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Primary Health Properties PLC Annual Report 2024
Leading investor
inmodern primary
care premises
Primary Health Properties PLC Annual Report 2024
Contents
Leading investor in flexible,
modern primary healthcare
accommodation across the
UK and Ireland
Sustainable
income performance
Primary Health Properties PLC Responsible Business Report 2024
Strategic report
1 Highlights
2 At a glance
4 Our portfolio
6 Investment case
8 Chair’s statement
12 Business review
15 CEO Q&A
16 Business model
18 Strategic pillars
20 Key performance indicators
22 Financial review
26 EPRA performance measures
28 Responsible business
44 Task Force on Climate-related FinancialDisclosures
51 Section 172 statement
52 Risk management and principal risks
59 Viability statement
Governance
60 Chair’s introduction togovernance
62 Board of Directors
64 Senior leadership team
66 Corporate governance statement
76 Audit Committee report
81 Nomination Committee report
84 Remuneration Committee report
87 Directors’ remuneration report
108 Directors’ report
112 Directors’ responsibility statement
Financial statements
113 Independent auditor’s report
121 Group statement of comprehensive income
122 Group balance sheet
123 Group cash flow statement
124 Group statement of changes in equity
125 Notes to the financial statements
146 Company balance sheet
147 Company statement of changes in equity
147 Notes to the Company financial statements
Shareholder information
153 Notice of Annual General Meeting 2025
165 Shareholder information
166 Glossary of terms
169 Advisers and bankers
Discover more at phpgroup.co.uk
Read more in our Responsible Business Report at phpgroup.co.uk
Shareholder informationFinancial statementsGovernanceStrategic report
2.1%
1.9%
3.6%
Highlights
Dividend per share
6.9p
+3.0%
Total adjusted NTA return
∆
3.6%
+250bps
IFRS profit/(loss) after
taxpershare*
3.1p
+55.0%
IFRS NTA per share
103.0p
-3.3%
Average cost of debt
∆
3.4%
+10bps
Total property return
∆
4.2%
+70bps
Total property portfolio
£2.8bn
-1.4%
Adjusted NTA per share
∆
105.0p
-2.8%
Adjusted earnings per share
∆
7.0p
+2.9%
Net rental income
∆
£153.6m
+2.9%
2024
2023
2022
2021
2020
£153.6m
£149.3m
£141.5m
£136.7m
£131.2m
2024
2023
2022
2021
2020
6.9p
6.7p
6.5p
6.2p
5.9p
8.9%
10.1%
2024
2023
2022
2021
2020
2024
2023
2022
2021
2020
2.0p
3.1p
4.2p
10.5p
8.8p
2024
2023
2022
2021
2020
7.0p
6.8p
6.6p
6.2p
5.8p
2024
2023
2022
2021
2020
3.4%
3.3%
3.2%
2.9%
3.5%
2024
2023
2022
2021
2020
Adjusted earnings
∆
£92.9m
+2.4%
2024
2023
2022
2021
2020
£92.9m
£90.7m
£88.7m
£83.2m
£73.1m
2024
2023
2022
2021
2020
£2.8bn
£2.8bn
£2.8bn
£2.8bn
£2.6bn
2024
2023
2022
2021
2020
2.8%
3.5%
4.2%
9.5%
7.4%
2024
2023
2022
2021
2020
103.0p
106.5p
110.9p
112.5p
107.5p
105.0p
108.0p
112.6p
116.7p
112.9p
* The IFRS profit after tax per share as set out in the summarised results table on page 23.
∆ Alternative performance measures (“APMs”): Measures with this symbol ∆ are APMs defined in the Glossary section on pages 166 to 168, and presented throughout
this Annual Report. All measures reported on a continuing operations and 52-week comparable basis.
IFRS profit/(loss) after tax
£41.4m
+51.6%
2024
2023
2022
2021
2020
£27.3m
£41.4m
£56.3m
£140.1m
£112.0m
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
1
At a glance
Capturing significant opportunity
We invest in flexible, modern properties for local primary healthcare, leton long term leases with a property
portfolio of516assets in the UKand Ireland valued at £2.8 billion.
Our purpose
To support the NHS in the UK,
the HSE in Ireland and other
healthcare providers in tackling
the underinvestment in primary
care facilities in both countries
by being a leading investor in
modern, primary care premises.
Capitalising on our growth drivers
Our sector has many political, economic and social growthdrivers
assisted by the fact that over one-third of the UK’s current
primary care estate is in need of modernisation or replacement.
The current capacity of existing facilities remains a significant
obstacle to implementing government policies aimed at expanding
social delivery within general practice, including social prescribing,
clinical pharmacists, mental health and minor operations.
Political drivers
• Strong political support for
Primary Care, central to the UK’s
reformed NHS under the
‘Neighbourhood Health Scheme.’
• In Ireland, the Government
prioritises Primary Care as the
foundation of healthcare reform.
• Focus on accessibility and
integrated services in both the
UK and Ireland to reduce the
record number of patients
waiting for treatment whilst
progressively moving services
away from hospitals into
primary care.
Economic drivers
• Primary Care is a cost effective
alternative to Secondary Care,
with significantly lower patient
costs. Government initiatives,
like the ‘10 Year Health Plan’
expected in Spring 2025, aim to
improve services and
workforce development.
• Over one-third of UK primary
care estate not fit for purpose,
highlighting the urgent need for
modern facilities.
Social drivers
• The need for additional space
is compounded by a population
that is growing, ageing and
suffering from increased
chronic illnesses.
• Those aged over 65 continues
to increase, and is expected
to increase further by over
30% by 2040 emphasising
the need for expanded and
integrated services.
Over
33%
of UK Primary Care centres
are unfit for purpose
30%
increase in those aged over
65 years old in the UK and
Ireland by 2040
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
2
At a glance continued
Building on a strong and resilient portfolio
Over a six-year period we have increased adjusted earnings by
around 150%, withthedividendpershare paid out to investors
increasing by over 28%.
Our portfolio in 2018
Contracted rent roll
£79.4m
Adjusted earnings
£36.8m
Number of properties
313
Number of tenants
709
Our portfolio in 2024
Contracted rent roll
£153.9m
Adjusted earnings
£92.9m
Number of properties
516
Number of tenants
1,207
Delivering value through our strategy...
Huge investment is required into Primary Care to meet the increasing
needs of its users, and we have the knowledge, skills, expertise
and relationships to deploy in order to make this happen, through
asset management and risk-controlled development and stand
ready to play our part in delivering and modernising the primary
care infrastructure.
...and our approach to sustainability
A strategy and approach to meet the evolving sustainability needs
of the healthcare sector. PHP is committed to transitioning to net
zero carbon (“NZC”) by 2030 for all of the Group’s operational,
development and asset management activities.
FundDeliver
GrowManage
Read more in our Strategy section onpages 18 and 19
Read more in our Responsible business section on pages 28 to 43
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
3
Our portfolio
Building on our strengths
andmaintaining resilience
The majority of our healthcare facilities are GPsurgeries, with otherproperties let to
NHSorganisations, the HSE inIreland, pharmacies anddentists.
Geographical spread byvaluation
38
90
40
32
83
51
119
21
42
Property value
£2.8bn
(2023: £2.8bn)
Property portfolio
516
(2023: 514)
Locations Properties Value % value
1 Midlands and EastAnglia
119 £595m 22%
2 North East, Yorkshire andHumberside
83 £395m 14%
3 South East
90 £376m 14%
4 North West
51 £366m 13%
5 Republic of Ireland
21 £255m 9%
6 London
42 £230m 9%
7 Scotland
38 £201m 7%
8 Wales
40 £201m 7%
9 South West
32 £131m 5%
516 £2,750m 100%
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
4
Our portfolio continued
Portfolio distribution by capital valueanalysis*
58 £886m
124 £839m
172 £681m
156 £339m
58 £892m
128 £876m
163 £651m
160 £353m
£10m+
£5–10m
£3–5m
£1–3m
2024 2023
£0–1m
6 £4m
5 £3m
* Excluding land and residential units valued at £1.3 million (2023: £1.3 million).
Analysis of leases unexpired – WAULT 9.4 yearsCovenant analysis
Government bodies 89%
Pharmacy 8%
Other 3%
Holding over 5%
<3 years 10%
3–5 years 13%
5–10 years 32%
10–15 years 20%
15–20 years 12%
20+ years 8%
Rental growth outlook
2024 continued to see strong organic rental growth of
£4.0 million, with rent review completions generating
£3.2 million of additional annualised income.
Asset management projects in the year delivering a further
£0.8 million of annualised rental growth from completed and
committed projects. Total rent review completions compares
to £4.0 million achieved in 2023, but importantly open market
completions increased in the same period from £1.3 million
to£1.4 million in 2024.
The progress continues the improving rental growth outlook
seen over the last couple of years and it should be noted that
most of the increase comes from rent reviews arising primarily
in the periods prior to 2022, a period when rental growth was
muted and did not reflect the higher levels of construction cost
and general inflation experienced in recentyears.
Like-for-like rental growth
£4.0m
(2023: £4.3m)
Occupancy rate
99.1%
(2023: 99.3%)
Additional income from rent reviews – growing momentum
2024 £3.2m2024 £1.4m
2023 £4.0m
2022 £3.0m
2021 £2.0m
2020 £1.7m
2019 £1.6m
2023 £1.3m
2022 £1.2m
2021 £1.1m
2020 £0.9m
2019
£0.7m
Open market rental growth
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
5
Investment case
Investing in PHP
PHP is a strong business creating progressive
1
returns forshareholders
by investing in healthcare real estate letonlong term leases, backed
by asecure underlying covenantwhere the majority ofrental income
is funded directlyor indirectly byagovernment body.
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Entering 29 years of consecutive dividend growth
1 Progressive is where it is expected to continue to rise each year, as defined in the Glossary section on pages 166 to 168.
2 7.10 pence is an annualised amount, based on the first quarterly dividend, declared on 2 January 2025.
1.50p
1.40p
1.75p
2.00p
2.25p
2.50p
2.75p
3.00p
3.38p
3.75p
4.13p
4.25p
4.38p
4.50p
4.63p
4.75p
4.88p
5.00p
5.125p
5.25p
5.40p
5.60p
5.90p
6.20p
6.50p
6.70p
6.90p
7.10p
2
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
6
Investment case continued
Low risk, long term and
non-cyclical market
• Two development
opportunities on site
intheUK
• Opportunities in Ireland that
remainattractively priced,
with one acquisition
completed in Ireland for
£18.2 million (€22.0 million)
post period end
• Majority of rents in
bothjurisdictions funded
bygovernment for long
leaseterms
• WAULT of 9.4 years
(2023: 10.2 years)
Strong, high quality
andgrowing cash flow
• Effectively upward-only
orindexed rentreviews
• Continued positiverental
growthoutlook following
another record year in open
marketrental growth in 2024
• Open market rental growth
continues to benefit from the
high inflation experienced in
recent years
• Ireland continues to be the
preferred area of investment
with attractive returns and
alower cost of finance
creating a positive yield gap
• Efficient cost structure
enhancesearnings
Efficient financial
management
• EPRA cost ratio continues
tobe one of the lowest in the
sector with costs continuing
to be tightly controlled
• Marginally higher EPRA
costratio reflects the cost
ofa voluntary redundancy
programme completed in the
year as well as the write-off
of one development work
inprogress that is no
longercompleting
• Notwithstanding the increase
in costs, costs continue to
beclosely controlled and
monitored, representing 10.1%
if vacancy and Axis costs
areexcluded
Sector demand factors
dictate development of
healthcare premises
• Demand from population
growth, ageingand suffering
from more instances of
chronicillnesses
• Capacity of existing facilities
remains a significant
obstacleto implementing
government policies
• Unwavering political support
in theUKand Ireland and
promotion ofintegrated
primary care and NHS Long
Term Plans to effectively
manage patient needs
• Labour’s pledge to reform
primary care with its
proposals being published
inanew 10-Year Health Plan
duein spring 2025
Stable, increasing
incomereturns
• Growing shareholder
returnthroughdividend
andcapitalappreciation
• Dividend fully covered
byadjusted earnings
• Strong yield characteristics
continues, supported by
government backed income
• 28 consecutive years
ofdividendgrowth
Investing in ESG
• Ongoing construction of
PHP’s first NZC development in
West Sussex and commenced
fit-out works on PHP’s second
NZC development in South
Kilburn, London, with both
projects due to achieve
practical completion in
Q22025
• Completed PHP’s first NZC
asset management project
• Continued progress made
onNZC Framework with the
steps to achieve the Group’s
target of being NZC by 2030
for all of PHP’s operational,
development and asset
management activities
• All operational activities NZC
in 2024, 2023 and 2022
Rent roll funded by
government bodies
89%
(2023: 89%)
Rental growth
+£4.0m
or2.7%
(2023: +£4.3m or 3.0%)
EPRA cost ratio
10.8%
(2023: 10.7%)
PHP’s portfolio serves
6.3m
patients
or 9.3% of UK population
Dividend per share
6.9p
(2023: 6.7p)
Portfolio EPC ratings A–C
88%
(2023: 85%)
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
7
Chair’s statement
Continuous dividend growth underpinned
by another year of robust operational
andfinancial performance in 2024
In my first Annual Report as Chair, I am pleased to report PHP
continued to deliver on its 28-year track record of continuous
dividend growth underpinned by another year of robust operational
and financial performance in 2024. The performance in the year
is a testament to the quality of PHP’s business model, portfolio,
management team and people against the backdrop of a volatile and
uncertain interest rate environment which continues to weigh heavily
on the real estate sector and the Company’s share price.
The Group’s operational resilience throughout the year reflects the
security and longevity of our income which are important drivers
of our predictable income stream and underpin our progressive
dividend policy. We have maintained our strong operational property
metrics, with high occupancy at 99.1% (31 December 2023: 99.3%),
89% (31December 2023: 89%) of our rent being securely funded
directlyorindirectly by the UK and Irish governments and a long
weighted average unexpired lease term (“WAULT”) of 9.4 years
(31December 2023: 10.2 years).
The value of the property portfolio remains broadly unchanged
and currently stands at just under £2.8 billion (31 December 2023:
£2.8billion) across 516 assets (31 December 2023: 514 assets),
including 21 assets in Ireland, with a total rent roll of £153.9 million
(31 December 2023: £150.8 million). In the second half of the year,
we have seen values start to stabilise with yield expansion starting
to moderate and the impact of rental growth outweighing yield shift
and we expect this trend to continue in 2025. Notwithstanding the
modest fall in values in the year the portfolio’s average lot size is
£5.3million (31 December 2023: £5.4 million).
Harry Hyman
Non-executive Chair
We continue to focus on driving rental growth from both rent reviews
and asset management activities which generated an extra £4.0 million
(2023: £4.3 million) of annualised rental income during the year which
is a critical factor in the Group’s business model and underpins both
the earnings and dividend outlook.
Importantly, we have continued to see open market value (“OMV”)
growth improving with reviews completed in 2024 generating an extra
£1.4 million (2023: £1.3 million), an uplift of 6.0% (2023: 5.4%) over the
previous passing rent equivalent to 1.9% (2023: 1.8%) on an annualised
basis. This continues the positive trend in growth seen over the last
couple of years. The improving rental growth outlook has also been
reflected in the valuation of the portfolio with the independent
valuers’ assessment of estimated rental values (“ERV”) increasing
by3.2% during 2024 (2023: 2.5%).
“ After nearly a year in my position as
Chair, it is with great privilege that
Iwrite to you for the first time as
Chair. The performance in the year
isa testament to the quality of PHP’s
business model, portfolio and
management team.”
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
8
Adjusted earnings persharegrowth
+2.9%
Dividend per share growth
+3.0%
Chair’s statement continued
The significant increase in construction costs, together with
historically suppressed levels of open market rental growth in the
sector, will be significant pull factors to future growth and we are
starting to see positive movement in some locations where the NHS’s
need for investment in new buildings is strongest. We have recently
commenced work on PHP’s second development at South Kilburn,
London, which is an example of an Integrated Care Board (“ICB”)
andlocal authority stepping in with a capital contribution where
theDistrict Valuer’s (“DV”) proposals have prevented much needed
schemes from progressing. This, along with the use of “top-up” rents
and capital contributions, is starting to allow certain schemes to
progress viably and we anticipate this will continue to accelerate
tohelp meet the real need for additional and improved capacity.
We welcome the new Labour Government’s commitment to the NHS
together with its manifesto pledge to reform primary care along with
acontinuation of the shift of services out of hospitals and into the
community. Primary care will face challenges in meeting the new
objectives set, withthe capacity of existing facilities creating a significant
obstacle to implementing the new government’s policies aimed at
expanding service delivery within general practice. Further details on
the government’s proposals will be published in a new 10-Year Health
Plan expected later in spring 2025. Many of our primary care facilities and
occupiers will need to deal with future reforms along with addressing the
large backlog of procedures that has built up over recent years. We
continue to maintain close relationships with our key stakeholders and
GP partners to ensure we are best placed to help the NHS and Health
Service Executive (“HSE”), Ireland’s national health service provider,
evolve and deal with the ever-increasing pressures and scrutiny which
they continue to face.
We recognise that the success of the Group depends on our people and
Iwould again like to warmly thank all of our employees and the Board
fortheir continued commitment, dedication and professionalism.
Overview of results
PHP’s adjusted earnings increased by £2.2 million or +2.4% (2023:
£2.0million or +2.3%) to £92.9 million (2023: £90.7 million) in the year,
primarily driven by organic rental growth from rent reviews and asset
management projects, plus increased profit generated by Axis PHP,
our Irish property management business, partially offset by higher
interest costs on the Group’s increased variable rate debt and
additional administrative expenses. Using the weighted average
number of shares in issue in the year, the adjusted earnings per
shareincreased to 7.0 pence (2023: 6.8 pence), an increase of 2.9%
(2023: +3.0%).
A revaluation deficit of £38.4 million (2023: deficit of £53.0 million)
was generated in the year from the portfolio, equivalent to -2.9 pence
(2023: -4.0 pence) per share. The valuation deficit was driven by net
initial yield (“NIY”) widening by 17bps (2023: 23bps) in the year,
equivalent to a valuation reduction of around £101 million (2023: deficit
of £128 million), albeit this was partially offset by gains equivalent to
£63 million (2023: gain of £75 million) arising from rental growth and
asset management projects.
A combined loss of £7.6 million (2023: loss of £11.6 million) on the
fairvalue of interest rate derivatives and convertible bonds, the
amortisation of the fair value adjustment on the MedicX fixed rate
debt at acquisition, the amortisation of the intangible asset which
arose on the acquisition of Axis PHP in 2023 and early termination
fees on repayment of bond debt resulted in a profit before tax as
reported under IFRS of £47.0 million (2023: £26.1 million).
The Group’s balance sheet remains robust, with significant liquidity
headroom, with cash and collateralised undrawn loan facilities, after
capital commitments, totalling £270.9 million (31 December 2023:
£321.2 million). The loan to value ratio of 48.1% (31 December 2023:
47.0%) is within the targeted range of between 40% and 50%, with
significant valuation headroom across the various loan facilities and
with values needing to fall by around £1.0 billion or 37% before the
loan to value covenants are impacted.
Dividends
The Company distributed a total of 6.9 pence per share in 2024,
anincrease of 3.0% over the 2023 dividend of 6.7 pence per share.
The total value of dividends distributed in the year increased by
2.9%to £92.1 million (2023: £89.5 million), which was fully covered by
adjusted earnings. During 2024, the scrip dividend scheme continued
to be suspended as a consequence of the ongoing weakness in the
share price and a Dividend Reinvestment Plan continued to be offered
in itsplace.
The first interim dividend of 1.775 pence per share was declared on
2January 2025, equivalent to 7.1 pence on an annualised basis, which
represents an increase of 2.9% over the dividend distributed per share
in 2024. The dividend was paid to shareholders on 21 February 2025
who were on the register at the close of business on 10 January 2025.
The dividend will be paid by way of a Property Income Distribution of
1.375 pence and an ordinary dividend of 0.4 pence.
The Company intends to maintain its strategy of paying a progressive
dividend, paid in equal quarterly instalments, that is covered by
adjusted earnings in each financial year. Further dividend payments
are planned to be made on a quarterly basis in May, August and
November 2025 which are expected to comprise a mixture of both
Property Income Distribution and normal dividend.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
9
Chair’s statement continued
Board succession and changes
As previously reported, Mark Davies succeeded myself as Chief
Executive Officer (“CEO”) with effect from the conclusion of the 2024
Annual General Meeting (“AGM”) on 24 April 2024. At the same time,
Steven Owen retired from the Board as Non-executive Chairman and I
was appointed, with strong shareholder support at the AGM, as
Non-executive Chair.
Following my appointment as Non-executive Chair and in order to ensure
that the Board consists of a majority of independent Non-executive
Directors and is therefore compliant with the UK Corporate Governance
Code 2024, Dr Bandhana (Bina) Rawal was appointed as a fourth
independent Non-executive Director of the Company with effect from
27February 2024, increasing the size of the Board to seven. Dr Rawal
brings a wealth of experience from senior executive and non-executive
roles across healthcare, including instrategy, partnerships, governance
and risk management.
The Board is grateful to Steven for his commitment and dedication to
the Company since his appointment as a Non-executive Director in
2014 and for subsequently chairing the Company from 2018 to 2024,
aperiod of transformational growth and change, particularly following
the merger with MedicX, the process of internalising the management
function and establishing PHP as a key member of the FTSE 250 Index.
Secondary listing
On 24 October 2023 the Company completed a secondary listing of
PHP shares on the Johannesburg Stock Exchange (“JSE”). The Board of
PHP believes that the secondary listing will contribute to liquidity in
the Group’s shares as a result of the growing interest in the Company
and its increased profile in the South African market, where a number
of investors have shown strong interest in our unique healthcare
property investment opportunity. Since listing on the JSE
approximately 14 million shares, across 450 shareholders, have been
transferred to the Company’s South Africa register to date and we
continue to help potential South African investors acquire PHP shares
and provide further liquidity on the JSE with the objective of
increasing the number of shares listed there to between 5% and 10%
of the Group’s total issued share capital. We are delighted that PHP
isnow included in a number of key South African indices as of
September 2024, including the prominent FTSE/JSE All Share Index
and All Property Index, helping to further increase liquidity on
thismarket.
Environmental, social and governance (“ESG”)
PHP has a strong commitment to responsible business. ESG matters
are at the forefront of the Board’s and our various stakeholders’
considerations and the Group has committed to transitioning to
netzero carbon (“NZC”). PHP published, at the start of 2022, a NZC
Framework setting out the five key steps we are taking to achieve
anambitious target of being NZC by 2030 for all of PHP’s operational,
development and asset management activities.
We continue to make good progress on the delivery of our NZC
Framework commitments and achieved our first milestone of net
zerooperations for the last three years, one year ahead of target.
Additionally, the Group’s has two NZC developments under
construction at Croft, West Sussex, and South Kilburn, London,
withboth projects due to achieve practical completion in Q2 2025.
We continue to modernise existing buildings and improve
theenvironmental credentials of our portfolio through the asset
management programme and have completed six projects in the year,
all of which saw an improvement in the EPC ratings to a B. In the year,
we also completed PHP’s first net zero asset management project at
Long Stratton, Norfolk, where oil fired heating was replaced with air
sourced heating, solar PV was installed and the residual carbon
incurred was offset. A further ten projects are currently on site or
committed with an advanced pipeline of additional schemes where
we continue to evaluate options for energy efficiency, renewables
andnet zero asset management projects.
As at 31 December 2024, 47% of assets have an EPC rating of A or B
(31 December 2023: 42%) and 88% at A to C (31 December 2023: 85%).
As part of establishing the wider carbon impact of the buildings and
improving our access to energy performance data we have partnered
with arbnco, the award-winning Protech company addressing climate
change, to increase and move towards 100% energy data coverage
across the portfolio, allowing us to proactively engage with and
support tenants on improving their energy performance.
As a leading provider of modern primary care premises, we aim to
create a lasting positive social impact, particularly on the health
outcomes and wellbeing in the communities where we are invested.
We believe that our activities benefit not only our shareholders but
also our wider stakeholders, including occupiers, patients, the NHS
and HSE, suppliers, lenders, and the wider communities in both the
UKand Ireland.
Further details on our progress in the year, objectives for the future
and approach to responsible business can be found throughout this
report and on our website.
Market update and outlook
We welcome the new Labour Government’s continued commitment to
the NHS and its manifesto pledge to reform primary care along with
three key proposals for change, in particular:
• changes so that more people can get care at home or in
theircommunity;
• changes so that the NHS has the workforce of the future, with the
technology it needs; and
• changes so that there is a focus on prevention to reduce pressures
on theNHS.
Labour’s policy includes a continuation of the shift of services out of
hospitals and into the community with healthcare delivered close to
home and readily available for individuals when they need it. As part
of this commitment Labour acknowledges there needs to be a reform
of primary care with patients needing new and more varied
opportunities to access healthcare, unlocking earlier diagnosis of
progressive health conditions and promoting better health outcomes
for the population. Amongst the proposals for primary care are:
• improve GP access;
• bring back the family doctor;
• join up community health and social care services;
• open new referral routes;
• further expand the role of community pharmacy;
• free up GP appointments by boosting mental health support; and
• create a Neighbourhood NHS Workforce.
Primary care will continue to face challenges in meeting the above
objectives. The growing demand for healthcare services alongside the
capacity constraints of existing facilities represent a significant obstacle
to successfully implementing the new government’s policies aimed at
expanding service delivery within general practice and local communities.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
10
Chair’s statement continued
Market update and outlook continued
The need for additional space is compounded by a population that is
growing, ageing and suffering from increased chronic illnesses, which is
placing a greater burden on healthcare systems in both the UK and
Ireland. The extent of the NHS backlog also remains a significant concern,
with the number of patients waiting for treatment reaching record highs
and hospitals struggling to meet objectives. All these factors make more
urgent the need for improved and increased primary healthcare
infrastructure with approximately one-third of the UK’s current primary
care estate in need of modernisation or replacement.
PHP stands ready to support the new Labour Government’s ambition
of building an NHS fit for the future but declining rents in real
termshave made investing in the transformation of GP facilities
lessappealing. Construction costs have risen significantly over the
past decade, surpassing the growth in primary care rents, driven
bymaterial and labour costs and increasing sustainability
requirements, all of which have been compounded by Brexit, the
COVID-19 pandemic and the volatile fiscal policy outlook. We look
forward to the publication of the new 10-Year Health Plan expected
later inspring 2025 with further details on the government’s
proposals especially around community healthcare.
PHP’s mission is to support the NHS, the HSE and other healthcare
providers, by being a leading investor in modern, fit-for-purpose
primary care premises. We will continue to actively engage with
government bodies, the NHS, the HSE in Ireland and other key
stakeholders to establish, enact (where we can), support and help
alleviate increased pressures and burdens currently being placed on
healthcare networks.
Primary health and investment market update
The commercial property market continues to be impacted by
economic turbulence and the uncertainty of interest rates continues
to weigh on the real estate sector. The UK budget and rising debt
levels along with the US election continue to pose ongoing risks and
create added uncertainty.
We believe healthcare, and in particular primary care real estate,
remains a structurally supported sector and benefits from the
demographic tailwinds of a population that is growing, ageing and
suffering from increased chronic illnesses, which is placing a greater
burden on healthcare systems in both the UK and Ireland, which in turn
compounds the need for both fit for purpose and additional space.
However, future developments will now need a significant shift of
between 20% to 30% in rental values to make them economically
viable. We continue to actively engage with the NHS, ICB and DV for
higher rent settlements. Despite these negotiations typically becoming
protracted, we are starting to see positive movement in some locations
where the health system’s need for investment in new buildings is
strongest such as our recent development at South Kilburn, London.
Primary care asset values have continued to perform well relative to
mainstream commercial property due to recognition of the security
oftheir government backed income, crucial role in providing
sustainable healthcare infrastructure and more importantly a stronger
rental growth outlook enabling attractive reversion over the course
oflong leases.
In the first half of 2024, the continued lack of recent transactions
inthe period resulted in valuers continuing to place reliance primarily
on sentiment to arrive at fair values. However, in the second half of
the year there has been a small pool of transactional evidence, with
alimited number of purchasers in the market, including distressed
asset sales, which have enabled valuers to have regard to these
comparables with lesser reliance on market sentiment. Yields adopted
by the Group’s valuers have moved out by 17bps in the year to 5.22%
as at 31 December 2024 (31 December 2023: 5.05%).
We believe further significant reductions in primary care values are
likely to be limited and we have now reached an inflexion point with
astronger rental growth outlook offsetting the impact of any further
yield expansion.
We have also seen significant real estate sector consolidation in the
UK over the last few years where poor structures and investment
strategies have resulted in material share price discounts to net asset
values. As a result, we believe that there are further opportunities for
consolidation, with investors increasingly focused on larger, more
scalable and efficient cost structures.
PHP outlook
The Company continues to operate a leading portfolio of primary care
assets across the UK and Ireland.
As outlined at its 2024 Capital Markets Day, PHP has built a leading
presence in Ireland following the acquisition of Axis, PHP’s Irish property
management business, in 2023. This market benefits from: long leases
directly let to the HSE, larger lot sizes; indexed linked rent reviews; and
benefits fom cheaper Euro denominated interest rates. As a result, it
offers a significant opportunity for profitable growth as highlighted by
the recent earnings enhancing acquisition of Laya Health Facility in Cork.
The Group is strongly positioned to expand its presence in Ireland and
continues to monitor and review other Eurozone opportunities and
consider future expansion into new primary care markets that add
further value for stakeholders and shareholders alike.
Growth in the immediate future will also continue to focus on
increasing income from our existing portfolio and we are encouraged
by the firmer tone of rental growth experienced over the last couple
of years. We believe the dynamics of inflation in recent years,
including significantly increased build costs combined with demand
for new primary care facilities and the need to modernise the estate,
will continue to drive future rental settlements.
We are currently on site with only two developments with costs
tocomplete of just £2.5 million and consequently have very limited
exposure to higher construction cost pressures and supply chain
delays. In our immediate pipeline we have one development and
13 asset management projects with a total expected cost of
£6.7 million and will continue to evaluate these, together with a
wider medium-term pipeline at various stages of progress and seek
to negotiate rents with the NHS at the level required to deliver an
acceptable return.
Harry Hyman
Non-executive Chair
27 February 2025
Sustainable
income performance
Primary Health Properties PLC Responsible Business Report 2024
Read more in our Responsible
Business Report at phpgroup.co.uk
Read more about our culture
onpage 66
Read more about our stakeholders
onpages 42 and 43
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
11
Business review
Organic rental growth
continuing tounderpin
our performance
Mark Davies
Chief Executive Officer
Rental growth
PHP’s sector-leading metrics remain robust and we continue to focus on
delivering organic rental growth derived from our existing assets. This
growth arises mainly from rent reviews and asset management projects
(extensions, refurbishments and lease re-gears) which provide an
important opportunity to increase income, extend lease terms and avoid
obsolescence, whilst ensuring that our properties continue to meet their
communities’ healthcare needs as the emphasis continues to shift from
treatment to prevention, as well as improving their ESG credentials.
In 2024, we have continued to see strong organic rental growth from
our existing portfolio with income increasing by £4.0 million or 2.7%
(2023 and 2022: £4.3 million or 3.0% and £3.3 million or 2.4%
respectively) on a like-for-like basis. The progress continues the
improving rental growth outlook seen over the last couple of years
and it should be noted that most of the increase comes from rent
reviews arising primarily in the periods prior to 2022, a period when
rental growth was muted and did not reflect the higher levels of
construction cost and general inflation experienced in recent years.
We have also seen the improving rental growth outlook reflected
inthe valuation of the portfolio with the independent valuers’
assessment of estimated rental values (“ERV”) increasing by 3.2%
in2024 (2023 and 2022: 2.5% and 2.2% respectively).
Rent review performance
The Group completed 341 (2023: 331) rent reviews with a combined
rental value of £42.2 million (2023: £42.4 million), adding £3.2 million
and delivering an average uplift of 7.7% against the previous passing
rent (2023: £3.6 million/8.5%).
68% of our rents are reviewed on an open market basis, which
typically takes place every three years. The balance of the PHP
portfolio has either indexed (27%) or fixed uplift (5%) based reviews
which also provide an element of certainty to future rental growth
within the portfolio. Approximately one-third of index-linked reviews
in the UK are subject to caps and collars which typically range from
6% to 12% over a three-year review cycle.
In Ireland, we concluded 12 (2023: 18) index-based reviews, adding
afurther £0.2 million/€0.2 million (2023: £0.4 million/€0.4 million),
anuplift of 15.3% (2023: 15.2%) against the previous passing rent.
InIreland, all reviews are linked to the Irish Consumer Price Index,
upwards and downwards, with reviews typically every five years.
Leases to the HSE and other government bodies, which comprise
79%of the income in Ireland, have increases and decreases capped
and collared at 25% over a five-year review cycle.
At 31 December 2024, 600 (31 December 2023: 585) open market rent
reviews representing £88.8 million (31 December 2023: £84.9 million) of
passing rent were outstanding, out of which 326 (31 December 2023:
334) have been triggered to date and are expected to add another
£2.7 million (31 December 2023: £2.2 million) to the contracted rent
roll when concluded and represent an uplift of 5.5% (31December 2023:
4.5%) against the previous passing rent. The balance of the
outstanding reviews will be actioned when there is further
comparative evidence to support the estimated rental values.
The large number of outstanding reviews reflects the requirement
forall awards to be agreed with the District Valuer. A great deal of
evidence to support open market reviews comes from the completion
of historical rent reviews and the rents set on delivery of new
properties into the sector. NHS initiatives to modernise the primary
care estate will result in previously agreed rental values having to be
renegotiated to make a number of these projects viable in the current
economic environment.
Strong organic rental growth
£4.0 million
EPRA cost ratio
10.8%
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
12
Business review continued
Rent review performance continued
The growth from reviews completed in the year, noted above, is
summarised below:
Review type Number
Previous rent
(per annum)
£m
Rent increase
(per annum)
£m
% increase
total
% increase
annualised
UK – open
market
1
175 23.7 1.4 6.0 1.9
UK – indexed 142 13.7 1.4 10.4 4.6
UK – fixed 12 3.6 0.2 6.0 2.8
UK – total 329 41.0 3.0 7.4 2.9
Ireland
– indexed 12 1.2 0.2 15.3 3.9
Total – all
reviews 341 42.2 3.2 7.7 2.9
1 Includes 35 (2023: 49 reviews) where no uplift was achieved.
Asset management projects
In the UK, we exchanged on ten (2023: five) new asset management
projects, eight (2023: eight) lease regears and seven (2023: four) new
lettings during 2024. These initiatives will increase rental income by
£0.8million, investing £13.0 million and extending the leases back to
20years.
In the year, £0.8 million of income was lost to voids following the
insolvency of Lloyds pharmacy at five units and lease expiries at a
further four units in the UK and the restructure of three, and surrender of
two pharmacy leases in Ireland where the space is to be relet to the HSE
in the future as part of an asset management initiative.
PHP continues to work closely with its occupiers and has a strong
pipeline of 13 similar asset management projects which are currently in
legal due diligence and are being progressed to further increase rental
income and extend unexpired occupational lease terms. The immediate
asset management pipeline will require the investment of approximately
£6.7 million, generating an additional £0.4 million of rental income and
extending the WAULT on those premises back to an average of 16 years.
Additionally, we continue to progress an advanced pipeline of further
asset management initiatives across 24 projects.
The Company will continue to invest capital in a range of physical
extensions or refurbishments through asset management projects
which help avoid obsolescence, including improving energy efficiency,
and which are key to maintaining the longevity and security of our
to suffer from delays as ICBs finalise their future estate strategies
together with the requirement for new rents to be approved by the
DV. We continue to maintain a close relationship with all parties
concerned and receive NHS rent reimbursement in a timely manner.
Ifall the currently agreed transactions completed, then the WAULT
onthe portfolio would increase to 10.2 years (31 December 2023:
10.6years).
Investment and pipeline
In 2024, the Group selectively completed the opportunistic acquisition
of one primary health centre at Basingstoke for a total consideration
of £4.5 million. The property is fully let to a GP practice, pharmacy
and dentist and benefits from a long WAULT of 17 years and
three-yearly open market value rent reviews.
Post period end, 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.
We continue to monitor a number of potential standing investments,
direct and forward funded developments and asset management
projects, with an advanced pipeline across a number of opportunities
in both the UK and Ireland. These will only be progressed if accretive
to earnings.
The Group’s disciplined approach to investment ensures it remains
focused on income growth. In 2024, PHP chose not to progress with
several potential transactions that were not accretive to earnings.
Ireland continues to be the preferred area of investment with
attractive returns and a lower cost of finance.
The immediate pipeline of opportunities in legal due diligence
continues to be focused predominantly on PHP’s existing portfolio
through asset management projects.
income through long term occupier retention, increased rental income
and extended occupational lease terms, adding to both earnings and
capital values.
Robust portfolio metrics
The portfolio’s annualised contracted rent roll at 31 December 2024
was £153.9 million (31 December 2023: £150.8 million), an increase
of£3.1 million or +2.1% (2023: £5.5 million/+3.8%) in the year driven by
organic growth from rent reviews and asset management projects of
£4.0 million (2023: £4.3 million). The acquisition of Basingstoke
andthe development at South Kilburn, London, added a further
£0.5million of income although these gains were offset by the loss
ofincome arising from foreign exchange movements of £0.6 million
onour portfolio in Ireland and UK lease surrenders and voids of
£0.8million.
The security and longevity of our income are important drivers of our
secure, long term predictable income stream and enable our
progressive dividend policy.
Security: PHP continues to benefit from secure, long term cash flows
with 89% (31 December 2023: 89%) of its rent roll funded directly or
indirectly by the NHS in the UK or HSE in Ireland. The portfolio also
benefits from an occupancy rate of 99.1% (31 December 2023: 99.3%).
Longevity: The portfolio’s WAULT at 31 December 2024 was 9.4 years
(31 December 2023: 10.2 years). £23.6 million or 15.4% of our income is
currently holding over or expires over the next three years, of which
c.70% have agreed terms or are in advanced discussions to renew
their lease. £62.0 million or 40.3% expires in over ten years. The table
below sets out the current lease expiry profile of our income:
Income subject to expiry £m %
Holding over 7.8 5.1
<3 years 15.8 10.3
4–5 years 19.3 12.5
5–10 years 49.0 31.8
10–15 years 30.3 19.7
15–20 years 19.1 12.4
>20 years 12.6 8.2
Total 153.9 100.0
As at 31 December 2024, 69 leases or £7.8 million of income
(2023:45leases/£4.1 million) were holding over. All these leases are
expected to renew but are subject to NHS approval which continues
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
13
Business review continued
Investment and pipeline continued
In legal due diligence Advanced pipeline
Pipeline Number Cost Number Cost
UK – asset
management 13 £6.7m 24 £23.9m
UK – direct
development 1 £4.1m — —
Ireland – forward
funded development — — 3
£62.5m
(€75m)
Total pipeline 14 £10.8m 27 £86.4m
Developments
At 31 December 2024, the Group had limited development exposure
with two projects on site and £2.5 million of expenditure required to
complete them:
• Croft Primary Care Centre, West Sussex, is being built to NZC
standards and due to complete later in Q2 2025 with £0.9 million
of expenditure required to complete the project.
• In July 2024 the Group also commenced work on a second
development scheme at South Kilburn, London, where we have
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 NZC
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 DV. The scheme is expected to achieve practical
completion in Q2 2025 with £1.6 million of expenditure remaining.
The Group has currently paused any further direct development activity
whilst negotiations with the NHS, ICBs and DVs continue in order to
increase rental levels to make schemes economically viable with rental
values needing to increase by around 20%-30%. Without these necessary
increases in rent primary care development will remain constrained in the
UK, however the recent indications from the UK Government, particularly
following Lord Darzi’s report, suggests there will be an increased
allocation for primary care from the NHS budget. The new 10-Year Health
Plan is expected to be announced inspring 2025 which will provide the
Group with greater detail and clarity on potential next steps.
The portfolio’s average lot size fell slightly to £5.3 million
(31December 2023: £5.4 million), reflecting the fall in values in
theyear; however, 88% of the portfolio (31 December 2023: 87%)
continues to be valued at over £3.0 million. The Group only has
sixassets valued at less than £1.0 million.
Number of
properties
Valuation
£m %
Average
lot size
£m
>£10m 58 885.9 32.2 15.3
£5m–£10m 124 838.5 30.5 6.8
£3m–£5m 172 681.2 24.8 4.0
£1m–£3m 156 338.7 12.3 2.2
<£1m (including
land £1.3m) 6 5.8 0.2 0.8
Total
1
516 2,750.1 100.0 5.3
1 Excludes the £3.0 million impact of IFRS 16 Leases with ground rents recognised
as finance leases.
The valuation deficit combined with the portfolio’s growing income,
resulted in a total property return of +4.2% for the year (2023: +3.5%).
The total property return in the year compares with the MSCI UK
Monthly Property Index of 6.5% for 2024 (2023: -0.5%).
Year ended
31 December
2024
Year ended
31 December
2023
Income return 5.5% 5.3%
Capital return (1.3%) (1.8%)
Total return 4.2% 3.5%
Mark Davies
Chief Executive Officer
27 February 2025
We currently do not have any forward funded developments on site in
Ireland although we continue to progress a near-term pipeline with an
estimated gross development value of approximately €50 million.
PHP expects that all future direct developments will be constructed
to NZC standards.
Valuation and returns
In the second half of the year, we have seen values start to stabilise
with yield expansion starting to moderate and the impact of rental
growth outweighing yield shift. We expect this trend to continue
in2025.
As at 31 December 2024, the Group’s portfolio comprised 516 assets
(31December 2023: 514) independently valued at £2.750 billion
(31December 2023: £2.779 billion). After allowing for acquisition costs
and capital expenditure on developments and asset management
projects, the portfolio generated a valuation deficit of £38.4 million
or-1.4% (2023: deficit of £53.0 million or -1.9%).
During the year the Group’s portfolio NIY has expanded by 17bps
to5.22% (31 December 2023: 5.05%) and the reversionary yield
increased to 5.6% at 31 December 2024 (31 December 2023: 5.4%).
The expansion of yields created a deficit of approximately £101
million which has been partially offset by gains of approximately
£63million arising from an improving rental growth outlook and
assetmanagement projects.
The movement in the portfolio’s valuation deficit is summarised in the
table below:
£m H1 2024 H2 2024 FY 2024
NIY expansion (£73.0)/
+13bps
(£28.6)/
+4bps
(£101.6)/
+17bps
Rental growth £33.0 £30.2 £63.2
Total (deficit)/surplus (£40.0) £1.6 (£38.4)
At 31 December 2024, the portfolio in Ireland comprised 21 standing
and fully let properties with no developments currently on site,
valuedat £255.3 million or €308.6 million (31 December 2023:
21assets/£244.6 million or €282.2 million). The portfolio in Ireland
hasbeen valued at a NIY of 5.0% (31 December 2023: 5.4%).
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
14
CEO Q&A
“ We are in a
greatposition
to maintain growth
and capitalise on
the significant
sector-leading
opportunities.”
I was pleased to announce my first Irish acquisition at a very
attractive yield of 7.1% which is the Laya Healthcare facility in Cork,
Ireland. Through our team in Ireland I had the opportunity to get to
know the building and operation very well and given the transaction
is in line with strategy, pleasing to get over the line.
