Primary Health Properties (PHP), the proprietor of 21 primary wellness centres throughout Ireland, is determined to continue its expansion despite encountering challenges related to rising construction costs. The company recently published its interim results, which are in concordance with initial forecasts.
PHP, a real estate investment trust listed in London and headquartered in the UK, specialises in constructing and leasing healthcare facilities. Over the last few years, the surge in building expenses has deterred PHP from pursuing further market extension ventures. Despite this hurdle, PHP’s CEO, Mark Davies, is optimistic about what lies ahead. He cites the increasing, ageing populations in both UK and Ireland, along with the rise in chronic diseases, as factors that are placing additional strain on the health systems in both countries.
A reported disparity between what the HSE is willing to pay for new plans, accounting for rental rates, and current building costs outlined by Davies, led to the cancellation of two prospective projects in Ireland. Even though these plans were halted, Davies revealed they are actively partaking in an ongoing retendering process.
The near-term pipeline for PHP in Ireland has a projected gross expansion value of approximately €50 million, as revealed in the results. Axis Technical Services, the local property management group purchased by PHP in the previous year, is tasked with spotting opportunities within the industry.
Presently, the organisation’s Irish properties have a valuation of £244.4 million (€288.5 million) which provides around 9% to PHP’s £2.75 billion portfolio value despite its assets in Ireland comprising just above 4% of PHP’s 516 properties.
PHP, which began its investment journey in Ireland a decade ago, plans to increase its Irish unit to make up roughly 15% of its entire portfolio.
“Things are on the rise once more, according to Mr Davies, who is eager to pursue more projects similar to the Ballincollig, an enhanced care facility which the company purchased for €29.6 million from O’Flynn Construction last year, their most substantial single investment in Ireland to date.
The company has more than £300 million at their disposal, and they’re continually looking for engaging opportunities to invest this money. As Mr Davies expressed, they are hoping to broaden their interests within Ireland.
Their operations include obtaining GP-centred health centres or constructing them themselves, and they primarily lease them out to the HSE under agreements that foresee five-year rent assessments following the consumer price index.
Mr Davies spoke highly of the HSE and the Irish Government, praising their advocacy of community health, and he asserted that they have the necessary know-how to collaborate effectively with them.
However, the report specifically mentions opportunities afforded by the new Labour government in the UK. Mr Davies sees the changes in the government as very positive for the company, emphasising that the newly-appointed health secretary, Wes Streeting, understands the importance of community health and primary healthcare and plans to invest billions more pounds in these sectors. Streeting recognises the cost/benefit dynamic of reducing hospital visits, which can cost the country over £400 per patient, in favour of primary healthcare, which can cost as little as £40 per patient.
According to Mr Davies, signals from the new government are promising, and they warmly welcome this refreshing and dynamic change. In the first half, the company’s revenue surged over 9 per cent to £91.9 million, with the net rental income improving just under 1 per cent to £76.2 million.
Adjusted for distinctive costs, profits increased by a similar margin to £46.3 million. The company elevated its dividends by 3 per cent to 3.45p per share in the first half, marking a notable 28-year stretch of continuous dividend growth.
Mr Davies characterised the outcomes as favourable, adding that they lined up with the consensus and expectations, and that there were no unexpected occurrences.”
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