Primary Health Properties PLC (LON:PHP), a leading investor in modern primary care facilities in the UK and Ireland, has announced an unaudited trading update, including the key financial highlights, for the six months ended 30 June 2025.
· Improving rental growth and stabilisation in yields underpin valuation growth, further evidencing an inflexion point in the cycle
· 10-Year Health Plan for England supports investment in primary healthcare estate as a social infrastructure asset, with a clear pathway to future growth
· PHP is excited about the compelling market backdrop for the Group and opportunities ahead
Mark Davies, Chief Executive Officer of Primary Health Properties commented:
“At a pivotal time for our sector, PHP has delivered a strong operational and financial performance driven by rental growth across our portfolio, a value-accretive acquisition in Ireland, valuation gains and another period of dividend growth. The improving rental growth outlook and a stabilisation of our property yields at 5.25% signal that we’ve moved through a key inflexion point in the property cycle with a very encouraging outlook ahead.
The 10 year Health Plan which was published last week is clearly positive for PHP. We welcome the Government’s commitment to strengthening the NHS, particularly its emphasis on shifting more services to modern primary care facilities embedded in local communities. This plays directly to our strengths and our long standing partnerships across the NHS give us a strong foundation to support this transition and deliver value to our shareholders.
We continue to believe in the compelling strategic and financial rationale for the recommended combination with Assura plc. The transaction is expected to be earnings accretive for both sets of shareholders and we were pleased to have secured strong support for the transaction from PHP shareholders at our general meeting last week with over 99% of voting shareholders approving the proposed combination. This is a clear endorsement of the Company’s ability to deliver a financially beneficial transaction that is strategically valuable, supported by an expected strong investment grade credit rating that will deliver future value to shareholders and underpin the Group’s progressive dividend policy.
Since the announcement of the Assura plc recommendation, we’ve been discussing forming a joint venture, which is expected to include the private hospital portfolio. Conversations are ongoing with a range of high quality investors and we remain confident of our ability to conclude a transaction in a timely manner post completion.
From day one the combined group will offer a powerful platform with greater scale, enhanced income and valuation growth potential and a lower cost of capital-all underpinned by a clear and important social purpose. The proposed combination also positions us strongly to invest in the future of healthcare infrastructure and we will have the financial capacity and Government support to help deliver it”.
Recommended combination with Assura
On 16 May 2025, PHP announced a firm intention to make a share and cash offer for the entire issued share capital of Assura pursuant to Rule 2.7 of the Takeover Code and on 13 June 2025 posted an offer document to Assura shareholders along with a combined circular and prospectus to PHP shareholders.
Subsequent to the above, on 23 June 2025, the Boards of both PHP and Assura announced the terms of a recommended combination which will be implemented by way of an increased shares and cash offer. Under the increased terms of PHP’s offer, Assura shareholders will receive for each share held 0.3865 new PHP shares and 12.5 pence in cash. Assura shareholders will be entitled to receive a special dividend of 0.84 pence per Assura share in addition to the dividends, each of 0.84p, already declared and paid in April 2025 and to be paid on 9 July 2025. The offer is not conditional on any antitrust, competition or merger control approvals.
On 1 July 2025, PHP’s general meeting was held to approve the transaction with 99.3% of shareholders who voted approving the proposed combination which is a strong endorsement of the transaction.
The transaction will create a UK REIT of significant scale and liquidity with a combined portfolio of approximately £6 billion of long leased, sustainable infrastructure assets principally let to government tenants and leading UK healthcare providers benefiting from increased income security, longevity, diversity of assets, geography and mix of rent review types.
To support the combined group’s progressive dividend policy, paid on a quarterly basis, we have set out an attractive strategy and financial framework which will focus on:
· 80% to 90% government backed income target with new or regeared leases typically in excess of 20 years
· Focus on organic rental growth greater than 3% to deliver sector leading, risk adjusted total property returns
· Risk controlled and capital light asset management and development projects
· Targeting a strong investment grade credit rating of BBB+ or better
· LTV target of 40% to 50%
· Interest cover target of greater than 2.5x net rental income with more than 90% of debt fixed or hedged
· Strong control on costs and overheads with one of the lowest EPRA cost ratios in the sector
A return to PHP and Assura’s long term trading valuations could potentially deliver significant share price valuation upside for shareholders, whilst also benefiting from capital growth and a growing dividend.