Finally, and perhaps most pleasing, was the successful and seamless
CEO transition from Harry Hyman to myself. Harry is the founder of
our business so I knew I had big shoes to fill. I feel this has gone as
well as it possibly could and we now work well together as Chair
andCEO.
What are the future opportunities that most
excite you at PHP?
We continue to monitor a number of potential standing investments,
direct and forward funded developments and asset management
projects with an advanced pipeline across a number of opportunities
in both the UK and Ireland but these will only be progressed if
accretive to earnings. Similar primary healthcare models exist across
other geographies and adjacent healthcare sectors that we continue
to explore and consider.
Our sector has many political, economic and social growth drivers
assisted by the fact that around 50% of all primary care centres in
the UK are no longer considered fit for purpose. Huge investment is
required to modernise the primary healthcare estate and PHP stands
ready to play its part, with a detailed knowledge of the sector, skills,
expertise and strong relationships but rental values will need to
increase by around 20% to 30% to make this economically viable.
What have you learned about the corporate
culture at PHP?
I have been impressed by the hard work and dedication of my
colleagues along with the depth of knowledge and our relationships
in both the UK and Irish healthcare markets. This gives us great
confidence in the future of our business and that we can continue
todeliver strong financial results and sector-leading performance
especially with the demographic tailwinds and political support for
primary care in both countries.
PHP also has a strong commitment to ESG matters which are at
theforefront of the Board’s, teams and our various stakeholders’
considerations. PHP’s activities create a lasting positive social impact,
particularly in the health outcomes and wellbeing for the communities
where we are invested.
How will the new government’s plans for the
health sector affect PHP?
We welcome the new Labour Government’s commitment to the NHS
together with its manifesto pledge to reform primary care along with
a continuation of the shift of services out of hospitals and into the
community. Primary care will face challenges in meeting the new
objectives set, with the capacity of existing facilities creating a
significant obstacle to implementing the new government’s policies
aimed at expanding service delivery within general practice. We look
forward to further details on the government’s proposals being
published in a new 10 Year Health Plan due later in spring 2025.
What are your priorities for the year ahead?
We are approaching PHP’s 30-year anniversary with a dedicated
determination to continue growing our dividend on a fully covered
basis. Our progressive dividend policy remains sacrosanct, we have
already declared and paid the first quarterly dividend of 1.775 pence
per share, equivalent to 7.1 pence and a 2.9% increase over 2024
marking the start of the Company’s 29th consecutive year of
dividendgrowth.
Now that valuations have stabilised and look set to improve as rental
growth accelerates we are seeing more opportunities to acquire earnings
accretive acquisitions and this was demonstrated by our recent
acquisition in Ireland of the Laya Healthcare and diagnostic facility.
Growth in the immediate future will also continue to focus on
increasing income from our existing portfolio and we are encouraged
by the firmer tone of rental growth experienced over the last couple
of years. We believe the dynamics of inflation in recent years,
including significantly increased build costs combined with demand
for new primary care facilities and the need to modernise the estate,
will continue to drive future rental settlements.
Can you discuss some of the things you
haveachieved during your first year?
This is my first year since taking over as CEO last year and it
ispleasing to report a solid set of results that are slightly ahead
ofmarket consensus. I am very pleased to report such a positive
financial performance, particularly in the second half of the year,
withgood momentum in rental and earnings growth. Encouragingly,
we have also seen positive valuation growth in the second half of
theyear, the first time since 2021, which has led to stability in our
adjusted NTA per share whilst the dividend per share has continued
to grow by 3% and remained fully covered.
A significant portion of my time in the first year has been spent
inspecting the portfolio and meeting with investors and stakeholders
across the UK, Europe, North America and South Africa where we
have a secondary listing on the JSE.
We also held a highly successful Capital Markets Day in October 2024
where we showcased PHP’s leading position including in Ireland along
with the strength of our asset management and development capabilities.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
15
Business model
Creating long term
sustainable value
We invest 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 has invested in healthcare real
estatelet on long term leases, backed by a secure underlying
covenantwhere the majority of rental income is funded directly
orindirectly by a government body.
Our key strengths
Prudent risk management:
PHP aims to operate in a relatively low risk
environment togenerate progressive returns to
shareholders through investment in the primary
healthcare real estate sector, whichis less
cyclical than other realestate sectors.
Long term focus:
By providing additional spacefacilitating the
provision ofadditional services or extending the
term of underlying leases, PHP can increase and
lengthen its income streams andcreate
theopportunity to add capitalvalue.
Experienced and innovativemanagement:
PHP’s portfolio is managed byanexperienced
team withinanefficient management structure,
where operating costs aretightly controlled.
Appropriate capital structure:
PHP funds its portfolio with a diversified mix
of equityand debt, in order tooptimise
risk-adjusted returns to shareholders.
Key characteristics of the portfolio
Occupancy rate
of99.1%
Weighted average
unexpired lease length
of 9.4 years
Highly visible
cash flows
andstable
valuation yields
UK leases have effectively
upward-only rent reviews
Irish leases linked
toIrishCPI
Strong tenant covenant
– 89% of rent roll paid
directly/indirectly by
government bodies
32% of portfolio on
fixedor indexed uplifts.
68% open market
review, typically
everythreeyears
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
16
Business model continued
Our strategy
Fund
The Group funds its portfolio with a diversified
mix of equity and debt on a secured and
unsecured basis, in order to optimise risk-
adjusted returns toshareholders.
Deliver
There is a positive yield gap between
acquisition andfunding with continued
improvements in rental growth.
1 2
Wider outcomes
Social impact
PHP aims to provide modern premises located within
residential communities toenable better access to an
increasing rangeofservices being delivered locally
with greater accessibility than fromhospitals.
Environmental impact
Environmental impact is an integral consideration
inthedevelopment, design and construction of new
PHP properties. When developing new premises,
PHPand its development partners seek toachieve
thehighest BREEAMstandards in the UKor a nearly
zero energy building (“nZEB”) rating inIreland, as well
as improving our premises’ energy performance.
We have seen continued improvement in portfolio
EPCratings with 47% and 88% (2023: 42% and 85%)
rated A–B and A–C respectively, driven by the asset
management programme.
Healthcare targets
The modern, flexible premises that PHP provides
facilitate the provision of more wide ranging and
integrated care services helping to realise the NHS’s
target of 24/7 access to GP services and the HSE’s
expansion of primary care infrastructure.
Investors
Winner of MSCI’s UK Highest 10-Year Risk Adjusted
Total Return Award for the third consecutive year in
2023, 2022 and 2021, reflecting PHP’s market leading
property performance.
The Company’s share price started the year at
103.8pence per share and closed on 31 December 2024
at 93.3 pence, a decrease of 10.1%. Including dividends,
those shareholders who held the Company’s shares
throughout the year achieved a Total Shareholder
Returns of -3.5% (2023: -0.3%).
Values
We employ sustainable design to develop, refurbish
and upgrade our buildings to modern medical and
environmental standards.
NHS/primary healthcare
Our flexible, modern properties benefit not only our
shareholders but also our occupiers, patients, the NHS
and HSE, suppliers and the wider communities in both
the UK and Ireland.
Patients
PHP’s portfolio serves 6.3 million patients, which is
expected to further increase as primary healthcare
demands increase to assist with overstretched
Accident & Emergency (A&E) departments, and
withthe ageing andgrowing population.
Communities
We support initiatives that further the health, wellbeing
and education of our local communities.
We look forward to the publication of the new 10-Year
Health Plan due later in spring 2025 with further details
on the government’s proposals especially around
community healthcare.
People
We conduct our business with integrity and invest
inhuman capital, with 60 employees in the UK
and27inIreland, investing and supporting eleven
employees intheir professional development studies.
4
3
Grow
The Group looks to selectively grow its
propertyportfolio by funding and acquiring
highquality developments and newly developed
facilities and investing in already completed,
letproperties.
Manage
PHP manages its portfolio effectively
andefficiently, managing the risks faced
byitsbusiness inorder to achieve its
strategicobjectives.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
17
Strategic pillars
Delivering our strategic priorities
Activity in 2024
• Opportunistic acquisition of one standing
letinvestment at Basingstoke for £4.5 million
andcommenced work on the Group’s second
development at South Kilburn, London,
for£3.3 million
• Portfolio of 516, including 21 in Ireland at
yearend with one further acquisition ofLaya
Healthcare facility for €22.0 million/
£18.2million in February 2025
• Total property return in the year of 4.2%,
withthe income return remaining strong
at5.5% offset by unfavourable movements
invaluation of -1.3%; however, we saw
stabilisation of values in the second half
ofthe year
Looking forward
• Sector fundamentals of long leases and
government backed income continue to
drivedemand in the sector
• Continue to monitor a number of potential
standing investments, direct and forward
funded developments and asset management
projects with an advanced pipeline across a
number of opportunities in both the UK and
Ireland but these will only be progressed if
accretive to earnings
Link to KPIs
A
B
C
D
E
F
G
H
Link to risks
1
2
1. Grow
The Group looks to selectively grow its property portfolio byfunding
and acquiring high quality developments and newly developed
facilities and investing in already completed, lethealthcare
realestate.
Activity in 2024
• £4.0 million, or 2.7% additional income from
rent reviews andasset management projects
• 10 new asset management projects legally
exchanged during the year, 1 of which formed
part of the 6 asset management projects
physically completed in the year. A further
8lease regears and 13 new lettings were
delivered, delivering £0.8 million of rental
growth and investing £13.0 million
• EPRA cost ratio of 10.8% continues to be one
of the lowest in the sector
Looking forward
• Strong pipeline of over 13 advanced asset
management projects and lease regears
beingprogressed over the next two years,
investing £6.7 million whilst extending the
WAULT on these premises back to 16 years
• Continued discussions with occupiers and the
NHS to discuss requirements and
opportunities as well as continue to negotiate
rents in order to deliver an acceptable return
Link to KPIs
A
D
E
F
Link to risks
3
4
5
2. Manage
PHP manages its portfolio effectively andefficiently,
managingthe risks faced byits business inorder to achieve
itsstrategic objectives.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
18
Strategic pillars continued
Activity in 2024
• £270 million of term and revolving credit
facilities refinanced for a new three-year
term, with options to extend at the first and
second anniversary
• Exercised options to extend £150 million of
revolving credit facilities for an additional
one-year term out to 2027
• Significant liquidity headroom with cash and
collateralised undrawn loan facilities totalling
£271million (2023: £321million) after taking
into account capital commitments of
£36million
Looking forward
• Convertible bond will be redeemed in July
2025, and is currently expected to be repaid
using undrawn headroom on the existing
revolving credit facilities given the current
depressed share price
• Liquidity of the Company’s secondary listing
of PHP shares on the JSE has increased to 1%
of the total share capital of PHP, and we look
to increase the number of shares listed there
to between 5% and 10%
Link to KPIs
A
B
F
G
H
Link to risks
6
7
Activity in 2024
• Adjusted earnings per share of 7.0 pence
increased by2.9% (2023:6.8 pence)
• Dividend per share increased by 3.0%
to 6.9pence
• Total adjusted NTA return of 3.6% (2023: 1.9%)
• Strong organic rental growth from rent
reviews and asset management projects,
offset by the selectively muted investment
inthe year
• Acquisition of Axis continues to provide
acritical strategic advantage in Ireland,
theGroup’s preferred area of future
investment activity
Looking forward
• Undrawn loan facilities continue to provide
significant firepower to secure new
investment opportunities
• 100% of the Group’s net debt is fixed or
hedged, protecting underlying earnings from
potential future economic changes
Link to KPIs
A
B
C
D
E
F
G
H
Link to risks
8
9
3. Fund
The Group funds its portfolio with adiversified mix of equity
and debt on asecured and unsecured basis, in order
tooptimise risk-adjusted returns toshareholders.
4. Deliver
Positive yield gap between acquisition andfunding remains for
selective investments, despite the macroeconomic environment,
along with continued improvements in rental growth, delivering
progressive shareholder returns.
KPIs
A
Adjusted earnings per share
B
Dividend cover
C
Total property portfolio
D
Total property return
E
Capital invested in asset management projects
F
EPRA cost ratio
G
Loan to value
H
Average cost ofdebt
Read more about our Key Performance Indicators
onpages 20 and 21
Risks
1
Property pricing and competition
2
Financing
3
Lease expiry management
4
People
5
Responsible business
6
Debt financing
7
Interest rates
8
Potential over-reliance on the NHS and HSE
9
Foreign exchange risk
Read more about our Risks onpages 52 to 58
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
19
Key performance indicators
Our performance is measured against KPIs
across each of our four strategic pillars
A B C D
Adjusted earnings per share
∆
7.0p
+2.9%
Dividend cover
∆
101%
– bps
Total property portfolio
£2.8bn
-1.4%
Total property return
∆
4.2%
+70bps
7.0p 101% £2.8bn 4.2%
6.8p 101% £2.8bn 3.5%
6.6p 102% £2.8bn 2.8%
2024
2023
2022
2024
2023
2022
2024
2023
2022
2024
2023
2022
Rationale
Adjusted earnings per shareisa key measure of the
Group’s operational performance as it excludes all
elements not relevant to the underlying net income
performance of the properties.
Performance
Adjusted earnings per share increased in the year
reflecting the strong organic rental growth in the
period and the full year benefit of the Axis
acquisition partially offset by higher interest costs.
Rationale
The Group looks to maintain aprogressive dividend
policy whichitaims tocover from itsoperational
performance. Dividend cover looks at the proportion
ofdividends paid inthe year that are funded
byadjusted earnings.
Performance
Dividends paid in 2024 were fully covered by
adjusted earnings andwe intend to maintain a
strategy of paying a progressive dividend that is
covered by adjusted earnings in each financial year.
Rationale
The Group looks to selectively grow itsportfolio in
order to secure theyield gap between income returns
and the cost offunds.
Performance
Opportunistic acquisition of one standing let
investment at Basingstoke for £4.5 million and
commenced work on the Group’s second development
at South Kilburn, London, for £3.3 million.
Rationale
The Group invests in properties thatprovide the
opportunity forincreased returns through
acombination of rental and capitalgrowth.
Performance
Income return of 5.5% inthe year was offset by
unfavourable valuation movements that delivered
-1.3% capital deficit, delivering a total property return
of 4.2%.
Link to strategy
1
2
3
4
Link to strategy
1
3
4
Link to strategy
1
2
4
Link to strategy
1
4
Strategy
1
Grow
2
Manage
3
Fund
4
Deliver
Read more about our strategy on pages 18 and 19
∆ Alternative performance measures (“APMs”): Measures with this symbol ∆ areAPMs defined in the Glossary section on
pages166 to 168, and presented throughout this Annual Report. All measures reported on a continuing operations and
52-week comparable basis.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
20
Key performance indicators continued
E F G H
Capital invested in asset
management projects
£13.0m
-0.8%
EPRA cost ratio
∆
10.8%
+10bps
Loan to value
∆
48.1%
+110bps
Average cost ofdebt
∆
3.4%
+10bps
£13.0m 10.8% 48.1% 3.4%
£13.1m 10.7% 47.0% 3.3%
£17.5m 9.9% 45.1% 3.2%
2024
2023
2022
2024
2023
2022
2024
2023
2022
2024
2023
2022
Rationale
The Board is committed to keepingitsassets fit for
purpose anddeveloping them to meet the needsof
the Group’s occupiers.
Performance
The Group exchanged 10 asset management projects,
8 lease regears and 13 lettings in the year, and is
on-site with a further 10 projects, which maintain the
longevity of the use of its properties and generate
enhanced income and capital growth. Astrong
pipeline of 27 projects will continue to achieve
thisobjective.
Rationale
The EPRA cost ratio is used toprovide anindicator
ofthe efficiency of the management ofthe Group
looking attotal administrative costs as a proportion
of net rental income.
Performance
The slightly higher EPRA cost ratio reflects the cost
of a redundancy programme performed in the year
along with the write-off of development work in
progress for a scheme at Colliers Wood, Merton, of
£0.5 million which is no longer progressing.
Rationale
The Board seeks to maintain anappropriate balance
between theuse ofexternal debt facilities and
shareholder equity in order to enhance shareholder
returns whilst managing the risks associated with
debtfunding.
Performance
Additional debt to fund acquisitions in the year,
alongwith valuations declining, has resulted inthe
Group’sLTV increasing to 48.1%, within the Group’s
targeted range of between 40% and 50%.
Rationale
The combination of a range ofmaturities and tenors
of debt iskeyto the Group achieving the lowest
blended cost of debt.
Performance
The Company successfully exercised options to extend
the maturities of £150 million of RCFs by one year to
2027. Taking into account £200 million of interest rate
hedges executed in January 2025, we remain fully
hedged, effectively hedging out all the current net debt
drawn along with providing further protection for future
debt required to meet capital commitments.
Link to strategy
1
2
4
Link to strategy
1
3
4
Link to strategy
1
3
4
Strategy
1
Grow
2
Manage
3
Fund
4
Deliver
Read more about our strategy on pages 18 and 19
∆ Alternative performance measures (“APMs”): Measures with this symbol ∆ areAPMs defined in the Glossary section on
pages166 to 168, and presented throughout this Annual Report. All measures reported on a continuing operations and
52-week comparable basis.
Link to strategy
1
2
3
4
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
21
Financial review
Organic rental growth and effective
cost management drive earnings to
maintain afully covered dividend
Richard Howell
Chief Financial Officer
PHP’s adjusted earnings increased by £2.2 million or 2.4% to £92.9 million
in 2024 (2023: £90.7 million). The increase in the year reflects the
continued positive organic rental growth from rent reviews and asset
management projects in both 2024 and 2023 along with increased
earnings from PHP Axis’ activities in Ireland, partially offset by
increased interest costs on the Group’s variable rate debt and
administrative expenses.
Using the weighted average number of shares in issue in the year the
adjusted earnings per share increased to 7.0 pence (2023: 6.8 pence),
an increase of 2.9% (2023: +3.0%).
“ PHP’s adjusted earnings increased by
£2.2 million or 2.4% to £92.9 million in
2024 (2023: £90.7 million), reflecting
the continued positive organic rental
growth together with the increased
contribution from Axis, partially
offset by increased interest costs.“
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
22
Financial review continued
Summarised results
The financial results for the Group are summarised as follows:
Year ended
31 December
2024
£m
Year ended
31 December
2023
£m
Net rental income 153.6 149.3
Axis contribution net of overheads 1.2 1.1
Administrative expenses (12.1) (11.6)
Operating profit before revaluation and net financing costs 142.7 138.8
Net financing costs (49.8) (48.1)
Adjusted earnings 92.9 90.7
Revaluation deficit on property portfolio (38.4) (53.0)
Fair value loss on interest rate derivatives and convertible bond (7.6) (13.2)
Amortisation of MedicX debt MtM at acquisition 3.0 3.0
Exceptional item – early termination cost on refinancing variable rate bond (2.0) —
Axis amortisation of intangible asset (0.9) (0.9)
Axis acquisition and JSE listing costs — (0.5)
IFRS profit before tax 47.0 26.1
Corporation tax — (0.1)
Deferred tax provision (5.6) 1.3
IFRS profit after tax 41.4 27.3
Adjusted earnings increased by £2.2 million or 2.4% (2023: £2.0 million/2.3%) in 2024 to £92.9 million
(2023:£90.7 million) and the movement in the year can be summarised as follows:
Year ended
31 December
2024
£m
Year ended
31 December
2023
£m
Year ended 31 December 90.7 88.7
Net rental income 4.3 7.8
Axis contribution net of overheads 0.1 1.1
Administrative expenses (0.5) (2.0)
Net financing costs (1.7) (4.9)
Year ended 31 December 92.9 90.7
Net rental income received in 2024 increased by 2.9% or £4.3 million to £153.6 million (2023: £149.3 million)
reflecting £3.2 million of additional income from completed rent reviews and asset management projects
and £1.4 million of rent arising from the acquisition of Ballincollig in Ireland in December 2023, offset by
a£0.3 million increase in non-recoverable property costs which relates primarily to the write-off of
development work in progress for a scheme at Colliers Wood, Merton, of £0.5 million which is no longer
progressing partially offset by other savings of £0.2 million.
Administration expenses continue to be tightly controlled and the Group’s EPRA cost ratio remains one of
the lowest in the sector at 10.1% (2023: 10.1%) excluding PHP Axis and direct vacancy costs. The £0.5 million
increase in administration costs in the year is due primarily to the £0.4 million cost of a redundancy
programme aimed at reducing staff headcount and future costs by around £1.0 million in 2025, together
with the costs arising from annual pay increases and one additional Non-Executive Director recruited
atthe start of the year, offset by a reduction in performance related pay.
EPRA cost ratio
Year ended
31 December
2024
£m
Year ended
31 December
2023
£m
Gross rent less ground rent, service charge and other income 160.7 155.8
Direct property expense 26.2 18.2
Less: direct and service charge costs recovered (21.0) (13.3)
Non-recoverable property costs 5.2 4.9
Administrative expenses 12.1 11.6
Axis overheads and costs 0.9 0.8
Less: ground rent (0.2) (0.2)
Less: other operating income (0.7) (0.5)
EPRA costs (including direct vacancy costs) 17. 3 16.6
EPRA cost ratio 10.8% 10.7%
EPRA cost ratio excluding Axis overheads and direct vacancy costs 10.1% 10.1%
Total expense ratio (administrative expenses as a percentage of
grossasset value) 0.4% 0.4%
Net finance costs in the year increased by £1.7 million to £49.8 million (2023: £48.1 million) because of
a£16.5 million increase in the Group’s net debt during 2024, the impact of increased interest rates on
theGroup’s unhedged debt and the loss of interest receivable on forward funded developments which
completed in H1 2023, now income producing and accounted for as rent.
IFRS profit after tax increased by £14.1 million to £41.4 million (2023: £27.3 million) predominantly driven by
the lower valuation deficit of £38.4 million (2023: £53.3 million) generated in the year.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
23
Financial review continued
Shareholder value and Total Accounting Return
The adjusted net tangible assets (“NTA”) per share declined by 3.0 pence or -2.8% to 105.0 pence
(31December 2023: 108.0 pence per share) during the year with the revaluation deficit of £38.4 million
or-2.9 pence per share being the main reason for the decrease.
The total adjusted NTA (“NAV”) return per share, including dividends distributed, in the year was 3.9 pence
or 3.6% (2023: 2.1 pence or 1.9%).
The table below sets out the movements in the adjusted NTA and EPRA Net Disposal Value (“NDV”) per
share over the year under review.
Adjusted NTA per share
31 December
2024 pence
per share
31 December
2023 pence
per share
Opening adjusted NTA per share 108.0 112.6
Adjusted earnings for the year 7.0 6.8
Dividends paid (6.9) (6.7)
Revaluation of property portfolio (2.9) (4.0)
Axis acquisition cost — (0.5)
Foreign exchange and other movements (0.2) (0.2)
Closing adjusted NTA per share 105.0 108.0
Fixed rate debt and derivative mark-to-market value 9.3 8.1
Convertible bond fair value adjustment 0.1 0.1
Deferred tax (0.7) (0.3)
Intangible assets 0.4 0.5
Closing EPRA NDV per share 114.1 116.4
Financing
In the year, the Group has addressed the refinancing risk of the debt maturities falling due in 2025 by
refinancing two revolving credit facilities with Barclays and Lloyds totalling £270 million. The new facilities
were partially used to repay the £70 million variable rate bonds ahead of maturity in December 2025 and
provide the Group with sufficient headroom to repay the £150 million convertible bond which matures in
July 2025. Following the completion of these refinancings the next significant refinancings fall due in
October 2026. During the year the Group also exercised options to extend the maturities by one year to
2027 and 2026 on its shorter dated revolving credit facilities with HSBC (£100 million) and Santander (£50
million) respectively.
The Group’s balance sheet and financing position remain strong with cash and committed undrawn
facilities totalling £270.9 million (31 December 2023: £321.2 million) after contracted capital commitments
of £36.3 million (31 December 2023: £14.6 million).
At 31 December 2024, total available loan facilities were £1,630.4 million (31 December 2023: £1,642.5 million)
ofwhich £1,326.7 million (31 December 2023: £1,309.9 million) had been drawn. Cash balances of £3.5 million
(31 December 2023: £3.2 million) resulted in Group net debt of £1,323.2 million (31 December 2023:
£1,306.7million). Contracted capital commitments at the balance sheet date totalled £36.3 million
(31December 2023: £14.6 million) and comprise the acquisition of Laya Healthcare, Ireland, for
£19.8million, asset management projects of £14.0 million and development expenditure across two
schemes of £2.5 million.
The Group’s key debt metrics are summarised in the table below:
Debt metrics
31 December
2024
31 December
2023
Average cost of debt – drawn
1
3.4% 3.3%
Average cost of debt – fully drawn
1
4.0% 4.1%
Loan to value 48.1% 47.0%
Loan to value – excluding convertible bond 42.6% 41.6%
Total net debt fixed or hedged
1,2
100.0% 97.2%
Net rental income to net interest cover 3.1 times 3.1 times
Net debt/EBITDA 9.3 times 9.4 times
Weighted average debt maturity – drawn facilities 5.7 years 6.6 years
Weighted average debt maturity – all facilities 4.9 years 5.7 years
Total drawn secured debt £1,176.7m £1,159.9m
Total drawn unsecured debt £150.0m £150.0m
Total undrawn facilities and available to the Group
2
£270.9m £321.2m
Unfettered assets £47.3m £37.0 m
1 Including the impact of post year end hedging completed.
2 Including the impact of capital commitments at the year end.
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Primary Health Properties PLC Annual Report 2024
24
Financial review continued
Average cost of debt
The Group’s average cost of debt increased marginally at the year end to 3.4% (31 December 2023: 3.3%)
following the completion of new interest rate hedging post year end that was put in place following the
expiry of a legacy swap at the end of 2024. The new fixed rate swap arrangements will provide further
protection to the Group’s earnings over the course of 2025 and 2026.
Assuming the £150 million convertible bond is repaid in July 2025 using the Group’s undrawn headroom
onexisting revolving credit facilities then the average cost of debt is expected to increase by around
20bps to 3.6%.
Interest rate exposure
The analysis of the Group’s exposure to interest rate risk in its debt portfolio as at 31 December 2024 is
asfollows:
Facilities Net debt drawn
£m % £m %
Fixed rate debt 1,105.4 67.8 1,105.4 83.5
Hedged by fixed rate interest rate swaps
1
200.0 12.3 200.0 15.1
Hedged by interest rate caps 49.6 3.0 49.6 3.8
Floating rate debt – unhedged 275.4 16.9 (31.8) (2.4)
Total 1,630.4 100.0 1,323.2 100.0
1 Including the impact of post year-end hedging completed.
Interest rate swap contracts
During the year the Group did not enter into any new fixed rate debt or hedging arrangements.
Post year end, in January 2025, the Group fixed, for two years, £200 million of nominal debt at a rate of
3.0% for an all-in premium of £4.5 million. The fixed rate swap will provide further protection to the Group’s
interest rate exposure especially whilst rates continue to remain elevated and volatile. The fixed rate swap
effectively hedges out all of the current net debt drawn along with providing protection for future debt
required to meet capital commitments.
Accounting standards require PHP to mark its interest rate swaps to market at each balance sheet date.
During the year there was a loss of £4.5 million (2023: loss of £4.3 million) on the fair value movement of
the Group’s interest rate derivatives due primarily to decreases in interest rates assumed in the forward
yield curves used to value the interest rate swaps and the impact of the passage of time. The net
mark-to-market (“MtM”) of the swap portfolio is an asset value of £0.2 million (31 December 2023: net MtM
asset £4.7 million).
Currency exposure
The Group owns €308.6 million or £255.3 million (31 December 2023: €282.2 million/£244.6 million)
ofeurodenominated assets in Ireland as at 31 December 2024 and the value of these assets and rental
income represented 9% (31 December 2023: 9%) of the Group’s total portfolio. In order to hedge the risk
associated with exchange rates, the Group has chosen to fund its investment in Irish assets through the
use of euro denominated debt, providing a natural asset to liability hedge, within the overall Group loan
tovalue limits set by the Board. At 31 December 2024 the Group had €274.1 million (31 December 2023:
€281.0 million) of drawn euro denominated debt.
Euro rental receipts are used to first finance euro interest and administrative costs and surpluses are used
tofund further portfolio expansion. Given the large euro to sterling fluctuations seen in recent years and
continued uncertainty in the interest rate market, the Group entered, in January 2025, a new FX forward
trade hedge (fixed at €1.1459:£1) for a two-year period to cover the approximate euro denominated net
annual income of €10 million per annum, minimising the downside risk of the euro remaining above €1.1459:£1.
Fixed rate debt mark-to-market (“MtM”)
The MtM of the Group’s fixed rate debt as at 31 December 2024 was an asset of £125.5 million
(31December 2023: asset £106.2 million) equivalent to 9.4 pence per share (31 December 2023: asset
of7.9pence) which is not reflected in the NTA reported. The movement in the year is due primarily to the
significant increases in interest rates assumed in the forward yield curves used to value the debt at the
year end. The MtM valuation is sensitive to movements in interest rates assumed in forward yield curves.
Convertible bonds
In July 2019, the Group issued, for a six-year term, unsecured convertible bonds with a nominal value
of£150 million and a fixed coupon of 2.875% per annum. Subject to certain conditions, the bonds are
convertible into fully paid Ordinary Shares of the Company and the initial exchange price was set at
153.25 pence per Ordinary Share. The exchange price is subject to adjustment, in accordance with the
dividend protection provisions in the terms of issue if dividends paid per share exceed 2.8 pence per
annum. In accordance with those provisions the exchange price has been adjusted to 125.64 pence per
Ordinary Share as at 31 December 2024.
The conversion of the £150 million convertible bonds into new Ordinary Shares would reduce the Group’s
loan to value ratio by 5.5% from 48.1% to 42.6% and result in the issue of 119.4 million new Ordinary Shares.
Richard Howell
Chief Financial Officer
27 February 2025
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Primary Health Properties PLC Annual Report 2024
25
EPRA performance measures
Providing
transparent
information
Adjusted earnings per share
∆
7.0 pence, up 2.9% (2023: 6.8 pence).
Definition
Adjusted earnings is EPRA earnings excluding the MtM
adjustments for fixed rate debt acquired with the merger
withMedicX in 2019, divided by the weighted average number
ofshares in issue during theyear.
Purpose
A key measure of a company’s underlying operatingresults and
anindication of the extent towhich current dividend payments
aresupported by earnings.
Calculation
See Note 8 to the Group financial statements.
EPRA earnings per share
∆
7.2 pence, up 2.9% (2023: 7.0 pence).
Definition
EPRA earnings is the profit after taxation excluding investment
anddevelopment property revaluations, gains or losses on
disposals, changes in the fair value of financial instruments and
associated close-out costs and their related taxation and one-off
exceptional payments divided by the weighted average number of
shares in issue during the year.
Purpose
A measure of a company’s underlying operating results and an
indication of the extent to which current dividend payments are
supported byearnings.
Calculation
See Note 8 to the Group financial statements.
Adjusted net tangible assets (“NTA”) pershare
∆
105.0 pence, down 2.8% (2023:108.0pence).
Definition
Adjusted net tangible assets are the EPRA net tangible assets
excluding the MtM adjustment of the fixed rate debt, net of
amortisation, acquired on the merger with MedicX, divided
bythenumber of shares in issue at the balance sheet date.
Purpose
Makes adjustments to IFRS net assets to provide stakeholders
with the most relevant information onthefairvalue of the assets
and liabilities within a true realestate investment company with
along term investment strategy.
Calculation
See Note 8 to the Group financial statements.
EPRA NTA per share
∆
103.1 pence, down 2.6% (2023: 105.8 pence).
Definition
EPRA net tangible assets are the balance sheet netassets,
excluding the MtM value of derivative financial instruments and
the convertible bond fair value movement, and deferred taxes
divided by the number of shares in issue at the balance
sheetdate.
Purpose
Makes adjustments to IFRS net assets to provide stakeholders
with themost relevant information on thefair value of the assets
and liabilities within atrue real estate investment company with
along term investment strategy.
Calculation
See Note 8 to the Group financial statements.
The Company is a member of the European
Public Real Estate Association (“EPRA”). EPRA
has developed a series of measures that aim to
establish best practices in accounting, reporting
andcorporate governance and toprovide
transparent and comparable information
toinvestors.
We use EPRA and adjusted measures to illustrate PHP’s underlying
recurring performance and to enable stakeholders to benchmark the
Group againstother property investment companies. Setoutopposite
is a description of each measure and how PHPperformed.
∆ Alternative performance measures ("APMs"): Measures with this symbol ∆ are APMs defined in the Glossary section on pages 166 to 168, and presented throughout this
Annual Report. All measures are reported on a continuing operations and 52-week comparable basis.
* The Group does not have any material rent free periods and therefore the EPRA "Topped-up" NIY is the same as the EPRA net initial yield.
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Primary Health Properties PLC Annual Report 2024
26
EPRA performance measures continued
EPRA cost ratio
∆
10.8%, up 10bps (2023:10.7%) (including direct vacancy cost).
10.1%, no movement (2023:10.1%) (excluding direct vacancy cost).
Definition
EPRA cost ratio is the ratio of net overheads and operating
expenses against gross rental income (with both amounts excluding
ground rents payable). Net overheads and operating expenses
relate to all administrative and operating expenses, netof any
service fees, recharges orother income specifically intended to
cover overhead and property expenses. The Group hasdirect
vacancy costs of £0.4million that have been deducted.
Purpose
A key measure to enable meaningful measurement ofthechanges
ina company’s operating costs.
Calculation
See page 23, Financial Review.
EPRA vacancy rate
∆
0.9%, increase of 20bps (2023: 0.7%).
Definition
EPRA vacancy rate is, as a percentage, the estimated rental value
(“ERV”) of vacant space in the Group’s property portfolio divided by
the ERV of the whole portfolio.
Purpose
A measure of investment property space that isvacant, based
onERV.
Calculation
2024
£m
2023
£m
ERV of vacant space 1.4 1.1
ERV of completed property portfolio 153.9 150.8
EPRA vacancy rate 0.9% 0.7%
EPRA net initial yield
∆
5.22%, increase of 17bps (2023: 5.05%).
Definition
Annualised rental income based on the cash rents passing
atthebalance sheet date, less non-recoverable property operating
expenses, divided by the market value of the property, increased
with (estimated) purchaser’s costs.
Purpose
A comparable measure for portfolio valuations. This measure should
make it easier for investors to judge for themselves how the
valuation of the Group’s portfolio compares with others.
Calculation
2024
£m
2023
£m
Investment property (including
those held for sale but excluding
those under construction) 2,745.4 2,778.4
Estimated purchaser’s costs and
capital commitments 194.9 190.2
Grossed-up completed property
portfolio valuation (B) 2,940.3 2,968.6
Annualised passing rental income 153.4 150.8
Property outgoings net of deemed
rent increases — (1.0)
Annualised net rents (A) 153.4 149.8
EPRA net initial yield (A/B)* 5.22% 5.05%
EPRA LTV
∆
48.1%, increase of 110bps (2023: 47.0%).
Definition
Net debt at nominal value, divided by the fair value of properties.
Purpose
A comparable measure to assess gearing.
Calculation
2024
£m
2023
£m
Net debt (see page 25) 1,323.2 1,306.7
Total property value 2,750.0 2,779.3
EPRA LTV 48.1% 47.0%
∆ Alternative performance measures ("APMs"): Measures with this symbol ∆ are APMs defined in the Glossary section on pages 166 to 168, and presented throughout this
Annual Report. All measures are reported on a continuing operations and 52-week comparable basis.
* The Group does not have any material rent free periods and therefore the EPRA "Topped-up" NIY is the same as the EPRA net initial yield.
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Primary Health Properties PLC Annual Report 2024
27
Responsible business
Towards net zero
PHP is committed to transitioning to net zero carbon (“NZC”) across its
operations and property portfolio. Our framework focuses on five key steps
to achieve this across our operational, development and asset management
activities by 2030 and to help our occupiers achieve NZC by 2040.
Highlights 2024
Development
Net zero project at Croft on site, due to
complete in Q2 2025, and second project
commenced in South Kilburn, London
Asset management
First NZC projects completed
Tenants and operations
Achieved Toitu Carbon Reduce certification and
purchased 100% renewable energy
Projects
Committed to applying science-based targets
and continued EPC reassessments generate
significant improvements
Net Zero Carbon Framework
Our net zero targets relate to the emissions from our direct
operations, embodied carbon from new build and refurbishment
projects and our tenants' emissions from their use of our buildings.
Purchased goods and services are not yet included in our targets
as these are new sources of emissions being measured for PHP.
However, we will consider a suitable target over time.
By 2023 – operations net zero
• Reduce emissions from offices, transport and assets where we
procure energy for tenants
• We are now procuring 100% renewable energy where PHP
controls supplies
• We are offsetting residual emissions using high quality nature-
based carbon offset projects
By 2025 – all new developments net zero
• Continually reduce energy use intensity of new buildings and
ensure they can operate with net zero emissions
• Measure, minimise, benchmark and improve embodied carbon
performance for all new developments, setting incrementally more
challenging targets for reduction
• Offset residual embodied carbon emissions via high
qualityprojects
By 2030 – net zero asset management and EPC B
• Across the portfolio all properties to have an EPC rating of B
orbetter, where economically feasible
• Achieve reductions in energy use intensity (kWh/m
2
) through
asset management projects and electrify buildings where
feasible, as part of net zero operational assets
• Measure, target reductions and offset residual embodied carbon
from our asset management activities
• Collect and communicate energy performance data for all our
occupiers and support them to transition to lower energy and
carbon operations
By 2035 – 80% carbon reduction of the portfolio
• Continued energy demand reduction through upgrade
andrefurbishment
• Remove fossil fuel heating systems from all properties
• Increase proportion of renewable energy generation on our sites
• Reduce the carbon intensity of buildings compared to 2021
portfolio baseline
By 2040 – enabling a net zero portfolio
• Help occupiers to lease and operate our buildings with net zero
carbon emissions
• Offset any remaining occupier residual carbon from 2040 for all
properties where the lease was signed or renewed after 2035
• NZC achieved five years ahead of the NHS’s target of 2045 and
ten years ahead of the UK and Irish governments’ targets of 2050
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
28
Responsible business continued
Members of the ESG Committee (the“Committee”)
Member
Number of meetings
and attendance
Laure Duhot (Chair) 3 (3)
David Austin 3 (3)
Ivonne Cantú 3 (3)
Mark Davies (appointed 24 April 2024) 2 (2)
Richard Howell 3 (3)
Harry Hyman 3 (3)
Ian Krieger 3 (3)
Bina Rawal 2 (2)
Steven Owen (resigned 24 April 2024) 1 (1)
Jesse Putzel (resigned 30 June 2024) 2 (2)
David Bateman (resigned 31 July 2024) 2 (2)
Bracketed numbers indicate the number of meetings the member was eligible
to attend in 2024. The Company Secretary acts as the secretary tothe
Committee and attends all the meetings.
Responsible business
andESG review
Premises, Health and People: investing in the health and wellbeing of our communities.
Laure Duhot
Chair of the ESG Committee
“ PHP has had another strong year
indelivering on its NZC Framework
through its asset management and
development activities.”
Dear shareholder,
PHP has a strong commitment to responsible business and ESG
matters are at the forefront of the Board’s and our various
stakeholders’ considerations. The Group has committed to
transitioning to net zero carbon (“NZC”) by 2030 and has
published a framework setting out the five key steps it is taking
to achieve this ambitious target.
In 2024, we have continued to deliver against the objectives set
and Iam pleased to present the Responsible Business and ESG
Review highlighting the progress made in the year.
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Primary Health Properties PLC Annual Report 2024
29
Responsible business continued
In 2024, we continued to deliver and make good progress on our
NZCFramework and our wider ESG commitments, building on the
strong progress made in previous years.
Through our development and asset management activities we
havecontinued to invest in the portfolio, improving energy and
carbon performance, driving rental growth and creating more
sustainable healthcare infrastructure for the future and notable
achievementsincluded:
• completion of our first pilot NZC asset management project at
Swan Lane Medical Centre, Norfolk;
• ongoing construction of our first NZC development at Croft,
WestSussex due Q2 2025; and
• commencing work on a second NZC fit-out project at South Kilburn,
London, which is due to be completed in Q2 2025.
The ESG Committee has also overseen the further development of our
work on energy and carbon reduction and I am pleased to report that
in 2024 we committed to the application of science-based targets
and for the second year in succession achieved certification from
Toitu Carbon Reduce and ISO 14064, which demonstrates our robust
approach to carbon measurement and reduction. As part of this we
continued to improve our understanding of the energy performance
ofthe wider portfolio and continued to build on our partnership with
ARBNCO Ltd to move towards 100% data coverage and to enable
engagement with tenants to help them improve their performance.
Following our extensive work on climate risks and scenario analysis in
previous years we have produced our fourth TCFD disclosure, which is
set out on pages 44 to 50.
We have also amended our social impact programme to focus
andlink with our asset management projects, working directly
withtenants to provide support for their chosen social prescribing
initiatives in favour of their patient list and wider local community.
Additionally, we continue to engage with and support our employees
focusing on professional and personal development.
I trust you find this report helpful and informative and would be delighted
to receive any feedback or comments you may have on ourapproach.
Laure Duhot
Chair of the ESG Committee
27 February 2025
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
30
Responsible business continued
Our approach
PHP’s approach is based around its core activities of investment, development, andasset
andproperty management together with its corporate activities.
PHP supports and links its strategy to the UN Sustainable Development Goals (“SDGs”), focusing on the most relevant SDGs where it can have
apositive impact. Our strategy is based around three core pillars that run through our activities focused on Premises, Health and People and
issupported by our ESG policies (available on our website). These are:
Our approach Performance against our commitments
Approach Purpose Aims Focus Commitments and targets Progress 2024 Focus areas 2025
1. Premises – Built environment
Investing in
anddeveloping
sustainable
buildings.
To employ
sustainable
designto develop,
refurbish and
upgrade our
buildings to
modern medical
and environmental
standards.
Building a more
resilient portfolio
forthelong term.
Reducing risk by building purpose-built new
developments and making quality acquisitions.
Working with occupiers to improve the energy
efficiency of our properties and integrate more
sustainable features.
Having a preference for reusing existing buildings,
upgrading them in an energy and resource efficient
way, reducing reliance on new resources.
Sourcing responsibly and designing for future reuse
of assets and materials.
All new developments are to be NZC by 2025 and
asset management projects by 2030.
Delivering BREEAM and
nZEB certified buildings.
Improving portfolio
EPCratings.
Increasing visibility of
energy performance across
the portfolio.
Delivering on our net zero
carbon commitments.
Our NZC development at Croft is due to achieve
practical completion in Q2 2025 and our second
project at South Kilburn in London commenced on site.
We plan to start a third NZC development at Spilsby,
Lincolnshire, later in 2025.
We completed PHP’s first pilot NZC asset
management project at Swan Lane Medical Centre,
Norfolk, confirming good energy performance and
reductions that can be applied to future projects.
Future development and asset management projects
(in excess of £1.0 million project cost) are targeted to
achieve BREEAM Excellent or Very Good in the UK or
nZEB and BER A3 in Ireland.
The overall portfolio now has 47% A–B ratings and
88% A–C, by value.
