Primary Health Properties (LON:PHP) outlined what management called a “transformational year” as it reported results following its merger with Assura PLC and provided an update on integration progress, joint venture plans, and balance sheet priorities.
Merger integration and full-year performance
Management said the combination with Assura has already begun delivering strategic and financial benefits, despite the Competition and Markets Authority completing its review at the end of October with no conditions. In the four and a half months since gaining management control, the company said integration is progressing ahead of schedule and is expected to complete by the end of June.
Like-for-like rental growth generated an additional £9 million of income, which management described as 7% growth over the previous passing rent, or just over 3% on an annualized basis. The company said this was slightly ahead of prior guidance of 3%.
Dividend growth and portfolio fundamentals
PHP announced a further dividend increase for 2026 to 7.3p per share annualized (with a second quarterly dividend of 1.825p), representing an increase of just under 3% versus 2025. Management highlighted that this marks the company’s 30th consecutive year of dividend growth.
Executives emphasized what they see as the defensive characteristics of the enlarged portfolio, including:
- 99% occupancy
- 11-year weighted average unexpired lease term (WALT)
- Approximately 76% government-backed income (with an 80%-90% target)
The portfolio stands at around £6 billion following the Assura merger. The company said it remains positioned to benefit from organic rental growth from both open market reviews and index-linked or fixed uplifts across roughly 40% of the portfolio.
Valuation, NAV, and cost control
The company reported a £48 million valuation gain for the year. Management said rental growth contributed £72 million of value, partly offset by 3 basis points of yield expansion during the year (a £24 million deficit). Executives noted the yield expansion occurred in the first half of 2025, with net initial yield remaining flat in the second half.
EPRA net tangible assets (NTA) per share ended the year at 99p, down 4%, which management attributed primarily to one-off transaction impacts from the Assura acquisition. Richard, the finance lead on the call, said the acquisition reduced NTA by 6p per share, split between 3p from £72 million of acquisition costs incurred across both companies and 3p from the share exchange ratio.
The company also highlighted the impact of stamp duty within transaction costs, noting over £8 million of stamp duty was paid to acquire Assura shares, which it said avoided more than £150 million of stamp duty that would have been incurred if the Assura portfolio had been purchased directly in the open market.
PHP reported adjusted NTA of 104p per share, reflecting what it described as the positive fair value (mark-to-market) of long-term fixed-rate debt not recognized under IFRS, equivalent to 5p per share.
On operating efficiency, management said the EPRA cost ratio was just under 10%, down 30 basis points year-over-year, and is expected to fall toward 9% in 2026 as merger synergies flow through. PHP said more than 80% of planned cost synergies—£7.5 million—have already been delivered, with a £9 million synergy target overall.
Deleveraging plan: joint ventures and refinancing
Management reiterated that deleveraging is an immediate priority following the merger. The enlarged group’s loan-to-value ratio stands at 57%, with a 3.7% average cost of debt, and net debt-to-EBITDA of just over 10x. The company’s stated targets are an LTV of 40%-50% and net debt-to-EBITDA below 9.5x, and management said it expects to return to a “strong investment grade” position later in the year.
The company described two key initiatives intended to reduce leverage:
- Primary care JV with USS: PHP said it has agreed commercial terms on £103 million of UK primary care assets to be transferred into the joint venture, subject to final due diligence, with completion expected in Q2 2026. This would take the JV’s assets under management to around £0.3 billion. PHP holds a 20% interest and acts as asset and development manager, earning management fees.
- Private hospital JV: PHP said its £0.7 billion private hospital portfolio is “performing very strongly,” with improving rent cover and inflation-linked long leases. Management said it has four credible offers under evaluation and expects to select a preferred partner soon, targeting a decision before the end of March and no later than the end of April. The company said it expects to complete the transaction in the summer, and indicated it is seeking to achieve book value or close to book value.
Richard said the two deleveraging priorities are expected to generate around £700 million of proceeds and reduce leverage back to 50% on a pro forma basis, with proceeds intended to partially repay approximately £1 billion of acquisition and other facilities.
On funding, PHP said it received significant support from credit markets during the Assura transaction, including a £1.2 billion unsecured bridging facility, the refinancing of £357 million of Assura private placement debt, and work with Fitch to reconfirm Assura’s BBB+ rating post-merger, avoiding a change-of-control event on £900 million of listed bonds.
The company said it has received offers from eight banks to form a new club term and revolving credit facility of £800 million, with three- and five-year maturities and extension options, with the aim of completing the refinancing later in Q2 2026. Management said this facility would provide about £300 million of undrawn liquidity headroom and reduce credit margins by roughly 30 basis points. PHP also said it is documenting an EMTN program to enable future access to the listed bond market, with management indicating this would be more likely after deleveraging and publication of a credit rating, potentially in the second half of the year.
Rental growth, development pipeline, and market commentary
Management said open market rent reviews delivered an uplift of 6.5% over the previous passing rent (2.1% annualized), up from 1.9% annualized in 2024. The company said the integration of rent review teams is complete and that sharing evidence across the enlarged portfolio should support future negotiations.
Executives also discussed development and asset management activity, saying the company exchanged on 49 projects in the year across asset management, lease regears, and new lettings, and has 51 projects in the advanced pipeline. PHP said it completed five new developments in 2025 at an average rent of £260 per sq m and described a current pipeline across six schemes with a weighted average rent of £280 per sq m. The company noted its portfolio is currently let at a weighted average rent of £200 per sq m and said asset management activities are achieving rent “rebased” uplifts of around 15%.
In Q&A, management said rental growth across the enlarged portfolio in the first two months of 2026 has been 3.4%. The company also addressed questions on development economics, saying it was not seeing the District Valuer changing criteria or making direct capital contributions, but emphasized that new developments—particularly those within the USS joint venture—help provide rental evidence.
On the private hospital JV, management said it would likely be structured bilaterally rather than as a club deal, and that PHP could retain a 20% interest similar to the USS JV or potentially a higher stake (up to 50%), depending on final structure and partner selection. Executives said they have not seen appetite diminish due to recent geopolitical events, citing the “resilient nature” of the asset class.
About Primary Health Properties (LON:PHP)
PHP invests in flexible, modern properties for local primary healthcare.
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 healthcare real estate let on long-term leases, backed by secure underlying covenants where the majority of rental income is funded directly or indirectly by a government body.
