Primary Health Property (PHP) reported a 3.1% rise in net rental income to £78.6mn. Growth was largely driven by rent reviews and property upgrades, with a smaller contribution from recent acquisitions.
Underlying income grew at a slightly slower pace of 2.2% to £47.3mn, due to a 4% increase in financing costs.
Occupancy remained stable at 99.1%, and the portfolio value was broadly flat at £2.8bn. The loan-to-value ratio (how much debt is being used relative to property values) rose marginally from 48.1% to 48.6%.
No new information has been released about PHP’s proposed bid of around £1.79bn for rival property company, Assura. The Assura board has recommended PHP’s bid to its shareholders, who have up until 12 August 2025 to cast their vote.
Dividends totalled 3.55p per share over the first half, up 2.9%.
The shares were broadly flat in early trading.
Our view
PHP’s had a strong start to the year, with rent reviews driving the top line higher and property values starting to offer some stability.
The main story remains PHP’s acquisition and combination with Assura, which is making progress. We can see the logic. Valuations for both businesses have been under pressure in recent years, making this a timely opportunity for consolidation.
Both portfolios focus on primary healthcare sites across the UK and Ireland, where demand for high-quality facilities is expected to rise. PHP has historically been the stronger operator, suggesting scope for both cost savings and improvements to Assura’s portfolio.
The deal includes a £1.2bn credit facility from a group of banks. The aim would be to repay this through asset disposals and joint ventures, to bring the loan-to-value down to within 40-50%.
PHP has tended to operate at the upper end of that range, which is also high by industry standards. If interest rates come down as expected, there should be a mechanic improvement as property values increase, but the balance sheet is something to keep an eye on.
A higher cost of capital in today’s market means attractive development sites are limited, and PHP is lobbying hard with bodies like the NHS to make projects more viable. There’s progress, but only in areas where the need for new buildings is strongest.
It’s a bit of a balancing act though, as performance over the past couple of years has been driven by rent hikes. Those same elevated costs that limit development opportunities are giving landlords like PHP more bargaining power at the negotiating table.
Looking ahead, we think PHP (and Assura) have several features that underpin long-term dividend potential. NHS backlogs mean improving access to primary care is a key component of the UK government’s latest plans. And, with 88% of PHP’s rent roll funded by the NHS or its Irish equivalent (targeting 80–90% post-acquisition), tenant risk remains low.
Ireland is also a key growth driver, with arguably better market dynamics than here in the UK. Leases tend to be longer term, with better yields, and it’s a key area of focus for future growth.
We continue to like PHP as a play on a resilient UK property segment and a potential beneficiary of interest rate cuts and the renewed political focus on the NHS. The valuation isn’t stretched, and the dividend yield is attractive, though not guaranteed. In the near term, developments in the Assura deal are likely to drive investor sentiment, so expect more volatility than usual.
Environmental, social and governance (ESG) risk
Real estate is relatively low risk in terms of ESG. One of the principal drivers of this risk is the capacity to integrate material ESG considerations into decision-making, risk management and public reporting; the most material ESG considerations are environmental, like carbon emissions reduction, energy efficiency and physical climate risk. The rise of hybrid working has also reduced demand for commercial property, making product governance and customer satisfaction a top priority. Other risks to monitor include labour relations, business ethics, and emissions & waste.
According to Sustainalytics, PHP’s overall management of material ESG issues is strong.
Responsibility for overseeing ESG issues is assigned to board level and there is an adequate environmental policy in place. Improvements could be made to ESG related disclosures and executive compensation does not appear to be linked to ESG performance. PHP has targets for increasing investment in sustainable buildings and deadlines to meet those targets, in line with industry best practice.
Primary Health Properties key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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