We have energy data points for 77% (improved from
75% in 2023 and 60% in 2022). We are now partnering
with ARBNCO to get to 100% and improve data quality.
We also committed to the application of science-based
targets and expanded our carbon measurement to
include our supply chain and gained Toitu Carbon
Reduce certification for our Scope 1, 2 and 3 emissions
for the second year in succession.
100% of PHP procured electricity is now from
renewable sources.
Continue to focus on improving EPC
ratingsto B and deliver net zero ready
refurbished buildings via our asset
management programme.
Apply the learnings from the first pilot NZC
asset management project completed in
2024 and work with expert partners to
carry out net zero audits for buildings to
inform our approach and align with the
NHS Net Zero Carbon Buildings Standard.
Measure embodied carbon from our asset
management projects to understand our
performance and set targets as part of
ourNZC commitments.
Roll out our partnership with ARBNCO to
collect 100% of energy data, enabling tenant
engagement and performance improvement.
Keep under review targets for energy
useintensity and embodied carbon and
submit our corporate targets for approval
by the Science Based Targets initiative.
Reducing our
carbonfootprint.
Working with our stakeholders to improve the energy
efficiency of our properties and integrate more
sustainable features with a long term ambition of
thewhole portfolio, including occupiers’ operations,
being NZC by 2040.
Policies Net Zero Carbon Framework; Sustainability;
Sustainable Development and Refurbishment.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
31
Responsible business continued
Our approach Performance against our commitments
Approach Purpose Aims Focus Commitments and targets Progress 2024 Focus areas 2025
2. Health – Community impact
Engaging with and
enhancing the
right stakeholders
to drive effective
decision making.
To support
initiatives that
further the health,
wellbeing and
education of our
local communities.
Meeting the
healthcare needs
ofcommunities.
Engaging in effective communications and
collaborative practices with our occupiers.
Investing, via our
Community Impact Fund,
into causes which enhance
health and deliver
socialvalue.
Demonstrating the
positiveimpact investment
in primary healthcare
cangenerate.
We continued grant giving as part of asset
management projects, awarding two grants totalling
£13,000 to charitable organisations directly linked to
our assets, and will continue in 2025.
Continue to expand our social
prescribingprogramme, linked to our
assetmanagement projects, focusing
onlocal initiatives linked directly to
PHP’stenants.
Capture the positive social outcomes of
our initiatives and business activities.
Creating
socialvalue.
Working with partners to enhance wellbeing and
inclusivity through initiatives that contribute to
thecreation of healthy, supportive and
thrivingcommunities.
Policies Sustainability.
3. People – Responsible business
Conducting our
business with
integrity and
investing in
humancapital.
To create
opportunities and
maximise the
potential of the
stakeholders we
work with.
Providing a good
place to work.
Ensuring effective investment in the professional
development of the Group’s employees.
Maintaining a culture of empowerment, inclusion,
development, openness and teamwork for
ourpeople.
Continuing to promote
PHP’s culture and
commitment to high levels
of ethics and a workplace
culture of inclusion, diversity
and equal opportunity.
Conducting an independent
annual staff survey to
inform and monitor
continued improvement.
We increased our efforts to guard against modern
slavery in our supply chain, engaging with all our
supply partners, conducting third-party audits on
three sites.
We conducted a confidential staff survey and fed
back to employees on issues raised. General
sentiment was positive.
We provided enhanced maternity and paternity
benefits to staff and continued to promote volunteering
opportunities, with two members of staff taking up
the option, totalling seven days of volunteering.
Continue to engage our supply chain
onethical labour and sourcing and make
use of targeted audits as part of our due
diligence process.
Continue to support staff with individual
training and development plans.
Continue to survey staff to ascertain levels
of employee satisfaction and implement
targeted action plan for identified areas
for improvement.
Governing an
ethicalbusiness.
Being transparent and compliant in all
ouroperations.
Policies Business Ethics, Equality, Diversity and Inclusion,
Anti-bribery and Corruption.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
32
Responsible business continued
Introduction
PHP invests in flexible, modern properties for the delivery of primary
healthcare to the communities they are located in. The buildings
arelet on long term leases where the NHS, the HSE, GPs and other
healthcare operators are our principal occupiers. As at 31 December
2024, the Group owned 516 properties valued at £2.8 billion which
arelocated across the UK and Ireland.
Responsible business reflects PHP’s strong commitment to ESG
matters and addresses the key areas of ESG that are embedded into
our investment, development, asset and property management, and
corporate activities. We are committed to acting responsibly, having
a positive impact on our communities, improving our responsible
business disclosures, mitigating sustainability risks and capturing
environmental opportunities for the benefit of all our stakeholders.
We realise the importance of our assets for the local healthcare
community, making it easier for our GP, NHS and HSE occupiers to
deliver effective services. We are committed to creating great
primary care centres by focusing on the future needs of our occupiers
and thereby ensuring we are creating long term sustainable buildings.
PHP is committed to helping the NHS achieve its target to become
the world’s first net zero carbon national health system by 2045 and
to delivering against the aims of the NHS Net Zero Carbon Buildings
Standard. PHP’s Net Zero Carbon Framework sets out its own plan to
transition the Company’s activities to net zero by 2030 and help its
occupiers achieve this for their activities by 2040, ahead of the NHS
and UK and Irish governments’ net zero target dates. PHP will
continue to proactively engage and work with its various healthcare
occupiers tohelp them achieve this.
This Responsible Business Report sets out our commitment and
approach to environmental and social sustainability. It is reviewed
annually and approved by the Board and sets the framework for
establishing objectives and targets against which we monitor and
report publicly on our performance.
• PHP’s first net zero carbon development
• Achieved BREEAM Excellent
The development at Croft, West Sussex, represents the future
ofsustainable primary care in the UK. PHP was appointed to
develop the highly sustainable premises to consolidate and
expand services locally and cater for an expected significant
growth in patient numbers over the next few years.
The premises support the national and local NHS strategies
tomove services away from over-stretched hospitals, providing
agreater range of primary and community care services.
Developed on brownfield land and due to achieve practical
completion in Q2 2025. The premises have been let for 25years
to the local GP partnership and pharmacy, allowing patients and
the wider primary care network to access a rangeof services,
including general practice, mental health assessments,
occupational and physiotherapy, social prescribing and training
for GPs, nurses and paramedics.
The building has an EPC A rating and is PHP’s first net zero
carbon development. The building is being delivered in ahighly
sustainable way, with materials from certified responsible
sources, low carbon products, low waste and water and
enhanced ecology on site. During construction, PHP has also
carried out ethical labour audits and engaged with the main
contractor to raise awareness of modern slavery risks.
Case study – Croft, West Sussex
Read more about how we are investing in and developing sustainable
buildings in section 1. Premises – Builtenvironment on pages 34 to 37
Read more about how we are engaging and enhancing the right stakeholders
to drive effective decision making in section 2. Health – Community impact
on page 38
Read more about how we are conducting our business with integrity and
investing in human capital in section 3. People – Responsible business
onpages 39 to 43
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Primary Health Properties PLC Annual Report 2024
33
Responsible business continued
1. Premises – Builtenvironment
As part of the regeneration of a socially deprived area of South
Kilburn, London, 2,500 new homes are being constructed and the
estate master plan requires the delivery of a new Civic Centre
which includes a new medical centre as well as retail and
community space.
The new primary care centre will accommodate the Kilburn Park
Medical Centre, providing significant new investment in both
primary and enhanced services for up to 13,000 patients to
address significant population growth in the area.
PHP has worked collaboratively with the lead residential
developer, the local ICB and the Kilburn Park Medical Centre
practice to design and deliver the new centre and work has
already commenced and is due for completion in Q2 2025.
The fit-out is being delivered to achieve NZC and the
environmental impact is at the centre of its design. The project
ison track to be delivered to BREEAM Excellent, exceeding the
NHS requirement of “Very Good”. Heating and cooling will be
provided through electrically powered air source heat pumps.
The fit-out contractor has also worked with local community
organisations to raise the profile of construction in education
and we are currently working with the GP practice for wider
community engagement in the run-up to practical completion
and the new centre opening.
Responsible investment
Key commitments: Minimum EPC rating of C and capable
ofbeing improved to B or better.
Environmental and sustainability performance are integral elements
of PHP’s approach to the acquisition of existing and funding of new
primary healthcare buildings. We use detailed assessments of each
location, looking at building efficiency and performance, enhanced
service provision for the community and support for wider
healthcareinfrastructure.
We undertake detailed environmental and building surveys to assess
physical environmental risks for each investment, including flooding,
to ensure the risk is avoided or appropriate prevention measures are
developed (see our TCFD disclosures on pages 44 to 50).
During 2024 we continued applying our net zero and ESG
commitments to investment activities, engaging with developers and
asset owners to challenge standards and leverage our influence.
The acquisition of Gillies Health Centre, Basingstoke, demonstrates this
with good environmental performance including an EPC rating of B.
Responsible development
Key commitments: All new developments to be NZC by
2025, BREEAM Excellent and Very Good for fit-outs in the
UK, and nearly nZEB and BER A3 in Ireland.
PHP, together with its development partners, is committed to
promoting the highest possible standards of environmental and
socialsustainability when designing and constructing new assets.
Our Sustainable Development and Refurbishment policy outlines
ourminimum requirements for BREEAM Excellent and a range of
environmental issues, including energy and carbon, waste and
resources, biodiversity, climate adaptation and health and wellbeing.
Our development partners are also required to work to the
samestandards.
We aim to develop new buildings to be net zero carbon
inconstruction (minimising embodied carbon and offsetting
residualemissions) and ready to operate with net zero emissions.
Alldevelopments aim to be fossil fuel free and we are working
towards setting specific energy intensity benchmarks and targets.
Construction of PHP’s first NZC development at Croft, West Sussex,
isdue to reach practical completion in Q2 2025 and theembodied
carbon to practical completion has been measured with our contractor.
In July 2024 the Group commenced work on a second development
atSouth Kilburn, London. The scheme comprises the fit-out of a shell
unit which is being constructed to NZC standards and is also
expected to reach practical completion in Q2 2025.
Responsible asset and property management
Key commitments: Improve EPC ratings to B, procure
100% renewable energy, achieve BREEAM Very Good for
refurbishments and extensions over £1 million and engage
tenants on, and improve, the visibility of energy and
carbonperformance.
We are committed to creating best-in-class primary care centres,
focusing on the future needs of our occupiers and thereby ensuring
we are creating sustainable buildings for the long term. We invest
inthe portfolio of properties to generate enduring occupier and
patient appeal, which provides opportunities to improve rental
values,the security and longevity ofincome, and the quality of
assets. This is a key route for PHP to deliver energy efficiency
improvements and to introduce low or zerocarbon measures for
ouroccupiers and their patients.
Asset and property management will play a key role in achieving
ourNZC target of having an NZC portfolio by 2040, with interim
commitments for all properties to have an EPC rating of at least
Band NZC asset management by 2030 and an 80% reduction in
portfolio emissions by 2035 via targeted improvements to buildings
and occupier engagement.
Case study – South Kilburn, London
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
34
Responsible business continued
Responsible asset and property management continued
During 2024 we completed six (2023: eight) asset management
refurbishment projects, with all achieving an EPC B rating. This
includes three projects where a significant improvement was achieved
from D and E. We have a further ten (2023: six) refurbishment
projects on site or committed, which include energy efficiency
upgrades, installation of roof-mounted solar panels and air source
heat pumps and thermal efficiency upgrades. We have continued to
use BREEAM for refurbishments but several projects during the year
could not be certified due to their scope and size. We agreed 21
(2023: 12) new leases and regears during the year, with all including
Green Lease clauses.
In addition, we carried out targeted reassessment of building EPC
ratings to better reflect their current performance. Combined with
annual renewals, we now have 47% of properties by value at an EPC
rating of B or better (2023: 42%) and 88% at A–C (2023: 85%).
Our first net zero ready refurbishment project was completed in
theyear at Long Stratton in Norfolk, which is on site and has been
designed to move away from gas to an air source heat pump.
This has enabled us to provide benchmarks for target setting on
future projects and we are assessing embodied carbon for a number
of these which along with net zero audits of buildings in operation
will pave the way for future NZC asset management projects as we
aim to accelerate progress ahead of our current 2030 commitment.
Working with our occupiers is essential to improving the performance
of buildings and during 2024 our property management and facilities
management teams engaged with all of our tenants, carrying out
over 830 (2023: over 1,000) site visits at which issues, including
energy and utilities, were discussed. During 2024 we have continued
to review ways to improve the performance of the portfolio outside
ofour asset management programme. This includes 283 (2023: 330)
facilities management plant and equipment replacements and
upgrades, including LED lighting, more efficient heating systems and
building management systems. We also supported tenants to make
their own building improvements, including energy efficiency
upgrades and solar PV installations.
To build on this, we are planning to roll out larger solar PV installations
to sites where PHP will facilitate this for tenants where they procure
their own energy. This approach offers the potential to reduce costs
fortenants in the long term as well as reducing carbon emissions.
Case study – Long Stratton, Norfolk
• PHP’s first NZC asset management project
• EPC A rating and BREEAM Very Good
• NZC for all future operational use
• Air source heat pumps replace oil fed system
• Solar PV and electric vehicle charging
As a consequence of significant new housing development
inthelocal area, delivering 1,800 new homes and placing
significant pressure on the existing healthcare provision, PHP has
refurbished and extended the existing primary care centre which
was more than 20 years old to create seven additional clinical
rooms, increasing the capacity of the practice by 20% toserve
more than 12,000 patients locally.
The refurbished and extended centre has now been future-
proofed for the foreseeable future allowing the practice of
eightGPs and 13 healthcare professionals to deliver enhanced
medical services including minor operations, mental health,
physiotherapy and a pharmacist.
The project represented PHP’s first NZC asset management
project with the environmental performance and impact of the
materials used being at the heart of its design and construction.
The learnings from the project will be used for future projects as
the Group focuses on its target that all asset management
projects will be NZC by 2030.
Progress on energy and carbon performance
As outlined above, during 2024 our investment, development and
asset and property management activities continued to deliver
against targets and to support our net zero carbon commitments.
During 2024 all building electricity supplies procured by PHP were
from renewable energy for all but one building. We also continued
tooffset residual emissions using high quality nature-based carbon
offset projects.
Our operational Scope 1, 2 and 3 emissions are provided on pages 36
and 37 in our SECR disclosure.
We have continued to improve our methodology for estimating whole
portfolio emissions and now have data points for 77% of the portfolio
by area (2023: 75%). To move towards 100% coverage and better data
quality and to enable future engagement with tenants to help
improve their performance, we continue to partner with ARBNCO.
Thisis a cost effective and scalable software solution providing a
direct route to access tenant energy data for our UK property
portfolio and a reporting platform.
As part of our ongoing efforts to improve our approach, during 2024
we were successfully certified, for the second year in succession, by
Toitu Carbon Reduce and ISO 14064 for carbon measurement and
management. As part of this process, our Scope 1, 2 and 3 emissions
for 2023 and 2022 gained limited assurance. We also enhanced our
Scope 3 measurement, carrying out a screening of all 15 Greenhouse
Gas Protocol (“GHGP”) Scope 3 categories. Further details are
provided on page 37. We will undergo recertification and assurance
of2024 disclosures in March 2025.
Our most significant and consistent source of Scope 3 emissions
isdownstream leased assets (tenants’ use of our buildings), as
previously reported, where we aim to achieve net zero by 2040.
Weare now tracking this year on year against our outline net
zerotrajectory.
In addition to our asset management projects, during 2024 we carried
out further building-level net zero audits and assessments fora
number of large assets in our portfolio, identifying routes to reduce
energy use intensity and electrification of buildings. We will
continueto assess buildings in this way to inform our transition
planand trajectory.
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Primary Health Properties PLC Annual Report 2024
35
Responsible business continued
Progress on energy and carbon performance continued
SECR disclosures
PHP measures its emissions in line with the GHGP and takes an
operational control approach. Emissions are based on verified data
currently reviewed by a third party, Sustainable Energy First
(previously called Inenco), and assured by Achilles via the Toitu
Carbon Reduce certification programme (2023 emissions limited
assured and 2024 pending limited assurance following audit in
March2025).
Our emissions are calculated using activity data, i.e. metered energy
use, with minimal estimates used, e.g. for miles driven by employees.
Scope 1 and 2 emissions are normalised by revenue and full-time
employees as these relate to our direct operations and by kWh/m²
forenergy supplied to or procured by tenants. In January 2023, PHP
acquired Axis, an Irish property and facilities management business,
and we continue to include emissions that relate to Axis’ operations
arising from its one office in Cork, as well as its delivery of services
toclients.
PHP’s direct operations result in very limited greenhouse gas
emissions. The table overleaf shows our operational Scope 1, 2 and 3
emissions. Scope 1 relates to gas used in our London office, business
travel by car and diesel used in vans by Axis. the Stratford-upon-Avon
and Cork offices are all electric. Scope 2 relates to grid electricity
used at PHP and Axis offices. Scope 3 relates to partial emissions
from downstream leased assets,for properties where PHP supplies
energy to occupiers, which they hold operational control over. We view
these as “operational Scope 3 emissions”.
We have reported Scope 3 emissions from tenant procured energy
separately along with purchased goods and services.
A detailed breakdown of portfolio emissions is provided in our EPRA
sustainability disclosure which is available on our website. 100% of
reported Scope 1, 2 and 3 emissions in the year were based in the
UKand Ireland.
Operational Scope 1, 2 and 3 emissions
2024 2023
Source tCO
2
e MWh tCO
2
e MWh
Scope 1
Business travel (car) 35.9 149 62.7 283
Diesel (vans) 20.7 86 18.8 79
Gas (offices) 12.1 66 10.7 59
Scope 2
Electricity (offices) 14.8 68 15.7 75
Market based
1
— — — —
Total Scope 1 and 2 83.5 369 107.9 496
Market based
1
68.7 — 92.2 —
Operational Scope 3
Landlord supplied electricity 1,190 5,440 1,188 5,737
Market based
1
— — 35 —
Landlord supplied gas 997 5,450 1,240 6,780
Total operational Scope 3 2,187 10,890 2,428 12,517
Market based
1
997 — 1,276 —
Total operational Scope 1, 2 and 3 2,272 11,259 2,536 13,013
Market based
1
1,066 — 1,368 —
Upfront embodied carbon from completed asset management project 184 — — —
Nature-based carbon credits purchased (1,250) — (1,368) —
Net tCO
2
e — — — —
Intensity metrics
Scope 1 and 2 tCO
2
e per full-time employee 1.0 — 1.3 —
Scope 1 and 2 tCO
2
e per £m revenue 0.5 — 0.6 —
Scope 3 kgCO
2
/m
2
and kWh/m
2
13.8 68.8 14.8 76.2
Market based
1
6.3 — 7.8 —
1 Market-based reporting reflects the emissions from the electricity being purchased, whereas location based uses national grid average emissions for the reportingyear.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
36
Responsible business continued
Progress on energy and carbon performance continued
Operational Scope 1, 2 and 3 emissions continued
During 2024 absolute Scope 1 and 2 emissions have decreased by
23% (2023: +43%) and intensity by 23% (2023: +20%). This is primarily
due to greater accuracy of readings and the removal of estimates
used in the prior year calculations. The emission intensity of grid
sourced electricity also increased by 5% in 2024 (2023: +7%).
Like-for-like business mileage has decreased in the year as a result
ofa lower number of business travel. Employees are encouraged to
use public transport where possible and during the year employees
continued to use the Train Hugger platform, which supports UK
reforestation through every journey. Staff continue to take up our
electric and hybrid vehicle benefit, withseven (2023: five) members
ofstaff taking up the option to date.
Our office energy use has remained broadly static during 2024 and 2023.
We will continue to reduce energy demand from our offices where
possible and emissions from transport; however, our wider portfolio
iswhere we aim to focus our attention. As shown in the table above,
Scope 3 emissions from landlord supplied energy (downstream leased
assets) have decreased on an absolute and normalised basis. This is
primarily due to a decrease in gas as assets start to transition to all
electric buildings.
Electricity and gas consumption have decreased by 5% and 20%
(2023: +8% and +9%) respectively. We have continued to support
tenants to reduce their use of energy and resulting emissions,
including through our asset management programme. We expect
tosee results of these and new initiatives over time.
We have now switched all electricity supply to 100% renewable
energy (2023: 97%). Therefore, on a market-based reporting basis,
there has been a 22% reduction (2023: 8% reduction) in absolute
and10% reduction (2023: 12% reduction) in normalised emissions.
We have offset all residual 2024 and 2023 emissions, including
theenergy we procure on behalf of our tenants, through purchasing
high quality nature-based carbon credits from independently
certifiedprojects.
• EPC B rating and BREEAM Very Good
• Hydrogen ready gas boilers
• LED lighting throughout
• Solar PV and electric vehicle charging
The Trinity Medical Centre, originally constructed in 1998, is being
repurposed and refurbished following the merger of two separate
GP practices. The reconfiguration of the accommodation will create
13 additional consulting rooms to increase capacity, one new
waiting area with a compliant reception desk to serve patients,
new disabled WCs and baby changing facilities.
An essential part of the refurbishment work includes significant
environmental improvements to the property with the current gas
boilers replaced with hydrogen ready gas boilers to future proof
the heating system. To enhance thermal efficiency, the external
windows will be replaced and LED lights including sensor controls
will be installed to reduce running costs for the practice. Additional
improvements include PV solar panels and the provision of electric
vehicle charging points in the car park. The improvements will
result in the EPC rating being improved to a B rating (currently D)
and the project will also achieve a BREEAM Very Good certification.
Community services will be introduced to the building promoting
the PHP Community Impact Fund with two applications, one from
Wakefield Hospice Outreach Team who care for people with
progressive illnesses and a second from Memory Action Group,
alocal charity who provide drop in centre for people living
withdementia.
Case study – Trinity Medical Centre, Wakefield
Wider Scope 3 emissions
During 2024, we have continued to expand our measurement of wider Scope 3 emissions against the 15 categories of the GHGP
Scope3Standard.
As part of our certification to Toitu Carbon Reduce, we have determined the most material categories. Categories 3, 8, 9, 10, 11, 12, 14 and 15
are not relevant for PHP’s business. Categories 5, 6 and 7 have been assessed and are de minimis at under 10 tCO
2
e. We will continue to track
emissions from business travel. Category 4, upstream transportation, is included within the calculation for Category 1, purchased goods and
services. Embodied carbon is relevant under Category 2, capital goods. This is being measured for developments and some refurbishments and
will be reported when projects are completed (including associated transport emissions).
2024 2023
Scope 3 source
tCO
2
e MWh £m tCO
2
e MWh £m
Purchased goods and services 6,659 — 36 5,730 — 37
Downstream leased assets
Electricity 11,230 53,029 — 11,284 54,492 —
Gas 11,763 64,419 — 12,567 68,697 —
Total wider Scope 3 29,652 117, 4 48 36 29,851 123,189 37
Intensity metrics 36kgCO
2
e/m
2
143kWh/m
2
185tCO
2
e/£m 36kgCO
2
e/m
2
151kWh/m
2
154tCO
2
e/£m
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
37
Responsible business continued
2. Health – Community impact
Social – health and wellbeing
PHP seeks to have a positive impact on the health and wellbeing
ofthe communities where its assets are located and has set policies
and targets to improve this through the Group’s asset and property
management activities.
PHP is committed to supporting both the NHS and HSE in tackling the
major underinvestment in primary care facilities in the UK and Ireland.
PHP’s aim is to provide modern, purpose-built properties let to the
NHS, the HSE, GPs and other healthcare operators which enable
themto provide the highest standards of modern healthcare.
The facilities are predominantly located within residential communities
and enable the UK and Irish population to access better health
services locally. This is central to the Group’s purpose, strategic
objectives and business planning processes.
PHP’s portfolio serves around 6.3 million patients or 9.3% of the UK
population and our portfolio is their first point of contact with the
NHS when they start their patient journey.
Our interventions, when we acquire, refurbish or develop new healthcare
facilities, have a significant positive social impact, whether through
enhancement of experience for people using our facilities, expansion
of healthcare provision locally or making healthcare more accessible
to those that need it most.
Modern, high quality primary healthcare facilities also help to
reducepressure and costs for the secondary care system. Our
activemanagement of the property portfolio seeks to maintain the
centresas fit for purpose and enables PHP to identify and manage
opportunities and risks associated with the provision of its properties.
Occupier engagement and support
PHP is committed to ensuring that the properties it develops and
owns continue to meet its GP, NHS and HSE occupiers’ requirements
and provide flexibility for future change, update and expansion.
Ourdedicated teams of asset and property managers look after our
occupiers’ requirements, with a policy of regular communication and
asupportive approach. Our in-house facilities management (“FM”)
team engages with and supports occupiers, carrying out reactive
andplanned maintenance to optimise building performance.
Social trends of a growing and ageing population continue to
highlight the need for purpose-built primary care premises to provide
modern healthcare to the UK and Irish populations. This further
reinforces our objectives to continue to invest in existing and new
premises for the benefit of all our stakeholders.
It is crucial that we continually update our understanding of what
issues matter to our occupiers. To support this, we regularly engage
with them and carry out a tenant feedback survey. Throughout 2023
and 2024, we have continued to gather tenant feedback, conducting
surveys directly as part of site visits. In 2024 coverage of our survey
was 28% (2023: 30%) of the portfolio (by number of buildings). We
continue to generate a positive Net Promoter Score for both 2024
and2023. While positive feedback is helpful, where tenants feel more
negatively about an issue, it allows us to work with them on solutions,
such as engagement by our asset management team to discuss
building refurbishment options. Asummary of our engagement
withand support for tenants is provided in the table following.
Community Impact Fund
PHP continues to support social and charitable activities and services
linked to the patients and communities of our occupiers, which cannot
be readily accessed elsewhere. In total, PHP provided £12,000 during
2024 (2023: £137,500).
During 2024 we amended our social impact programme to focus and
link directly with the Group’s asset management projects, working
directly with tenants to provide support for their chosen local initiatives.
Grants have been committed totalling £13,000 (2023: £20,000) and
we are engaging with practices, at a number of projects whose
buildings are at varying stages of refurbishment, delivering much
needed support through social prescribing, and we plan to continue
to offer grants in this way. We continue to monitor the positive
impact of these awards.
Our experience, and that of our award recipients, continues to
demonstrate the important role social prescribing has to play in
addressing direct and indirect health impacts.
Engaging and supporting tenants…
1,100
property visits by PM, FM
and AM teams
94%
of the portfolio inspected
by PM and/or FM
20,254
help desk jobs processed
283
FM plant upgrades
andreplacements
PHP has also continued to support a number of charities from the
Community Impact Fund during the year, including TheAcademy of
Real Assets, Children with Cancer UK, Welsh Air Ambulance, Children
in Need and Insulate Ukraine and charity matched funding for
employees' chosen charities.
Volunteering
PHP staff benefit from five paid days per annum for volunteering
activities that are personal and meaningful to them, delivering
support to local communities and benefiting from the personal
development that these activities provide. Two members of staff
havetaken up the opportunity to volunteer during 2024 with
causesincluding the Order of Malta taking Lebanese guestswith
physical and mental disabilities on a camp in Lebanon,providing
arange of activities and games allowing them and their carers some
much needed respite. We expect more employees to take up the
opportunity going forward.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
38
Feedback from our tenants…
92%
94%
76%
35%
94%
are happy with PHP’s level
ofcommunication
feel net zero is important
or very important
feel their building meets
theirneeds
Net Promoter Score
would recommend PHP
as a landlord
– +
Responsible business continued
3. People – Responsible business
People
PHP recognises the importance of the welfare of the employees
whowork on behalf of the Group and are critical to its success. Their
experience and contribution to the business are essential to the delivery
of our business strategy and ESG commitments.
The Group is highly focused with 60 (2023: 58) UK employees at the
year end, with a further 27 (2023: 31) employees in the Axis team, and
five Non-executive Directors which allows for a flexible and individual
approach. PHP’s Board has a strong commitment to maintaining,
improving and promoting the highest levels of ethics and conduct
andpromoting a workplace culture of:
Inclusion and communication We have a flat management structure with clear responsibilities. We strongly encourage input on
decisionmaking from all staff and wide participation in Committee and team meetings. There is
strongcollaboration across teams which enables good sharing of information and ideas. Regular
strategyand performance updates are provided to employees from the Executive Directors and
seniormanagement team.
Modern, flexible workingpractices We have flexible working arrangements allowing employees to work from home one day per week,
ongoing flexibility around start and finish times and a flexible dress code.
Fair remuneration Employee remuneration is aligned to personal, Company and ESG performance with Long Term Incentive
Plans in place for senior employees that replicate arrangements for Executive Directors. All employees
receive a variety of benefits which are noted later in this section.
Diversity and
equal opportunity
We promote diversity across knowledge, experience, gender, age and ethnicity with a published
Equality,Diversity and Inclusion policy in place. Whilst overall female employee representation is good,
we recognised that we needed to specifically promote greater gender diversity in the senior team.
Our female Board representation is now 43% (2023: 33%) and, in the year, we continued to support the
training and professional development of several female members of the property and finance teams.
Recognising the significant diversity imbalance in the real estate sector, we continue to support the
promotion of diversity, both internally and externally.
Employee development andtraining An appraisal process is undertaken twice a year where career progression, training needs and
performance are discussed. We actively encourage training and we continue to monitor our staff training
each year focusing on professional, including ESG and cyber risk awareness, and personal development.
Health and safety Health and safety remain central to the execution of PHP’s business strategy and we take our
responsibilities very seriously and are committed to continued improvement but have an excellent record.
See pages 41 and 42 for further details on health and safety.
Wellbeing and employeesatisfaction During 2024 we completed the refurbishment and made improvements to the IT infrastructure at our
office in Stratford-upon-Avon for delivery in 2024. The results of our 2024 employee survey are shown
later in this section and reflect continued high levels of employee satisfaction.
Laure Duhot, the Company’s designated workforce Non-executive Director, continues to be closely
involved in monitoring employee satisfaction.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
39
Responsible business continued
People continued
Laure Duhot is the designated workforce Non-executive Director.
Inthe year she considered the results of the staff survey and held
meetings in the London, Stratford-upon-Avon and Cork (Axis) offices,
which were open to all employees. The sessions aimed to gather
feedback and ideas from different areas of the Company, to discuss
how people feel and their experiences of working at PHP, with
feedback reported back to the Board. This resulted in areas for
continuing focus through 2025, including continued development and
understanding of PHP’s culture; continuing to enhance understanding
of personal objectives and remuneration outcomes flowing from them;
and cross-team working to further progress the Company’s people
agenda by acting on employee feedback received.
During 2024 eight (2023: four) employees left the business in the year
reflecting a staff turnover rate of 14% (2023: 6%).
Employee satisfaction survey
In October 2024, we undertook PHP’s third annual employee
engagement survey and the first survey of the Axis team based in
Ireland. Both surveys were managed by an independent third party
totrack staff satisfaction. In total, we asked 33 questions, receiving
responses anonymously. The survey focused on several key areas and
in total we had 43 and 17 responses across the PHP and Axis teams
respectively with engagement from 73% (2023: 86%) of PHP employees
and 55% (2023: n/a) of Axis employees.
Overall, the results of the survey showed PHP staff sentiment had
weakened following a request for staff to be present in the office four
days (2023: three days) a week, albeit this was limited to
approximately one-third of responses received from the PHP team.
The strongest scoring areas of the survey included the following points:
• the Company’s image is of a high quality organisation with
aresponsible approach to business contributing to reduce its
environmental impact and supporting its local communities;
• the Company performs its business operations to a high standard;
• employees understood the link between their personal and the
Company’s objectives and receive adequate feedback;
• employees felt they are able to speak with senior managers as
needed and knew who to go to if they had a query or problem; and
• overall employees were satisfied and enjoy working for PHP.
The weakest scoring areas and other issues identified for further
improvements were:
• while employees felt comfortable they could have an open dialogue
with management and be listened to, top-down corporate
communication was identified as an area where – whilst progress has
already been made in response to previous employee feedback – more
could be done to keep staff informed and employees also felt there
should be more prior consultation on decisions impacting their work;
• employees identified the need for better co-operation across the
departments and between teams; and
• employees identified the need for better and quicker IT along with
more training support and career progression.
Results of the survey were communicated to staff and identified
improvement areas will be a priority objective for the Board and
thesenior team in the year ahead.
The Company now has a good balance of flexible working while
retaining the collaboration benefits of in-office working. Overall,
webelieve there are significant benefits from working collaboratively
in person and we are stronger together, but people are empowered
towork from home for one day per week.
Employee benefits
In addition to fair remuneration which is aligned to personal and
Company performance, including ESG related targets, and as part of
our ongoing commitment to supporting employees and attracting and
retaining talent, the Company offers the following benefits to all staff:
• Company pension contributions of 6% of salary;
• 25 days of annual leave plus an additional day of annual leave for
each year of continuous service up to a maximum of five days;
• private medical insurance, health cash benefit, income protection
and critical illness insurance;
• a green car salary sacrifice benefit to help individuals move to low
carbon electric and hybrid personal vehicles;
• life assurance given to all employees at four times salary;
• cycle to work and season ticket loan schemes;
• all employees are eligible to participate in the PHP Sharesave plan; and
• enhanced maternity and paternity pay providing 25 weeks of leave
on full pay for women and two weeks for men.
Employee development
PHP’s human capital is essential to the success of the business and
delivery of outstanding services to our occupiers in the healthcare
sector. Attracting, retaining and developing employees is therefore
akey commitment for the business.
The training programme for 2024 has continued to focus on needs
identified through the appraisal process. We also concluded a
mentoring programme, working with our training partner Bisarto,
which had positive feedback from employees taking part.
In 2024, we rolled out a compulsory online cyber threat awareness
course for all employees who are required to complete a number
ofmodules regarding online security essentials, email and instant
messaging security and defence against phishing and spear
phishingattacks.
We continued with the sustainability e-learning pathways that
covered net zero and embodied carbon, and a range of environmental
and social impact issues specific to roles.
PHP also supported funding and facilitation of professional
qualifications for six (2023: five) employees and three employees
achieved their professional qualifications during the year.
Thesupportive culture of PHP means those training for qualifications
are also mentored and assisted by more experienced colleagues.
PHP continued its membership of the Supply Chain Sustainability
School and UK Green Building Council. Through both, staff have
access to a range of learning and development resources, including
e-learning. Training has been promoted to all employees, on subjects
including sustainable development, business ethics, modern slavery,
climate change and net zero, social value, circular economy and
sustainable procurement.
A total of 420 personal development training hours have been
delivered across the Group during 2024 (2023: 460 hours) and the
Company invested a total of £38,000 (2023: £60,500) or an average
of £635 per employee on professional and personal development
(2023:£1,040).
All employees received ESG related training during the year, including
face-to-face and e-learning modules.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
40
Responsible business continued
People continued
Diversity and equal opportunity
We promote diversity across knowledge, experience, gender, age
andethnicity.
Following the appointment of Dr Bandhana (Bina) Rawal, effective
from 27 February 2024, we have further increased female and ethnic
minority Board representation to 43% and 28% respectively. Whilst
overall female employee representation is good, we recognised that
we needed to specifically promote greater gender diversity,
particularly in the senior team.
Recognising the significant diversity imbalance in the real estate
sector, we continue to support and promote diversity, both internally
and externally.
UK employee gender diversity at 31 December 2024
Number of employees Male Female
Board of Directors 4/57% 3/43%
Executive Committee 2/100% —/—
Directors/Head of Department 4/67% 2/33%
Associate Directors 3/37% 5/63%
Associates and Senior Surveyors 6/40% 9/60%
Other 11/41% 16/59%
Total 30/46% 35/54%
The Irish employee gender diversity at 31 December 2024 for the
Axisteam showed 18 of the 27 employees as male, with 9 female
employees. All seven of the senior management are male.
UK employee ethnicity at 31 December 2024
2024
Ethnic origin No. % ONS
1
White – British, English, Welsh, Irish,Other 44 74% 82%
Asian – Indian, Pakistani, Other 3 5% 9%
Black – African, Caribbean, Other 2 3% 4%
Mixed heritage 3 5% 3%
Other/prefer not to say 8 13% 2%
Total 60 100% 100%
1 Office for National Statistics: Census 2021 data for England and Wales published
June 2022.
The Irish employee ethnicity at 31 December 2024 for the Axis team
showed 25 of the 27 employees identify as white, with 4 employees
from other backgrounds.
Board gender identity or sex as at 31 December 2024
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions on
the Board
(CEO, CFO,
SID
and Chair)
Number
in executive
management
1
Percentage
of executive
management
Men 4 57% 4 4 100%
Women 3 43% — — —
Board ethnic background as at 31 December 2024
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the Board
(CEO, CFO,
SID and
Chair)
Number
in executive
management
1
Percentage
of executive
management
White British or
other White
(including
minority-white
groups)
5 71% 4 4 100%
Mixed/multiple
ethnic groups
— — — — —
Asian/Asian
British
1 14% — — —
Black/African
Caribbean/Black
British
— — — — —
Other ethnic group,
including Arab
1 14% — — —
Not specified/
prefer not to say
— — — — —
1 The Executive Committee, as set out on page 64 is considered to be the
Company's Executive Management as defined in the Listing Rules.
The above data is drawn from internal information supplied by our
staff. Refer to page 73 for further details on required Board diversity
disclosures and the Diversity policy.
UK gender pay gap at 31 December 2024
PHP pays employees equally for doing equivalent jobs across the
business and any pay gaps are the result of our employee profile and
do not represent pay discrimination. PHP is not required to publish
details of gender pay gaps; however, we view this as an important
metric to ensure equal and fair treatment regardless of gender.
Gender pay gap Bonus pay gap
Male Female Pay gap Male Female Pay gap
Board – NEDs 66% 34% 49% — — —
Board – Executive 100% — 100% 100% — 100%
Executive
Committee 100% — 100% 100% — 100%
Directors/Head
of Department 63% 37% 41% 73% 27% 63%
Associate
Directors 49% 51% (5)% 59% 41% 31%
Associates and
Senior Surveyors 48% 52% (8)% 57% 43% 26%
Other 50% 50% (1)% 50% 50% (2)%
Total 73% 27% 62% 90% 10% 89%
Gender pay is the individual average pay divided by the sum of the
averages. The Irish gender pay gap at 31 December 2024 showed
59% weighted to male, 41% to female, and an overall pay gap of 30%.
Health and safety
Health and safety remain central to the execution of PHP’s business
strategy and we take our responsibilities very seriously and are
committed to continued improvement but have an excellent record.
The Board is responsible for ensuring appropriate health and safety
procedures are in place and during 2024 we maintained a regime of
inspections utilising both third-party agents, including two risk
management solutions providers, and in-house resources to support
the portfolio.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
41
Responsible business continued
People continued
Health and safety continued
Where risks need to be assessed under a specific duty or regulation,
we ensure that an assessment is carried out and that all actions are
implemented on a priority basis. The key health and safety risk areas
PHP faces are:
1. Managed properties – where there are multiple occupiers in the
same property, a combination of third-party advisers and internal
resources is used to carry out a health and safety assessment
and audits relating to the common parts.
2. Asset management projects, developments and forward funded
developments – all our partners are required to uphold our high
standards. Procedures and processes have been developed to
ensure compliance with current legislation and requirements.
AProject Monitor is also appointed to oversee, manage and
monitor health and safety.
3. Employees are required to uphold our high standards and
separate procedures and processes are in place to ensure
compliance with current legislation and requirements.
During 2024 there were no reported major accidents nor any
healthand safety prosecutions or enforcements (2023: no incidents).
Across the Group 20 out of 21 members of the property and facilities
management team hold the Institute of Occupational Safety and
Health (“IOSH”) accreditation, with no training required during the
year. Our Board approved Health and Safety policy is available on
theCompany’s website.
Other stakeholders
While our investment, asset management and development activities
focus on the sustainability risks and opportunities that are most
material to our business, there are a number of additional issues
thatare of lower material impact but are of interest to specific
stakeholder groups:
• we are transparent and our policies are available on our website
and we expect our principal advisers, suppliers and occupiers to
follow them;
• we expect organisations we employ to meet the standards we set
ourselves; and
• we engage with stakeholders to ensure we are aware of, and are
able to respond to, their expectations.
Lenders
Future generations
Investors
NHS
Suppliers
HMRC
Occupiers
People Patients
Contractors and suppliers
Delivering developments, asset management projects and property
services on time, on budget and in adherence with our high standards
is a key priority. Our supply chain is checked (accredited by the
SafeContractor scheme) to ensure it is high quality, has a proven
track record and applies appropriate standards on areas such as
labour, human rights, modern slavery, health and safety and
environmental management. During 2024 we have continued to
engage with all our suppliers to make them aware of our ESG policies
(available on our website) and in particular have focused on the issue
of modern slavery. Our Modern Slavery Statement is available on our
website and no human rights concerns arose within the year.
We have approximately 820 suppliers across the Group ranging from
small local businesses to large multi-national companies. We also
acknowledge the importance of our suppliers, which are often small
businesses and sole traders, especially those involved with the
upkeep and maintenance of our assets. We aim to pay all invoices
and amounts due promptly and well within stated payment terms in
an effort to preserve the cash flows of these small businesses.
Tax
The Group is committed to complying with tax laws in a responsible
manner and has open and constructive relationships with the UK
andIrish tax authorities. Whilst the Group enjoys REIT status and
therefore is not directly assessable for corporation or capital gains
tax on property investments, the dividends that the Group pays are
assessed for income tax when they reach investors. During 2024 the
Group has directly paid £31.3 million (2023: £32.7 million) of taxes in
theform of VAT, income tax, stamp duty land tax, stamp duty and
National Insurance contributions to the UK and Irish governments.
The Company has also published a tax strategy which is available
onits website.
Investors and lenders
The support of our shareholders, banking partners and lenders is
crucial to sustaining our investment in the health infrastructure of
theUK and Ireland and we continue to enjoy strong relationships
withthese partners.
During 2024 we have successfully continued to value existing
andpotential relationships with our investors with just under 200
(2023:210) meetings during the course of the year. Shareholders and
analysts are regularly updated about our performance and are given
the opportunity to meet management throughout the year and
attend presentations, including a Capital Markets Day, both physical
and virtual, and attend site visits to gain a better understanding of
our business and strategy.
Governance and business ethics
We conduct our business with integrity and require that our Directors,
employees and other businesses engaged by us, including developers,
contractors, suppliers and agents, do the same.
We believe that good governance practices are essential to a
successful and sustainable business and therefore we ensure that
they are integral to us. We are compliant with the provisions of the
UK Corporate Governance Code except one instance where we have
not met criteria, and we have explained why on page 61 in our
Corporate Governance Statement.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
42
Responsible business continued
Other stakeholders continued
Governance and business ethics continued
We believe in transparency of our business to stakeholders, ensuring
we report comprehensively and fairly in our Annual and Interim
Reports and engage with our stakeholders throughout the year.
Responsibility for business ethics lies with the PHP Board and
Chief Executive Officer and is overseen by the ESG Committee.
We will:
• be honest, open, transparent, helpful and polite;
• obey all relevant laws and regulations;
• be prepared to admit and correct mistakes without delay and
facilitate ‘‘whistleblowing’’ by employees and other stakeholders;
• declare any potential conflicts of interest which may compromise
our business dealings;
• not give or receive illegal or inappropriate inducements in order
to retain or bestow business or financial advantages; and
• at all times promote the ethical conduct of business.
