: the price of the securities may decline and investors could lose all or part of their investment; the securities offer no guaranteed income and no capital protection; and an investment in the securities is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.

The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Capital Raising. Furthermore it is noted that, notwithstanding the Target Market Assessment, the Banks will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the securities.

Each distributor is responsible for undertaking its own target market assessment in respect of the securities and for determining appropriate distribution channels.

July 2020

Primary Health Properties Interim Results Presentation 2020

34

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Primary Health Properties plc published this content on 28 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 July 2020 09:05:09 UTC