PHP encourages all Assura shareholders to accept the PHP offer and to make a mix and match election. Further details including completion and return of the Form of Acceptance and Election or making of an Electronic Acceptance ahead of the deadline on 12 August 2025 can be found on the Group’s website: https://www.phpgroup.co.uk/investors/offer-for-assura-plc. If you have any questions in relation to this offer please telephone the Receiving Agent, Equiniti Helpline on +44 (0) 371 384 2414.
The NHS ‘fit for the future’ 10-year health plan for England
The UK Government’s 10-year plan for the NHS in England was launched on 3 July 2025, to create a new model of care fit for the future, setting out three radical shifts – from hospital to community, analogue to digital, and sickness to prevention.
· The move from hospital to community will be delivered through a ‘neighbourhood health service’ that will join up multiple services through local teams to make them patient focused, accessible and, in time, to offer predictive and preventitive care, anticipating need rather than reacting to it.
· The move to digital will be through the NHS app to improve patient access to services and control their data in a single patient record.
· The move from sickness to prevention will include an ambition to end obesity, incentivisation of healthier choices, better support for people to find and stay in work, an expansion of mental health support and increased use of genomics to enable intervention for people at high risk of developing disease.
There is a clear theme of reducing the reliance on hospitals and an accompanying commitment to shift expenditure away from expensive hospital care. Consequently, the plan should be a catalyst for unlocking significant future opportunities in primary care and community diagnostics.
In support of the shift from hospital to community, the plan outlines the development of neighbourhood health centres in every community acting as a ‘one stop shop’ for patient care and the place from which multidisciplinary teams operate. The objective of NHC’s is to create an offer that meets population needs holistically by co-locating NHS, local authority and voluntary sector services, bringing historically hospital based activities such as diagnostics, post-operative care and rehabilitation into the community but also offer a variety of services such as smoking cessation, weight management, employment support and debt advice providing convenient access to services, particularly for those with complex needs, but will also support more integrated working by healthcare and allied professionals. Importantly, much of the existing UK primary care infrastructure is incapable of facilitating these broad, multi-disciplinary services in the community.
The creation of NHCs will therefore mandate the improved utilisation of existing assets and the delivery of new premises. The plan recognises that private capital, including third party development, will be essential to the delivery of the new estate and proposals for a new plan to support the establishment of an NHC in every community is expected with the Autumn 2025 Budget.
PHP is strategically well placed to assist and support the government and NHS with the NHC programme by enhancing its existing estate through both the Group’s pro-active asset management and development activities.
Financial and operational highlights for the six months ended 30 June 2025
| Income statement and financial metrics | Six months to 30 June 2025 | Six months to 30 June 2024 | Change |
| Net rental income | £78.6m | £76.2m | +3.1% |
| Adjusted earnings | £47.3m | £46.3m | +2.2% |
| Adjusted earnings per share | 3.54p | 3.46p | +2.3% |
| IFRS profit for the period | £59.4m | £3.6m | |
| IFRS earnings per share | 4.4p | 0.3p | |
| Dividends | |||
| Dividend per share | 3.55p | 3.45p | +2.9% |
| Dividends paid | £47.4m | £46.1m | +2.8% |
| Dividend cover | 100% | 100% | |
| Balance sheet and operational metrics | 30 June2025 | 31 December2024 | Change |
| Adjusted NTA per share | 106.2p | 105.0p | +1.1% |
| IFRS NTA per share | 104.0p | 103.0p | +1.0% |
| EPRA NDV per share | 113.9p | 114.1p | -0.2% |
| Property portfolio | |||
| Investment portfolio valuation | £2.81bn | £2.75bn | +0.7% |
| Net initial yield (“NIY”) | 5.25% | 5.22% | +3bps |
| Contracted rent roll (annualised) | £157.7m | £153.9m | +2.5% |
| Weighted average unexpired lease term (“WAULT”) | 9.1 years | 9.4 years | |
| Occupancy | 99.1% | 99.1% | |
| Rent-roll funded by government bodies | 88% | 89% | |
| Debt | |||
| Average cost of debt | 3.4% | 3.4% | |
| Loan to value ratio (“LTV”) | 48.6% | 48.1% |
A glossary of the above terms is available on pages 166 to 168 of the 2024 Annual Report. For the purposes of Rule 29.1(a) and Rule 29.2(a) of the Takeover Code, updated valuations of PHP’s property portfolio supported by valuation reports have been produced by each of CBRE, Avison Young and Knight Frank as external valuers (as defined by the Royal Institution of Chartered Surveyors’ Valuation – Global Standards (2022)) as at 30 June 2025 pursuant to the requirements of Rule 29 of the Takeover Code and will promptly be available on PHP’s website at www.phpgroup.co.uk.