These principles are supported by policies which address anti-bribery
and corruption, business ethics, equality, diversity and inclusion,
sustainability, sustainable development and refurbishment,
whistleblowing, money laundering, prompt payment and management
of the supply chain and which are available on our website.
We provide training to staff on these key issues and communicate our
policies to key stakeholders and our supply chain and expect them to
uphold the same standards in their operations and with their own
supply chains.
Anti-corruption and anti-bribery
The Group’s policy is to conduct all of its business in an honest and
ethical manner. The Group takes a zero-tolerance approach to bribery
and corruption and is committed to acting professionally, fairly and
with integrity in all business dealings and relationships wherever it
operates and implements and enforces effective systems to counter
bribery. There were no reported incidents of non-compliance during
2024 (2023: no incidents).
Enhanced disclosure and benchmarking
We have published our fourth disclosure against the guidance and
requirements of the Task Force on Climate-related Financial
Disclosures (“TCFD”) which are provided on pages 44 to 50.
GRESB – During 2024, PHP completed its fifth submission to the Global
Real Estate Sustainability Benchmark (“GRESB”). We received a sector
leader award for development, with a score of 95% (2023: 92%) and a
four-star rating. Our standing asset score decreased to 66% (2023: 72%)
during the year because a number of tenants had not renewed their
Display Energy Certificates which expired in the period. Albeit we
remained at a one-star rating, the same as 2023. Weaim for continual
improvement in GRESB and view it as a useful tool. However, circa 30%
of the available score is very difficult to achieve for a portfolio like
PHP’s, made up of a large number of smaller healthcare buildings
whichare largely tenant controlled.
MSCI – In February 2025, MSCI rated PHP as A for the 2024 Annual
Report, retaining our 2023 rating. We will continue to engage with
MSCI to ensure our rating best reflects the actions we are taking,
although the current methodology restricts us in some areas. For
example, a large proportion of our environmental score relies on having
a high proportion of BREEAM certified assets, which is not an area that
we can influence quickly.
CDP – We responded in full for the third time to the CDP climate
questionnaire in 2024, retaining our 2023 rating in receiving a B rating
and achieving A levels of performance for several aspects. We see CDP
as a key tool to disclose our performance and approach and to help us
improve over time. Our rating of B demonstrates we have a high quality
approach to managing climate related risks and being transparent in
our disclosures and we believe we will achieve an A rating as we deliver
on our strategy in the coming years.
EPRA – PHP disclosures are in line with EPRA Sustainability Best Practices
Recommendations (“sBPR”). In 2024 and 2023 PHP achieved aGold
award in recognition of our enhanced disclosures and performance.
Our latest disclosures are available in the standalone version of this
Responsible Business Report, on our website.
PHP also received an EPRA Best Practices Recommendations Gold
award for the 2023 and 2022 Annual Report.
In October 2024, Institutional Shareholder Services Inc. ("ISS") rated
PHP as “Prime” in its Corporate Rating Report. ISS considers “Prime”
rated companies are industry leaders which are well equipped to
mitigate the most prevalent ESG risks. This is atestament to our efforts
fulfilling ISS ESG’s requirements regardingsustainability performance.
Non-financial information statement
Following best practice, the Group has included certain non-financial
information within the Strategic Report. This can be found as follows:
The Group’s business model is on pages 16 and 17.
Information regarding the following matters, including policies, the
due diligence process implemented in pursuance of the policies and
the outcomes of those policies, can be found on the following pages:
• environmental matters on pages 28 to 37;
• social matters on page 38;
• health and safety matters on pages 41 and 42;
• respect for human rights on page 42; and
• anti-corruption and anti-bribery matters on this page 43.
Responsible business and ESG matters have been identified as
aprincipal risk and further details can be found on page 56.
All key performance indicators of the Group are on pages 20 and 21.
The Business Review section on pages 12 to 14 includes, where
appropriate, references to, and additional explanations of, amounts
included in the entity’s annual accounts.
Laure Duhot
Chair of the ESG Committee
27 February 2025
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
43
Task Force on Climate-related Financial Disclosures
Task Force on Climate-related
Financial Disclosures
PHP TCFD disclosure for 2024 Annual Report and Accounts
This year, we are making our fourth disclosure against TCFD
guidelines and reporting in line with the TCFD reporting requirements
for UK premium listed companies. We have outlined how climate
change is incorporated into our governance processes, its impact on
our business strategy and planning, our approach to risk management
and the climate related metrics, targets and commitments we use.
Governance
Board oversight
The Board is responsible for the Group’s risk management framework,
including the consideration of climate related risks and opportunities
as part of its wider oversight of responsible business. The Board
reviews climate related risks and opportunities within our existing
reporting and governance structure (as detailed on page 56) and has
established a specific ESG Committee, which is made up of all
members of the Board and relevant members of the Executive team
to review, plan, approve and act on climate related issues. The Board
and ESG Committee’s review of key issues typically happen through
relevant update papers presented at each meeting from the relevant
members of the Executive Committee, through the ESG Committee
and the Risk Committee reporting into the Audit Committee.
The Board and members of the Executive team consider climate
related issues when setting objectives, in budget setting and
throughthe Board’s annual strategic review of the business.
TheESGCommittee monitors progress against the business’
responsible business objectives and key strategic climate related
workstreams, including progress towards PHP’s NZC commitment (see
page 28) at all meetings of the ESG Committee (which meets at least
three times a year) and at the annual Strategy Day, held in October.
Climate related issues are also considered by the Board and
Executive team in key investment, development, asset and property
management decision making.
The ESG Committee oversaw and approved PHP’s Net Zero Carbon
Framework in 2022 and subsequent plans and actions to deliver
against it. The Committee reviews and approves the ESG budget
eachyear, with specific allowances in 2023 and 2024 made for
climate related work, including energy performance measurement
ofthe portfolio and delivering net zero (operational and embodied)
carbon projects for developments and asset management. The Board
regularly reviews and approves acquisitions made by the Group and
takes into consideration ESG and climate related commitments,
specifically minimum EPC ratings and progress towards net zero
carbon ready buildings.
Management team’s role
The ESG Committee monitors progress on responsible business
matters, including climate risks. Implementation and management
ofresponsible business are delegated to the Executive team, with its
members leading the ESG working group; other members consist of
arepresentative from each of the investment, development, asset
management, property and facilities management teams. The ESG
working group met five times during 2024 to consider progress
against commitments and proposals for improvement. Climate related
action points included a commitment to apply science-based targets
across the Group’s activities, embodied carbon measurement for
asset management and development projects, EPCimprovement,
operational energy and carbon assessments of buildings. Outside of
these meetings, the Executive team ensures that responsible business
and ESG targets are delivered or re-evaluated where not achieved
and engages throughout the year regarding progress against planned
actions. The Executive and management teams make it clear to
relevant employees what is expected and required. Where relevant,
specific actions or targets form part of both team and individual
personal objectives for each year, for example the improvement of
EPC ratings. The Executive team also leads engagement and training
across the Group on responsible business and ESG matters, including
climate related risks.
The Executive and management teams have specific ESG and climate
related performance objectives relevant to their roles and area of the
business along with other personal performance objectives which are
linked to bonuses to incentivise performance.
Strategy
PHP’s NZC Framework (see page 28) details the five key steps it is
taking to achieve an ambitious target of being NZC by 2030 for all
ofPHP’s operational, development and asset management activities
and to help its occupiers achieve NZC by 2040, five years ahead of
the NHS’s target of becoming the world’s first net zero carbon
national health system by 2045 and ten years ahead of the UK and
Irish governments’ targets of 2050. TheResponsible Business Report
on pages 28 to 43 provides further detail on our strategy, actions
taken and progress made in 2024 and objectives for future years to
address climate risks, such as improving EPC ratings within the portfolio.
Climate related risks and opportunities
During the year, PHP reviewed its existing analysis of climate risks
and opportunities and identified no major changes from its extensive
analysis carried out during 2022. During 2024 we have continued to
operate in a turbulent economic and political climate, particularly in
relation to the new UK Government's approach including the
Audit Committee
Risk Committee
ESG Committee
ESG working group
Executive team
Management
team
Board
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
44
Task Force on Climate-related Financial Disclosures continued
transition to clean home-grown energy, and the climate and health
policy landscape causing significant uncertainty, including the UK
Government’s approach to future EPC. Despite this, our overarching
view on risk and opportunity and our business strategy in relation
toclimate change have not changed.
Analysis that was carried out in 2022 by Willis Towers Watson
(“WTW”) to assess physical and transition risks and undertake
quantitative physical and transition scenario analysis is still
applicable in the current year. The analysis included engagement
andinput from across PHP’s operational teams.
Transition risks and scenario analysis were assessed over theshort
(to2026) and medium (to 2030) terms. Physical risks and scenario
analysis are assessed over the short, medium and long terms
(2030–2100). We have not assessed beyond 2030 for transition risks
given the high level of uncertainty in determining impacts of transition
risks over the longer term.
The short and medium term time horizons have been chosen based
onthe Group’s detailed knowledge of the portfolio and the estimated
time required to implement the NZC Framework (see page 28). The
long term time horizon reflects the nature of real estate assets and
long leases typical of the primary care sector.
To assess the potential impact of transition risks, an initial risk
screening was carried out, based on PHP’s existing identified risks
and with input from WTW and in relation to relevant risks for other
real estate companies. The impact of transition risks was assessed
via workshops with key disciplines within PHP and analysis was
carried out by WTW, based on the findings. The potential annualised
estimated financial impact associated with risks and opportunities
has been quantified where possible and categorised using PHP’s risk
impact scales, which consider impacts to revenue and/or the balance
sheet. Risks are scored 1 (very low) to 5 (very high) with financial
impact bands for each level. Risk 2a has not been quantified
separately as it is included within the impact of risk 1c.
The current potential climate related risks and opportunities we have
identified that could have the most material financial impact are
outlined on the right. We do not, however, believe these impacts are
currently material enough to impact our financial statements.
Assessed range of annual impact and likelihood of transition risks
Residual risk on medium term time horizon (2030) under an NZC 2050 1.5°C scenario
Very
unlikely (1)
(<20%)
Unlikely
(2)
(20–40%)
Possible
(3)
(40–60%)
Highly
probable (4)
(60–80%)
Almost
certain (5)
(>80%)
Very high (5)
(>£30m)
High (4)
(£10m–£30m)
Medium (3)
(£3m–£10m)
Low (2)
(£1m–£3m)
Very low (1)
(<£1m)
Impact
Likelihood
1e
1a 3a3b
3c
3d 1f 3e
1d
3f
4a
4c 4b
1b 1c
Policy
1a. Pricing of GHG emissions (PHP)
1b. Pricing of GHG emissions (tenant)
1c. EPC requirements
1d. Enhanced emissions reporting obligations
1e. Climate change litigation
1f. Increasingly stringent planning requirements
Technology
2a. Substitution of existing technologies with lower
emissions options (included in 1c)
Market
3a. Increased cost of raw materials
3b. Increased cost and availability of electricity (PHP)
3c. Increased cost and availability of electricity(tenant)
3d. Cost of capital
3e. Change in tenant demands
3f. Emissions offsets
Reputation
4a. Investment risk/opportunities
4b. Stakeholder risk/opportunities
4c. Employee risk/opportunities
Strategy continued
Climate related risks and opportunities continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
45
Task Force on Climate-related Financial Disclosures continued
Strategy continued
Climate related risks and opportunities continued
Below represents the transition and physical risks and opportunities that the Group faces, applicable to both our UK and Ireland businesses.
Category Risk/opportunity Time frame Potential £ impact Business response/mitigation
Transition risks
EPC requirements andchange
incustomer demands
1e
3e
Transition risks impacted
The NHS, and the HSE, accounts
for 89% of revenue and is
targeting tobe NZC by2045.
Costs related to
meetingproposed Minimum
Energy Efficiency Standards
(“MEES”) and fines associated
withnon-compliance.
Medium term Medium
(P&L and BS)
• Commitment to getting all properties to a minimum ofEPCB by 2030.
• Group’s asset management programme actively targeting reductions in carbon emissions and improving energy/EPC performance.
• Assets are being extended and refurbished with improvements made to the environmental performance including the
installation of LED lights, move away from gas heating and integration of renewable energy generation resulting in improved
EPC ratings.
• The additional costs are reflected in appraisals and typically supported by increased lease terms and increases in rent.
Increasing cost ofenergy and
GHGemissions
1a
1b
3b
3c
Transition risks impacted
The cost of energy has increased
significantly andinthe 1.5°C low
carbon worldscenario GHG
emissions pricing will need tobe
implemented from 2025–2030.
Short–medium
term
PHP – low (P&L)
Tenants – medium
• PHP procures energy for a limited number of properties in the portfolio and has operational control over none of the buildings’
GHG emissions.
• Consequently, the risk of energy and GHG pricing from energy consumption is minimal to PHP. To mitigate risk in PHP’s value
chain, embodied and supply chain carbon are being measured and actions put in place tominimise and reduce these over time.
• Tenants are responsible for their own energy bills and large increases in pricing have a significant impact on them, which could
adversely impact the desirability of our assets.
• Improving the energy efficiency and reducing the carbon emissions from buildings mitigates these risks, helping tenants to
save money in the long term.
Restricted access tocapital
3d
Transition risks impacted
Investors and debt providers only
willing to invest in climate
resilientbusinesses.
Medium–long
term
Low (P&L) • PHP has a strong and clearly articulated NZC Framework and strategy developed with clear targets for reduction of direct
and indirect emissions and to reach NZC in the future.
• Strong stewards of underinvested key social infrastructure assets delivering healthcare and wellbeing to theUK and
Irishpopulations.
• Green loan framework developed for several existing and future loan facilities and ongoing engagement withlenders.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
46
Task Force on Climate-related Financial Disclosures continued
Category Risk/opportunity Time frame Potential £ impact Business response/mitigation
Physical risks
Flood risk
(current and future climates)
Losses from assets located in high
flood risk zones, primarily the
costs of repair and business
interruption, reflected in increased
insurance costs.
Long term Low (medium for
potential uninsured
losses under high
emissions
scenario)
(P&L)
• PHP has flood alleviation and response plans in place, isappropriately insured and assesses these risks forany new
developments and acquisitions.
• Under current climate conditions, nine sites have a moderate risk and 15 sites have a very high risk from flood. This equates to
under 5% of total asset value.
• Our remaining assets have a very low exposure. In a future high emissions climate scenario, the number ofsites does not
increase, but the potential frequency andseverity of floods increase.
Increased severity andfrequency
ofextreme weather events and
windstorms
Increased costs to develop
climate resilient properties and
physical damage requiring repair.
Costs of business interruption,
reflected in increased
insurancecosts.
Medium term Low (medium for
potential uninsured
losses)
(P&L)
• All assets in the portfolio are insured for physical damage and loss of rent with cost of insurance predominantly recovered
from occupiers.
• Mitigation strategies in operation at assets with identified potential risk.
• Comprehensive business continuity plan in place and commitment to repeat physical risk impact and scenario analysis periodically.
Heat stress (futureclimates) The UK has very low exposure
toheat stress today, increasing
beyond 2050 under the 4°C
scenario. Costs associated with
retrofitting buildings to mitigate
overheating and tenant discomfort.
Long term Low
(P&L)
• Sensitivity analysis for heat stress has determined thatthe overall risk is low.
• Approximately 10% of PHP’s buildings have air conditioning and therefore additional cooling may be necessary in the future.
• PHP also monitors instances of overheating and works with tenants to mitigate this.
Opportunities
Change in tenantdemand The NHS is aiming for net zeroand
primary healthcare tenants will
increasingly covet or insiston low
carbon, sustainable buildings.
Short–medium
term
Medium
(P&L and BS)
• PHP’s strategy to improve the performance of buildings via asset management and NZC developments will maximise rental
income in the future.
• Existing buildings brought up to modern, low carbon standards will be best placed to achieve occupier contentment and lease
renewals and attract the highest rents, performing closer to newly built properties.
Substitution of
existing technologies
Potential to help tenants reduce
their carbon footprint and their
energy costs via introduction
ofnew low carbon technology
tobuildings.
Medium PHP – low (P&L)
Tenants – medium
• Introducing renewable energy as part of lease regears will help PHP to secure high quality, long term income from tenants.
• Supporting and enabling tenants to make use of on-site renewable energy, in particular solar, can reduce tenant costs. Review
of entire portfolio for solar potential and active targeting of installation to suitable properties via different delivery models.
Strategy continued
Climate related risks and opportunities continued
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Primary Health Properties PLC Annual Report 2024
47
Task Force on Climate-related Financial Disclosures continued
Strategy continued
Scenario analysis
In 2022, WTW undertook a physical climate risk assessment of the
Company’s portfolio on an asset-by-asset basis, assessing exposure
to a range of acute and chronic climate risks and a transition risk
assessment based on PHP’s current corporate strategy and
actionplanning.
For physical risks, each is assessed against different scenarios and
potential impact is scored 1–5 with scoring for each different physical
risk based on Munich RE models and projections. For example, flood
risk is scored 1–5 where 1 indicates a minimal flood risk and 5
indicates an asset in a known flood zone with a 1 in 100-year
returnperiod.
Our scenario analysis has been based on the Representative
Concentration Pathways (“RCP”) designed by the IPCC in its Fifth
Assessment Report (“AR5”), which are mapped to the latest IPCC AR6
report’s Shared Social Economic Pathway (“SSPs”) scenarios. The
methodology evaluates risks and opportunities for PHP’s business
under three plausible climate scenarios: a "low carbon world" 1.5°C
scenario (for physical and transition risks), 2–3°C scenario and
a4°Cscenario (for physical risks only)
1
.
These scenarios have been chosen as the best available at the
timeof assessment. In particular, the "low carbon world" scenario
represents the greatest potential transition risks for PHP and the "hot
house world" scenario the greatest physical risks to PHP’s portfolio.
In the low carbon world scenario, limiting global warming to 1.5°C
willbe achieved through stringent climate policies, innovation and
demand-led change, where global net zero CO
2
emissions will be
reached around 2050. The scenario assumes proactive and sustained
action to reduce carbon emissions over the next 30 years to build
alow carbon economy. It assumes a carbon price of $130/tCO
2
by
2030, low growth in material consumption and increasing consumer
pressure on businesses to drive sustainability.
The hot house world scenario is aligned with RCP 8.5. It envisions
that, due to limited government policy and international effort,
emissions continue to grow and consequently global warming exceeds
4°C temperature rise by the end of the century. The scenario assumes
current policies promoting sustainability are removed, there is no
carbon pricing and there is increasing adoption of resource and
energy intensive lifestyles around the world. As a result, economies
fail to transition to a low carbon world and the physical impacts of
climate change become increasingly severe.
There are assumed to be longer and more severe heatwaves and
droughts and there is an increase in frequency and severity of
flooding and other natural catastrophic events.
We regularly review risks internally and will reassess risks and
perform scenario analysis on a periodic basis (currently every three
years, reflective of changes to real estate climate models, policy,
regulatory, market and technology advances).
Resilience of the business to scenarios
By delivering on the strategy put in place by PHP and commitments
and actions outlined in its Net Zero Carbon Framework, and given
thelow exposure to physical climate risks and relatively low potential
financial impact, the business is resilient to the assessed scenarios
under current conditions.
Based on our asset specific assessment of physical hazard exposure,
our portfolio’s exposure to all physical climate impacts is low. Our
exposure to material levels of flood risk is limited to 5% of properties
(by value). We regularly review flood risks of standing assets, have
plans and appropriate levels of insurance in place for them and
consider resilience to long term flood risk for any new acquisitions
ordevelopments.
In the post 2030 scenarios assessed, only flood and windstorm
riskwas assessed as somewhat “material” under the 4°C scenario.
Weview heat stress as a potential risk given the nature of our
buildings and the desire to offer optimum comfort levels for our
healthcare related buildings. PHP is already addressing instances
ofoverheating in today’s climate by working with our tenants and
taking remedial action where necessary. When refurbishing buildings
we consider overheating through the addition of solar shading,
insulation and, where needed, energy efficient cooling.
Through our Net Zero Carbon Framework and commitments and
ourasset management activities, we have a robust approach to
meeting energy efficiency, EPC and carbon performance requirements
that areexpected as part of the low carbon world 1.5°C scenario.
Ourstrategy also supports PHP’s ability to meet or surpass the
NHS’snet zero commitments.
During 2024, we have continued to analyse the newly published NHS
Net Zero Carbon Building Standard against our current approach and
requirements for new build and refurbishment and intend to align our
projects where relevant.
Under a high emissions scenario from the 2050s, drought stress and
heat stress increase and become a moderate risk which could impact
water scarcity and tenant wellbeing; however, in the short term or
under a low emissions scenario, these risks are relatively low. We
willcontinue to assess potential risks in due diligence for future
acquisitions and to make appropriate adaptations where required.
Impact on business strategy and financial planning
Climate related risks and opportunities impact and inform PHP’s
business strategy for asset management and refurbishment, property
management, development and acquisition of buildings.
The Group’s continued focus on flexible, modern primary care
properties, which generally have low energy consumption, means
theoverall carbon footprint of the portfolio is minimised. In addition,
the Group’s continued investment in asset and property management
initiatives means that its typically slightly older and less energy
efficient assets are being upgraded, where feasible, to the latest
energyefficient standards.
We are improving and adapting our assets to be more resilient to
climate change through maintenance, energy efficiency upgrades and
the provision of renewable energy supplies for the Group’s occupiers.
Furthermore, whilst development is only a small part of our activities,
we are focusing on the energy and carbon performance of our
developments, including measuring, minimising and offsetting
residualembodied carbon impacts.
1 This is in line with the Intergovernmental Panel on Climate Change (“IPCC”) Representative Concentration and Shared Social Economic Pathways (“RCPs” mapped to “SSPs”)
RCP 2.6 (“SSP1”), RCP 4.5 (“SSP2”) and RCP 8.5 (“SSP5”) respectively.
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Primary Health Properties PLC Annual Report 2024
48
Task Force on Climate-related Financial Disclosures continued
Strategy continued
Impact on business strategy and financial planning
continued
During 2024 we commenced work on the Group’s second net zero
carbon development and in early 2025 completed construction of the
Group’s first net zero carbon development and all new developments
in the UK are being designed to be net zero. During 2024 we have
financed and implemented a number of actions to deliver our strategy,
including bringing forward work and completing PHP’s first net zero
for asset management project, targeted reassessment of buildings’
EPC ratings, committing to applying science-based targets, funding
net zero audits of buildings, extending our carbon measurement
including purchased goods and services, and achieving certification
via Toitu Carbon Reduce and ISO 14064.
During our investment process, we review the locational flood risks,
the building fabric and the energy efficiency of potential acquisitions
and current assets to understand the climate related risks and costs
involved in mitigating those risks.
These actions help to future-proof our buildings and allow us to take
advantage of opportunities with the NHS, and our other occupiers,
asit transitions towards net zero carbon with its multi-year plan to
become the world’s first NZC national health system by 2045 and
with an ambition for an interim 80% reduction by 2036–2039.
By improving occupier contentment, we enhance the desirability
andvalue of our assets together with our reputation with the NHS
and GPoccupiers.
Risk management
Approach to identifying and assessing climate risks
PHP assesses climate risks alongside other business risks but also
specifically as part of a dedicated climate risk management process.
A climate risks and opportunities register is reviewed and updated by
the ESG working group and the ESG Committee along with the Risk
Committee reporting to the Audit Committee.
The most material (highest scoring) risks are pulled out and
actionplans put in place, which are reviewed by the Risk and ESG
Committees. The longlist of risks is revisited annually to ensure changes,
such as to regulation, market or customer demand, have not altered
the likelihood or potential impact of the less material risks.
In identifying and assessing the impact of risks, we consider impacts
to PHP’s direct operations and stakeholders, including our supply
chain, partners and tenants. The size and scope of risks are assessed
using the internal expertise of our teams supplemented by data
relating to impact where available, for example spend data, GHG
emissions and energy and any associated future projections. The
potential financial impact is estimated and quantified against defined
impact scales and value bandings.
To supplement our approach, PHP engages with expert advisers such
as Cushman & Wakefield, WTW, Carbon Trust and MSCI, accessing
the latest climate science and transition data sets, to further assess
and understand potential risks, quantify potential impacts and
consider planned and potential actions to address risks posed by
climate change.
Approach to managing climate risks
The Company’s overall approach to risk management, including
management of climate related risks, is set out on pages 52 to 58.
Strategic risks are recorded in a risk register and are assessed and
rated within a defined scoring system. The Risk Committee reports
itsprocesses of risk management and rating of identified risks to
theAudit Committee. The risk register is reviewed and updated twice
annually by members of the Risk Committee, and assesses inherent
risks the business faces, as well as the residual risk after specific
safeguards, mitigation and/or management actions have been
overlaid. The risk register forms an appendix to the report which
details risks that have (i) an initial high inherent risk rating, and (ii)
higher residual risk ratings. The Audit Committee in turn agrees those
risks that will be managed by the Executive and management teams
and those where the Board will retain direct ownership and
responsibility for managing and monitoring.
The Board has also undertaken a robust assessment of the emerging
and principal risks faced by the Group that may threaten its business
model, future performance, solvency or liquidity and its ability to
meet the overall objective of the Group of delivering progressive
returns to shareholders through a combination of earnings growth
and capital appreciation. The Group has identified “responsible
business” as a principal risk which includes environmental issues but
aspecific climate change risk is still considered to be emerging within
the risk management process.
As a response to these risks, PHP developed and launched the NZC
Framework, which reduces the overall inherent risk to a much smaller
residual risk, should the framework be implemented successfully over
time. Business planning and strategy now take into account the
commitments set out in the framework and key decisions are made
with these commitments in mind, primarily decisions related to
investment, development and asset management activities.
Integration with wider corporate risk management process
Responsible business, including climate change, is one of the principal
risks faced by the Group as set out on page 56. Climate related risks
and opportunities are identified and assessed as part of our risk
management framework and are considered by the Board which
recognises that this is an increasingly important area.
The Executive and management teams assist the Board in its
assessment and monitoring of operational and financial risks. A Risk
Committee is formed of members of the senior management team
and chaired by the Chief Financial Officer, who is experienced in
theoperation and oversight of risk management processes, with
independent standing invitees attending throughout the year.
The Audit Committee reviews the Group’s systems of risk
management and their effectiveness on behalf of the Board.
Metrics and targets
Details of PHP’s target to achieve NZC across operational,
development and asset management activities by 2030 and to help
our occupiers achieve NZC by 2040 are set out on page 28.
Relevant material energy and carbon metrics include EPC ratings for
our standing assets which are tracked and reported below along with
revenue from BREEAM certified buildings and rental increase from
energy efficient refurbishments. These directly link to our targets to
achieve NZC, and minimum EPC and BREEAM ratings, set out in our
Responsible Business Report on pages 28 to 43. At present, PHP does
not have an internal carbon price. Under the Directors’ remuneration,
for the 2024 and 2025 LTIP, an environmental metric linked to
improving portfolio EPC ratings has been included with a weighting
of15%. Senior management’s annual bonuses also have wider ESG
objectives. This is set out in more detail on page 94.
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Primary Health Properties PLC Annual Report 2024
49
Task Force on Climate-related Financial Disclosures continued
Metrics and targets continued
We measure and disclose Scope 1, 2 and 3 emissions on pages 36 and
37 and in our EPRA sustainability disclosures within the Responsible
Business Report on our website. Our most material Scope 3 emissions
are included, with the exception of capital goods (embodied carbon),
which will be reported for projects in the future when they are
completed. We also measure and track flood risk across the portfolio
based on asset value. These metrics are consistent with cross-industry
climate related metrics for GHG emissions, and transition and physical
risks and opportunities.
We also report our GRESB benchmark performance score, and ratings
provided by the CDP climate programme, MSCI and ISS, with results
set out in our Responsible Business Report on pages 28 to 43. We
review our metrics and targets annually and update TCFD disclosures
for any changes made.
Financial category Climate category Metric Unit 2024 2023
Revenues Products and services Revenue from BREEAM Very Good and Excellent properties % revenue 16% 15%
Products and services Revenue from DEC A–C rated properties % revenue 49% 47%
Products and services Rent increase from completed AM projects with energy
improvement measures
£k 173 211
Assets Energy source Portfolio energy data coverage (by m
2
) % 77% 75%
Energy source Electricity procured by PHP from renewable sources % 100% 97%
Policy and legal EPC A % asset value 11% 12%
EPC B % asset value 36% 30%
EPC C % asset value 41% 43%
EPC D % asset value 11% 13%
EPC E–F % asset value 1% 2%
Extreme weather Portfolio value assessed as at material exposure to flood risk % asset value 5% 5%
The current potential climate related risks and opportunities we have identified that could have the most material financial impact are set out
on pages 44 to 47 and these have been used to inform and determine the key metrics and targets noted above.
Compliance statement
PHP confirms that:
1. We believe our climate related financial disclosures for the year ended 31 December 2024 are consistent with the Task Force on Climate-
related Financial Disclosures (“TCFD”) Recommendations and Recommended Disclosures (as defined in Appendix 1 of the Financial
Conduct Authority Listing Rules). Concerning 4b (relating to our Scope 3 emissions), we have assessed all 15 categories but only
disclose our material emissions, which are from downstream leased assets and purchased goods and services.
2. Our annual disclosures are contained on the previous pages and in the Responsible Business Report on pages 28 to 43, including
commentary on data gaps and performance improvement measures. Further details on our policies and approach to responsible
business are also available on our website.
3. We believe that the details of these climate related financial disclosures are conveyed in a decision-useful format to the users of this report.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
50
Section 172 statement
Companies Act 2006
Section 172Statement
How does the Board consider the interests
of key stakeholders?
Our responsibility to stakeholders, together with
consideration of thelong term consequences of our
decisions and maintaining high standards of business
conduct, is integral to the way the Board operates.
The Board of Directors, both individually and
collectively, are required by law under Section 172
of the Companies Act 2006 to act in the way that
it considers, in its good faith judgement, would be
most likely to promote the success of the Company
for the benefit of its shareholders as a whole and
in doing so needs to take into account a number
offactors, including the views of the Group’s key
stakeholders, and describe in the Annual Report
how their interests have been considered in Board
discussions and decision making. The Board
considers that throughout the year, it has acted in
a way and made decisions that would most likely
promote the success of the Group for the benefit
of its members as a whole, with particular regard to:
Section 172 matter How the matter is brought into Board decision making Read more
a) The likely
consequences ofany
decision in the
longterm
The very nature of our business model means that the Board has to have the long term consequences of its investment
decisions in mind.
The leases which we grant on primary care medical centres are generally over 20 years in length as these facilities form
akey component in the delivery of healthcare in a locality. The practices operating from these premises need modern,
flexible premises from which to operate and the security of a long term commitment from the landlord to deliver their
crucial front-line health services.
We seek to improve and enhance existing premises so they remain fit for purpose, incorporate new technologies and meet
the latest environmental standards.
We strive to build lasting relationships with our occupiers and build a partnership with them.
The Board undertook a comprehensive review and update of the business’ long term strategy during the year.
Our business model
(page16)
Financial Review (page22)
Responsible Business
Report (page 28)
Corporate Governance
Statement (page 66)
b) The interests of the
Company’s employees
The Group’s employees are at the heart of the business and our people strategy focuses on delivering a culture
ofempowerment, inclusion, development, openness and teamwork.
Staff turnover remains low and the small number of staff allows for a flexible and individual approach.
Laure Duhot is the Non-executive Director representative for workforce engagement and attended five staff meetings
during the year.
People (pages 39 to 42)
c) The need to foster the
Company’s business
relationships with
suppliers, customers
and others
The relationships with our occupiers, suppliers and key partners are critical to our ability to maintain our high quality,
resilient rental income. Strong relationships with occupiers support retention and we treat our suppliers fairly, ensuring
prompt settlement of their invoices.
Stakeholders (page 42)
Directors’ Report
(page108)
Corporate Governance
Statement (page 66)
d) The impact of the
Company’s operations
onthe community and
theenvironment
We have continued to support our tenants during the year with dedicated property and facilities management services
and in adapting their premises to ensure they provide modern, fit for purpose and energy efficient healthcare premises.
This year we continued our ESG focus to enable the Group’s operational, development and asset management activities
totransition to NZC by 2030 and help our occupiers achieve NZC by 2040.
Responsible Business
Report (page 28)
Corporate Governance
Statement (page 66)
e) The desirability of the
Company maintaining
areputation for
highstandards of
businessconduct
We have a clear purpose to deliver progressive returns for shareholders through creating outstanding spaces for primary
healthcare services in our communities.
We adhere to the highest standards of good governance and business conduct in interaction with all our stakeholders and
seek to comply with all legal and regulatorystandards.
Responsible Business
Report (page 28)
Corporate Governance
Statement (page 66)
f) The need to act fairly
asbetween members
oftheCompany
The Board embraces open dialogue with shareholders and engages with them through arange of channels and has
communicated with them on the most important corporate events through the year, including the appointment of a new
Chief Executive Officer and Chair in 2024, Capital Markets Day and the interim and full year results, to understand
theirviews.
Stakeholders – investors
and lenders (page 42)
Corporate Governance
Statement (page 66)
Examples of how we have exercised our Section 172 duties in practice are set out in the case studies on pages 33, 34, 35 and 37.
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Primary Health Properties PLC Annual Report 2024
51
Risk management and principal risks
Flexible and responsive to risks
Our risk management processes enable us to be flexible and responsive to the impact of risks on the business.
Risk management overview
Effective risk management is a key element of the Board’s
operationalprocesses. Risk is inherent in any business, and the
Boardhas determined the Group’s risk appetite, which is reviewed
onan annual basis. Group operations have been structured in order
to accept risks within the Group’s overall risk appetite and to oversee
the management of these risks to minimise exposure and optimise the
returns generated for the accepted risk. The Group aims to operate
ina low risk environment appropriate for its strategic objective of
generating progressive returns for shareholders. Key elements of
maintaining this low risk approach are:
• investment focuses on the primary healthcare real estate
sectorwhich is traditionally much less cyclical than other real
estate sectors;
• the majority of the Group’s rental income is received directly
orindirectly from government bodies in the UK and Ireland;
• the Group benefits from long initial lease terms, largely with
upwards-only review terms, providing clear visibility of income;
• the Group has a small (£0.9 million) exposure as a direct developer
of real estate, which means that the Group is not exposed to risks
that are inherent in property development;
• the Board funds its operations so as to maintain an appropriate
mix of debt and equity; and
• debt funding is procured from a range of providers, maintaining
aspread of maturities and a mix of terms so as to fix or hedge
themajority of interest costs.
The structure of the Group’s operations includes rigorous, regular
review of risks and how these are mitigated and managed across all
areas of the Group’s activities. The Group faces a variety of risks that
have the potential to impact on its performance, position and longer
term viability. These include external factors that may arise from the
markets in which the Group operates, government and fiscal policy,
general economic conditions and internal risks that arise from how
the Group is managed and chooses to structure its operations.
Approach to risk management
Risk is considered at every level of the Group’s operations and
isreflected in the controls and processes that have been put in
placeacross the Group. The Group’s risk management process is
underpinned by strong working relationships between the Board and
the management team which enables the prompt assessment and
response to risk issues that may be identified at any level of the
Group’s business.
The Board is responsible for effective risk management across the
Group and retains ownership of the significant risks that are faced by
the Group. This includes ultimate responsibility for determining and
reviewing the nature and extent of the principal risks faced by the
Group and assessing the Group’s risk management processes and
controls. These systems and controls are designed to identify,
manage and mitigate risks that the Group faces but will not eliminate
such risks and can provide reasonable but not absolute assurance.
The management team assists the Board in its assessment and
monitoring of operational and financial risks and PHP has in place
robust systems and procedures to ensure risk management is
embedded in its approach to managing the Group’s portfolio and
operations. PHP has established a Risk Committee that comprises the
Chair of the Audit Committee and members of its senior management
team and is chaired by the Chief Financial Officer, who is experienced
in the operation and oversight of risk management processes, along
with independent standing invitees attending throughout the year.
The Board has delegated to the Audit Committee the process
ofreviewing the Group’s systems of risk management and their
effectiveness. These systems and processes have been in place
forthe year under review and remained in place up to the date
ofapproval of the Annual Report and Accounts.
PHP has implemented a wide-ranging system of internal controls
andoperational procedures that are designed to manage risk as
effectively as possible, but it is recognised that risk cannot be totally
eliminated. Staff employed by PHP are intrinsically involved in the
identification and management of risk. Strategic risks are recorded
ina risk register and are assessed and rated within a defined
scoringsystem.
The Risk Committee reports its processes of risk management
andrating of identified and emerging risks to the Audit Committee.
The risk register is reviewed and updated every six months by the
Director of Finance assisted by members of the Risk Committee, and
assesses inherent and emerging risks the business faces, as well as
the residual risk after specific safeguards, mitigation and/or
management actions have beenoverlaid.
The risk register forms an appendix to the report which details risks
that have (i) an initial high inherent risk rating and (ii) higher residual
risk ratings. The Board retains ultimate responsibility for determining
and reviewing the effectiveness of risk management but has
delegated the process to the Audit Committee which is assisted
bythe Risk Committee. The Audit Committee agrees which risks are
managed by management in fulfilling its duties which is reviewed
bythe Risk Committee.
The Board recognises that it has limited ability to control a number of
the external risks that the Group faces, such as the macroeconomic
environment and government policy, but keeps the possible
impactofsuch risks under review and considers them as part
ofitsdecision-making process.
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Primary Health Properties PLC Annual Report 2024
52
Risk management and principal risks continued
Monitoring of identified and emerging risks
In completing this assessment the Board continues to monitor
recently identified and emerging risks and their potential impact on
the Group. The manner in which we have addressed the challenges
ofthe last few years has demonstrated the resilience of our business
model, and our robust risk management approach, to protect our
business through periods of uncertainty and adapt to a rapidly
changing environment.
Since the completion of our 2024 financial year, the interest rate
market has remained volatile, driven in part by the inauguration of
President Trump in the US, rising UK debt levels and the market's lack
of confidence in the Labour Government's longer term funding plans.
However, despite seeing 10 year gilts reach record highs of 4.9% in
January 2025, these rates have abated and at the time of writing are
back at 4.6% and there is quiet optimism in the market that there will
be several further interest rate cuts during 2025. We welcome the
Labour Government's commitment to the NHS together with its
manifesto pledge to reform primary care and look forward to the
government's proposal in the 10-Year Health Plan due later in 2025.
The potential adverse impact of these factors on our business
includes reduced demand for our assets impacting property values
inthe investment market, increased financing costs and our ability to
continue to execute our acquisition and development strategy which
could impact our rental income and earnings. The Board and key
Committees have overseen the Group’s response to the impact of
these challenges on our business and the wider economic influences
throughout the year.
The Board has considered the principal risks and uncertainties as set
out in this Annual Report, in light of the challenging macroeconomic
environment, and does not consider that the fundamental principal
risks and uncertainties facing the Group have changed. Whilst
economic uncertainty remains over the coming years, we have set out
in our principal risk tables on the following pages, an update on the
changes to our principal risks and expected impact on our business of
the macroeconomic uncertainty, along with the mitigating actions
and controls we have in place. The Group’s continued ability to be
flexible to adjust and respond to these external risks as they evolve
will be fundamental to the future performance of our business.
The Board also considered, at its annual Strategy Day, emerging risks
affecting the current primary care delivery model, in particular the
impact of artificial intelligence increasing cyber and security threats
on our digital technologies.
Our risk management structure
Structure Responsibility
Board
Sets strategic objectives and considers risk
aspart of this process.
Determines appropriate risk appetite levels.
Audit
Committee
Reports to the Board on the effectiveness ofrisk
management processes and controls:
• External audit
• Risk surveys
• Health and safety
• Insurance
• Need for an internal audit function
Risk
Committee
Reports to and assists the Audit Committee,
monitoring and reviewing:
• Attitude to and appetite for risk and future
risk strategy
• Company’s systems of internal controls and
risk management
• How risk is reported internally and externally
• Processes for compliance with law, regulators
and ethical codes of practice
• Prevention of fraud
Senior
management
Implements and monitors risk
mitigationprocesses:
• Policies and procedures
• Risk management and compliance
• Key performance indicators
• Specialist third-party reviews
Mapping our key risks and residualrisk movement
We use a risk-scoring matrix to ensure wetake a consistent
approach when assessing their overall impact. Overall, we do
notfeel there has been any movement in the types or quantum
ofrisks PHP faces, given that despite volatility in 2024 there
remains quiet optimism of further interest rate cuts during 2025,
balanced against PHP’s robust business model. The residual risk
exposures of the Company’s principal risks are shown in the heat
map below, being the risk after mitigating actions have been
taken to reduce the initial inherent risks.
Grow property portfolio
1. Property pricing
andcompetition
2. Financing
Manage effectively
andefficiently
3. Lease expiry management
4. People
5. Responsible business
Diversified, long term funding
6. Debt financing
7. Interest rates
Deliver progressive returns
8. Potential over-reliance on
the NHS and HSE
9. Foreign exchange risk
Indicates risk movement
from last year
Likelihood
Impact
8
9
1
2
3
4
5
6
7
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Primary Health Properties PLC Annual Report 2024
53
Risk management and principal risks continued
Grow property portfolio
1. Property pricing and competition
A
C
D
KPIs impacted
The primary care property market continues to
beattractive to investors attracted by the secure,
government backed income, low void rates and
longlease.
The emergence of new purchasers in the sector and
the recent slowing in the level of approvals of new
centres in the UK may restrict the ability of the
Group to secure new investments.
Commentary on risk
in theyear
In terms of values, the
Group has previously
benefited from a flight to
income as a consequence
ofthe wider economic
uncertainty seen in previous
years, with demand
increasing from investors
seeking its long term,
secure, government backed
cash flows against a
backdrop of limited supply.
A revaluation deficit of
£38.4 million was
generated in the year,
driven by NIY widening of
17bps in theyear.
Elevated interest rates,
including volatility, in
particular, for gilts and
bonds, have had a
negative impact on the
property yields in the
sector. This reduced
investor sentiment,
competition and
attractiveness of PHP’s
assets and consequently
impacted valuations.
Mitigation
The reputation and track
record of the Group in the
sector mean it is able to
source forward funded
developments and existing
standing investments from
developers, investors and
owner-occupiers.
As a result, the Group has
several formal pipeline
agreements and
long-standing development
relationships that provide
an increased opportunity
to secure developments
that come to market in the
UK and Ireland.
Despite the unprecedented
market conditions faced,
the Group continues to
have a strong, identified
pipeline of investment
opportunities in the UK
and Ireland.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
High
Likelihood is high and impact of occurrence could
be major.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Group’s position within the sector and
commitment to and understanding of the asset
class mean PHP is aware of a high proportion of
transactions in the market and potential
opportunities coming to market.
Active management of the property portfolio
generates regular opportunities to increase income
and lease terms and enhance value.
2. Financing
G
H
KPIs impacted
The Group uses a mix of shareholder equity and
external debt to fund its operations. A restriction
onthe availability of funds would limit the Group’s
ability to fund investment and development
opportunities and implement strategy.
Furthermore, a more general lack of equity or debt
available to the sector could reduce demand for
healthcare assets and therefore impact values.
