Strategic Objectives

The overall objective of the Group is to create progressive returns to shareholders through a combination of earnings growth and capital appreciation. To achieve this, PHP invests in health care properties across the United Kingdom let on long term leases, backed by a secure underlying covenant where the majority of rental income is funded directly or indirectly by the UK government.

DELIVER

DELIVER PROGRESSIVE RETURNS

Generate progressive shareholder returns through a combination of earnings and valuation growth.

HOW HAVE WE PERFORMED?

Operating activity in the year has increased overall profitability, which translates into improved earnings per share. A total of 19.5 pence per share was paid in dividend to shareholders, an increase of 2.6%. Dividend cover rose to 84% (2013: 57%).

The quality of the Group’s portfolio, a successful acquisition strategy and the execution of value adding management projects has underpinned significant valuation growth.

PERFORMANCE MEASURES

EPRA EPS increased 116% to 16.4p
Property portfolio valuation surplus of £29.2 million, like for like growth of 3.2%
EPRA NAV per share increased by 6.3% to 319 pence per share
Total NAV return of 12.8%
Dividend cover 84% (2013: 57%)

LOOKING FORWARD

By delivering on each of the operational strategic objectives, the Board will deliver growing returns to shareholders.

An interim dividend of 10.0 pence per share has been declared, payable on 1 April 2015.

KEY RISKS MANAGED BY THE GROUP

The key overall risk associated with the Group’s businesss strategy is its investment in a niche sector that is greatly influenced by Government policy.

The valuation and return from the Group’s portfolio may be affected by adverse economic conditions.

GROW

GROW PROPERTY PORTFOLIO

Fund the development of and acquire modern, purpose built health care premises that provide secure long term income streams with the potential for rental growth and capital enhancement.

HOW HAVE WE PERFORMED?

In the year PHP acquired three completed assets and committed to fund the development of four further assets with an aggregate cost of £42.9 million.

We also took delivery of five assets on completion of their construction with a total cost of £21.7 million.

PERFORMANCE MEASURES

Total capital value (including commitments) increased by 8.2% to £1.04 billion
Acquisitions in period totalling £42.9 million, WAULT of 24 years

LOOKING FORWARD

The sector fundamentals are strong with continued demand for modern, purpose built premises.

We have a good pipeline of further commitments and opportunities that will be delivered in 2015.

KEY RISKS MANAGED BY THE GROUP

The development of new properties is tightly controlled by the NHS and recent structural changes within the NHS have slowed the level of approvals. Continued availability of funding is key to the Group’s ability to secure further assets.

MANAGE

MANAGE EFFECTIVELY AND EFFICIENTLY

Work to improve the rental potential, longevity of underlying income streams and secure capital growth from assets within the portfolio, whilst controlling operating costs.

HOW HAVE WE PERFORMED?

In the year we have completed eight asset management projects that have (i) created new lettable areas and income streams from extending existing properties, (ii) increased the rent received from the existing asset, or (iii) extended the unexpired lease terms with tenants at the centres, or a combination of these.

The provision of advisory and administrative services were consolidated to Nexus in May 2014, amending the charging structure and reducing fee rates.

PERFORMANCE MEASURES

Eight completed projects, committing £4.4 million of capital
Generated additional WAULT of 15.7 years and additional rental income of £0.3 million
Portfolio WAULT of 15.3 years (2013: 15.7 years)
TER managed down to 69 basis points (2013: 88 basis points)

LOOKING FORWARD

Two further projects on-site committing £2.1 million of capital to add 20.5 years to the lease term and £0.2 million of rental income. A number of projects are under discussion with tenants and the NHS.

TER will continue to fall due to the reducing scale advisory fee basis as the property portfolio continues to grow.

KEY RISKS MANAGED BY THE GROUP

The bespoke nature of the Group’s assets can lead to limited alternative use requiring them to be kept fit for purpose.

The Group has no employees and depends upon services provided by third parties for its efficient operation and management.

FUND

DIVERSIFIED, LONG TERM FUNDING

Fund activities through a prudent mix of shareholder equity and debt, from a diverse range of sources with varied maturities.

HOW HAVE WE PERFORMED?

The £178 million of debt that was assumed with the PPP acquisition in December 2013 was all refinanced in the year.

The Group has introduced new lenders in the year and widened the range of debt products it utilises with the issue of a £82.5 million Convertible Bond.

Existing facilities have been extended and renegotiated to reduce overall borrowing costs.

PERFORMANCE MEASURES

Facilities available to the Group total £785.9 million, with facility headroom of £116.7 million
Average maturity of facilities 6.2 years (2013: 5.8 years)
LTV of 64.1% (31 Dec 2013: 61.6%)

LOOKING FORWARD

The longevity and security of the Group’s income is attractive to both equity and debt investors.

The Group has strong relationships with a number of providers keen to provide more capital to PHP.

KEY RISKS MANAGED BY THE GROUP

Movement in underlying interest rates could adversely affect the Group’s profits and cash flows.

Without the continuity and longevity of debt facilities, PHP may be unable to meet current and future commitments.