Rental growth
We have continued to focus on delivering organic rental growth derived from our existing assets. This growth arises mainly from rent reviews and asset management projects with income increasing by £2.2 million or 1.4% in the six-month period (H1 2024: £1.8 million or 1.2%). The progress continues the improving rental growth outlook seen over the last couple of years.
Rent review performance
In the six months to 30 June 2025, the Company generated an additional £2.1 million (Q1 2024: £1.6 million; Q2 2024: £1.6 million) of extra rental income from its rent review activities, both in the UK and in Ireland.
Importantly, the Company continues to see an improving open market rent review performance with an additional £0.8 million (H1 2024: £0.6 million; H2 2024: £0.8 million) an increase of 7.6% over the previous passing rent completed across 86 reviews. This includes 37 open market value rent reviews arising in 2022, 2023 and 2024 which delivered an increase of 12.3% over the previous passing rent or 3.6% on an annualised basis.
Asset management
The Group continues to progress an advanced pipeline of 43 projects (31 December 2024: 37 projects) which highlight the improving rental growth outlook with the current weighted average rent of £195psm due to increase by around 15% to £223psm post completion. These projects provide important evidence for future rent review settlements across the wider portfolio.
In the UK, we exchanged on two (H1 2024: three) new asset management projects, three (H1 2024: seven) lease re-gears and two (H1 2024: three) new lettings during the period. These initiatives will increase rental income by £0.12 million, investing £2.2 million and extending the leases back to 18 years.
Valuation and returns
In the period, we have continued to see values stabilise (see table below) with yield expansion continuing to moderate and the impact of rental growth outweighing yield shift. This continues the trend experienced in the second half of 2024 and we expect this to continue in the future.
As at 30 June 2025, the Group’s portfolio comprised 517 assets (31 December 2024: 516) independently valued at £2.81 billion (31 December 2024: £2.75 billion). After allowing for acquisition costs and capital expenditure on developments and asset management projects, the portfolio generated a valuation surplus of £19.8 million or +0.7%, equivalent to 1.5 pence per share.
During the period, the Group’s portfolio NIY has expanded by 3bps to 5.25% (31 December 2024: 5.22%) and the reversionary yield remains unchanged at 5.6% (31 December 2024: 5.6%).
The movement in the portfolio’s valuation over the last three six monthly periods is summarised below and follows on from several years of valuation declines as a result of the higher interest rate environment.
| £ million | H1 2025 | H2 2024 | H1 2024 |
| NIY expansion | (£9.0) / +3bps | (£28.6) / +4 bps | (£73.0) / +13 bps |
| Rental growth | £28.8 | £30.2 | £33.0 |
| Total surplus / (deficit) | £19.8 | £1.6 | (£40.0) |
We continue to see evidence of an improving market for healthcare real estate both in the UK and Ireland which are increasingly viewed as social infrastructure assets with a growing rental income stream considered secure, long and predictable. There are new pools of capital looking at the asset class including global infrastructure funds, pension funds and life assurance companies most of whom manage large pools of capital at a lower cost. This improved liquidity is likely to enhance asset valuations in the future.