Commentary on risk
in theyear
The Company successfully
completed two debt
refinances during the
year,including a new
£170million facility with
Barclays and refinancing
the £100 million revolving
credit facility with Lloyds
for a further three years.
Additionally we extended
both the HSBC £100 million
and Santander £50 million
revolving credit facility by
exercising the +1 extensions.
The credit margin agreed
on this new facility remains
in line with previous
facilities at c.1.6%,
reiterating the confidence
in PHP’s business model
shown by lenders.
The Group’s undrawn
facilities mean it currently
has headroom of
£271million.
All covenants have been
met with regard to the
Group’s debt facilities and
these all remain available
for their contracted term.
Mitigation
Existing and new debt
providers are keen to
provide funds to the sector
and specifically to the
Group, attracted by the
strength of its cash flows.
The Board monitors its
capital structure and
maintains regular contact
with existing and potential
equity investors and debt
funders. Management also
closely monitors debt
markets to formulate
itsmost appropriate
fundingstructure.
The terms of the completed
revolving credit facilities
arethree years with the
option to extend for a
further two years at the
lender’s discretion.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
High
Likelihood is high and impact of occurrence could
be major.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Group takes positive action to ensure continued
availability of resource, maintains a prudent ratio of
debt and equity funding and refinances debt
facilities in advance of their maturity.
Residual risk movement in the year
Increased Unchanged Decreased Low 0–5 Medium 6–14 High 15–20
Principal risks and uncertainties
The Board has undertaken a robust assessment of the emerging andprincipal risks faced by the Group
that may threaten its business model, future performance, solvency or liquidity and its ability to meet the
overall objective of the Group of delivering progressive returns to shareholders through a combination of
earnings growth and capital appreciation. As a result of this assessment there have been no changes to
the number of principal risks faced by the business in the year, which are all still deemed appropriate.
Theseareset out below, presented within the strategic objective thatthey impact:
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
54
Risk management and principal risks continued
Principal risks and uncertainties continued
Residual risk movement in the year
Increased Unchanged Decreased Low 0–5 Medium 6–14 High 15–20
Manage effectively and efficiently
3. Lease expiry management
E
F
KPIs impacted
The bespoke nature of the Group’s assets can lead
to limited alternative use. Their continued use as
fit-for-purpose medical centres is key to delivering
the Group’s strategic objectives.
Commentary on risk
in theyear
Lease terms for all property
assets will erode and the
importance of active
management to extend
theuse of a building
remains unchanged.
The amount of income that
is currently holding over or
is expiring in the next three
years has increased from
11% to 15% in the year.
Mitigation
The asset and property
management teams meet
with occupiers on a regular
basis to discuss the specific
property and the tenants
aspirations and needs for
its future occupation.
Six asset management
projects physically
completed in the year,
witha further ten projects
on site, enhancing income
and extending occupational
lease terms.
In addition, there is a strong
pipeline of over 13 projects
that will be progressed in
2025 and the coming years.
Despite the income holding
over or expiring in the next
three years increasing, all
these leases are expected
to renew with 75% of these
having agreed terms or are
in advanced discussions to
renew the lease.
The increase is driven
byadelay in NHS approval
asICBs finalise their future
estate strategies together
with the requirement for
new rents to be approved
by the DV. We continue
tomaintain a close
relationship with all parties
concerned and receive NHS
rent reimbursement in a
timely manner.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Likelihood of limited alternative use value is
moderate but the impact of such values could
beserious.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Management employs an active asset and property
management programme and has a successful track
record of securing enhancement projects and
securing new long term leases.
4. People
F
KPI impacted
The inability to attract, retain and develop our
people to ensure we have the appropriate skill base
in place in order for us to implement our strategy.
Commentary on risk
in theyear
Whilst there was
achangein senior
management during the
year with the appointment
of a new CEO, the strong
culture continued with
staff attrition levels
remaining low.
Despite the overall real
estate market sentiment
remaining muted in the
year there is quiet
optimism as we look
towards 2025, with the
riskof losing the highly
skilled and specialist
staffremaining.
Mitigation
Succession planning is
inplace for all key positions
and will be reviewed regularly
by the Nomination Committee.
Remuneration incentives
arein place such as
bonuses and an LTIP for
Executive Directors and
senior management to
incentivise and motivate
theteam which are
renewed annually and
benchmarked to themarket.
Notice periods are in place
for key employees.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Likelihood and potential impact could be medium.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Remuneration Committee has benchmarked
remuneration with the help of remuneration
consultants, and reviewed and updated policies
toensure retention and motivation of the
management team.
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Primary Health Properties PLC Annual Report 2024
55
Risk management and principal risks continuedRisk management and principal risks continued
Principal risks and uncertainties continued
Residual risk movement in the year
Increased Unchanged Decreased Low 0–5 Medium 6–14 High 15–20
Manage effectively and efficiently continued
5. Responsible business
D
E
H
KPIs impacted
Risk of non-compliance with responsible business practices, including
climate mitigation and ethical business consideration, not meeting
stakeholders’ expectations, leading to possible reduced access to
debtandcapital markets, weakened stakeholder relationships and
reputational damage.
Commentary on risk in theyear
Properties no longer meet occupiers’ expected environmental requirements.
Stakeholders including investors and debt providers see ESG as a key issue
and want to see a sufficiently developed plan to decarbonise the property
portfolio and to operate to the highest standards of business ethics and
due diligence.
There is a risk that we may not meet the hurdles sought by stakeholders
including equity and debt investors should PHP not focus enough on ESG
matters, potentially impacting the funding of the business significantly.
Additionally, political and regulatory changes to corporate governance
anddisclosure, energy efficiency and net zero carbon requirements are
expected to be mandated in the short to medium term. The recent
introduction of the Corporate Sustainability Reporting Directive (“CSRD”) and
International Sustainability Standards Board (“ISSB”), amongst other policies,
is akey example of increasing requirements, although not all are applicable to
PHP atpresent.
Mitigation
PHP’s ESG credentials remain at the forefront of its strategic planning and
ithas established an ESG Committee to review and drive the Group’s ESG
agenda forward. During the year PHP has:
• worked with Achilles to provide limited third-party assurance of our
disclosures and achieved certification to Toitu Carbon Reduce and
ISO14064;
• provided staff training covering individual personal development and ESG;
• commissioned third-party audits for development and refurbishment
projects to guard against the risks of modern slavery and unethical supply
chain standards;
• engaged with external experts to assess and inform our net zero carbon
approach for developments and refurbishments;
• set, monitored and reported sustainability targets and hurdles to ensure
acquired assets or asset management schemes meet specific ESG criteria,
with these same criteria aligned to investors and debt providers;
• achieved EPC rating benchmarks to ensure compliance with the Minimum
Energy Efficiency Standard (‘‘MEES’’) that could otherwise impact the
quality and desirability of our assets, leading to higher voids, lost income
and reduced liquidity;
• worked with its occupiers to improve the resilience of its assets to climate
change as well as with contractors which are required to conform to PHP's
sustainable development and refurbishment requirements; and
• reported sustainability performance under EPRA sBPR guidelines, reported
to external rating benchmarks including GRESB and CDP, and rated by
MSCI and ISS ESG CorporateRating.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
High
Likelihood is high and impact of occurrence could be major.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Group is committed to meeting its obligations in line with its
Responsible Business Framework and feels it has introduced sufficient
mitigants to continue to deliver its objectives.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
56
Risk management and principal risks continued
Principal risks and uncertainties continued
Residual risk movement in the year
Increased Unchanged Decreased Low 0–5 Medium 6–14 High 15–20
Diversified, long term funding
6. Debt financing
G
H
KPIs impacted
Without appropriate confirmed debt facilities,
PHPmay be unable to meet current and future
commitments or repay or refinance debt facilities
asthey become due.
Commentary on risk
in theyear
Negotiations with
lendershave confirmed
that the Group enjoys the
confidence of the lending
markets both in terms
ofthe traditional high
street lenders and the
bond markets.
The Company successfully
completed two debt
refinances during the
year,including a new
£170million facility with
Barclays and refinancing
the £100 million revolving
credit facility with Lloyds
for a further three years.
Additionally, we extended
both the HSBC £100 million
andSantander £50 million
revolving credit facilities by
exercising the +1 extensions.
Mitigation
Existing lenders remain
keen to finance PHP and
new entrants to debt
capital markets have
increased available
resources. Credit margins
agreed on the new facilities
and revolving credit facility
+1 extensions in the year
remained in line with what
has been achieved in
previous years, reiterating
the confidence in PHP’s
business model shown by
the lending banks.
Management regularly
monitors the composition
ofthe Group’s debt portfolio
to ensure compliance with
covenants and continued
availability of funds.
Management regularly
reports to the Board on
current debt positions and
provides projections of
future covenant compliance
to ensure earlywarning of
any possible issues.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The likelihood of insufficient facilities is moderate
but the impact of such an event would be serious.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Board regularly monitors the facilities available
to the Group and looks to refinance in advance of
any maturity. The Group is subject to the changing
conditions of debt capital markets.
7. Interest rates
A
B
F
G
H
KPIs impacted
Adverse movement in underlying interest rates
could adversely affect the Group’s earnings and
cash flows and could impact property valuations.
Commentary on risk
in theyear
Despite three rate cuts
during 2024, interest rates
remained at elevated levels
during the year, driven
mainly by the uncertain
macroeconomic/political
environment in the UK and
overseas in the period.
Since the completion
ofour2024 financial year,
theinterest rate market
has remained volatile,
driven in part by the
inauguration of President
Trump in the US, rising
UKdebt levels and the
market's lack of confidence
in the Labour government's
longer term funding plans.
Despite this there is quiet
optimism in the market
that there will be several
further interest rate cuts
during 2025.
Despite these risks we
continue to believe further
significant reductions in
primary care values are
likely to be limited with
astronger rental growth
outlook offsetting the
impact of any further
yieldexpansion.
Aside from the £150 million
convertible, there are no
immediate refinances
required until 2026.
Mitigation
The Group holds the
majority of its debt in long
term, fixed rate loans and
mitigates its exposure to
interest rate movements
onfloating rate facilities
through the use of interest
rate swaps.
MtM valuations on debt
andderivative movements
do not impact the Group’s
cash flows and are not
included in any covenant
test in the Group’s
debtfacilities.
The Group continues
tomonitor and consider
further hedging
opportunities in order
tomanage exposure to
rising interest rates.
Following the £200 million
interest rate swap put in
place in January 2025 we
are fully hedged, effectively
hedging out all of the current
net debt drawn along with
providing protection for
future debt required to
meet capital commitments.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
High
The likelihood of volatility in interest rate markets is
high and the potential impact if not managed
adequately could be major.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
The Group is currently well protected against the
risk of interest rate rises but, due to its continued
investment in new properties and the need to
maintain available facilities, is increasingly exposed
to rising interest rate levels.
Property values are still subject to market
conditions which will continue to be impacted
bythe interest rate environment.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
57
Risk management and principal risks continued
Principal risks and uncertainties continued
Residual risk movement in the year
Increased Unchanged Decreased Low 0–5 Medium 6–14 High 15–20
Deliver progressive returns
8. Potential over-reliance on the NHS
and HSE
D
C
KPIs impacted
PHP invests in a niche asset sector where changes
in healthcare policy, the funding of primary care,
economic conditions and the availability of finance
may adversely affect the Group’s portfolio valuation
and performance.
Commentary on risk
in theyear
The UK and Irish
governments continue
tobe committed to the
development of primary
care services and
initiatives to develop new
models of care increasingly
focusing on greater
utilisation of primary care.
Despite the UK’s economic
outlook and the continued
backlog of treatments
created by the COVID-19
pandemic, staff shortages
and recruitment issues that
the NHS faces, we expect
the demand for health
services to continue to grow,
driven by demographics. We
welcome the new Labour
government’s commitment
to the NHS together with its
manifesto pledge to reform
primary care along with a
continuation of the shift of
services out of hospitals
and into the community.
Further details on the
government’s proposals will
be published in a new
10-Year Health Plan due
later in spring 2025.
Whilst supported by the
government, the NHS, HSE
and District Valuer do need
to acknowledge that higher
build costs and inflation
need to be reflected in
future rent settlements
fornew schemes to be
economically viable.
Mitigation
The commitment to primary
care is a stated objective of
both the UK and Irish
governments. Weawait the
detail of how new Labour’s
commitment of spending
£25 billion on the NHS in
future years willmaterialise
into the primary care sector.
Neverhas the
modernisation of the
primary care estate been
more important in order to
reduce the huge backlog of
treatments and to avoid
patients being directed to
understaffed and
over-burdened hospitals.
Management engages
directly with government
and healthcare providers
inboth the UK and Ireland
topromote the need for
continued investment in
modern premises.
This continued investment
provides attractive long
term, secure income
streams that characterise
the sector, leading to
stability of values.
PHP continues to appraise
and invest in other
adjacent, government
funded healthcare related
real estate assets.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Likelihood is low but impact of occurrence may
bemajor.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Policy risk and general economic conditions are out
of the control of the Board, but proactive measures
are taken to monitor developments and to consider
their possible implications for the Group.
9. Foreign exchange risk
A
B
C
D
KPIs impacted
Income and expenditure that will be derived from
PHP’s investments in Ireland will be denominated
ineuros and may be affected unfavourably by
fluctuations in currency rates, impacting the
Group’searnings and portfolio valuation.
Commentary on risk
in theyear
The Group now has
21investments in Ireland.
Asset values, funding
andnet income are
denominated in euros.
The wider macroeconomic
and political environment
across the world continues
to cause exchange
ratevolatility.
Mitigation
The Board has funded and
will continue to fund its
investments in Ireland with
euros to create a natural
hedge between asset
values and liabilities
inIreland.
To hedge out the euro
denominated income
exposure post year end in
January 2025 PHP entered
into a euro foreign
exchange forward (fixed at
€1.1459:£1) to cover net
annual income of €10 million
per annum, which expires in
January2027.
Management closely
monitors the euro to GBP
currency rates with its
banks to formulate a formal
hedging strategy against
Irish net cash flow.
Inherent risk rating
2
4
6
8
10
12
14
16
18
20
Medium
Likelihood of volatility is high but the potential
impact at present is low due to the quantum of
investment in Ireland, albeit this is increasing.
Residual risk rating
2
4
6
8
10
12
14
16
18
20
Low
PHP has implemented a natural hedging strategy
tocover balance sheet exposure and has hedged
out the income exposure for the period until
January 2027.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
58
Viability statement
In accordance with the 2018 UK Corporate Governance Code, the
Board has assessed the prospects of the Group over the longer term,
taking account of the Group’s current position, business strategy,
principal risks and outlook.
The Board believes the Company has strong long term prospects,
being well positioned to address the need for better primary care
health centres in the UK and Ireland.
The Directors confirm that, as part of their strategic planning and
riskmanagement processes, they have undertaken an assessment
ofthe viability of the Group, considering the current position and
thepotential impact of the principal risks and prospects over a
three-year time horizon. Based on this assessment, the Directors have
areasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period to
31December 2027. Although individually the Group’s assets may
haverelatively long unexpired lease terms and will all have a defined
asset management strategy, the Board has undertaken its detailed
financial review over a three-year period because:
• the Group’s financial review and budgetary processes cover
athree-year look forward period; and
• occupational leases within the Group’s property portfolio typically
have a three-yearly rent review pattern and so modelling over this
period allows the Group’s financial projections to include a full
cycle of reversion, arising from open market, fixed and index-linked
rent reviews.
The Group’s financial review and budgetary processes are based on
an integrated model that projects performance, cash flows, position
and other key performance indicators including earnings per share,
leverage rates, net asset values per share and REIT compliance over
the review period. In addition, the forecast model looks at the funding
of the Group’s activities and its compliance with the financial
covenant requirements of its debt facilities. The model uses a number
of key parameters in generating its forecasts that reflect the Group’s
strategy and operating processes and the Board’s expectation of
market developments in the review period. In undertaking its financial
review, these parameters have been flexed to reflect severe, but
realistic, scenarios both individually and collectively.
Sensitivities applied are derived from the principal risks faced by the
Group that could affect solvency or liquidity.
The sensitivities applied are generally the same as used for the
31December 2023 year-end financial statements which included
a10% decline in valuations and 15% tenant default rate. We believe
these remain realistic, reasonable worst-case scenarios, having seen
an absolute valuation decline of 1.4% in 2024.
Across our various loan facilities, valuations will need to fall by a
further £1.0 billion or 37% before the loan to value covenants are
impacted. During the year, Bank of England base rates have started
to fall from their peak of 5.25% to 4.50% at the time of writing, with
the trend expecting to continue as inflation is now in line with the
target set by the Bank of England. We therefore feel the increase in
variable interest rates should remain a sensitivity at 1%.
The sensitivities applied are as follows:
• declining attractiveness of the Group’s assets or extenuating
economic circumstances impact investment values – valuation
parameter stress tested to provide for a one-off 10%/£278 million
fall in June 2025;
• 15% tenant default rate;
• rental growth assumptions amended to see nil uplifts on open
market reviews;
• variable rate interest rates rise by an immediate 1% effective from
1January 2025; and
• tightly controlled NHS scheme approval restricts investment
opportunity – investment quantum flexed to remove non-
committedtransactions.
We have assessed the impact of these assumptions on the Group’s
key financial metrics over the assessment period including covenant
compliance, profitability, net debt, loan to value ratios and available
financial headroom which are as follows:
Key metrics at 31 December 2027
31 December
2024
Viability
scenario
Loan to value ratio 48.1% 55.0%
Net debt £1,323m £1,442m
Interest cover ratio 3.1x 2.3x
Adjusted net assets £1,403m £1,156m
Available financial headroom £271m £156m
All covenants have been monitored throughout the viability period
that has been assessed and were the sensitivities to come to fruition,
any breaches would be minor and could be remedied with cash or
property collateral.
In making its assessment, the Board has made a number of specific
assumptions that overlay the financial parameters used inthe
Group’s models. The Board has assumed, in addition to the specific
impact of new debt facilities, the Group will be able to refinance or
replace other debt facilities that mature within the review period in
advance of their maturity and on terms similar tothose at present.
See Note 14 to the financial statements for aprofile of the Group’s
debt maturity.
Mark Davies
Chief Executive Officer
27 February 2025
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
59
Chair’s introduction to governance
Our long-established and effective governance framework
supports efficient management of the business
Dear shareholder
Introduction
I am pleased to introduce the governance section of this year’s
Annual Report which gives more detail on the governance structures
we have in place and how the Board and its Committees worked on
behalf of shareholders and other stakeholders, driving the culture
necessary for PHP to achieve its strategic goals.
The Board is responsible to our shareholders, customers, employees
and other stakeholders for the Company’s long term success.
Thelong term success of the Company in delivering excellent
property returnsfor its shareholders, many of whom are also
employees, wasrecognised by PHP being judged the winner of MSCI’s
Highest Ten-Year Risk Adjusted Total Return Award for the third year
in succession for 2023, having previously won the award in 2022,
2021and 2017.
These accolades are in no small part thanks to the sound governance
framework we have in place and the excellent work and dedication of
our highly experienced team, led by the CEO, Mark Davies, in delivering
high quality, modern medical centres for GPs and other primary care
professionals in the UK and Ireland.
Implementation of Board succession plan
As described in the Company’s 2023 Annual Report, 2024 saw the
evolution of PHP’s Board through implementation of its three-stage
succession plan. The first step involved the recruitment and appointment,
further to a thorough and extensive search process, ofMark Davies
as the Company’s new CEO. Mark’s term duly commenced, following
awell planned handover process and then his appointment as
aDirector at the 2024 AGM, on 24 April 2024.
Harry Hyman
Non-executive Chair
“ The quality of our governance
framework, which we continue
torefine in line with evolving best
practice, serves as a platform for
thecrucial role which the Board
playsin continuing to successfully
lead the business.”
Also following approval by more than 80% of shareholders at the
2024 AGM, I was appointed as Non-executive Chair from that point in
time. This formed the second step in the succession plan. This phase
was led by Ian Krieger, the Company’s Senior Independent Director,
and involved consultation with major shareholders (representing
approximately 60% of the register). It was pleasing to see the feedback
from the process translate into strong shareholder support at the AGM.
The Board, conscious of best practice and shareholder feedback,
determined that my term as Chair will be for a maximum of three
years from the 2024 AGM – allowing the Company to benefit from my
experience through the extended period of health system evolution
under the Labour Government elected during 2024 – subject to
annualreview by an experienced and robust group of independent
Non-executive Directors and subject also to annual shareholder
re-appointment during that time in the usual way. In accordance
withCode requirements, I do not sit on the Remuneration or Audit
Committees, and the Company will otherwise continue to adhere
tocorporate governance best practice.
The third step in the Company’s plan saw the appointment of DrBina
Rawal as a fourth independent Non-executive Director of the Company
and we were delighted to welcome Bina to the Board with effect from
27 February 2024, enhancing the Board’s mix of skills andensuring
compliance with the Code.
I am pleased to confirm that the successful implementation of the
planhas resulted in a strong Board, with the right combination of
skills,experience and knowledge and a majority of independent
Non-executive Directors, well placed to provide effective and
entrepreneurial leadership to promote the sustainable success of
theCompany in the long term, to the benefit of shareholders and
wider society.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
60
Chair’s introduction to governance continued
Evaluation
The annual Board evaluation process is an important part of our
governance process as it provides an opportunity for reflection on
aspects of the Board’s work that went well and considers areas for
further improvement.
To support the Board’s continuing effectiveness, in 2024 we
undertook the latest iteration in PHP’s programme of externally
facilitated Board reviews. Gould Consulting, which has no other
involvement with the Company or Board members, carried out an
external evaluation in line with the recommendations of the Code.
Iam pleased that the feedback confirms my view that the Board,
further to a well-managed and successful transition to its new
configuration in 2024 – a transition undertaken in consultation with
major shareholders, whose strong support for the plan was secured
at the 2024 AGM – functions highly effectively, is of an appropriate
size and possesses an excellent balance of skills and experience to
challenge, motivate and support the business. Details of the
evaluation and the main findings of the process are set out
onpages73 to 75.
I am also pleased to report that, following an evaluation of the
performance of the Directors and their other commitments, each of
the Directors standing for re-election at the Annual General Meeting
on 7 May 2025 has been recommended by the Board for re-election.
Culture and strategy
Culture and strategy need to be aligned for us to achieve our corporate
purpose and governance has a key role to play in establishing the
culture that we want to create. We aim to be akeypartner working
incollaboration with the health services in theUnited Kingdom and
Ireland to deliver much needed investment into primary care facilities
which have been demonstrated to improve health outcomes and
reduce referral rates to overstretched hospitals, all in a manner which
maximises health system value formoney.
Accordingly, the Board culture seeks to foster an environment where
we conduct our operations with honesty, integrity and respect for the
many people, organisations and localities that our business touches. In
addition to monitoring and assessing culture with this objective in mind
(as further described on page 67), the Board also seeks to maintain an
environment which encourages openness, respect, trustand fairness.
Stakeholders and sustainability
The nature of our business, from investing in and developing properties
to managing and improving our spaces for the delivery ofprimary care,
means we have a continuous dialogue with a wide group of stakeholders
and we consider our environmental and social impacts in all that we do.
This approach is central to our purpose andour stakeholders’ views are a
key consideration when making decisions which may affect them. More
detail on the Board’s engagement with shareholders, employees and
other stakeholders can be found on pages 39 to 42.
In 2024, we evolved our social impact programme to focus andlink
with our asset management projects, working directly withtenants
toprovide support for their chosen local initiatives. Additionally,
wecontinue to engage with and support our employeesfocusing
onprofessional and personal development.
Our ESG Committee continued to drive forward our environmental,
social and governance agenda. We provide further details on our
initiatives to engage with all our stakeholders on pages 42 to 43 and
how we discharge our duties under Section 172 of the Companies Act
2006 on page 51.
AGM
We will be holding our Annual General Meeting on 7 May 2025
andthe Notice of the meeting, a covering letter from me about
themeeting, explanatory notes for the resolutions to be put to the
meeting and details of how you vote are set out on pages 153 to 164
ofthe Annual Report. I hope that you will be able to join us at the
meeting. If you are not able to do so, please either use the form of
proxy that you should find with the Annual Report or cast your vote
electronically as explained on pages 162 to 164.
Looking ahead
I would like to conclude by thanking members of the Board for their
continued support and commitment over the past year. Building on the
successful implementation of the succession plan, I am confident that
PHP, with a focused and experienced Board, skilled senior management
team and committed workforce, is well positioned to take the
opportunities that lie ahead, and that its governance structures
provide a robust platform to develop and deliver its strategy.
I hope that you find the remaining pages of this Governance Report
informative and useful.
Harry Hyman
Non-executive Chair
27 February 2025
Statement of compliance with the Code
This report sets out the Company’s governance structures
andpractices and explains how the Board discharges its duties
and applies the principles and complies with the provisions of
the 2018 UK Corporate Governance Code (the “Code”), issued
by the Financial Reporting Council (“FRC”) and available at
www.frc.org.uk. The Company is mindful that the FRC published
a revised version of the Code in January 2024, which applies to
accounting periods beginning on or after 1January 2025 (with
the exception of Provision 29 regarding risk management and
internal control, which is applicable for accounting periods
beginning on or after 1January 2026).
The Board has considered the Company’s compliance with the
provisions of the Code during the year ended 31 December 2024.
The Board confirms that, throughout the year ended
31December 2024 and to the date of this report, the Company
was compliant with all the relevant provisions as setout in the
Code, save that the Chair was not considered independent on
appointment for the purposes of Provision 9, given his previous
role as Chief Executive. That said, major shareholders were
consulted ahead of his appointment, as required by the Code in
these circumstances, and his appointment was approved by
more than 80% of the Company’s shareholders atits 2024
Annual General Meeting, with further explanatory content set
out on page 82.
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Primary Health Properties PLC Annual Report 2024
61
Board of Directors
E
N
S E
S E
S A
E
N
R
Harry Hyman
Non-executive Chair
Election to the Board
Harry Hyman founded the Company in 1996 and served on
theBoard as Managing Director from that time and represented
the former adviser to the Company, Nexus Tradeco Limited
(“Nexus”), on the Board. On completion of the internalisation
on5 January 2021, Harry was appointed as Chief Executive
Officer. Shareholders approved his appointment as Non-executive
Chair with effect from the end of the 2024 AGM. The Board
believes that Harry’s appointment continues to be in the best
interests of the Group and all of its stakeholders, particularly as
his knowledge and expertise gained over nearly 30 years in the
primary care property sector will continue to be invaluable and
highly relevant to the Group’s future success. The Board has
determined that the termwill be a maximum of three years
fromthe2024AGM.
Career
Harry graduated from Cambridge University and trained as a
Chartered Accountant and Corporate Treasurer. He established
the Company in 1996 and was the Managing Director of Nexus
Tradeco Limited, which until 5 January 2021 was the Adviser
to PHP.
He is a Fellow of the Institute of Chartered Accountants
inEngland and Wales, and a Fellow of the Association of
Corporate Treasurers.
Skills, competence and experience
Harry has extensive experience in investing in the primary
healthcare sector, having developed the Company’s business
from inception over 20years ago to its current position with
an investment portfolio of over £2.8 billion. Healsobrings
entrepreneurial flair to the Boardhaving established a number
of successfulprivate companies.
Other listed directorships
Non-executive Chair of Biopharma Credit PLC, an externally
managed investment trust which invests in the fast-growing
science industry and islisted on the London Stock Exchange.
Mark Davies
Chief Executive Officer
Election to the Board
Mark Davies was appointed to the Board from the 2024 AGM.
Career
Mark was a Co-founder Director of NewRiver REIT plc
(“NewRiver”) in 2009 and played an important role in taking
NewRiver from IPO into the FTSE 250 Index in seven years.
Hewas CFO of NewRiver for over twelve years and, alongside
his role as CFO, was also CEO/Executive Chair of Hawthorn
Leisure Limited (“Hawthorn”) for five years. Mark stood down
from the board of NewRiver following the successful sale of
Hawthorn in July 2021 to private equity at a premium price.
Skills, competence and experience
Mark has considerable capital markets experience and over
the last 14 years has raised over £3 billion of equity and debt
in public and private markets.
Other listed directorships
Senior Independent Director of Palace Capitalplc.
Richard Howell
Chief Financial Officer
Election to the Board
Richard Howell was appointed to the Board from31 March 2017,
having joined Nexus on 13March 2017, and following completion
of the internalisation of the advisory and management functions
previously carried out by Nexus, hewas appointed Chief
Financial Officer.
Career
Richard is a Chartered Accountant and has over 20 years’
experience working with London-listed commercial property
companies, gained principally with LondonMetric Property plc
and Brixton plc. Richard was part of the senior management
team that led the merger of Metric Property Investments plc
and London & Stamford Property plc in 2013 to create
LondonMetric Property plc. In May 2022 he was appointed
asaNon-executive Director at Life Science REIT plc, an
AIM-listed, externally managed real estate investment trust.
Skills, competence and experience
Richard has extensive finance experience, havingpreviously
held senior accounting positions within listed property
companies operating across the UK. Whilst working for
LondonMetric Property plc and Brixton plc, hehas been
involved in over £5 billion of property transactions.
Other listed directorships
Senior Independent Non-executive Director and Audit Chair
ofLife Science REIT plc.
Laure Duhot
Independent Non-executive Director
Election to the Board
Laure Duhot was appointed to the Board from 14March 2019
following completion of the merger with MedicX Fund Limited.
She is Chair ofthe ESG Committee.
Career
Laure started her career in the investment banking sector and
has developed a focus on theproperty sector. She has held
senior roles atLehman Brothers, Macquarie Capital Partners,
Sunrise Senior Living Inc., Grainger plc andLendlease.
Skills, competence and experience
Laure brings over 30 years of senior executive level experience
in the investment banking and property sectors, specialising in
alternative real estate assets, and has been a Non-executive
Director at a number of funds and propertycompanies.
Other listed directorships
Non-executive Director of Safestore Holdings plc and NB
Global Monthly Income Fund Limited (until July 2024).
Independent Non-executive
Yes.
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Primary Health Properties PLC Annual Report 2024
62
Composition of the Board
Board skills and experience
Board of Directors continued
Ian Krieger
Senior Independent
Non-executive Director
Election to the Board
Ian Krieger was elected a Director at the 2018 Annual General
Meeting, having been appointed to the Board in February
2018, and is Chair of the Audit Committee.
Career
Ian is a Chartered Accountant and was a Partner and
Vice-Chair at Deloitte until his retirement in2012.
Skills, competence and experience
Ian qualified as and practised as a Chartered Accountant and
brings a wealth of recent financial experience to the Board as
well as his experience as Chair of the audit committees oftwo
other UK-listed companies in the property sector (having been
Senior Independent Non-executive Director and Chair of the
audit committee at both Safestore Holdings plc and Capital &
Regional plc until his retirement in 2024 as notedbelow).
Other listed directorships
Safestore Holdings plc and Capital & Regional plc (until March
and June 2024, respectively).
Independent Non-executive
Yes.
Ivonne Cantú
Independent Non-executive Director
Election to the Board
Ivonne Cantú was appointed to the Board from 1January 2022.
Career
Ivonne has significant public company experience having
spent over 20 years advising listed businesses. She is
currentlythe Director ofInvestor Relations, Communications
and Sustainability as well as a member of the executive
management team and the sustainability committee of
Benchmark Holdings plc, a biotechnology aquaculture
company. She is also a Non-executive Director and Chair of
the remuneration committee at Creo Medical Group plc and
aTrustee of two non-profit charitable organisations, La Vida
and Info Latinos, and TEHAdvisory Board.
Skills, competence and experience
Prior to taking up her position at Benchmark Holdings plc,
Ivonne spent 13 years as a Senior Corporate Finance Adviser
at Cenkos Securities plc, and prior to that seven years as
anInvestment Banker at Merrill Lynch. She has adegree in
engineering from the Universidad Panamericana in Mexico City
and an MBA from the Wharton School of Business at the
University of Pennsylvania.
Other listed directorships
Creo Medical Group plc.
Independent Non-executive
Yes.
Dr Bandhana (Bina) Rawal
Independent Non-executive Director
Election to the Board
Bina Rawal was appointed to the Board from 27February 2024.
Career
Bina is a medical professional with 25 years’ senior
executiveexperience in healthcare, including with blue chip
pharmaceutical companies such as Roche and global research
funding charity Wellcome Trust. She is currently Senior
Independent Director at Worldwide Healthcare Trust plc, aFTSE
250-listed investment trust specialising in healthcare and life
sciences companies where she is board lead for ESG and chairs
the nominations committee.
Skills, competence and experience
Bina has a wide breadth of experience spanning patient care,
digital and population health, ESG, strategy, partnerships and
EDI, alongside extensive networks in UK healthcare through
her senior level executive and non-executive roles to date in
large, complex organisations within the public, private and
not-for-profit sectors.
Other listed directorships
Worldwide Healthcare Trust plc.
Independent Non-executive
Yes.
A
E
N
R A
E
N
R A
E
N
R
S
14%
14%
43%
29%
Audit and risk
Finance and banking
Property
Healthcare
1 Chair
2 Executive
4 Non-executive
4 Male
3 Female
Balance of the Board
Gender
Key to Committee membership
A
Audit Committee
E
ESG Committee
N
Nomination Committee
R
Remuneration Committee
S
Standing Committee
Indicates Chair of Committee
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
63
Senior leadership team
Toby Newman
Company Secretary and ChiefLegalOfficer
Toby joined PHP at the start of 2023, having, since 2017,
beenGeneral Counsel and Company Secretary at national
independent hospital, gym and healthcare services provider
Nuffield Health, where he led a multi-disciplinary team
responsible for all legal matters across its businesses. Toby
isa solicitor with more than 20years’ experience, gained in
private practice in the City specialising in M&A, capital
markets and corporate governance, then focusing on the
healthcare sector before moving in house.
David Austin
Director: Asset, Property and Facilities
Management
David has worked in the PHP business since August 2016
andwas appointed to head up the asset management team
in2019 following the merger with the MedicX Fund. David now
leads the combined asset, property and facilities management
teams, managing value across the existing portfolio, and was
promoted to the Executive Committee during 2023. David is a
Chartered Surveyor with over 20 years’ post qualified
experience with Jones Lang LaSalle, Axa, LandSec and MWB.
Mark Davies
Chief Executive Officer
Full biography on page 62.
Richard Howell
Chief Financial Officer
Full biography on page 62.
Management team at PHP
Executive and senior leadershipteams
Set out below is a chart showing the structure ofthe
Executive and senior leadership teams which managed
the day-to-day operations of the business during the
year. Further details of the team are set out opposite
and on page65.
The Executive team operates under the direction and
leadership of the Chief Executive and meets weekly to
oversee the day-to-day running of the business and
progress in delivering the Board’s approved
strategic objectives.
The senior leadership team comprises departmental
heads from all key business functions with a diverse
range of skills and experience. To further enhance
efficient, joined-up working, asset, property and
facilities management were brought together
during2023.
Oliver
Goodman
Director: Rent
Reviews and
Valuation
Olivia Mawdsley
Head of Property
Management
Maurice Citron
Head of Asset
Management
Yasmin Romane
Head of Facilities
Management
Executive Committee
The team is listed opposite, along with the dates they joined the business.
Richard Howell
Chief Financial Officer
Tony Coke
Director:
Development
Toby Newman
Company Secretary and
Legal Officer
Mark Davies Chief Executive Officer
Liam Cleary
Director:
Finance
Alan O’Connell
General
Manager, Axis
James Buckley
Managing
Director, Axis
David Austin
Director: Asset,
Property
and Facilities
Management
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
64
Senior leadership team continued
Oliver Goodman
Director: Rent Reviews andValuation
Oliver joined following the merger with the MedicX Fund in
2019, and heads up the team responsible across the portfolio
for negotiating and securing rent reviews, both when provided
for under the terms of the lease and on asset management
projects when the lease is re-geared. Oliver is a Chartered
Surveyor and hehas an in-depth understanding of the process
of agreeing rent reviews with District Valuers in accordance
with the detailed regulations that govern the reimbursement
of rents onGPsurgeries.
Tony Coke
Director: Development
Tony is a Chartered Surveyor with over 20 years’ experience in
primary care development. Tony’s teams have delivered some
30 new premises across the South of the UK, with a particular
focus on the South East and Greater London. Tony is
conversant with all aspects of primary care premises
development from the initial project brief right through to
achieving practicalcompletion on the premises.
Liam Cleary
Director: Finance
Liam joined following the merger with the MedicX Fund in
2019, and is now responsible for the finance function including
commercial finance, debt raising, financial reporting and
treasury. Liam is a Chartered Accountant who has over
15 years’ experience working in private and public companies.
Before working at MedicX Fund he worked at both PwC and
Deloitte Touche Tohmatsu in the UK and Australia on capital
market and merger and acquisition transactions.
James Buckley
Managing Director, Axis PHP
James leads the Axis business in Ireland and joined following
the acquisition of Axis Technical Services in 2023 and is
responsible for all aspects of the Ireland business including
new investments. James has an MBA from London and has
over 40 years’ experience in property and construction,
founding and growing several property and facilities
management businesses. James has unique experience of
healthcare asset development in Ireland from design,
construction and long term management of the properties.
Senior management
Alan O’Connell
General Manager, Axis PHP
Alan is the general manager of the Axis business in Ireland
and joined following the acquisition of Axis Technical Services
in 2023 and is responsible for the day-to-day running of the
business. Alan has over 30 years’ experience in property
and construction, with particular experience in healthcare
property management and developments. Prior to PHP he
worked as Assistant National Director of Estates within the
HSE in Ireland with oversight of healthcare capital
infrastructure investment.
Olivia Mawdsley
Head of Property Management
Olivia joined following the merger with the MedicX Fund in
2019 and heads up the UK property management team. Before
working at MedicX Fund, she worked in commercial property
management at Workman LLP, where she qualified as a
Chartered Surveyor. Olivia’s experience includes retail,
industrial, offices and healthcare facilities.
Maurice Citron
Head of Asset Management
Maurice joined in 2019 and heads up the asset management
team, responsible for managing value across the existing
portfolio through lease regears and capital intensive asset
management schemes. Maurice holds an MA in Psychology
and MSc in Property Finance and has over 20 years’
experience in managing retail and residential assets in the
UK and Ireland.
Yasmin Romane
Head of Facilities Management
Yasmin joined in 2020 and heads up the facilities management
team, responsible for all service charge properties. She has
over 22 years of real estate and facilities management
experience within commercial property. Before working at PHP,
she held similar facilities management roles at Sodexo Ltd
and Pfizer Ltd.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
65
Corporate governance statement
Part A: Board leadership and
Companypurpose
Purpose, strategy, values and culture
The Board has determined that the Company’s purpose is to support
the NHS in the United Kingdom and the HSE in Ireland in tackling the
underinvestment in primary care facilities in both countries. We exist
to facilitate the NHS, the HSE, GPs and our other customers in
delivering close-to-home health services for the communities that
they serve. We are proud that our buildings serve a total patient list
of over 6.3million. We also continually invest in our estate through
asset management projects designed to improve the quality of the
buildings, making them more energy efficient and increasing the
number of consulting rooms and other facilities available to deliver
key services.
As described in more detail on pages 18 and 19 of the Strategic
Report, our strategy is built around four pillars: Grow, Manage, Fund
and Deliver. Set out in the table on the right is how the decisions
taken bythe Board have supported the delivery of this strategy
during theyear.
How governance supports our strategy
At the same time our strategy has delivered strong and secure returns to shareholders which has been recognised by PHP being judged the winner of
MSCI’s Highest Ten-Year Risk Adjusted Total Return Award for the third year in succession. The Board believes that the Group’s portfolio of properties
offers long term and sustainable sources of rental income to underpin the steadily growing returns we offer toshareholders.
1. Grow
With development activity still muted in a volatile economic and
geopolitical environment, the Board scrutinised far fewer acquisition
and development proposals than it would ordinarily expect to,
approving the Basingstoke acquisition and South Kilburn
development. PHP’s focus has accordingly been on continuing to
successfully deliver asset management projects (of which 2024 saw
ten new schemes legally exchange, one of which making up the six
schemes physically completed in the year, with an aggregate value of
£13.0 million), together with rental improvements (with an aggregate
of £0.8 million in 2024).
The Board also supported a range of training programmes and
mentoring opportunities for staff at all levels across the business
tosupport their career development and personal growth.
Read more on page 18
3. Fund
The Board approved £270 million of term and revolving credit facilities
for a three-year term, as well as exercising the options to extend £150
million of revolving credit facilities for a further one-year term.
The Board considered the reports of the ESG Committee after each of
its meetings and approved investment required to meet the ESG
targets proposed by the ESG Committee to drive forward our
sustainability initiatives, details of which are set out in the
Responsible Business Report, and decided to re-focus its community
impact funding to more closely align with benefiting the communities
served by buildings at which asset management projects took place.
Read more on page 19
4. Deliver
The Board critically reviewed the level of quarterly interim dividends
for the year in light of a likely reduction in the level of revaluation
reserves and increased income from rent reviews to ensure a fully
covered dividend.
Following its previous decision to introduce a Dividend Reinvestment
Plan in light of the fall in the premium over net asset value in the
Group’s share price, the Board continued to make the plan available
for shareholders as a means for them to increase their shareholding
in a cost-effective manner.
Read more on page 19
2. Manage
In the economic conditions referred to above, a major area of focus
for PHP has been successfully delivering asset management projects.
To enhance the capital value of the portfolio, regear leases and
improve the energy efficiency of properties, the Board agreed capital
expenditure investment of £13.0 million on asset management
projects completed and exchanged in the year and interim
reallocation of staff from the investment to asset management team
to undertake more projects.
Proposals to invest in new facilities software systems to improve the
maintenance of the portfolio and deliver facilities management
services where PHP is required to do under the terms of its leases
were approved.
Read more on page 18
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
66
Corporate governance statement continued
Part A: Board leadership and
Companypurpose continued
Purpose, strategy, values and culture continued
Culture and values
The Company’s purpose is core to every decision taken by the
Board.As detailed on pages 18 to 19, the Company has a framework
of values and strategic measures that underpin our purpose to ensure
that the strategy and culture of the Company are aligned. We recognise
that, as guardian of our culture, the Board plays a vital role in
defining the way in which we do business and the Board sets the tone
for the Company. An appropriate governance structure for decision
making, together with promoting an environment of trust, respect
andaccountability, is fundamental to our culture. This attitude and
mindset to do what is right shapes the environment within which the
Executive Committee and wider PHP team work and the way PHP
behaves towards its stakeholders. Our strong culture supports our
strategic priority of partnering with the NHS in the UK and the HSE in
Ireland in the modernisation of the primary care estate and promotes
employee engagement, retention and productivity. We are genuine
and passionate about what we do, working collaboratively and using
our expertise to find high quality solutions for our occupiers and
improve the experience of the people who use our buildings.
Our size, being only 87 employees in the UK and Ireland combined,
and the regular interaction of the Executive Committee members and
senior leadership team with the wider workforce, facilitate the
monitoring of culture, which we do in anumber of ways, as follows:
• inclusion of culture and value-led questions within our employee
surveys as detailed below;
• regular reporting and feedback from the Executive Directors and
the designated workforce NED following staff engagement
meetings, highlighting what we do well and where improvements
can be made;
• regular face-to-face engagement with employees through Board
site visits and exposure to the senior management team; and
• monitoring of staff turnover rates, whistleblowing and health and
safety incidents.
