Cost and funding efficiencies combined with continued asset growth have delivered strong earnings growth in 2015 for Primary Health Properties (L:PHP). By the year end the progressive dividend was again fully covered (107% in H215 and 98% for the year). There is political and financial support for NHS planning that should soon see an acceleration of new development spending, with good prospects for long-term growth. Property yields have contracted but funding conditions remain strong, maintaining a healthy spread and opportunity for ongoing accretive growth. Meanwhile, PHP is making a limited entry into the Irish market where it can acquire at higher debt-adjusted yields.
Operational gearing
On the back of a 5% increase in rental income, EPRA earnings per share increased by 19.5%. The operational gearing reflects the renegotiation of the management fee in May 2014, which helped limit the growth in administrative costs to less than 1%, as well as debt cost efficiencies resulting from active liability management. IFRS earnings grew by 52%, additionally benefitting from further significant revaluation gains, which also saw NAV per share grow despite the high payout of underlying earnings. Our 2016 estimates are slightly increased and point to further growth in dividend cover in the current year.
To read the entire report Please click on the pdf File Below