The total property returns generated by the portfolio in the period are set out below:
| H1 2025 | H1 2024 | FY 2024 | |
| Income return | 2.9% | 2.8% | 5.5% |
| Capital return | 0.7% | (1.4%) | (1.3%) |
| Total return | 3.6% | 1.4% | 4.2% |
Ireland
As previously reported, in February 2025 the Group acquired the Laya Healthcare facility, Cork, Ireland for €22.0 million / £18.2 million delivering an earnings yield of 7.1%. The private medical facility is let to Laya Healthcare, Ireland’s second largest provider of private health insurance and clinical services providing a bespoke urgent care and diagnostic facility providing some of the best medical technology available in Ireland, and has been subject to a comprehensive tenant led, €6 million, fit-out to provide a number of services including X-ray, MRI, CT, Ultrasound and Dexa scanning and is open 365 days of the year with patients guaranteed to be seen within one hour. The property also provides space for several health and wellbeing clinics providing access to a number of expert teams and services and also acts as the headquarters for Laya Healthcare in Ireland.
At 30 June 2025, the portfolio in Ireland comprised 22 standing and fully let properties with no developments currently on site, valued at £292.6 million or €340.9 million (31 December 2024: 21 assets/£255.3 million or €308.6 million). The portfolio in Ireland has been valued at a NIY of 5.1% (31 December 2024: 5.0%).
PHP continues to see significant growth opportunities in Ireland driven by sustained Government investment in primary care infrastructure and a strategic shift towards community-based healthcare. We continue to monitor a number of potential opportunities in Ireland and in particular three forward funded developments with an expected cost of approximately €75 million being progressed by our development partner in Ireland.
Development
In July 2025, the Group completed work on a development scheme at South Kilburn, London, where we worked with both the local council and ICB, each contributing £0.5 million, to make the scheme economically viable. The scheme comprises the fit-out of a shell unit, being constructed to net zero carbon standards, for a total cost of £3.3 million net of the £1.0 million capital contribution which equates to a 26% uplift in the rent originally set by the District Valuer.
The NZC development, Croft Primary Care Centre, West Sussex, is also due to complete imminently. All further development activity has currently been placed on hold whilst negotiations with the NHS, ICBs and DVs continue to increase rental levels to make schemes economically viable with rental values needing to increase by around 20%-30%.
Financing
The Group’s balance sheet and financing position remain strong with cash and committed undrawn facilities totalling £107.3 million (31 December 2024: £270.9 million) after contracted capital commitments of £12.7 million (31 December 2024: £36.3 million) and the planned repayment of the £150 million convertible bond maturing on 15 July 2025.
At 30 June 2025, total available loan facilities were £1,636.8 million (31 December 2023: £1,630.4 million) of which £1,377.2 million (31 December 2024: £1,326.7 million) had been drawn. Cash balances of £10.4 million (31 December 2024: £3.5 million) resulted in Group net debt of £1,366.8 million (31 December 2024: £1,323.2 million). Contracted capital commitments at the balance sheet date totalled £12.7 million (31 December 2024: £36.3 million) and comprise asset management projects of £12.3 million and development expenditure on the one scheme on site of £0.4 million.
The Group’s key debt metrics are summarised in the table below:
| Debt metrics | 30 June 2025 | 31 December 2024 |
| Average cost of debt – drawn | 3.4% | 3.4% |
| Average cost of debt – fully drawn | 3.9% | 4.0% |
| Loan to value | 48.6% | 48.1% |
| Total net debt fixed or hedged | 100.0% | 100.0% |
| Net rental income to net interest cover | 3.1 times | 3.1 times |
| Net debt / EBITDA | 9.4 times | 9.3 times |
| 5.1 years | 5.7 years | |
| Weighted average debt maturity – all facilities | 4.5 years | 4.9 years |
| Total undrawn facilities and available to the Group | £107.3m | £270.9m |
Dividends
Primary Health Properties distributed a total of 3.55 pence per share in the six months to 30 June 2025, equivalent to 7.1 pence on an annualised basis, which represents an increase of 2.9% over the dividend per share distributed in 2024 of 6.9 pence. This will mark the 29th year of consecutive dividend growth for PHP.
A third quarterly interim dividend of 1.775 pence per share was declared on 16 June 2025. The dividend will be paid on 15 August 2025 to shareholders who were on the register at the close of business on 3 July 2025. The Company intends to maintain its strategy of paying a progressive dividend, which is paid in equal quarterly instalments, and covered by underlying earnings in each financial year. A further interim dividend payment is planned to be made in November 2025, which is expected to comprise a mixture of both Property Income Distribution and normal dividend.