Going forward, we will continue to remain open minded to efficient,
tech-enabled ways of working, which can also assist us as we
continue to further drive down our environmental impact.
Leadership
The Board, supported by an expert management team, continues
tomaximise the competitive advantage of the Company by utilising
the team’s deep knowledge of the primary care sector to create
sustainable value for shareholders. The Company is led by the Board
in its entrepreneurial approach and continues to innovate to produce
sector-leading healthcare facilities in both the United Kingdom
andIreland.
Our stakeholders and the Board’s engagement withthem
Our tenants
Whether in working on the development of new facilities, planning
asset management projects to further improve our existing sites or
working with our tenants day to day to optimise the functioning of
our buildings, we engage deeply with the NHS in the UK and the HSE
in Ireland, as well as with local GPs and other healthcare professionals
at our facilities, to understand their evolving requirements. We continue
to engage with NHS integrated care systems in England to understand
their key priorities for the improvement of care in their regions and
develop an effective partnership with them to deliver their vision
forimproved primary care provision. We also continue to find new
ways to collaborate withNHS partner organisations to continually
progressthe high compliance standards which are central to
PHP’sstakeholder offer.
The Board reviewed the results of the tenant survey conducted in
October 2024 based on a face-to-face interview format with a sample
of the tenant base to better understand tenants’ views and ensure
that we are engaging with the right individuals to gain feedback on,
and continually improve, our property management performance.
Our communities
In 2024, we have amended our social impact programme to focus
andlink with our asset management projects, working directly with
tenants to provide support for their chosen local initiatives.
Our employees
In 2024, PHP:
• continued to focus on staff career pathway support and
development, including through continued evolution of our objective
and appraisal approach; and
• continued to engage with our teams, including through changes to
internal structure.
PHP’s annual staff engagement survey took place in October 2024
togauge the current level of staff satisfaction and seek our people’s
views on areas where we can do even better. Responses were
received from 67% of staff (86% in 2023), with positive feedback on
the team culture and ethic, together with suggestions on areas for
further improvement, which the management team will take forward.
Following on from the survey, Laure Duhot, as the designated
NEDtolead and support workforce engagement for the Board, held
twoface-to-face meetings this year with staff in both the London
and Stratford-upon-Avon offices (two of five meetings with staff
across the year, including two in Ireland). The sessions ranged openly
across a wide number of areas, including the feedback from the staff
surveys and management communication style in a hybrid working
environment. She reported back her detailed feedback from these
sessions, on a non-attributable basis, to the Board, which discussed
proposals to address matters raised in these sessions.
In response to feedback received from the designated workforce
NED’s meetings and the staff surveys referred to above, the Board,
alongside continued evolution of the actions above, will focus on the
key action points of the employee satisfaction survey presented on
page 40 in order to continue driving the right behaviours and
supporting the development of employees.
Our investors
Regular communication with investors continues to be a top priority for the
Board, which believes that understanding the views of shareholders is an
important contributor to the Company’s strategic direction and success.
Following appointment of Mark Davies as CEO with effect from
April2024, which was informed by the views of major shareholders,
the Senior Independent Director, together with the Chair, also
engaged with major shareholders, of whom shareholders contacted,
representing more than 60% of PHP’s register, positively received
PHP’s Chair succession and Board composition plans (detailed in the
2023 Annual Report), which were duly approved at the Company’s
2023 AGM and have been implemented accordingly.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
67
Corporate governance statement continued
Part A: Board leadership and
Companypurpose continued
Our stakeholders and the Board’s engagement withthem
continued
Our investors continued
Any shareholders wishing to raise any governance issues may contact
the Chair at any time. The Senior Independent Director is also
available to respond to shareholder concerns when contact through
the normal channels is not appropriate.
We want to create sustainable value for all three types of investors in
our business: institutional, private and debt. It is important to us that
our investors understand our strategy and equity story, so that they
can support the execution of our strategy and our capital recycling.
Institutional investors Private investors Debt investors
Our Executive Directors once again held a series
of meetings with institutional investors as part
ofroadshows following our full year and interim
results. The results presentation was conducted
in a hybrid format, with live conference call
andwebcast facilities available, which were
wellattended.
The Board works with its brokers, Deutsche
Numis and Peel Hunt, to ensure that an
appropriate level of communication is facilitated
through a series of investor relations activities
around the issue of our fullyear and interim
results. The feedback received by the brokers
from these meetings is relayed to the Board
forits review.
The Company also held a Capital Markets Day
inOctober 2024 at which investors had the
opportunity to learn more about the Company’s
business and its plans to capture the significant
opportunities which it hasidentified.
These meetings are an important method of
keeping investors informed of the Company’s
performance and plans, answering questions
they may have and understanding their views.
Topics discussed include the development and
implementation of strategy, financial and
operational performance, ESG matters, the
strength of the Company’s income, the debt
structure and the real estate market in general,
including as the new government in England
develops its ten-year plan for the NHS.
Private investors are an important part of our
shareholder base for whom we aim to deliver
progressive dividend growth and steady capital
appreciation. Our private investors are
encouraged to give feedback and communicate
with the Board via the Company Secretary
throughout the year.
The whole Board attended the 2024 Annual
General Meeting and was available to answer
shareholder questions.
All the resolutions put to the meeting received
strong support from investors. The results of the
voting at all general meetings are published on
our website.
We work closely with our registrar, Equiniti – and,
following the secondary listing of the Company’s
shares on the Johannesburg Stock Exchange,
with JSE Investor Services in South Africa – to
maintain an efficient share register, make limited
paper distributions and to address all queries
that we receive from our private shareholders
throughout the year.
In the year, the Group addressed the refinancing
risk of the debt maturities falling due in 2025
byrefinancing two revolving credit facilities
withBarclays and Lloyds totalling £270 million.
The new facilities were partially used to repay
the £70 million variable rate bonds ahead of
maturity in December 2025.
The Group also exercised options to extend
thematurities by one year on its shorter dated
revolving credit facilities with HSBC (£100million)
to December 2027 and with Santander (£50
million) to January 2026.
Post year end, in January 2025, the Group fixed,
for two years, £200 million of nominal debt at a
rate of 3.0% for an all-in premium of £4.5 million.
The fixed rate swap will provide further
protection to the Group’s interest rate exposure
especially whilst rates continue to remain
elevated and volatile.
Regular dialogue is maintained with all our
relationship banks, including meetings and/or
conference calls.
The Board received detailed feedback from management, PHP’s brokers and its registrar following shareholder meetings, roadshows and results
presentations andthe Capital Markets Day, and noted a generally high level of satisfaction with the performance.
Please refer to our Strategic Report and the Responsible Business section of the Annual Report for further details on wider stakeholders of
thebusiness.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
68
Corporate governance statement continued
Part B: Division of responsibilities
There is a clear written division of responsibilities between the Chair
(who is responsible for the leadership and effectiveness of the Board)
and the Chief Executive Officer (who is responsible for the day-to-day
operations of the business) and the Senior Independent Director
(whois responsible for supporting the Chair on all governance issues).
When running Board meetings, the Chair maintains a collaborative
atmosphere and ensures that all Directors have the opportunity
tocontribute to the debate. The Directors are able to voice their
opinions in a calm and respectful environment, allowing coherent
discussion. The Chair meets with individual Directors outside formal
Board meetings to allow for open, two-way discussion about the
effectiveness of the Board, its Committees and its members.
TheChair is therefore able to remain mindful of the views of the
individual Directors.
Five Committees of the Board have been operating throughout
theyear, the Audit, Remuneration, Nomination, ESG and Standing
Committees, to which certain powers have been delegated as set
outin their terms of reference which can be viewed on our website at
www.phpgroup.co.uk/about-us/corporate-governance. The reports of
each of the Audit, Remuneration and ESG Committees are set out in
the following pages.
This governance structure, set out on page 70, ensures that the Board
is able to focus on strategic proposals, property acquisitions, major
transactions and governance matters which affect the long term
success of the business.
The Board has delegated authority for the day-to-day management
of the business to the Chief Executive Officer, who is supported in
discharging these duties by two standing executive committees as
shown on page 70.
There is a clear statement of delegated authorities setting out the
financial parameters within which the Executive Directors and senior
management team may act without reference to the Board, although
any proposal could still be taken to the full Board for consideration
and approval where this is considered appropriate.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
69
Part B: Division of responsibilities continued
Corporate governance statement continued
Board of Directors
Audit Committee
Executive Committee Risk Committee
ESG CommitteeRemuneration Committee Standing CommitteeNomination Committee
Members: Ian Krieger, Ivonne Cantú,
LaureDuhot and Bina Rawal
Members: Mark Davies (Chair), Richard Howell, David Austin andToby Newman Members: Richard Howell (Chair), Ian Krieger, Mark Davies, Liam Cleary, David Austin and Toby Newman
Members: Laure Duhot, Ivonne Cantú,
HarryHyman, Ian Krieger, Bina Rawal,
Mark Davies andRichard Howell
Members: Ivonne Cantú, Laure Duhot,
IanKrieger and Bina Rawal
Members: Harry Hyman, Ian Krieger,
MarkDavies and Richard Howell
Members: Harry Hyman, Ian Krieger,
IvonneCantú, Laure Duhot and
BinaRawal
Chair: Harry Hyman
• The Board sets the Group’s strategic aims, ensuring that the necessary resources are available for the Group to meet its objectives, and oversees the
execution of the strategy within an acceptable risk management framework
Chair: Ian Krieger
• Oversees the quality of financial
andnarrative reporting
• Scrutinises significant judgements
made by management
• Provides assurance on internal controls,
risk management and audit processes
• Evaluates the performance of the
external auditor, with responsibility
foraudit tender
• Obtains assurance regarding the
objectivity of the valuers
• Reviews investment opportunities for consideration by the Board and approves any investment
decisions of less than £5 million
• Reviews operational performance of the business and approves proposals for asset management
projects involving capital expenditure of less than £2 million
• Undertakes day-to-day management of the PHP portfolio
• Reports to the Board at each meeting through formal reporting from the CEO, CFO and CLO
• Reviews strategic and operational risks in achieving delivery of PHP’s strategic goals
• Reviews operational risk management processes
• Recommends appropriate risk appetite levels and monitors risk exposure
• Reports to the Audit Committee at each of its meetings
Chair: Laure Duhot
• Assists in the development
ofESGstrategy
• Develops and monitors policies
onESGmatters
• Develops and monitors social
impactinitiatives
• Considers opportunities for
environmental initiatives in
theportfolio
Chair: Ivonne Cantú
• Determines and implements
Remuneration Policy
• Sets remuneration packages and
incentives for Executive Directors
andthe senior management team
• Approves annual bonus and LTIP
targets and outcomes for the senior
management team
• Oversees the operation of the PHP
Sharesave plan and approves the grant
of options under the plan
• Has oversight of workforce remuneration
arrangements and alignment of these
with the Group’s strategy
Chair: Harry Hyman
• Approves dividend announcements
andimplementation
• Approves the allotment and issue
ofnew shares in connection with
theCompany’s share plans or
dividendplans
• Approves other formal matters that
require the approval of the Board or
aduly authorised committee between
scheduled meetings of the Board and
acts as the disclosure committee
Chair: Harry Hyman
• Leads process for Board appointments
• Considers Board composition
andsuccession
• Reviews balance of skills and diversity
on the Board
• Oversees the annual Board
evaluationprocess
Our governance structure
Other non-Board committees
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
70
Corporate governance statement continued
Part B: Division of responsibilities continued
How the Board functions
Regular Board and Committee meetings are scheduled throughout
the year with five scheduled meetings held in 2024. The Board has
aformal schedule of matters specifically reserved for its decision,
which includes (amongst other things) various strategic, financial and
operational responsibilities. A summary of the key activities of the
Board during the year can be found on page 72.
The Standing Committee has certain matters delegated to it as noted
above. In addition, if the Board needs to meet to make a decision on
significant investment opportunities or other matters outside the
authority of the Executive Directors that arise between scheduled
meetings, the Board can do so by unanimous approval by email or
meet by video-conference but will only do so in such situations where
a detailed investment proposal has been circulated to the Board or
the matter discussed at a previous meeting so that all the Directors
are fully apprised, have the opportunity to ask questions and are in
aposition to make a fully informed decision on the matter. There is
also regular informal contact between the Executive and Non-
executive Directors between scheduled Board meetings.
Care is taken to ensure that information is circulated in good time
before Board and Committee meetings and that papers are presented
clearly and with the appropriate level of detail to assist the Board in
discharging its duties. The Company Secretary assists the Board and
Committee Chairs in agreeing the agenda in sufficient time before
the relevant meeting to allow input from key stakeholders and
seniorexecutives.
Further, the members of the senior management team regularly
attend meetings of the Board and have developed a strong
understanding of the Board’s approach and culture.
Role Responsibilities
Non-executive Chair
Harry Hyman
• Leads the Board and ensures it runs effectively
• Sets Board culture to promote boardroom debate
• Regularly meets with the CEO to stay informed about developments between Board meetings
• Monitors progress against strategy and performance
• Ensures all stakeholders’ views are considered
Senior Independent
Director
Ian Krieger
• Provides a sounding board for the Chair
• Leads performance evaluation of the Chair
• Is available to respond to shareholders’ concerns when contact through the normal channels is not appropriate
Non-executive
Directors
Ivonne Cantú
Laure Duhot
Bina Rawal
• Scrutinise and constructively challenge the performance of executive management
• Bring independent judgement to investment decisions brought to the Board and approve decisions reserved for the Board
asawhole
• Contribute to developing strategy and monitor the delivery of the agreed strategy
• Contribute a broad range of skills and experience
Chief Executive
Officer
Mark Davies
• Manages the day-to-day running of the business
• Manages dialogue with investors, shareholders and key stakeholders and relays views back to the Board
• Helps develop and formulate strategy for the Board and is responsible for its implementation
Chief Financial
Officer
Richard Howell
• Responsible for the preparation of accounts and integrity of financial reporting
• Implements decisions on financing and capital structure determined by the Board
• Responsible for day-to-day treasury management
• Ensures robust accounting systems and internal controls are implemented
Company Secretary
and Chief Legal
Officer
Toby Newman
• Advises the Board and is responsible to the Chair on corporate governance matters
• Ensures good flow of information to the Board and its Committees
• Promotes compliance across the business with statutory and regulatory requirements and Board procedures
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Primary Health Properties PLC Annual Report 2024
71
Corporate governance statement continued
Part B: Division of responsibilities continued
Meetings in the year
Details of the attendance of each of the Directors who served during the year are set out below:
Director
Board
(total in year – 5)
Audit Committee
(total in year – 5)
Nomination Committee
(total in year – 2)
ESG Committee
(total in year – 3)
Remuneration
Committee
(total in year – 3)
Harry Hyman 5 — 2 3 —
Mark Davies 5 — — 2 —
Richard Howell 5 — — 3 —
Ivonne Cantú 5 5 2 3 3
Laure Duhot 5 5 2 3 3
Ian Krieger 5 5 2 3 3
Bina Rawal 5 3 1 2 2
The diagram below sets out a summary of the key issues considered by the Board at its meetings during theyear.
February
• Strategic planning for the year ahead
against the backdrop of continuing
economic headwinds and
geopolitical uncertainty
• Critical examination of the
year-end property valuations
• Approval of the preliminary
announcement of results and the
2023 Annual Report, incorporating
the Notice of AGM
• Received and approved various
recommendations from the ESG
Committee, including with respect
to equality, diversity and inclusion
and prevention of modern slavery
April
• Consideration of the voting at the
Annual General Meeting, the reasons
for any votes against resolutions and
any follow-up actions
• In its new configuration following
MarkDavies’ formal appointment
atthe AGM and Harry Hyman’s
appointment as Chair, and with a UK
general election upcoming, strategy
discussion including in relation to
theuse of technology, growth and
communication of PHP’s proposition
July
• Careful consideration of the results
ofthe interim valuation
• Approval of the interim results
forrelease
• Received and discussed external
strategic market update
• Considered and approved: (i) the
Barclays £170 million facility with
proceeds used to repay the £70 million
variable rate bond; (ii) refinancing the
Lloyds £100 million RCF to 2027; and
(iii) exercising the option to extend
the £50 million Santander RCF to
January 2026 and £100 million HSBC
RCF to December 2027, together with
discussion of hedging arrangements
• Discussion of cyber security risk
management and mitigations
• Received an update on
regulatorymatters
October
• Reflected on key themes
fromstrategy discussions
• Received and discussed an update
oncurrent and emerging ESG trends
• Considered a number of
investmentopportunities
December
• Received and considered updates
in connection with 2024 audit
process, including internal controls
and risk register
• Reviewed and approved 2025 budget
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
72
Corporate governance statement continued
Part B: Division of responsibilities continued
Strategy meeting
The strategy meeting is held as a separate meeting outside the
regular Board schedule and attended by all the Directors and the
Executive Committee. It was this year followed by a wider meeting,
providing an opportunity for the members of the Board to meet and
discuss issues relating to the business with members of the senior
management team who do not attend Board meetings on
aregularbasis.
The 2024 strategy meeting was held in South West London. The
location of the meeting allowed the Board, alongside its strategy
discussions, to visit two of the Group’s properties: the Cobham Health
Centre (where tenants include Cobham Day Surgery – a day case
hospital facility – and NHS Property Services, which sub-lets to a GP
surgery) and Kingston Health Centre, a practice with 19 GPs serving
apatient list of 27,000. The Board was grateful for the opportunity to
meet and speak with the management and healthcare professionals
at these facilities about their requirements for the properties.
These visits reinforced the Board’s conclusions about the importance
of investment in modern primary and community care centres and
supported its view that the Group’s strategy of focusing on hub
primary care centres, with a large lot size, flexible floor plans and
theability to offer a variety of healthcare services, is the correct
response to the evolving requirements for the delivery of primary care
and associate services, close to patients’ homes. The session also
provided the Board with a valuable understanding of the challenges
facing GPs and other healthcare workers and how innovative
practices have continued to develop in response to these.
In preparation for the strategy meeting the Board received a
background reading pack that included content relating to finance,
asset management, forecasting and equity markets to support an
in-depth strategic discussion. The meeting also received valuable
insights from external speakers on strategic issues.
Part C: Composition, succession
andevaluation
Board composition
The current Board of Directors of the Company consists of the Chair,
four independent Non-executive Directors and two Executive
Directors and complies with the Code in that at least half of the
Board are independent Non-executive Directors. Details of the
composition of the Board by gender and ethnicity are set out below.
In 2024:
• following appointment of Dr Bina Rawal on 27 February 2024,
43%of the Board were women, such that the 40% target in the
Listing Rules was met;
• the target for at least one of the senior Board positions specified
inthe Listing Rules (being Chair, Chief Executive, Senior Independent
Director or Chief Financial Officer) being held by a woman was not
met. The Company considers that the experience and expertise in
these roles best positioned PHP for success in the year, and at the
same time will continue to approach Board recruitment having due
regard to its Listing Rules obligations aligned with the best interests
of the Company and its stakeholders; and
• the Listing Rules target that at least one individual on a company’s
board of directors is from an ethnic minority background was met.
Biographical information on each of our Directors can be found on
pages62 and 63, which shows the breadth of strategic and financial
management insight brought to our Board and that Ms Cantú, Ms Duhot,
Mr Krieger and Dr Rawal are all considered to be independent.
The composition of the Board is fundamental to its success.
Wecontinue to have a strong mix of experienced individuals on
theBoard. The Non-executive Directors are not only able to offer
anexternal perspective on the business, but also constructively
challenge the Executive Directors, particularly when developing
theCompany’s strategy.
As previously noted, the Company increased the Board to seven
Directors with Dr Bina Rawal’s appointment on 27 February 2024
asafurther independent Non-executive Director. We believe that
aBoard of seven Directors will continue to be of a size that is
appropriate for an agile business with a clear and focused strategy,
at the same time as delivering on the evolving corporate governance
requirements to which the Company is subject. We believe this size of
Board will continue to facilitate all members of the Board developing
a close understanding of PHP’s business and foster open debate.
Board induction and training
The Code provides that all Directors should receive a full, formal and
tailored induction on joining the Board. On joining the Board new
Directors are provided with an induction programme to enable them
to integrate into the Board as quickly as possible and feel able to
contribute to business and strategy discussions with enough
background knowledge.
A tailored induction programme for Dr Rawal was implemented by
theCompany Secretary and Chief Legal Officer. The induction
process included the following elements:
• one-to-one meetings with the Chair, other Board members,
members of the Executive Committee and the senior
managementteam;
• a full supporting pack of relevant materials to give insight into
strategy, structure and operations, as well as the Group’s
governance framework, policies and procedures; and
• meeting with the Company’s advisers, including with Korn Ferry,
PHP’s remuneration advisers, to understand the design and
implementation of the Group’s remuneration policies.
5 White British/White Other
1 Asian/Asian British (with effect
from 27February 2024)
1 Hispanic
4 Male
3 Female
Ethnicity Gender
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
73
Corporate governance statement continued
Part C: Composition, succession
andevaluation continued
Board induction and training continued
Ahead of his tenure as Chief Executive Officer commencing following
the 2024 AGM, Mark Davies worked at the Company on a two days
per week consultancy basis from January 2024. This provided Mark
with valuable insights and understanding of the business to best
support the successful transition which has been delivered.
The Directors receive regular updates in their Board papers,
facilitating greater awareness and understanding of the Group’s
business as well as legal and regulatory developments. PHP’s
preparatory work for the implementation of regulatory changes,
including implementation of the January 2024 update of the Code,
has continued in order to underpin the Company’s ongoing
adherence to best practice governance and assurance practices.
All Directors have access to the advice and services of the Company
Secretary and Chief Legal Officer and a procedure is in place for
them to take independent professional advice at the Company’s
expense should this be required.
Board evaluation
The Code indicates that FTSE 350 companies should have an externally
facilitated Board evaluation at least every three years. Continuing
PHP’s adherence to the Code in this regard, in 2024 anexternal firm,
Gould Consulting, was appointed to assess the effectiveness of the
Board and its Committees. Given the Company plans a further external
review in 2025, it was decided to undertake this by means of an online
questionnaire that covered a combination of standard items, such
asBoard dynamics and relationships, individual participation and
contribution, along with more topical matters, such as consideration
ofhow the Board succession process has operated. The Directors were
also asked to comment on the performance of the Board Committees.
The results of the survey were collated by Gould Consulting and
reviewed together with the Chair to consider any themes that had
been identified ahead of discussion of these issues by the Directors
atthe Nomination Committee, which also considered next steps
andrecommendations, as set out opposite. The Chair conducted an
evaluation of the performance of each of the individual Directors as
aseparate exercise. Ian Krieger, Senior Independent Non-executive
Director, had private meetings with each of the individual Directors
totake their feedback on the performance of the Chair. Overall, the
results of the evaluation process reflected very well on the Board and the tone set by the Chair and the Chief Executive Officer and concluded
thateach of the Committees is operating effectively. The Chair and Chief Executive Officer have already developed a strong, supportive
relationship providing clear and effective leadership and focus that are instrumental to the long term success of the Company. The members
oftheBoard and its Committees are seen as being engaged and committed and able to raise challenges openly while the culture remains open,
respectful and constructive.
Details of the outcomes of the 2023 evaluation and the 2024 evaluation, as well as the actions taken in response to the 2023 evaluation,
aresetout below:
2023 evaluation outcomes Actions in 2024 2024 evaluation outcomes
As the Company continues its journey
followinginternalisation in 2021 and
welcomesits new Chief Executive Officer,
tocontinue to develop its strategy and
cultureand implement its values for the
benefit of allits stakeholders.
Alongside continuing to develop its inclusive
culture where staff are encouraged to input
todecision making in a progressive and
supportive environment, the Company
refreshed the format for its Strategy Day
suchthat members of the wider team were
encouraged to contribute to the discussion
and development of strategy, enriching the
dialogue with their expertise as well as
providing development opportunities through
Board level exposure and engagement.
Continue to embed and refine the
Company’sculture, ensuring it is both
understood and lived throughout the
Company, including through successful
ongoing employee engagement.
In the context of continuing geopolitical and
economic volatility, to maintain a strategic
viewon the further horizon to best support
theCompany’s long term success.
The Board, Executive Committee and senior
leadership team continued to apply their deep
knowledge of the Company’s business to plot
the Company’s strategic course through
continuing volatility in the best long term
interests of its shareholders and stakeholders,
with sufficient time allocated to strategy
discussion and debate at all Board and
management meetings.
Ensure due strategic consideration of the NHS
10-year plan once published in 2025 to best
position the Company for long term success.
To continue to seek and benefit from expert
third-party insights relating to developments
inmedical practice, primary care and policy
that are relevant to the Company’s business
and delivery.
The Company continued to remain mindful of
the needs and priorities of the health systems
which its buildings support, and accordingly
continued to leverage expert connections and
insights throughout the year to best shape
its successful alignment to the needs of those
systems and their service users.
To continually keep in view future Board skills
to ensure the Company continues to position
itself to best effect.
The Board intends to review the implementation of these recommendations as part of its evaluation process in 2025, which as noted above it intends
will also be externally supported to support and maintain best governance practice, and will report on progress in next year’s Annual Report.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
74
Corporate governance statement continued
Part C: Composition, succession
andevaluation continued
Conflicts and commitment
The Board operates a policy to identify and, when appropriate,
manage actual or potential conflicts of interest affecting Directors.
Directors are required to submit any actual or potential conflicts of
interest they may have with the business of the Company to the
Board for approval. Any conflicts of interest are recorded and
reviewed by the Board at each meeting. Directors have a duty to
keep the Board updated about any changes to these conflicts.
The Company Secretary and Chief Legal Officer maintains the
register of approved conflicts of interest through this process. In
certain circumstances any conflicted Director may be required to
absent themselves while such matters are being discussed. No such
situations arose in the year.
The Board has delegated to the Nomination Committee the process
of formally reviewing conflicts disclosed on an annual basis and the
authorisations given (including such conditions as the Board may
determine in each case). Any conflicts or potential conflicts are
considered by the Board and any authorisations given are recorded
inthe Board minutes and in the register referred to above.
The letters of appointment for Non-executive Directors set out the
time commitment expected to be necessary to perform their duties.
All Directors are aware of the need to allocate sufficient time to the
Company in order to discharge their responsibilities effectively.
Directors must obtain prior approval from the Board when they take
on any additional responsibilities or external appointments and it is
their responsibility to ensure that such appointments will not prevent
them meeting their time commitments.
The Board has delegated to the Nomination Committee the review of
the external commitments of the Directors and further detail on how
the Nomination Committee has undertaken this work is set out in its
report on pages 81 to 83.
The Company provides the Non-executive Directors with appropriate
support and facilities for the consideration of the Company’s strategy
and performance, and dialogue with the Chair is encouraged so that
any issues regarding time pressures or conflicting commitments are
addressed appropriately.
Information and support
A comprehensive budgeting process is in place, with an annual budget
and three-year forecast prepared for consideration and approval by the
Board. The Directors are provided with relevant and timely information to
monitor financial performance against the budget. Defined authorisation
levels regulate capital expenditure. Investment decisions that require
Board approval in accordance with the authorisation matrices are
governed by defined appraisal criteria, which include anticipated financial
returns, the quality of the building and its environmental rating. The Board
is also provided with details of the healthcare services to be delivered
from the medical centre (including details of the patient numbers and the
local healthcare need) and other stakeholder considerations. In this way,
the Board monitors that agreed approaches and processes are well
understood and adhered to.
The Company Secretary and Chief Legal Officer is responsible
forensuring good and timely information flows within the Board
anditsCommittees and between the senior management and the
Non-executive Directors and assists the Board and Committee Chairs
in agreeing the agenda in sufficient time before the meeting to allow
input from key stakeholders and senior executives.
The Board uses a web-based system which provides ready access
toBoard papers and materials. Prior to each Board meeting the
Directors receive the agenda and supporting papers in good time
through this system to ensure that they have all the latest and
relevant information in advance of the meeting. After each Board
meeting, the Company Secretary and Chief Legal Officer operates
acomprehensive follow-up procedure to ensure that actions are
completed as agreed by the Board.
Part D: Audit, risk management and
internalcontrol
The Board is responsible for:
• the Company’s risk management and internal control systems
andfor reviewing their effectiveness;
• the ongoing processes for identifying, evaluating and managing
theprincipal risks faced by the Company;
• ensuring that the systems have been in place for the year under review
and up to the date of approval of the Annual Report and Accounts; and
• regularly reviewing these systems.
Audit Committee
The Audit Committee is responsible for monitoring the integrity
ofthefinancial statements and the narrative reporting and results
announcements of the Company, as well as the appointment,
remuneration and effectiveness of the external auditor. The detailed
Report of the Audit Committee is on pages 76 to 80.
Financial and business reporting
The Board is responsible for preparing the Annual Report and confirms in
the Directors’ Responsibility Statement set out on page 112 that it believes
that the Annual Report, taken as a whole, is fair, balanced and
understandable. The process for reaching this decision is outlined in the
Report of the Audit Committee. The basis on which the Company creates
and preserves value over the long term is described in the Strategic Report.
Risk management
The Risk Committee is tasked with reviewing the Group’s risk
horizonand preparing a detailed risk register which it presents
forconsideration by the Audit Committee. The Audit Committee
subsequently makes recommendations in respect of the Group’s
principal and emerging risks, mitigations, risk appetite and key risk
indicators to the Board which determines the extent and nature of the
risks it is prepared to take in order to achieve the Company’s strategic
objectives. Further information on the Group’s principal risks and risk
management processes can be found in the Risk Management and
Principal Risks section of the Strategic Report on pages 52 to 58.
During the course of its review for the year ended 31 December 2024,
and to the date of this report, the Audit Committee has not identified,
nor been advised of, a failing or weakness which it has determined to
be significant. In recognition of Directors’ responsibilities under
Provision 29 of the Corporate Governance code becoming applicable to
the Group for the year ending December 2026, the Audit Committee
recognises the need to further develop documentation of controls.
Part E: Remuneration
The UK Corporate Governance Code requires that a board should establish
a Remuneration Committee of at least three, or in the case of smaller
companies, two, independent Non-executive Directors. Inaddition the
Company Chair may also be a member of, but not chair,the Committee if
he or she was considered independent on appointment as Chair.
As Harry Hyman was not considered independent on appointment
forthe purposes of the Code, and in accordance with the
recommendation of the Code he is not a member of the
RemunerationCommittee (nor, as Chair, of the Audit Committee).
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Primary Health Properties PLC Annual Report 2024
75
Audit Committee report
Ian Krieger
Chair of the Audit Committee
Dear shareholder,
I am delighted to present my report as Chair of the Audit Committee
and over the coming pages you will see how the Committee has
discharged its responsibilities during the year.
Composition
Membership of the Committee is restricted solely to independent
Non-executive Directors. All the members of the Committee have
considerable commercial knowledge and industry experience
necessary to fulfil the Committee’s duties and responsibilities and
receive regular updates on business, regulatory, financial reporting
and accounting matters. I am the Committee’s designated financial
expert for the purposes of the Code.
In addition to the members of the Committee, the following
individuals attended by invitation: the Chief Financial Officer and
theDirector: Finance; the Chief Executive Officer and the Chair; the
Company Secretary and Chief Legal Officer; the audit partner and
senior managers from the auditor; and representatives from
PHP’svaluers.
As Chair, in conjunction with the Nomination Committee, I review on
an annual basis the composition of the Committee to ensure that it
comprises members with skills and competencies relevant to the
primary care real estate sector and recent and relevant financial
experience. The members of the Committee also evaluate the
performance of the Committee during the year.
Meetings
During the year the Committee met five times: four of these meetings
followed our annual programme which is aligned to the Company’s
financial reporting timetable and agreed at the start of the year.
Theadditional meeting in October related to audit planning for 2024,
also discussing cyber security testing and assurance. At the December
meeting, the Committee reviewed the Company’s risk management
and internal control processes and received an update on the audit,
including control findings.
Time is allocated for the Committee to meet the external auditor
independently of management. In addition to formal Committee
meetings, I have regular contact and meetings with the Chief
Financial Officer. This allows me to gain and maintain a good
understanding of key and emerging issues in advance of Committee
meetings, facilitating informed and constructive debate.
Members of the Audit Committee (the“Committee”)
Member
Number of meetings
and attendance
while in post
Ian Krieger (Chair) 5 (5)
Ivonne Cantú 5 (5)
Laure Duhot 5 (5)
Bina Rawal 3 (3)
Bracketed numbers indicate the number of meetings the member was eligible
to attend.
Key responsibilities
Financial and narrative reporting
• Monitor the integrity of the financial
statements
• Scrutinise the full and half year financial
statements
• Consider and challenge the key financial
judgements
For further information
see page 77
Risk management and
internal control
• Oversee the internal control processes
• Assess the need for an internal audit function
• Review the risk management framework
• Ensure risks are carefully identified,
assessed and mitigated
For further information
see page 77
External audit
• Review the performance, independence and
effectiveness of the external auditor and audit
process, including the quality of the same
For further information
see page 77
Regulatory compliance
• Review the viability statement and going
concern basis of preparation of the financial
statements
• Consider whether the Annual Report is “fair,
balanced and understandable”
• Monitor compliance with applicable laws
and regulations
For further information
see page 77
“ The Audit Committee is responsible
for independently overseeing and
challenging the integrity of the
financial reporting processes at PHP,
which supports and ensures the
accuracy of the financial results, as
well as the related internal controls.”
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Primary Health Properties PLC Annual Report 2024
76
Audit Committee report continued
Meetings continued
The Committee is satisfied that it receives sufficient, reliable and
timely information and support from management and the Company’s
external auditor to allow it to fulfil its obligations.
At least once a year, during an Audit Committee meeting, the
Committee meets separately with Deloitte without any other member
of management being present.
The Committee has formal, agreed terms of reference which are
available for viewing on the Company’s website at www.phpgroup.co.
uk/about-us/corporate-governance.
Our work in 2024
Our remit is unchanged from previous years, primarily to
independently oversee and challenge the integrity of the financial
reporting processes at PHP, which supports and ensures the accuracy
of the financial results. Alongside this, we review the valuation of the
Group’s portfolio at both the half year and at the year end and
require the valuers to attend our meetings so that we can interrogate
them on the assumptions and methodologies used in reaching
theirvaluations.
The other important aspect of our work is the Committee’s review ofthe
Company’s risk management framework and internal control procedures
to ensure they remain robust and are implemented effectively.
Regular tasks
The work undertaken this year has included the consideration,
reviewand approval of the following:
Financial and narrative reporting
• reviewing and monitoring the integrity of the financial statements
including reviewing significant financial reporting judgements and
estimates made by management, to ensure that the quality of the
Company’s financial reporting is maintained, in the Company’s half
and full year financial statements;
• reviewing and commenting on the alternative performance
measures, not defined under IFRS or “non-GAAP” measures, to
ensure these were consistent with how management measures
andjudges the Company’s performance, including reviewing the
balance between statutory and non-statutory measures;
• reviewing the content of the Annual Report and Accounts and
advising the Board on whether, taken as a whole, it is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s performance, business
model and strategy and whether it informs the Board’s statement
in the Annual Report on these matters that is required under
Provision 27 of the Code;
• assessing the independence and objectivity of the Group’s valuers
and gaining assurance around the integrity of the conduct of
valuation processes at the year end and at the half year;
• reviewing the process undertaken to ensure that the financial
statements are fair, balanced and understandable; and
• ensuring compliance with applicable accounting standards,
monitoring developments in accounting regulations as they affect
the Group and reviewing the appropriateness of accounting
policies and practices in place.
Risk management and internal control
• reviewing the Group’s risk register, in particular with regard to the
potential impact of climate change and principal and emerging
risks including digital technology;
• challenging the effectiveness of the Group’s risk management systems
and considering the adequacy of the process being undertaken to
identify risks and mitigate the exposure of the Group to them;
• considering the adequacy and effectiveness of the Group’s internal
controls and whether there was a need to establish an internal
audit function; and
• ensuring the process followed to support the making of the going
concern and viability statements remained robust and was
correctly followed.
External audit
• examining the performance of the external auditor, its objectivity,
effectiveness and independence, as well as the terms of its engagement
and scope of its audit, and agreeing the annual audit plan;
• monitoring the ratio and level of audit to non-audit fees paid to the
external auditor and agreeing its remuneration for the year; and
• recommending external auditor appointment or re-appointment
following any tender process from time to time.
Regulatory compliance
• reviewing the Committee’s composition, performance, terms of
reference and constitution;
• ensuring appropriate safeguards are in place for the detection of
bribery and fraud and reviewing the process by which employees
may raise concerns and ensuring that these have been effectively
communicated to and understood by the workforce, so that
concerns could be raised with me, the Company Secretary or
theauditor;
• reviewing the Company’s REIT compliance and tax strategy, which
may impact the integrity of the financial statements;
• considering the robustness of the Group’s assessment of viability
over a period of three years, in particular the assumptions
underlying the assessment; and
• determining the appropriateness of adopting a going concern basis
for the preparation of the financial statements.
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Primary Health Properties PLC Annual Report 2024
77
Audit Committee report continued
Significant issues considered in relation to the financial statements
During the year, the Committee considered key accounting matters and judgements in respect of the financial statements as detailed below:
Significant issue Actions taken
Valuation of the property portfolio
The Group has property assets of £2.8 billion as detailed in the Group
Balance Sheet and valuation is central to business performance.
Accordingly, the key judgement in the financial statements relates to
the valuation of the property portfolio which is driven by the yields and
ERVs applied in the valuation process. This is a recurring risk for the
Group as it is key to its IFRS profitability, balance sheet portfolio value,
net asset value, total property return and employee incentives. It also
affects investment decisions. Further, the judgemental nature of the
yields and ERVs used in the valuation is compounded by the continued
uncertain and volatile global economic environment, high inflation and
the previous, rapid rise of interest rates. Combined, these have led to
another period of subdued transactional evidence of primary care
transactions during the year, which is in contrast with more mainstream
property sectors, such as offices.
The portfolio is independently valued by Avison Young and Jones Lang LaSalle in the UK and by CBRE in Ireland (the “Valuers”), in accordance
with IAS 40 Investment property. The Committee ensured that there was a robust process in place to satisfy itself that the valuation of the
property portfolio by the valuers – all leading firms in the UK and Irish property markets – was carried out appropriately and independently.
Given the significance of the valuation, the Committee met twice with the valuers to review, challenge, debate and consider the valuation
process; understand any particular issues encountered in the valuation; and discuss the processes and methodologies used.
The Chair of the Audit Committee also discussed with the valuers such matters that allowed the Committee to scrutinise the valuation process
and ensure each of the valuers remained independent, objective and effective.
The auditor also met with the valuers and deployed the services of its own in-house property valuation expert to test the assumptions made.
It reported to the Audit Committee on its findings.
The Committee confirmed that it was satisfied that the valuation was not subject to undue influence and had been carried out fairly,
appropriately and in accordance with industry valuation standards, and therefore is suitable for inclusion in the financial statements.
Accounting for significant acquisitions, disposals and transactions
The accounting treatment of significant property acquisitions, disposals
and financing and leasing transactions is a recurring risk for the Group
with non-standard accounting entries required, and in some cases
management judgement applied.
Whilst transactional activity continued to be muted during 2024 due to wider economic conditions, the Group made one standing let
investment and commenced work on the Group’s second development during the year. The Committee reviewed management papers on key
judgements, scrutinising and challenging accounting treatments and judgements.
Following a review of the accounting treatment of the significant transactions, in particular the point at which each transaction should be
recognised, the Committee was satisfied that all relevant matters had been fully and adequately addressed and that the approach adopted
by the Company was appropriate in each case, and in accordance with IFRS.
The Committee concluded that the accounting treatment of the acquisitions was appropriate.
Financing
The Group uses a mixture of equity and debt finance to grow its
portfolio and has a number of debt finance arrangements and swaps to
hedge exposure to interest rate risk. The accounting treatment of these
transactions under IFRS 9 is by its nature complex.
During the year, the Group: (i) increased its Barclays £100 million RCF to £170 million, with the £70 million variable rate bond repaid with the
proceeds; (ii)refinanced the Lloyds £100 million RCF to 2027; and (iii) exercised the option to extend both the £100 million NatWest and £50
million Santander revolving credit facilities to 2027 and 2026 respectively. The Committee considered the finance team’s paper on the
proposed treatment of these transactions under IFRS 9 and agreed that they had been appropriately accounted for.
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Primary Health Properties PLC Annual Report 2024
78
Audit Committee report continued
Financial and narrative reporting
The integrity of the financial reporting and consolidation processes
and the completeness and accuracy of financial information are
subject to review by the Audit Committee and the Board. In
undertaking its review, the Committee considered:
• the suitability of the accounting policies adopted and whether
management had made appropriate estimates and judgements;
• the systems and controls operated by management around the
preparation of the accounts;
• the procedures included in these to bring relevant information
tothe attention of those who prepare the accounts;
• the consistency of the reports; and
• whether they are in accordance with the information provided
tothe Board during the year.
The Committee reviewed accounting papers prepared by
management which provided details on the main financial reporting
judgements. The Committee also reviewed reports by the external
auditor on the full year and half year results which highlighted any
issues with respect to the work undertaken on the year-end audit
andhalf year review.
The Committee paid particular attention to matters it considered
important by virtue of their impact on the Group’s results and
remuneration, and particularly those which involved a high level of
complexity, judgement or estimation by management, as noted above.
Developments in accounting regulations and best practice in financial
reporting are monitored by the Company and, where appropriate,
reflected in the financial statements. The Committee and the Board
review the draft consolidated financial statements and the
Committee receives reports from management and the auditor on
significant judgements, changes in accounting policies, and other
relevant matters relating to the consolidated financial statements.
Fair, balanced and understandable assessment
At the request of the Board, the Audit Committee also reviewed
theAnnual Report to consider whether it is fair, balanced and
understandable and provides the necessary information for
shareholders to assess the Group’s position, performance,
businessmodel and strategy.
The Committee was provided with, and commented on, a draft copy
of the Annual Report and Financial Statements. In carrying out the
process, key considerations included ensuring that there was
consistency between the financial results and the narrative provided.
The Committee is satisfied that alternative performance measures
used, not defined under IFRS, are consistent with how management
measures and judges the Group’s financial performance.
After reviewing the contents of this year’s Annual Report and
Financial Statements the Committee has confirmed to the Board
that,in its view, the report is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group’s position, performance, business model and strategy. In
forming this view, the Committee considered the overall review
andconfirmation process around the Annual Report and Financial
Statements, and going concern and viability statements.
Review of risk management
The Committee is responsible for reviewing the adequacy and
effectiveness of the Group’s risk management processes and systems of
internal controls, including financial, operational and compliance controls.
Risk management is taken seriously at PHP. The preparation of a
detailed risk register is the responsibility of the Risk Committee,
which reports to the Committee at least twice a year on risk matters,
following which the principal risks identified are brought to the Board.
The Board considers the principal risks identified and whether
appropriate action is being taken to remove or reduce their likelihood
and impact. This is discussed in detail in the Risk Management
section on pages 52 to 58.
The Board as a whole, including the Audit Committee members,
considered whether the nature and extent of PHP’s risk management
framework were satisfactory to achieve the Group’s strategic
objectives. There is a culture of risk awareness embedded into the
decision-making process and robust processes are in place to support
the identification and management of risk.
The Group has worked with Willis Towers Watson to develop
aseparate environmental risk register to seek to identify the main
emerging physical and transition risks associated with climate change
and the associated governmental policy responses. In particular,
increasing legislative requirements pertaining to operational building
energy efficiency standards, and the stated ambition of the NHS to
achieve a net zero health service for direct emissions by 2040, have
been identified as key risks as well as opportunities for the Group.
The register was tabled and agreed by the ESG Committee, and
subsequently reviewed by the Audit Committee as part of its
monitoring of the risk management process of the Group.
Review of internal control processes
The Committee is responsible for reviewing the adequacy and
effectiveness of internal control systems (covering all material
controls, including financial, operational and compliance controls and
risk management systems) on behalf of the Board.
Key features of PHP’s internal control systems include a
comprehensive system of budgeting, financial reporting and business
planning, formal documentation procedures and the close involvement
of the Executive Committee in all aspects of the Company’s day-to-
day operations. The Committee has reviewed the adequacy of these
systems through various activities including:
• reviewing the effectiveness of the risk management processes;
• reviewing and challenging management’s self-assessment of the
internal controls framework;
• reviewing the work undertaken by the external auditor in relation
to internal controls; and
• reporting of any control or fraud-related whistleblowing issues.
In reviewing the periodic financial reports of the Group, the Committee
is reliant on the policies and procedures followed by management to
ensure that the records accurately reflect transactions so as to
facilitate the production of consolidated financial statements in
accordance with International Financial Reporting Standards (“IFRS”)
and other applicable reporting standards. During the year the Audit
Committee received a recommendation from the external auditor that
internal control procedures need to be improved and documented
ahead of Provision 29 becoming applicable in 2026. Management will
look to develop these in the next financial year and consider whether
any additional assurance is required on controls ahead of the
implementation of Provision 29.
At the time of reviewing the half-yearly and annual financial reports,
the Audit Committee also receives a report from the Chief Financial
Officer to assist the Board in assessing the policies and procedures
and making the disclosures.
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Primary Health Properties PLC Annual Report 2024
79
Audit Committee report continued
Review of internal control processes continued
The Board reviewed the various guidance issued during the year to the
UK Corporate Governance Code 2024, including Provision 29 which is
applicable to PHP for its 2026 financial year end. Under Provision 29,
the Board will be required to monitor the Company’s risk management
and internal control framework and at least annually carry out a
review of its effectiveness. The monitoring and review should cover
allmaterial controls, including financial, operational, reporting and
compliance controls. The management team will determine what this
will look like in the 2026 annual accounts.
Separately, the Board also assessed the implications of the Corporate
Sustainability Reporting Directive (“CSRD”) that introduces reporting
in accordance with European Sustainability Reporting Standards and
related assurance but noted that this is not currently applicable to
the Group.
Effectiveness of external auditor and audit process
One of the key responsibilities of the Audit Committee was to assess
the effectiveness and quality of the external audit process, making
enquiries consistent with, and having regard to, the FRC’s “Audit
Committees and the External Audit: Minimum Standard”. In turn, the
effectiveness of the audit process is dependent on appropriate audit
risk identification at the start of the audit cycle. Ahead of the
commencement of the audit, the Committee received from Deloitte
LLP a detailed audit plan, identifying its assessment of these key
risks. For the audit of the 31 December 2024 financial statements,
theprimary risks identified were in relation to the valuation of the
property portfolio and subjective areas of ERVs and the application
ofyields, as well as management override of controls. It is also
standard practice for the Audit Committee to meet privately with
theexternal auditor to gauge the effectiveness of its processes.
Inaddition, the Audit Committee seeks feedback from management
on the effectiveness of the audit process. The Committee is satisfied
that the Company has complied with the Statutory Audit Services
forLarge Companies Market Investigation (Mandatory use of
Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014 published by the CMA on 26 September 2014.
Following its review of the effectiveness, independence, objectivity
and expertise of the external auditor (including through direct
interactions with the auditor without management present), the
Committee is satisfied with the effectiveness of the external auditor
and therefore recommends the re-appointment of Deloitte LLP as
external auditor for 2025.
It is the Committee’s policy to ensure that there is audit partner
rotation every five years to safeguard the external auditor’s
independence and objectivity. Daryl Winstone led the 2024 audit,
hissecond year as Deloitte LLP lead audit partner for PHP.
Auditor independence
The Group’s policy on the use of its external auditor for non-audit
services precludes the external auditor from being engaged to perform
valuation, tax or accounting services work. More broadly, the policy
prohibits the external auditor from performing services where there
may be perceived to be a conflict with its role as external auditor or
which may compromise its independence or objectivity.
All proposed engagements must be submitted to the Committee for
approval prior to engagement and all non-audit fees are reported to
the Committee.
The Committee considers the remuneration of the external auditor
atleast on a semi-annual basis and approves its remuneration. It also
keeps under close review the ratio of audit to non-audit fees to ensure
that the independence and objectivity of the external auditor
aresafeguarded.
In 2024, fees for audit services amounted to £0.6 million and the
non-audit fees amounted to £0.1 million.
The non-audit fee for 2024 equates to 14% of the average audit fees
of the last three years. These relate to half year review work, which
the Committee considers appropriate and in the Company’s interests
in order to provide continuing assurance with respect to its processes,
procedures and published information.
The chart below sets out the ratio of audit to non-audit fees for each
of the past three years.
2024 2023 2022
Audit fee £627,000 £649,000 £603,000
Non-audit fee £85,000 £82,000 £77,000
Evaluation of the performance of the Audit Committee
The performance of the Committee was assessed as part of the
annual Board evaluation. The overall conclusion was that the
Committee remained effective at meeting its objectives.
Internal audit
The Group does not have a separate internal audit function and the
Board, at least annually, reviews the requirement for establishing one.
Due to the size of the organisation, relatively simple nature of the
Group’s business and structure and close involvement of the senior
management team in day-to-day operations, the Committee did not
feel an internal audit function was either appropriate or necessary.
From time to time external advisers are engaged to carry out reviews
to supplement existing arrangements and provide further assurance.
The Committee considers that this structure, with external assurance
sought for any complex, specialist or high risk matters, is appropriate
for the Company at this stage.
I will be delighted to receive any written questions on the
workoftheCommittee. Please submit your questions by email
tocosec@phpgroup.co.uk, or by post, marked for my attention at
5thFloor, Burdett House, 15–16 Buckingham Street, London WC2N 6DU.
Ian Krieger
Chair of the Audit Committee
27 February 2025
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Primary Health Properties PLC Annual Report 2024
80
Nomination Committee report
Harry Hyman
Chair of the Nomination Committee
“ This year has been an important
milestone in the implementation
of the Company’s three-stage
succession plan: the appointment
of Mark Davies as the new CEO,
theappointment of myself as
Non-executive Chair and the
addition of Dr Bina Rawal
asourfourth Independent
Non-executive Director.”
Dear shareholder,
I am pleased to present the report of the Nomination Committee to
shareholders for the year to 31 December 2024.
Last year’s Nomination Committee Report provided an update on the
Committee’s activity in relation to implementation of the Company’s
leadership succession plan.
The Committee continues to play a crucial role in supporting
PHP’sstrategy by ensuring the Board and its Committees have an
appropriate balance of skills, experience and knowledge, with robust
succession plans in place to ensure continuity, promote diversity for
Board and senior management positions and implement a robust
evaluation process to ensure the Board and Committees are
workingeffectively.
Members of the Nomination Committee
(the“Committee”) during the year
Member
Number of meetings
and attendance
while in post
Steven Owen (former Chair) 1 (1)
Harry Hyman (Chair) 1 (1)
Ivonne Cantú 2 (2)
Laure Duhot 2 (2)
Ian Krieger 2 (2)
Bina Rawal 1 (1)
Bracketed numbers indicate the number of meetings the member was eligible
to attend.
Additional attendees invited to attend meetings as appropriate:
Mark Davies – Chief Executive Officer
Richard Howell – Chief Financial Officer
Toby Newman – Company Secretary and Chief Legal Officer
Key responsibilities
Board composition and
succession
• Reviews and evaluates the size, structure
and composition of the Board and
itsCommittees
• Ensures the Board comprises individuals
with the necessary skills, knowledge and
experience to be effective in discharging
itsresponsibilities
• Considers the diversity of the appointments
and balance of skills, knowledge and
experience of each Director
• Considers succession planning for the Board
and the senior management
For further information
see page 82
Board appointments
• Leads the process for new appointments
tothe Board and its Committees
• Ensures that all new Directors receive
anappropriate induction programme
and reviews the training requirements
oftheBoard
• Ensures that all potential conflicts of
interest are declared on appointment and
that all disclosed potential conflicts of
interest are reviewed regularly
For further information
see page 82
Diversity
• Promotes the Company’s policy on diversity
at Board level and to senior management
For further information
see page 82
Performance evaluation
• Leads the annual Board and Committee
evaluation exercise
For further information
see page 83
Re-appointment of Directors
• Reviews the time required from
Non-executive Directors and their
externalcommitments
• Considers the annual election and re-election
of Directors to the Board at the Annual
General Meeting
For further information
see page 83
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Primary Health Properties PLC Annual Report 2024
81
Nomination Committee report continued
Activities of the Committee during the year
Succession planning – implementation
As described in the Company’s 2023 Annual Report, 2024 saw the
evolution of PHP’s Board through implementation of its three-stage
succession plan. The first step involved the recruitment and
appointment, further to a thorough and extensive search process,
ofMark Davies as the Company’s new CEO. Mark’s term duly
commenced, following a well planned handover process and then
hisappointment as a Director at the 2024 AGM, in late April 2024.
Also following approval by more than 80% of shareholders at the
2024 AGM, I was appointed as Non-executive Chair from that point in
time. This formed the second step in the succession plan, this element
being led by Ian Krieger, the Company’s Senior Independent Director,
and involving consultation with major shareholders (representing
approximately 60% of the register). It was pleasing to see the largely
positive feedback from the process translate into strong shareholder
support at the AGM. We continue to engage with the Company’s
major shareholders to deliver strong governance and promote the
success of the Company to the benefit of shareholders and
stakeholders as a whole.
The Board, conscious of best practice and shareholder feedback,
determined that my term as Chair will be for a maximum of three
years from the 2024 AGM – allowing the Company to benefit from
myexperience through the extended period of health system
evolution under the Labour Government elected during 2024 – subject
to annual review by an experienced and robust group of independent
Non-executive Directors (who make up the majority of the Board in
accordance with the Code) and subject also to annual shareholder
re-appointment during that time in the usual way. In accordance
withCode requirements, I do not sit on the Remuneration or Audit
Committees, and the Company will otherwise continue to adhere
tocorporate governance best practice.
The third step in the Company’s plan saw the appointment of
DrBinaRawal as a fourth independent Non-executive Director
oftheCompany and we were delighted to welcome Bina to the
Boardwith effect from 27 February 2024, enhancing the Board’s
mixof skills and delivering compliance with the Code.
I am pleased to confirm that the successful implementation of the
plan has resulted in a strong Board, with the right combination of
skills, experience and knowledge and a majority of independent
Non-executive Directors, well placed to provide effective and
entrepreneurial leadership to promote the sustainable success of
theCompany in the long term, to the benefit of shareholders and
wider society.
The Committee continues to oversee succession plans across
thesenior management team and has continued to work with the
Executive Directors to develop succession plans for every member
ofthe senior management team as a part of the annual appraisal
process. This will ensure that the execution of the Company’s strategy
is not dependent on any one individual and continually improve our
processes for identifying and developing our internal talent.
Appointments
It is the responsibility of the Nomination Committee to maintain
anappropriate combination of skills and capabilities among our
Directors. The Nomination Committee seeks to ensure that all Board
appointments are made on merit and measured against objective
criteria and with due regard for the benefits of diversity on the
Board.The Board is committed to ensuring a broad mix of gender,
age, nationality, experience and skills throughout the business.
During 2024, following the appointment of Dr Bina Rawal on
27February, our Board comprised seven Directors, three of whom are
female, one of whom is from an Asian/Asian British background and
one of whom is from a Hispanic ethnic background.
Diversity
The Board’s policy on equality, diversity and inclusion recognises
theimportance of diversity in the broadest sense and the benefits
itbrings to the organisation in terms of skills and experience, wider
perspectives and fresh ideas. We are committed to the creation of an
inclusive culture where our colleagues reflect the diverse communities
we serve and where each person can operate in a working
environment which promotes a culture of mutual respect and inclusion
throughout the organisation. Senior management’s annual objectives
are linked to the diversity of the business and how they promote this
within their teams.
In setting the tone on diversity, the Board applies PHP’s Equality,
Diversity and Inclusion policy, whose terms apply to and are applied
throughout PHP’s governance structure, including by and in relation
toevery Board Committee. The policy’s overarching objectives are:
• to remove barriers to entry and encourage people from diverse
backgrounds to join the Company and consider a career in real estate;
• to maintain a working environment where individual differences
and the contributions of our people are recognised and valued
equally and where direct or indirect discrimination, bullying and
harassment are not tolerated;
• to raise awareness of equality, diversity and inclusion among all
our people so that they can recognise and take an active role in
contributing towards our goals and objectives;
• to ensure that remuneration, benefits, terms and conditions and
recruitment and promotion procedures do not discriminate,
discourage or create barriers directly or indirectly;
• to help all employees through training and other opportunities to
develop to their full potential;
• to promote and uphold our commitment to equality, diversity and
inclusion amongst our stakeholders;
• to ensure that we review our policies and approach, updating when
needed, and that our people know how to raise any thoughts,
issues or concerns;
• to effectively measure and report on our progress on diversity and
inclusion; and
• to recognise and celebrate the power of diversity, creating a truly
inclusive environment where all our people can always be the best
they can be and feel treated as equals.
Our policy is kept under review to align with best practice and
expressly extends to all appointments across our organisation.
The PHP Equality, Diversity and Inclusion policy is available on the
Company’s website at www.phpgroup.co.uk/responsible-business/.
Independence
The Nomination Committee has responsibility for ensuring that
atappointment each Director is independent and that they have
formally declared to the Company any actual or potential conflicts
ofinterest that may exist at the time of their appointment. Annually,
the Nomination Committee reviews the formal register of Directors’
interests tabled at each meeting of the Board to assess whether any
circumstances or relationships exist which could affect the judgement
or independence of each of the Non-executive Directors. In addition,
the Nomination Committee considered their independence of
character and judgement.
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Primary Health Properties PLC Annual Report 2024
82
Activities of the Committee during the year continued
Independence continued
During the year, the Nomination Committee formally reviews requests
from the Directors for approval of new Board appointments they may
wish to take up and also annually reviews each of the Directors’
external commitments on both a quantitative and qualitative basis
toassess whether these commitments impact negatively on their
commitment or performance. Details of the results of this process
areset out on page 75 in the Corporate Governance Statement.
It was considered that Harry Hyman’s role as Non-executive
Chairman of BioPharma Credit PLC, an externally managed
investment trust involving only four scheduled meetings a year, did
not affect his time commitment to the Company or his ability to
continue to contribute effectively as Chair.
As anticipated in the Company’s 2023 Annual Report, Ian Krieger
retired from his roles (previously disclosed to and approved by the
Committee as not affecting his time commitment to the Company)
asSenior Independent Non-executive Director and Chairman of the
audit committees at Safestore Holdings plc and Capital & Regional
plc on 13 March 2024 and 3 June 2024, respectively. Ivonne Cantú’s
other commitments were also not considered to detract from the time
commitment expected of her or to create any conflicts of interest.
Acknowledging that Harry Hyman is not considered to be
independent under the Code, the Nomination Committee is confident
that each of the other Non-executive Directors remains independent
and all will be in a position to discharge their duties and
responsibilities in the coming year.
Directors standing for election and re-election
All the Directors will stand for re-election at the 2025 AGM. Following
the annual reviews of individual Directors, it is considered that:
• each Director subject to re-election continues to operate as an
effective member of the Board; and
• each Director subject to re-election has the skills, knowledge and
experience that enable them to discharge their duties properly and
contribute to the effective operation of the Board.
The Board, on the advice of the Committee, recommends the election
or re-election of each Director and the skills and experience of each
Director are available on pages 62 and 63.
Evaluation
In accordance with its terms of reference, the Nomination
Committee’s performance was reviewed in the context of the results
of the annual Board evaluation, paying particular attention to any
issues raised with respect to the composition of the Board and its
skills, experience and diversity. The review found that the Committee
functions effectively and should continue to develop and refresh its
responsibilities. The Board evaluation noted the effective way in
which the Board succession plan had been implemented in 2024, and
the Committee will continue to support the Board – on which an
experienced and robust group of independent Non-executive
Directors make up the majority – in continuing actively to review
performance and working to ensure the delivery of effective
governance at all times.
Details of the evaluation process and its outcomes are set out in more
detail on page 74.
Harry Hyman
Chair of the Nomination Committee
27 February 2025
Nomination Committee report continued
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Primary Health Properties PLC Annual Report 2024
83
Remuneration Committee report
Ivonne Cantú
Chair of the Remuneration Committee
“ The Remuneration Policy provides
the necessary tools to effectively
attract, retain, and motivate a
high quality leadership team to
deliver continued growth and
sustained strong financial
performance for the Company
andits shareholders.”
Dear shareholder,
On behalf of the Remuneration Committee (the “Committee”),
Iampleased to provide an overview of our work in relation to both
Director and wider workforce remuneration for the year ended
31December 2024.
We were encouraged by the strong level of shareholder support for
the Directors’ Remuneration Policy and the Directors’ Remuneration
Report (98.45% and 84.22% of votes cast, respectively) at the Annual
General Meeting held in April 2024 and I would like to thank all our
shareholders for their continued engagement and support on
remuneration matters throughout the year.
Members of the Remuneration Committee
(the“Committee”) during the year
Member
Number of meetings
and attendance
while in post
Ivonne Cantú (Chair) 3 (3)
Laure Duhot 3 (3)
Ian Krieger 3 (3)
Bina Rawal 2 (2)
Bracketed numbers indicate the number of meetings the member was eligible
to attend.
Additional attendees invited to attend meetings as appropriate:
Mark Davies – CEO
Harry Hyman – Chair
Korn Ferry
Toby Newman – Company Secretary and Chief Legal Officer
No individual participated in any matters that involved their own remuneration.
Key responsibilities
Policy
• Setting the remuneration policy for
theChair, Executive Directors and senior
executives (the “Remuneration Policy”)
andensuring it is aligned to the Company’s
purpose and values and linked to delivery
ofthe Company’s long term strategy
• Reviewing the continued appropriateness
and relevance of the Remuneration Policy
For further information
see page 86
Remuneration
• Within the terms of the approved
Remuneration Policy and the Company’s
remuneration framework:
• setting the relevant performance
objectives and targets for short and
longterm incentive pay; and
• determining the remuneration of the
Directors, the Company Secretary and
thesenior executives
• Reviewing and considering remuneration
across the Group to ensure appropriate
alignment between the remuneration of the
Directors, senior executives and the Group
as a whole
• Appointing and setting out the terms of
reference for any remuneration consultants
to advise the Committee
• Agreeing policy on the recovery by
the Directors of expenses incurred in
performance of their duties
For further information
see page 86
Reporting
• Preparing the Directors’ Remuneration
Report and reporting to shareholders
onthe implementation of the Company’s
Remuneration Policy in accordance
with relevant statutory and corporate
governance requirements
For further information
see page 94
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Primary Health Properties PLC Annual Report 2024
84
Remuneration Committee report continued
This report is divided into three parts:
1. this Annual Statement on pages 84 to 86 in which I provide an
overview of the work of the Committee during the year and the
key decisions which it took in relation to the remuneration of
Executive Directors, senior executives and the wider workforce
remuneration for the year ended 31 December 2024;
2. a summary of the Directors’ Remuneration Policy (the ”Policy”)
approved by shareholders at the Annual General Meeting on 24
April 2024 and applicable throughout the year, which details the
link between Company performance and remuneration, set out on
pages 87 to 93; and
3. the Annual Report on Remuneration, which provides information
on how the Policy adopted at the 2024 General Meeting has been
applied during the year and how we intend to apply it for 2025,
set out on pages 94 to 107.
The Companies Act 2006 requires the auditor to report to the
shareholders on certain parts of the Remuneration Report and
tostate whether, in its opinion, those parts of the report have
beenproperly prepared in accordance with applicable regulations.
The parts of the Annual Report on Remuneration that are subject
toauditare indicated in the report.
Company performance
As you will have read earlier in this Annual Report, the Company once
again delivered increased income, with a 28th consecutive year of
dividend growth. The strong continuous growth of the business was
highlighted by the award of MSCI’s Highest 10-Year Risk Adjusted
Total Return Award.
These outcomes are, to a large extent, the result of the expertise
and hard work of the Executive Directors and the senior
management team.
The Remuneration Committee’s activities during the year
The Committee met three times, in February, July and December.
In 2024, the Committee oversaw the implementation of the Policy
asupdated and approved at the 2024 Annual General Meeting.
The Committee continued to have regard to evolving guidance and
market norms, with a strong focus on driving continued high
performance through the right remuneration approach. Thisincluded
implementation of ESG metrics in the LTIP, as detailed inthe
2023 Annual Report, to further drive delivery of the Company’s
ESG commitments.
ESG metrics
The Committee worked alongside the ESG Committee and its external
adviser in determining what ESG metrics and targets were most
suited to support our ESG strategy for inclusion in the LTIP as well as
the appropriate weighting. In determining the metrics to be included
in the LTIP we had in mind the following core principles:
• measures should be aligned with the Company’s business strategy;
• targets should be quantitative;
• targets should incentivise a stretch in management’s performance;
• performance against targets should be capable of being externally
assured/validated; and
• weighting should be meaningful, but not excessive in the context
ofthe other LTIP measures.
We concluded that it is most appropriate to include environmental
metrics in the LTIP measured over three years, and that these should
have up to 20% weighting in the LTIP. For 2024, being the first year
ofoperation, we included a single metric with a weighting of 15%.
Other ESG objectives will continue to be considered when
determining the annual bonus for the Executive Directors and senior
executives. These include: executing on the roadmap to net zero for
our existing portfolio; continuing to improve access to energy data
forthe portfolio; and ensuring direct developments meet our
ESGcommitments.
CEO appointment
As part of the managed Board succession process, the Committee
determined the package for our new full-time CEO, Mark Davies, and
our Company Chair, Harry Hyman, both of whom took up their roles
following the Company’s 2024 AGM.
Mark Davies’ remuneration is fully in line with our Policy and there
were no awards made to replace any incentives lost on joining
theCompany.
Chair appointment
In 2024, Harry Hyman was paid an annual fee of £195,600 (being the
same fee level paid to Steven Owen in 2024).
Other activities of the Committee during the year
The other areas of focus for the Committee in 2024 were:
• approval of salary increases for senior managers alongside the
wider workforce salary increase;
• agreeing annual bonus targets for 2024 for the Executive Directors
and senior management team;
• review and approval of the 2024 LTIP grant and the associated
performance conditions;
• discussion and approval of Executive Director and senior manager
remuneration outcomes for 2023;
• consideration and approval of the Directors’ Remuneration Report
set out in the Annual Report for 2023;
• consideration of the merits for the inclusion of an ESG element in
LTIP awards in 2025; and
• a review of pay, pensions and benefits across the workforce to
ensure that they continue to be aligned with executive pay and
sufficient to retain and attract quality staff. We recognise that
itiscritical that our employees feel valued and this needs to be
reflected in fair pay.
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Primary Health Properties PLC Annual Report 2024
85
Remuneration Committee report continued
The Remuneration Committee’s activities during the
yearcontinued
Other activities of the Committee during the year continued
Meetings are generally attended by a representative of Korn Ferry,
the remuneration advisers to the Committee. Korn Ferry is a signatory
of the Remuneration Consultants’ Code of Conduct and has no
connection with the Company other than in the provision of advice
onremuneration.
Remuneration in 2024
Base salaries
The annualised base salaries for the CEO of £525,000, and for the
CFO of £387,000 applied for the whole year. The former CEO received
an annualised base salary of £445,000 for the period up to the
2024AGM. It is important to note that the former CEO was not full
time during his appointment. On a full time equivalent basis, the
former CEO’s salary was £593,000.
Annual bonus outcome
The CEO and CFO both participate in the Annual Bonus Plan (as did
the former CEO in respect of the year up to 24 April 2024, with the
same targets as applied for the CEO and CFO). Targets for the 2024
annual bonus set by the Committee were based as to 70% of the
total opportunity on the achievement of financial targets (adjusted
earnings and total property return) and 30% on the achievement of
personal targets. The rationale for selecting EPRA earnings and total
property return (“TPR”) is that these are the key indicators of value
creation for shareholders capturing the income received less
expenses, and property valuation changes.
The adjusted earnings outcome for the year was £92.9 million against
athreshold target of £92.7 million and maximum of £95.2 million and
the total property return in the year was 4.2% against a threshold
target of 3.0% and maximum of 6.0%. The Committee assessed that
90% of the personal targets should be paid out for the both the CEO
and CFO in respect of the period to 31 December 2024, with 100% for
the former CEO in respect of the period up to 24 April 2024. Full
details of how this assessment was carried out are set out on
pages96 to 102.
In total, the overall bonus pay-outs were 60% of maximum, representing
90% of annualised salary for each of the CEO and CFO (maximum 150%
of salary) and 94% of annualised salary for the former CEO, pro rata of
which 30%, net of tax, was deferred into PHP shares for each of them, to
be held for aperiod of three years in accordance with the Policy.
LTIP
In 2024, Mark Davies, the CEO, was awarded a nil-cost option over
886,824 Ordinary Shares in PHP. Richard Howell as CFO was awarded
a nil-cost option over 539,779 Ordinary Shares in PHP. In line with the
Policy the awards have a face value of 160% and 125% of salary,
respectively, and will vest after three years subject to achievement of
performance targets (Total Accounting Return 42.5%, EPRA earnings
per share 42.5% and environmental rating 15%). The award is also
subject to a two-year post-vesting holding period and is subject to
clawback in the event of malus.
Full details of the performance conditions attaching to the award can
be found on page 89.
The LTIP award granted in 2022 (including to Richard Howell) partially
met the performance targets set at the time of its grant. As a result
50% of the award vested. Full details of the performance against the
targets are included on page 102.
The Committee did not feel that there were any circumstances that
warranted it to exercise discretion over the last twelve months.
Remuneration for 2025
The Committee considered and approved the remuneration
arrangements which will apply in 2025 and which are fully aligned
with the Remuneration Policy. The salaries of the CEO and CFO have
been increased by 3%, slightly below the average increase for the
workforce across the Group. The fees for the Chair and Non-Executive
Directors were increased by the same percentage.
In line with policy, the maximum bonus opportunity in 2025 for the
CEO and CFO is 150% and the bonus framework is in line with that
which operated in 2024, with 70% of the bonus determined by
financial measures split equally between EPRA earnings and total
property return and the balance linked to personal objectives. The
Committee approved the performance measures underpinning the
2025 LTIP award which, in line with 2024, include total accounting
return, EPRA earnings per share and an ESG target. Further
information on how the Remuneration Policy was implemented in
2025 can be found on pages 94 and 95. The Committee decided to
increase the LTIP award for the CFO from 125% to 150% of salary. The
increase reflects Richard Howell’s development and increased
experience in the role since the internalisation of the management
team in 2021. This brings his award level up to the lower quartile
against the market from a level that the Committee was not satisfied
was appropriate. The Committee sets challenging targets for LTIP
awards as is evidenced by the recent levels of vesting.
Planned activities for 2025
We set out below the activities which the Committee expects to
undertake in 2025:
• our normal oversight of the annual remuneration cycle including
approving Company-wide salary increases, approving the annual
bonus and LTIP targets for 2025 and determining remuneration
outcomes for 2024;
• review of Executive Director and senior manager salaries; and
• review of wider workforce pay policies and practices and feedback
from workforce engagement.
Committee composition
The Committee welcomed Dr Bina Rawal as a new Committee
member in 2024 following her appointment to the Board on
27February 2024. There were otherwise no changes in the
composition of the Committee during the year.
Conclusion
I trust you find this report helpful and informative and thank you
foryour support and engagement during the year.
Overall, the Company has performed robustly against challenging
market and economic conditions. The Committee believes that the 2024
remuneration outcomes are appropriate and reflective of the business
performance, and that the Remuneration Policy operated as intended
during the year.
I believe that we have put in place appropriate remuneration
structures to reward and retain the Executive Directors and the senior
management team. We always welcome feedback and hearing the
views of our shareholders, so if you have any questions about this
report or remuneration generally at PHP, do please contact me
through our Company Secretary at cosec@phpgroup.co.uk.
I look forward to your support for the advisory resolution to approve
the Directors’ Remuneration Report at our forthcoming 2025 AGM.
Ivonne Cantú
Chair of the Remuneration Committee
27 February 2025
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Primary Health Properties PLC Annual Report 2024
86
Directors’ remuneration report
Part 1: Summary of the Directors’
Remuneration Policy (the “Policy”)
The Directors’ Remuneration Policy was put to a binding shareholder
vote at the 2024 AGM and, following approval, was effective
immediately thereafter.
The overall Remuneration Policy of the PHP Group (the “Company”)
has been developed in compliance with the principles of the 2018 UK
Corporate Governance Code, UK institutional investor guidance and
the Listing Rules.
Key principles of the Policy
The Company is committed to ensuring that its remuneration
practices enable the Company to appropriately compensate
employees for the services they provide to the Company, attract
andretain employees with skills required to effectively manage the
operations and growth of the business and motivate employees to
perform in the best interests of the Company.
The Company’s remuneration principles ensure that:
• the Company offers a suitable package to attract, retain and
motivate people with the skills and attributes needed to deliver the
Company’s business goals, while recognising the unique nature of
the organisation and the requirements of its shareholders and
other stakeholders;
• the Company’s policy and practices aim to drive behaviours that
support the Company strategy, culture and business objectives; and
• the Company’s incentive plans are linked to Company and
individual performance to encourage high performance from staff
at both an individual and team level.
These policy objectives will be achieved by ensuring remuneration is
reflective of applicable market conditions, statutory obligations and
the level of accountability (responsibility, objectives and goals)
assigned to the provision of incentives to deliver outstanding
performance, whilst providing organisational flexibility and
operational efficiency.
In addition, the new Policy is tested against six factors listed inthe
Corporate Governance Code:
• Clarity – the new Policy is well understood by the management
team and is clearly articulated to shareholders;
• Simplicity – the Committee is very mindful of the need to avoid
overly complex remuneration structures which can be
misunderstood and deliver unintended outcomes. Therefore, one of
the Committee’s objectives is to ensure that the executive
remuneration policies and practices are as simple to communicate
and operate as possible, while also supporting strategy;
• Risk – the new Policy is designed to ensure that inappropriate risk
taking is not encouraged and will not be rewarded via: (i)the
balanced use of both short and long term incentive plans which
employ a blend of financial, non-financial and shareholder return
targets; (ii) the significant role played by equity in the incentive
plans (together with shareholding guidelines); and (iii) malus/
clawback provisions;
• Predictability – the incentive plans are subject to individual caps,
with the share plans also subject to market standard dilution limits;
• Proportionality – there is a clear link between individual awards,
delivery of strategy and long term performance. In addition, the
significant role played by incentive/”at-risk” pay, together with the
structure of the Executive Directors’ service contracts, ensures that
poor performance is not rewarded; and
• Alignment to culture – the executive pay policies are fully aligned
to the Company’s culture.
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Directors’ remuneration report continued
Part 1: Summary of the Directors’ Remuneration Policy (the “Policy”) continued
Key elements of the Policy
Pay element and purpose Operation Opportunity Performance metrics, weighting and assessment
Base salary
Provide a base level of remuneration
to support recruitment and retention
of Executive Directors with the
necessary experience and expertise
to deliver the Company’s strategy.
Salaries are normally reviewed annually and any changes are normally effective
from the beginning of the financial year, although there is no obligation to
increase salary.
When determining an appropriate level of salary, the Committee considers:
• remuneration practices within the Company;
• the performance of the individual Executive Director;
• the individual Executive Director’s experience and responsibilities;
• the general performance of the Company;
• salaries within the ranges paid by comparable companies used for
remuneration benchmarking; and
• the economic environment.
Base salaries will be set at an appropriate level within a
comparator group(s) of comparable companies and will
normally increase at a rate no higher than increases made
to the wider employee workforce (save where a higher
increase is appropriate to reflect a change in
role/ resp ons ibilities).
Individuals who are recruited or promoted to the Board
may, on occasion, have their salaries set below the
targeted policy level until they become established in
theirrole. In such cases subsequent increases in salary
may be higher than the average until the target
positioning is achieved.
None.
Benefits
Provide a market competitive level of
benefits to support recruitment and
retention of Executive Directors with
the necessary experience and
expertise to deliver the
Company’sstrategy.
The Executive Directors may receive benefits which include, but are not limited
to, family private health cover, critical illness cover, life assurance cover, income
protection and accident/sickness/business travel insurance (including tax
payable if any).
The Committee recognises the need to maintain suitable flexibility in the
determination of benefits that ensure it is able to support the objective of
attracting and retaining key personnel. Accordingly, the Committee would
expect to be able to adopt other benefits including (but not limited to)
relocation expenses, tax equalisation and support in meeting specific costs
incurred by Directors.
Any reasonable business related expenses can be reimbursed in accordance
with the Company’s expenses policy, including the tax thereon if determined to
be a taxable benefit. The Executive Directors may also participate in any
all-employee share plans operated by the Company.
The maximum will be set at the cost of providing the
benefits described.
None.
Pensions
Provide appropriate levels of pension
benefits to support recruitment and
retention of Executive Directors
withthe necessary experience and
expertise to deliver the
Company’sstrategy.
The Committee has the ability to provide pension funding in the form of a salary
supplement or as an employer contribution to a defined contribution pension
plan. Any pension payments would not be considered “salary” when determining
the extent of participation in the Company’s incentive arrangements.
For existing and any future Executive Directors, the
maximum pension contribution/allowance as a percentage
of basic salary will be in line with the contribution level
provided to the majority of the workforce (currently 6%
ofsalary).
None.
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88
Directors’ remuneration report continued
Pay element and purpose Operation Opportunity Performance metrics, weighting and assessment
Annual Bonus Plan
The Annual Bonus Plan provides an
incentive to the Executive Directors
linked to achievement in delivering
goals in a sustainable manner that
are closely aligned with the
Company’s strategy and the creation
of value for shareholders.
The Committee will determine the bonus payable after the year end based on
performance against targets.
Annual bonuses are paid in cash after the end of the financial year to which
they relate. However, Executive Directors who participate in the Annual Bonus
Plan will be required to defer 30% of the bonus, normally net of tax, into shares
which should be held for at least three years. The Committee may award
dividend equivalents on deferred shares to the extent they vest.
Malus and clawback provisions will apply to the award, up to the date of the
bonus determination and for three years thereafter.
Bonus payments are not pensionable.
The maximum bonus opportunity is 150% of salary. Discretionary bonus pay-outs will be determined on
thesatisfaction of a range of key financial and personal/
strategic objectives set annually by the Committee. No more
than 30% of the overall bonus opportunity can be based on
performance against personal/strategic targets.
The performance targets applied will be disclosed in the
relevant Annual Report, following the end of the
performanceperiod.
Discretion will apply, enabling the Committee to adjust the
bonus outcome upwards or downwards, where the formulaic
outcome is, in the view of the Committee, not a fair and
accurate reflection of business performance.
No more than 25% of the relevant portion of the bonus is
payable for delivering a threshold level of performance, and
no more than 50% is payable for delivering a target level of
performance (where the nature of the performance metric
allows such an approach).
Long Term Incentive Plan (“LTIP”)
Awards are designed to incentivise
the Executive Directors to maximise
returns to shareholders by
successfully delivering the Company’s
objectives over the long term in
asustainable manner.
Awards can be granted annually to Executive Directors under the LTIP in the
form of nil-cost options or conditional awards of shares. These would vest at
the end of a three-year period, normally subject to:
• the Executive Director’s continued employment at the date of vesting; and
• satisfaction of the performance conditions.
The Committee may award dividend equivalents on awards to the extent that
they vest.
The net of tax number of shares that vest after the end of the three-year
performance period will be subject to an additional two-year holding period,
during which the shares cannot be sold (irrespective of whether the individual
remains employed).
Malus and clawback provisions will apply to the award, up to the date of the
LTIP determination and for three years thereafter.
Awards may be made up to 200% of base salary in
normalcircumstances.
No more than 25% of the award will vest for
thresholdperformance. 100% of the award will vest
formaximum performance.
Awards vest subject to the achievement of challenging
performance conditions set by the Committee prior to
eachgrant.
Discretion will apply, enabling the Committee to adjust
theoutcome upwards or downwards, where the formulaic
outcome is, in the view of the Committee, not a fair and
accurate reflection of business performance.
All-employee share plan
To encourage share ownership. The Company currently operates an all-employee savings related share option
plan. To the extent the Company operates this or any future all-employee share
plan, the Executive Directors will be able to participate on the same terms as
other employees.
Actual participation in these plans will be disclosed in the
relevant Annual Report following the implementation and
participation in these plans.
None.
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Directors’ remuneration report continued
Pay element and purpose Operation Opportunity Performance metrics, weighting and assessment
Shareholding requirement
To support long term commitment to
the Company and the alignment of
Executive Director interests with
those of shareholders.
The Committee has adopted formal shareholding guidelines that will encourage
the Executive Directors to build up and then subsequently hold a shareholding
equivalent to a multiple of their base salary. Requirements will continue for two
years after an Executive Director ceases to be employed.
200% of salary. None.
Non-executive Directors
To provide a competitive fee for the
performance of NED duties, sufficient
to attract high calibre individuals to
the role.
Fees are set in conjunction with the duties undertaken.
Normally only increased when an individual takes on additional duties or where
benchmarking indicated fees require realignment to remain competitive.
Overall fees will not exceed the maximum in the
Company’s Articles of Association of £750,000.
None. The NEDs are not entitled to receive any remuneration
which is performance related. As a result, there are no
performance conditions.
Choice of performance measures
Each year, the Committee will choose the appropriate performance
measures and targets to apply to the Annual Bonus Plan and LTIP.
Themeasures will be closely aligned with the Company’s strategy
andbusiness priorities at the time and will be consistent with a Board
approved level of business risk.
Malus and clawback
Malus and clawback provisions within the Annual Bonus Plan,
PIF(alegacy plan) and LTIP apply in the following circumstances:
• material misstatement of results;
• gross misconduct;
• error in calculating the number of shares subject to an award
orthe amount of cash paid;
• corporate failure; or
• serious reputational damage.
Discretion
The Committee will operate the Annual Bonus Plan, PIF and LTIP
according to their respective rules and in accordance with the Listing
Rules where relevant. Consistent with market practice, the Committee
retains certain discretions in respect of the operation and administration
of these arrangements which include, but are not limited to, the following:
• the participants;
• the timing of the grant of an award or payment;
• the size of an award;
• the determination of the extent to which performance measures
have been met and the corresponding vesting or payment levels;
• discretion required when dealing with a change of control or
restructuring of the Group;
• determination of the treatment of leavers based on the rules of the
respective arrangement and the appropriate treatment chosen,
including the pro-rating of awards;
• adjustments required in certain circumstances (e.g. rights issues,
corporate restructuring events and special dividends);
• the annual review of performance measures, weighting and targets
from year to year; and
• the manner in which share awards can be satisfied (i.e. through the
use of new issue, market purchased or treasury shares or by way of
a cash payment).
In addition, the Committee retains the ability to adjust the targets
and/or set different measures if events or circumstances occur
(e.g.amaterial acquisition and/or divestment of a Group business)
which cause it to determine that the conditions are no longer
appropriate and the amendment is required so that the conditions
achieve their original purpose. Any use of the above discretions
wouldbe explained in the Annual Report on Remuneration for the
relevant year and may, as appropriate, be the subject of consultation
with the Company’s major shareholders. Furthermore, the Committee
has thediscretion to amend the new Policy with regard to minor
oradministrative matters where it would be, in the opinion of
theCommittee, in the best interests of the Company, and
disproportionate to seek or await shareholder approval.
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Directors’ remuneration report continued
Part 1: Summary of the Directors’
Remuneration Policy (the “Policy”) continued
The Policy and the wider employee population
The Group aims to provide a remuneration package for all employees
that is market competitive and operates the same reward and
performance philosophy throughout the business. The Group operates
variable pay plans primarily focused on mid to senior management
level. In some cases, incentive structures and performance conditions
apply which are different to those used for Executive Directors in
order to ensure the performance targets set can be influenced and
controlled by the participant. In addition, the Committee takes into
account workforce remuneration and related policies and the
alignment of incentives and rewards with culture when setting
thepolicy for Executive Directors’ remuneration.
Recruitment policy
The Company’s strategy is to attract and retain a talented and
diverse workforce.
The Company’s approach is that the remuneration of any newly
recruited Executive Directors will be assessed in line with the same
principles as apply to the existing Executive Directors.
The Committee is mindful that it wishes to avoid paying more than it
considers necessary to secure the preferred candidate and will have
regard to guidelines and shareholder sentiment regarding enhanced
short term or long term incentive payments made on recruitment and
the appropriateness of any performance measures associated with
an award. Subject to the paragraph opposite, the incentive awards
that can be received in any one year will not exceed the maximum
individual limits as set out in the new Policy.
The Committee’s policy is not to provide sign-on compensation.
Inaddition, the Committee’s policy is not to provide buyouts as a
matter of course. However, should the Committee determine that the
individual circumstances of recruitment justified the provision of a
buyout, the equivalent value of any incentives that will be forfeited
on cessation of a Director’s previous employment will be estimated.
This will take into account, among other things, the performance
conditions attached to the vesting of these incentives, the timing of
vesting, the likelihood of vesting and the nature of the awards (cash
or equity). The Committee may then grant a buyout of a value that
takes account of the value of the lapsed award, where possible,
under the Company’s incentive plans. To the extent that it is not
possible or practical to provide the buyout within the terms of
theCompany’s existing incentive plans, the Committee may,
inexceptional circumstances, consider it appropriate to grant
anaward under a different structure to facilitate a buyout of
outstanding awards held by an individual on recruitment.
Where an existing employee is promoted to the Board, or was
previously remunerated by a company that subsequently becomes
aGroup company, the policy set out above would apply from the
dateof promotion or that company becoming part of the Group but
there would be no retrospective application of the policy in relation
tosubsisting incentive awards or remuneration arrangements.
Accordingly, prevailing elements of the remuneration package would
be honoured and form part of the ongoing remuneration of the person
concerned. These would be disclosed to shareholders in the Annual
Report on Remuneration for the relevant financial year.
The Company’s approach is that the remuneration of any newly
recruited Non-executive Director will be assessed in line with the
same principles as apply to the existing Non-executive Directors.
The Company will not pay any introductory fee or incentive to any
person to encourage them to become a Director but may pay fees to
search and selection consultants in connection with the appointment
of any Non-executive Director.
Service agreements and letters of appointment
Executive Directors
Mark Davies’ service contract has a twelve-month mutual notice
period. Richard Howell’s contract has a six-month mutual notice
period. The Company’s policy is for Executive Directors to have
service agreements with no fixed term, but which may be terminated
by the Company for breach by the Executive or with no more than
twelve months’ notice from the Company to the Executive and twelve
months’ notice from the Executive to the Company.
If notice is served by either party, the Executive Director can continue
to receive base salary, contractual benefits and pension for the
duration of their notice period during which time the Company may
require the individual to continue to fulfil their current duties or may
assign a period of garden leave. Service contracts do not contain
liquidated damages clauses.
The Company may elect to make a payment in lieu of notice
equivalent in value to a maximum of twelve months’ base salary
andcontractual benefits including pension contribution but excluding
variable pay, payable in equal monthly instalments. Alternatively, the
Committee retains the discretion to make payments in lieu of notice
as a lump sum.
In the event of termination for cause (e.g. gross misconduct) neither
notice nor payment in lieu of notice will be given and the Executive
Director will cease to perform their services immediately.
In addition, and consistent with market practice, the Company may
pay a contribution towards the Executive Director’s legal fees for
entering into a statutory agreement, may pay a contribution towards
fees for outplacement services as part of a negotiated settlement,
ormay make a payment to compromise claims the Executive Director
may have. There is no provision for additional compensation on
termination following a change of control. Payment may also be made
in respect of accrued benefits, including untaken holiday.
The contracts of the Executive Directors and the appointment letters
of the Non-executive Directors will be available for inspection at the
2025 AGM and at the Company’s registered office during business
hours from the date of the Notice convening the meeting.
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Directors’ remuneration report continued
Part 1: Summary of the Directors’ Remuneration Policy (the “Policy”) continued
Service agreements and letters of appointment continued
Incentive awards – treatment on cessation
Remuneration element Treatment on exit
Salary, benefits
and pension
Salary, benefits and pension will be paid over the notice period. The Company has discretion to make a lumpsum payment on termination equal to the salary, value of contractual
benefits and value of Company pension contributions payable during the notice period. In all cases the Company will seek to mitigate anypayments due.
Annual Bonus Plan
Good leaver reason (reasons outlined below) – normally pro-rated to time and performance for year ofcessation, and payable at the year end. Deferred shares delivered in full at
normal vesting date.
Other reason – no bonus payable for year of cessation and unless they are already owned by the Director, deferred shares normally lapse.
LTIP
Good leaver reason – normally pro-rated to time and performance in respect of each subsisting LTIP award, with awards vesting at the original date. The Company will have the
discretion to allow awards to vest early in exceptional circumstances.
Other reason – lapse of any unvested LTIP awards. Vested LTIP awards will be retained by Executive Directors.
The Committee has the following elements of discretion:
• to treat a leaver as a “good leaver”. It is the Committee’s intention to only use this discretion in circumstances where there is an appropriate business case to do so;
• whether to measure performance over the original performance period or at the date of cessation; and
• the Committee’s policy is generally to pro-rate awards from the date of grant to the date of cessation. TheCommittee has the discretion to adopt a different approach to pro-rating
and the timing of vesting where it is felt appropriate and there is an appropriate business case to do so.
A good leaver reason may include cessation in the following circumstances:
• death;
• ill health;
• injury or disability; or
• at the discretion of the Committee.
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Directors’ remuneration report continued
Part 1: Summary of the Directors’ Remuneration Policy (the “Policy”) continued
Service agreements and letters of appointment continued
Incentive awards – treatment on a change in control
The Committee’s normal policy on the vesting of incentives on a change of control is summarised below:
Name of incentive plan Change of control Discretion
Annual Bonus Plan
Pro-rated to time and performance to the date of thechange of control
and paid at that time. Deferred shares released at the change
ofcontrol.
The Committee has discretion to continue the operation of the plan tothe end of the bonus year (subject
to the agreement of the acquiringcompany).
LTIP
The number of shares subject tosubsisting LTIP awards vesting on a
change of control will be pro-rated to time andperformance.
The Committee retains absolute discretion regarding the proportion vesting, taking into account time
and performance.
There is a presumption that the Committee will pro-rate for time, although it may adopt a different
approach if it considers appropriate.
Non-executive Directors
The Non-executive Directors each have specific letters of
appointment, rather than service contracts. Non-executive Directors
are appointed for an initial term of three years and, under normal
circumstances, would be expected to serve for additional three-year
terms, up to a maximum of nine years, subject to satisfactory
performance, which is reviewed annually by the Nomination
Committee. The Board shall have discretion to extend a term beyond
nine years in order to retain specialist skills and experience which are
hard to replace and provided always that the individual is considered
to remain independent. The Company requires that all Directors are
re-elected at each Annual General Meeting.
Non-executive Directors do not have any entitlement to payment
upon a loss of office over and above payment for any notice period
and any fees or expenses due to them but unpaid at the time
oftermination.
There is no provision for the recovery of sums paid to a Non-executive
Director or the withholding of the payment of any sum due to
aNon-executive Director.
External appointments
The Board recognises the benefit which the Company can obtain if
Executive Directors serve as Non-executive Directors of other companies.
Subject to review in each case, the Board’s general policy is that an
Executive Director can accept one non-executive directorship of
another listed company (but not the chairmanship) and can retain the
fees in respect of such appointment. Such appointments require
Board approval and the time commitment the appointment will
require is taken into consideration.
Statement of employment conditions elsewhere in the Company
The Committee considers pay and employment conditions across the
Company when reviewing the remuneration of the Executive Directors
and other senior employees. In particular, the Committee considers
the range of base pay increases across the Group as well as wider
workforce remuneration and related policies. The Policy for the
Executive Directors has been designed with regard to the policy for
the workforce as a whole. The Committee is kept updated through
the year on general employment conditions and it approves the
budget for annual salary increases. The Company did not consult with
employees in formulating the new Policy.
Consideration of stakeholders’ views
The Company is committed to engagement with shareholders and will
seek major shareholders’ views in advance of making significant changes
to its Policy and how it is implemented. The Chair of the Committee
will attend the Annual General as usual to hear the views of shareholders
and to answer any questions in relation to remuneration.
Having regard to Provision 41 of the Code, in the course of her
meetings as designated workforce Non-executive Director, Laure
Duhot engaged in the year with employees on alignment of executive
remuneration with wider Company pay policy. We remain confident
that Executive remuneration is aligned with the wider Company pay
policy, and – having regard also to engagement in year and previously;
the Company’s small number of staff; low level of staff turnover; and
continuity of approach as regards Executive pay – that the workforce
continues to be appropriately appraised on these matters.
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Directors’ remuneration report continued
Part 2: Annual report on remuneration
On the following pages we set out the Annual Report on Remuneration for the year ending 31 December 2024 which provides details of how the Policy was applied during the year and the remuneration received by
each of the Directors. It also sets out how we intend to operate the Policy for 2025.
This part of the report has been prepared in accordance with the Companies Act, various company regulations, and relevant sections of the Listing Rules. The Annual Report on Remuneration will be put to an advisory
shareholder vote at the 2025 AGM.
Implementation of the Policy for 2025
How the Policy will operate in 2025 is set out below:
Summary of Policy Implementation in the year to 31 December 2025
Base salary
An Executive Director’s base salary is set on appointment and reviewed
annually with changes normally taking effect from the beginning of the
year or when there is a change in position or responsibility.
The salaries of the CEO and the CFO were increased by 3% to £541,000 and £399,000 respectively, slightly below the average rate of
increase for our workforce across the Group, with effect from 1 January 2025.
Pension
Pension funding as an employer contribution to a defined contribution
pension plan or as asalary supplement. Any pension payments are not
to be considered “salary” when determining the extent of participation
intheCompany’s incentive arrangements.
An employer pension contribution or cash allowance of 6% of pensionable salary, in line with all other employees of the Group, will be
provided for the CEO and CFO.
Benefits
The Committee recognises the need to maintain suitable flexibility in
the benefits provided to ensure it is able to support theobjective of
attracting and retaining personnel in order to deliver the
Groupstrategy.
In line with the Policy, each Executive Director receives:
• life insurance.
In addition, in line with the rest of the workforce, the CEO and CFO receive private health cover, income protection cover and critical
illnesscover.
Annual bonus
Annual bonuses are paid in cash shortly after the end of the financial
year to which they relate. However, Executive Directors who participate
in the Annual Bonus Plan are required to defer 30% of the bonus net of
tax into shares which should be held for at least three years. Dividend
equivalents will be added on deferred shares.
The maximum opportunity under the bonus plan is 150% of salary for the CEO and CFO.
The bonus will operate as follows:
(i) Financial measures: 70% of opportunity, split equally between (a) EPRA earnings as adjusted by the Committee to ensure consistency
with the basis on which the targets areset; and (b) total property return.
(ii) Strategy and personal measures: 30% of opportunity split between key goals of the business for the year ahead, which include ESG goals
that will be cascaded through theCompany.
Full disclosure of the targets set and performance achieved will be made in next year’s report as due to the nature of the business these
targets are felt to be commercially sensitive at the current time.
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Directors’ remuneration report continued
Summary of Policy Implementation in the year to 31 December 2025
Long Term Incentive Plan
Awards are to be granted annually under theLTIP in the form of nil-cost
options or conditional awards of shares. These awards will vest at the
end of a three-year period, normally subject to continued employment
atthe date of vesting and achieving the performance conditions.
Dividend equivalents will be added to awards to the extent that they vest.
The net of tax number of shares that vest after the end of the
three-year performance period will be subject to an additional
two-year holding period, during which the shares cannot be sold
(irrespective of whether the individual remains employed).
The CEO and CFO will be granted an LTIP award of shares with a value at grant of 160% and 150% of their salaries respectively. The CFO’s
LTIP award has increased from 125% in 2024. The Committee decided to increase the LTIP award for the CFO from 125% to 150% of salary.
The increase reflects Richard Howell’s development and increased experience in the role since the internalisation of the management team in
2021. This brings his award level up to the lower quartile against the market from a level that the Committee was not satisfied was
appropriate. The Committee sets challenging targets for LTIP awards as is evidenced by the recent levels of vesting.
Other senior executives will also be granted LTIP awards.
The structure and performance conditions of the awards will include an environmental metric with a weighting of 15%. This metric will be
acalculation of the percentage of the property portfolio at 31 December 2027 that has at least a B EPC rating. LTIP awards will vest by
calculating the growth from the 2024 base level to the level for 2027.
Performance measure Weighting Threshold vesting (25%) Stretch vesting (100%)
Total Accounting Return 42.5% 4% pa CAGR 8% pa CAGR
EPRA earnings Per Share 42.5% 3% pa CAGR 8% pa CAGR
% of portfolio with at least a B rating 15% 48% 52%
Awards vest on a straight line basis for performance between the threshold and stretch targets and lapse if the threshold is not achieved.
The Committee will have a discretion to change the formulaic outcome of (both downwards and upwards) if it is out of line with the
underlying performance of the Company.
Shareholding requirement
Executive Directors are required to build upand hold a shareholding
equivalent to apercentage of base salary.
The requirements continue for two years after an Executive Director
ceases to beemployed.
The shareholding requirement is 200% of base salary.
Non-executive Directors
To provide a competitive fee for the performance of NED duties,
sufficient to attract high calibre individuals to the role.
The fees payable to the NEDs have been increased with effect from 1 January 2025 by 3% to the following levels:
Base fee £67,500, SID fee £11,500 and Committee Chair fee £11,500. The Chair’s fee has also been increased with effect from 1 January 2025
by3% to £202,000.
The performance of the Company during the year would not havebeen possible without a skilled and motivated workforce. Werecognise that it is critical for our colleagues to feel valued as well as to be paid fairly.
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Implementation of the Policy for 2025 continued
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Directors’ remuneration report continued
Tothis end we undertook a formal review of pay and benefits across the Company at the end of the year pursuant to which we have increased basic salary across the workforce and continue to keep our overall
benefits package under review so our colleagues feel valued. Our CEO pay ratio can be seen on page 104. Widespread share ownership is an objective of the Committee as it rewards our colleagues for the successful
execution of our strategy across several years and aligns their interests more closely with our shareholders. We were pleased to be able to again offer options to our UK colleagues under our PHP Sharesave plan in
April, which we expect to offer annually.
Executive Directors
Single total figure of remuneration (audited information)
The following tables detail all elements of remuneration receivable by the Executive Directors in respect of the year ended 31 December 2024 and show the comparative figures for the year ended 31 December 2023
ina separate table below. Amounts for 2024 represents remuneration earned during the period in their roles as Executive Directors, being amounts paid to Harry Hyman as CEO up to 24 April 2024 and Mark Davies’
asCEO from the same date:
Salary
2024
£000
Benefits
2
2024
£000
Pension
3
2024
£000
Total
fixed
2024
£000
Annual
bonus
1
2024
£000
LTIP
4
2024
£000
SAYE
5
2024
£000
Total
variable
2024
£000
Total
2024
£000
Mark Davies
6
416 1 22 439 322 — — 322 761
Harry Hyman 142 2 — 143 133 — — 133 276
Richard Howell 387 2 23 412 348 182 — 530 942
1 The CFO earned an annual bonus of £347,720; Mark Davies asthe CEO earned an annual bonus of £322,337 with Harry Hyman earning £132,955 as the former CEO, both pro-rated for the period of employment from/to the AGM on 24 April 2024. The annual
bonus is set by the Committee and is discretionary, of which 30% (net of tax) is deferred into Ordinary Shares which have to be held for three years and are subject to malus and clawback.
2 The CEO and CFO both receive life cover, private health cover, income protection cover and critical illness cover in line with the remainder of the workforce.
3 Mark Davies as the CEO and the CFO receive a pension allowance of 6% of their full salary, the same employer contribution as other members of the PHP pension plan. Harry Hyman as the former CEO did not receive a pension.
4 The long term incentive value for 2024 reflects the outturn for the 2022 LTIP scheme that vests in March 2025 at 50%. The vesting share price has been estimated at 95.5 pence, based on the three-month average share price ended 31 December 2024. A total
of190,383 shares were awarded to the CFO. None of the 2022 LTIP scheme was attributable to share price appreciation.
5 Mark Davies was granted an option to acquire up to 25,383 Ordinary Shares in the Company at a price of 73.08 pence per share under the PHP 2024 Sharesave plan. On leaving his role as CEO during the year, Harry Hyman left the PHP 2023 Sharesave plan but
will accrue a pro rata portion of these shares for his period of savings.
6 Mark Davies’s salary includes £56,535 he received under a consultancy agreement for the 3 month period before, and in anticipation of, him becoming CEO.
Salary
2023
£000
Benefits
2
2023
£000
Pension
3
2023
£000
Total
fixed
2023
£000
Annual
bonus
1
2023
£000
LTIP
4
2023
£000
SAYE
5
2023
£000
Total
variable
2023
£000
Total
2023
£000
Harry Hyman 413 4 — 417 437 — — 437 854
Richard Howell
360 2 22 384 381 24 — 405 789
1 The CFO earned an annual bonus of £380,700; Harry Hyman as CEO earned an annual bonus of £437,210. The annual bonus is set by the Committee and is discretionary, of which 30% (net of tax) was deferred into Ordinary Shares which have to be held for three
years and are subject to malus and clawback.
2 The CEO and CFO both received life cover, private health cover, income protection cover and critical illness cover in line with the remainder of the workforce.
3 The CFO received a pension allowance of 6% of his full salary, the same employer contribution as other members of the PHP pension plan. The CEO did not receive a pension.
4 The long term incentive value for 2023 reflects the outturn for the 2021 LTIP scheme that vested on 1 March 2024 at 7.7%. The actual vesting share price was 90.2 pence, based on the lower of the two prices shown in the Stock Exchange Daily Official List for that
day as the closing price for the shares, securities or strips on that day plus one-half of the difference between those two figures. A total of 25,081 shares were awarded to the CFO, and nil to the CEO who did not participate in the LTIP scheme. None of the 2021
LTIP scheme was attributable to share price appreciation.
5 The CEO and CFO were each granted an option to acquire up to 22,233 Ordinary Shares in the Company at a price of 80.96 pence per share under the PHP 2023 Sharesave plan.
Part 2: Annual report on remuneration continued
Wider workforce pay
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Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
2024 annual bonus outcome
The bonus scheme for the CEO and CFO in 2024 was based on a mixture of financial targets and personal targets. The maximum potential bonus awards were 150% of salary. The table below includes details of the
specific targets and the extent that they were met.
Metric Weight Threshold (25%) Maximum (100%) Outcome Bonus achieved
Financial targets
Adjusted earnings 35% £92.7m £95.2m £92.9m 30%
Total property return 35% 3.0% 6.0% 4.2% 64%
Personal targets
Individual targets 30% See below See below See below See below
Personal objectives (30% of total bonus)
The personal objectives for Harry Hyman (relating to that period of the year up to his retirement as CEO on 24 April 2024, and applied pro rata accordingly) were set based on Harry Hyman’s individual areas of
responsibility and are set out below:
Objective Achievement Committee assessment
Effective CEO transition plan,
evidenced by stakeholder support
andcontinuity in strength of
businessperformance
The CEO together with the Chair led a robust, efficient and transparent recruitment process with the
appointment of the new CEO well received by investors and employees. The implementation of the
transition plan is progressing well. This is evidenced by a strong working relationship developing between
Harry Hyman and Mark Davies.
The Committee has witnessed the success of the ongoing transition plan including during
Board meetings. The Committee also considered feedback obtained from investors and key
personnel and determined that the objective had been fully met.
100%
Effective development and
communication of the Company’s
strategy and vision to stakeholders
During the relevant part of the year the CEO led an active stakeholder engagement programme with the
Company’s key stakeholders including investors, employees and NHS bodies. In particular, the CEO was
effective in communicating the Company’s strategy and reasons for focusing on rental growth in the short
term, maintaining investor support.
The Committee assessed the CEO’s performance, including through feedback received from
investors and from the Board’s engagement activities with employees.
100%
Provide effective leadership to the
Company underpinned by the
Company’s values
The CEO provided effective leadership to the Company translating into stability and continued strong
performance against a challenging economic backdrop affecting the Company’s sector.
The Committee assessed the CEO’s leadership through the Company’s performance, the
cohesiveness of the management team and feedback obtained through the Board’s
employee engagement activities.
100%
Develop the talent in the team
evidenced in succession plans/
promotion readiness, and the
Company’s diversity agenda
The CEO is closely involved in the development, promotion and succession plan for the senior team and
proactively communicates with the Board and the Nomination and Remuneration Committees on these matters.
As a result, the Company has a stable, capable and committed team. The CEO supports the diversity agenda.
The Committee has high visibility of the CEO’s actions against this objective. The CEO
demonstrated a proactive approach to implementing the Company’s diversity agenda.
100%
Maintain a strong ESG programme The CEO has shown support for the Company’s ESG agenda, encouraging greater awareness which
contributed to the continued progress towards its ESG objectives.
The Committee assessed the CEO’s performance, evidenced by the Company’s strong and
improving ESG ratings and robust ESG agenda.
100%
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Directors’ remuneration report continued
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2024 annual bonus outcome continued
Personal objectives (30% of total bonus) continued
The Committee assessed Harry’s performance against his personal targets after the year end and agreed
that a bonus of 63% was payable pro rata having regard to his retirement as CEO on 24 April 2024, in
respect of the Annual Bonus Plan, in light of his performance against these objectives. In reaching this
conclusion the Committee determined that Harry had performed strongly during the relevant part of the
year and had succeeded in meeting most of the targets set for him.
In total, the bonus payable to the CEO in light of his performance against both the financial targets and
personal objectives was equivalent to 63% of the maximum payable, pro rata. This resulted in a bonus award
of £132,955 of which, in line with the Policy, £21,140 representing 30% of the award, after tax, will be deferred
into shares to be held for three years. The deferred shares are not subject to any further conditions.
In light of the financial performance of the Company in the year in an increasingly challenging economic
environment, the Committee is satisfied that the bonus pay-out is appropriate. Specifically, the Committee
took account ofthe following factors:
• The Company achieved a strong set of financial results with substantial year-on-year growth in EPRA
earnings and in EPRA earnings per share despite a challenging environment for the property sector.
• The Company paid £92.1 million in dividends for 2024 to shareholders. The full year dividend for the year
ended 31 December 2024, which was over 100% covered, increased by 3.0% from 6.7 pence to 6.9 pence.
• The Company maintained a strong control over costs, continuing to have one of the lowest EPRA cost
ratios in the sector.
On this basis, the Committee felt comfortable that the formulaic bonus outcome reflected the individual
Executive Director and Company performance and, as a result, the Committee determined that no
overriding discretion will be applied to the bonus outcome. Accordingly, the Committee is comfortable that
an overall bonus pay-out of 63% of maximum is reasonable.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
98
Part 2: Annual report on remuneration continued
2024 annual bonus outcome continued
Personal objectives (30% of total bonus) continued
The personal objectives (relating to that period of the year following his appointment as CEO on 24 April 2024, and applied pro rata accordingly) were set based on Mark Davies’ individual areas of responsibility and
the main objectives set out below:
Objective Achievement Committee assessment
Effective development and communication
of the Company’s strategy and vision to
stakeholders, including NHSPS and ICB
senior contacts
Following his appointment, the new CEO led an active stakeholder introduction and engagement programme
with the Company’s key stakeholders including investors, employees and NHS bodies. In particular, the CEO
was effective in communicating the Company’s strategy and reasons for focusing on rental growth in the short
term, maintaining investor support.
The Committee assessed the CEO’s performance, including through feedback received
from investors and from the Board’s engagement activities with employees.
100%
Hold an effective Strategy Day The CEO led the Company’s annual Strategy Day bringing together the Board and senior management to
discuss the Group’s future development.
Having participated directly in the Strategy Day and received feedback from other
participants, the Committee determined that the objective had been fully met.
100%
Effective CEO transition plan, evidenced
by stakeholder support andcontinuity in
strength of businessperformance
The CEO together with the Chair realised the highly effective implementation of the transition plan. This is
evidenced by a strong working relationship which has developed between Harry Hyman and Mark Davies.
The Committee has witnessed the success of the ongoing transition plan including
during Board meetings. The Committee also considered feedback obtained from
investors and key personnel, and determined that the objective had been fully met.
100%
Provide effective leadership to
theCompany underpinned by the
Company’s values, including further
development of its culture
The CEO provided effective leadership to the Company translating into stability and continued strong
performance against a challenging economic backdrop affecting the Company’s sector.
The Committee assessed the CEO’s leadership through the Company’s performance, the
cohesiveness of the management team and feedback obtained through the Board’s
employee engagement activities.
100%
Develop the talent in the team evidenced
in succession plans/promotion readiness,
and the Company’s diversity agenda
The CEO is closely involved in the development, promotion and succession plan for the senior team and
proactively communicates with the Board and the Nomination and Remuneration Committees on these matters.
As a result, the Company has a stable, capable and committed team. The CEO supports the diversity agenda.
The Committee has high visibility of the CEO’s actions against this objective. The CEO also
demonstrated a proactive approach to implementing the Company’s diversity agenda.
100%
Maintain a strong ESG programme The CEO has shown support for the Company’s ESG agenda, encouraging greater awareness which
contributed to the continued progress towards its ESG objectives.
The Committee assessed the CEO’s performance, evidenced by the Company’s strong and
improving ESG ratings, project investment having a social impact and robust ESG agenda.
100%
Invest time building a strong relationship
with the Chair and rest ofthe Board
including new NED
The CEO has invested considerable time building a strong relationship with the Chair and the rest of the Board. The Committee determined that the objective had been fully met.
100%
Expand the share register in South Africa
and take the PHP story to social impact
investors with a target over time of 10% of
the total share register
During the year the CEO undertook two investor roadshows in South Africa and the JSE register has
increased five fold.
The Committee determined that the objective had been partially met.
80%
Oversee and support Richard on
refinancing the convertible bond
andsupport the adjacency joint
ventureinitiative
The CEO has worked closely with the CFO throughout the year to ensure the capital structure of the
Company is effective and time has been invested in implementing a joint venture.
The Committee determined that the objective had been partially met.
75%
Directors’ remuneration report continued
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Primary Health Properties PLC Annual Report 2024
99
Objective Achievement Committee assessment
Explore opportunities for the business
with artificial intelligence (“AI”)
The CEO has set up an AI committee which he Chairs and AI is being used as a management tool on a daily basis. The Committee determined that the objective had been partially met.
75%
Best practice improvements in PM and FM
in the UK, looking at the Irish model and
how this could be adopted/used to
improve the UK portfolio management
The CEO has invested considerable time in Ireland looking at ways of expanding and improving the business
and the adoption of best practice across the Group.
The Committee determined that the objective had been partially met.
75%
Maintain PHP’s progressive dividend policy The CEO and the management team have a clear focus to maintain the progress dividend policy and
29years of dividend growth.
The dividend grew by c. 3% in the year and remains fully covered.
100%
The Committee assessed Mark’s performance against his personal targets and agreed that a bonus of 60%
was payable pro rata having regard to his appointment as CEO on 24 April 2024, in respect of the Annual
Bonus Plan, in light of his performance against these objectives. In reaching this conclusion the Committee
determined that Mark had performed strongly in his new role during the relevant part of the year and had
succeeded in meeting most of the targets set for him.
In total, the bonus payable to the CEO in the light of his performance against both the financial targets
andpersonal objectives was equivalent to 60% of the maximum payable, pro rata. This resulted in a bonusaward
of£322,337 of which, in line with the Policy, £51,252 representing 30% of the award, after tax, will be deferred into
shares to be held for three years. The deferred shares are not subject to any further conditions.
In light of the financial performance of the Company in the year in an increasingly challenging economic
environment, the Committee is satisfied that the bonus pay-out is appropriate. Specifically, the Committee
took account of the following factors:
• The Company achieved a good set of financial results with a year-on-year growth in EPRA earnings and in
EPRA earnings per share despite a challenging environment for the property sector.
• The Company paid £91.2 million in dividends for 2024 to shareholders. The full year dividend for the year
ended 31 December 2024, which was over 100% covered, increased by 3.0% from 6.7 pence to 6.9 pence.
• The Company maintained a strong control over costs, continuing to have one of the lowest EPRA cost
ratios in the sector.
On this basis, the Committee felt comfortable that the formulaic bonus outcome reflected the individual
Executive Director and Company performance and, as a result, the Committee determined that no
overriding discretion will be applied to the bonus outcome. Accordingly, the Committee is comfortable
thatan overall bonus pay-out of 60% of maximum is reasonable.
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
2024 annual bonus outcome continued
Personal objectives (30% of total bonus) continued
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Primary Health Properties PLC Annual Report 2024
100
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
2024 annual bonus outcome continued
Personal objectives (30% of total bonus) continued
The personal objectives were set based on Richard Howell’s individual areas of responsibility and the main objectives are set out below:
Objective Achievement Committee assessment
Focus on the portfolio, including joint venture and adjacency
opportunities, rental growth and income quality to deliver
opportunities for sustainable and progressive earnings growth
During the year the CFO and his team continued to support the investment teams and provided
significant levels of input and assistance including with respect to developing proposals for potential
JV opportunities.
The Committee assessed that the performance of the CFO had been strong in this area.
80%
Assist the investment, asset, property and facilities
management teams to deliver their respective objectives
andstrategy
The CFO’s team continued to support and provide advice to investment, asset management, rent
review and Axis teams during the year in what has been a very difficult market.
The Committee noted the positive level of organic rental growth in a challenging market
and the important part played by the CFO in delivering that.
90%
Optimise the funding structure to support the real estate
strategy, including refinancing the convertible bond
£420 million of refinancings completed in year addressing all refinancing risk in the next two years,
together with detailed planning to optimise debt structure moving forward.
The Committee assessed that the performance of the CFO had been very strong in this area.
100%
Maintain appropriate LTV, cost of finance and debt
maturitymetrics
Cost of debt maintained at 3.4% (FY23: 3.3%) following completion of recent £200 million hedging.
LTV increased slightly in year to 48.1% (2023: 47.0%) in a very difficult investment market and still within
target range of 40% to 50% and significant liquidity headroom of c. £300 million across undrawn facilities.
The Committee assessed that the performance of the CFO had been very strong in this area.
100%
Keep costs in line or below budget and the EPRA cost ratio
amongst the lowest in the UK REIT sector
EPRA cost ratio kept at 10.1% (2023: 10.1%) and now the second lowest in UK REIT sector. The Committee assessed that the performance of the CFO had been very strong in this area.
100%
Deliver an effective investor relations strategy and positive
feedback including reinforcing the position of the Company
as the leading investor in primary healthcare
The CFO continued to play a vital part in clearly implementing PHP’s message with c. 200 investor
meetings in year and positive investor feedback received.
Successful Capital Markets day, again with strong feedback received.
The Committee assessed that the performance of the CFO had been strong in this area.
90%
Deliver risk management/corporate governance agenda to
increasing satisfaction of stakeholders
This continues to be delivered to a high standard building on the work completed in previous years.
In 2024 the team worked hard to improve the control environment documentation along with evidence (for
audit purposes) that the controls are operating effectively to ensure the Board can attest that they operated
effectively throughout the year in future annual reports as this new requirement becomes effective.
The Committee noted the work undertaken and continued positive progress made in this
area during the year and concluded this objective had been met.
100%
Ensure smooth and timely running of audit and positive
feedback from auditor
Auditor feedback for FY23 and H1’24 audits was very positive.
Significant work has been undertaken to improve control documentation.
The Committee assessed that the performance of the CFO had been very strong in this area.
100%
Position the Company as an employer of choice and continue
to generate positive employee feedback and low staff
turnover rates
The CFO continued to be closely involved in progress in this area, including improvements to IT
infrastructure and team career progression.
The Committee assessed that the performance of the CFO had been very strong in this area.
90%
Drive the overall ESG strategy as set out in more detail inthe
Responsible Business Report
The CFO lead the overall ESG strategy for the Group, which is clearly articulated and well developed.
In 2024 PHP completed its first NZC asset management scheme as a pilot to work towards all AM projects
being NZC by 2030. PHP is already at NZC for operational and developments (with a second scheme started)
both achieved one-year ahead of target. PHP also agreed to implement Science Based Targets to provide a
more robust approach measuring our NZC targets, improved data coverage on Scope 3 emissions and
refocused community impact fund to focus on asset management projects.
The Committee assessed that the performance of the CFO had been very strong in this area.
100%
Work with Mark Davies to create a strong working
relationship and support his integration and handover
asCEO
The new CEO transition has gone very well and with a strong working relationship established over the
course of 2024 and alignment on the future strategy/plans for the Group going forward.
The Committee assessed that the performance of the CFO had been very strong in this area.
100%
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Primary Health Properties PLC Annual Report 2024
101
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
2024 annual bonus outcome continued
Personal objectives (30% of total bonus) continued
The Committee assessed Richard’s performance against his personal targets after the year end and
agreedthat a bonus of 60% was payable in respect of this aspect of the Annual Bonus Plan, in light of his
performance against these objectives. In reaching this conclusion the Committee determined that Richard
had performed strongly during the year and had succeeded in meeting many of the targets set for him.
In total, the bonus payable to the CFO in light of his performance against both the financial targets and
personal objectives was equivalent to 60% of the maximum payable. This resulted in a bonus award of
£347,720 of which, in line with the Policy, £55,287 representing 30% of the award, after tax, will be deferred
into shares to be held for three years. The deferred shares are not subject to any further conditions.
In light of the financial performance of the Company in the year in an increasingly challenging economic
environment, the Committee is satisfied that the bonus pay-out is appropriate. Specifically, the Committee
took account of the following factors:
• The Company achieved a strong set of financial results with substantial year-on-year growth in EPRA
earnings and in EPRA earnings per share despite a challenging environment for the property sector.
• The Company paid £92.1 million in dividends for 2023 to shareholders. The full year dividend for the year
ended 31 December 2023, which was over 100% covered, increased by 3.0% from 6.7 pence to 6.9 pence.
• The Company maintained a strong control over costs, continuing to have one of the lowest EPRA cost
ratios in the sector.
On this basis, the Committee felt comfortable that the formulaic bonus outcome reflected the individual
Executive Director and Company performance and, as a result, the Committee determined that no
overriding discretion will be applied to the bonus outcome. Accordingly, the Committee is comfortable that
an overall bonus pay-out of 60% of maximum is reasonable.
LTIP vesting in 2025
The 2022 LTIP awards will vest in March 2025, subject to Total Accounting Return and EPRA earnings per
share targets.
Richard Howell was granted a nil-cost option over 313,745 Ordinary Shares in PHP (the “Award”) which was
subject to the following performance targets over a three-year period to 31 December 2024:
Performance measure Weighting Threshold vesting (10%) Stretch vesting (100%)
Total Accounting Return 50% 5% per annum CAGR 10% per annum CAGR
EPRA earnings per share 50% 5% per annum CAGR 10% per annum CAGR
The Award vests on a straight line basis for performance between the applicable threshold and stretch targets.
Performance achieved and the level of vesting of the Award are as follows:
Performance measure Performance achieved Level of vesting
Total Accounting Return 3.1% per annum CAGR 0% of the whole award
EPRA earnings per share 12.5% per annum CAGR 50% of the whole award
Total 50% of the award
The Committee is comfortable that the current Policy operated as intended and that the overall 2024
remuneration paid to Executive Directors was appropriate.
Share scheme interests awarded during the year
Mark Davies and Richard Howell participated in the LTIP during the year.
Mark Davies was granted a nil-cost option over 886,824 Ordinary Shares in PHP. In line with the Policy the
Award has a face value of 160% of salary (calculated on the basis of a share price of £0.9472, being the
average of the closing middle market quotations on 2, 3 and 7 May 2024) and will vest after three years
subject to achievement of performance targets (Total Accounting Return 42.5%, EPRA earnings per share
42.5% and percentage of properties EPC rated A or B 15%).
Richard Howell was granted a nil-cost option over 539,779 Ordinary Shares in PHP (the “Award”). In line
with the Policy the Award has a face value of 125% of salary (calculated on the basis of a share price of
£0.8962, being the average of the closing middle market quotations for the Company’s Ordinary Shares on
28 February 2024, 1 March 2024 and 2 March 2024) and will vest after three years subject to achievement
of performance targets (Total Accounting Return 42.5%, EPRA earnings per share 42.5% and percentage of
properties EPC rated A or B 15%).
The Award is subject to the following performance targets over a three-year period to 31 December 2026:
Performance measure Weighting Threshold vesting (25%) Stretch vesting (100%)
Total Accounting Return 42.5% 4% per annum CAGR 8% per annum CAGR
EPRA earnings per share 42.5% 3% per annum CAGR 8% per annum CAGR
Percentage of properties
EPC rated Aor B 15% 46% of portfolio 50% of portfolio
The Award vests on a straight line basis for performance between the applicable threshold and stretch
targets and lapses to the extent the applicable threshold is not achieved. Any fractional result shall be
rounded to the nearest whole number of shares.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
102
Directors’ remuneration report continued
Part 2: Annual report on remuneration
continued
Share scheme interests awarded during the year continued
The rationale for selecting EPRA EPS and Total Accounting Return
(EPRA NTA per share growth plus dividends) is that these are also
keyindicators of value creation for shareholders out of which the
dividends are paid, and the share values are driven. TAR provides
continuity with the way the legacy PIF calculated value creation
andreflects the impact of gearing as experienced by shareholders.
Targets are absolute, rather than relative because there is not felt to
be a suitably large list of peer companies against which to make
comparison. Theinclusion of total shareholder return was considered
by the Committee, but potential volatility that is outside of
management control and a very small peer group made the use of
absolute and relative targets difficult to justify.
The Committee will determine whether, and the extent to which,
theperformance targets have been met, in accordance with the
rulesof the plan.
Mark Davies and Richard Howell also participate in the PHP Sharesave
plan. Mark Davies entered into a savings contract to save £500 per
month (the maximum sum permitted under the plan rules) and holds
options granted in 2024 to acquire 25,383 Ordinary Shares of 12.5
pence at a price of 73.08 pence per share. Richard Howell entered
intoa savings contract to save £500 per month (the maximum sum
permitted under the plan rules) and hold options granted in 2023 to
acquire 22,223 Ordinary Shares of 12.5 pence at a price of 80.96 pence
per share.
The Company may fund its share incentives through a combination
ofnew issue and/or market purchase shares. The Company monitors
the level of share grants and the impact of these on the continuing
requirements for shares. In accordance with guidelines set out by the
Investment Association at the time of adopting the share plans, the
Company can issue a maximum of 10% of its issued share capital in a
rolling ten-year period to employees under all its share plans, with an
inner limit of 5% applying to discretionary plans.
Non-executive
Fees Taxable benefits Total
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
Harry Hyman (Chair)
1
133 n/a — n/a 133 n/a
Steven Owen
2
62 182 — — 62 182
Ian Krieger (Senior Independent Director) 88 82 — — 88 82
Ivonne Cantú 77 71 — — 77 71
Laure Duhot 77 71 — — 77 71
Bina Rawal
3
55 — — — 55 —
1 Harry Hyman was appointed Chair of the Board at the 2024 AGM and his remuneration figure represents Directors’ fees from 24 April 2024.
2 Steven Owen retired from the Board as Chair at the 2024 AGM and his remuneration figure represents Directors’ fees to 24 April 2024.
3 Bina Rawal was appointed to the Board on 27 February 2024 and her remuneration figure represents Directors’ fees from this date.
The Committee agreed to increase the fee paid to the Chair by 3% with effect from 1 January 2025 at its meeting in December 2024 and the
Board agreed to increase the fees payable to the remaining Non-executive Directors for 2025 by the same amount.
Executive Directors: contracts
Name
Date of
appointment
Date of service
agreement or letter
of appointment
Harry Hyman 5 February 1996 5 January 2021
Mark Davies 24 April 2024 24 April 2024
Richard Howell 1 April 2017 1 April 2017
Mr Hyman entered into a contract of employment with the Company on 5 January 2021. Mr Hyman’s contract was for an initial fixed period of
twelve months and was capable of termination by either party on giving twelve months’ notice. Consistent with previously announced plans,
MrHyman retired as CEO with effect from the Company’s Annual General Meeting in 2024.
Mr Davies entered into a contract of employment with the Company which commenced on 24 April 2024 and Mr Howell entered into a revised
contract of employment with the Company on 15 April 2021 to reflect the terms of the Policy. Mr Davies’ contract is a rolling contract that can
be terminated by either party on giving twelve months’ notice. Mr Howell’s contract of employment is a rolling contract that can be terminated
by either party on giving six months’ notice.
Non-executive Directors: contracts
Name
Date of
appointment
Date of service
agreement or letter of
appointment
Length of appointment
Years
1
Harry Hyman 24 April 2024 24 April 2024 1
Ivonne Cantú 1 January 2022 14 December 2021 3
Laure Duhot 14 March 2019 14 March 2019 6
Ian Krieger 15 February 2018 15 February 2018 7
Bina Rawal 27 February 2024 27 February 2024 1
1 Subject to annual re-election at the Company’s AGM in accordance with the Code.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
103
Directors’ remuneration report continued
Part 2: Annual report on remuneration
continued
Non-executive Directors: contracts continued
The Non-executive Directors each have specific letters of
appointment, rather than service contracts. Non-executive Directors
are appointed for an initial term of three years and, under normal
circumstances, would be expected to serve for additional three-year
terms, up to a maximum of nine years, subject to satisfactory
performance, which is reviewed annually by the Nomination
Committee. The Board shall have discretion to extend a term beyond
nine years in order to retain specialist skills and experience which are
hard to replace and provided always that the individual is considered
to remain independent. Pursuant to its previously announced plans,
Mr Hyman’s term as Chair will be for a maximum of three years.
The appointment of the Chair and any Non-executive Directors may
be terminated immediately if they are not re-appointed by shareholders
or if they are removed by the Board under the Company’s Articles of
Association or if they resign and do not offer themselves for re-election.
In addition, appointments may be terminated by either the individual
or the Company giving three months’ written notice of termination.
In accordance with the Code, the Company requires that all Directors
are re-elected at each Annual General Meeting.
The Company’s performance
The following graph compares the total shareholder return of the
Company’s Ordinary Shares relative to a return on a hypothetical
holding over the same period in the FTSE All-Share Real Estate
Investment Trust Index. This index has been chosen by the Board as
the Company is a constituent member of that index. Total shareholder
return is the measure of returns provided by a company to
shareholders reflecting share price movements and assuming
reinvestment of dividends.
For the year ended 31 December 2024, the highest and lowest
mid-market prices of the Company’s Ordinary Shares were 103.8
pence and 88.5 pence respectively.
Total shareholder return performance %
CEO pay
This table shows how pay for the role of the CEO has changed in the last five years. This table will be expanded over future periods until a
ten-year history has been provided. Prior to 2020 the Group was externally managed. Amounts for 2024 represents remuneration earned during
the period in their roles as Executive Directors, being amounts paid to Harry Hyman as CEO up to 24 April 2024 and Mark Davies’ as CEO from
the same date:
Year
2024
£000
2024
£000
2023
£000
2022
£000
2021
£000
2020
£000
Incumbent Mark Davies Harry Hyman Harry Hyman Harry Hyman Harry Hyman Harry Hyman
Single figure of remuneration 761 276 854 263 836 574
% of max bonus earned* 60% 63% 71% n/a n/a n/a
% of max LTIP awards vesting* n/a n/a n/a n/a n/a n/a
* Mr Hyman did not participate in the LTIP scheme in any period, nor the Annual Bonus Plan in 2021 and 2022. He received £nil, £nil, £589k and £524k in 2023, 2022, 2021
and 2020 under the PIF.
Remuneration adviser
The Remuneration Committee’s appointed adviser is Korn Ferry which provides advice on Directors’ remuneration and governance. Korn Ferry
has no other connection with the Company and is a signatory to the voluntary code of conduct of the Remuneration Consultants Group in
relation to executive remuneration consulting. The Committee is satisfied that its advice is independent and objective. The fees paid for its
services, calculated on a time and materials basis during the calendar year, were £33,318.
300
250
200
150
100
50
0
31/12/2014 31/12/2015 31/12/2016 31/12/2017 31/12/2018 31/12/2019 31/12/2020 31/12/2021 31/12/2022 31/12/2023 31/12/2024
PHP
FTSE UK REIT
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
104
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
Relative importance of spend on pay
The following table shows the total remuneration paid to Directors and total management fees paid compared to the dividends paid toshareholders:
2024
£
2023
£ Difference
Directors’ remuneration 2,265,455 2,024,394 12%
Pay overall (including Executive Directors) 7,710,4 47 7,68 6, 7 75 0%
Dividends 92,125,295 89,545,084 3%
Note: The items listed in the table are as required by the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 Section 20.
The figures for this measure are as shown in Note 4 to the financial statements.
Statement of Directors’ shareholding and share interests (audited)
The interests of each person who served as a Director at any time during the financial year in the share capital of the Company (all of which are
beneficial unless otherwise stated) and any interests of a person connected with such persons (within the meaning of Section 96B(2) of the
Financial Services and Markets Act 2000) are shown below:
Director
Number of
shares
owned
beneficially
Number of
shares owned
by connected
persons % of salary held
Total interest
subject to
conditions (LTIP
nil-cost awards)
Total interests
subject to
continued service
condition only
Outstanding
Sharesave
options
Total interests
as at
31 December
2024
Mark Davies 287,610 — 55% 886,824 n/a 25,383 1,199,817
Richard Howell 262,826 281,633 141% 1,111,526 — 22,233 1,678,218
Steven Owen
1
124,358 70,923 n/a n/a n/a n/a 195,281
Harry Hyman
2
12,125,568 12,381,736 n/a n/a n/a 7,411 24,529,537
Ian Krieger 101,481 — n/a n/a n/a n/a 101,481
Laure Duhot — 23,169 n/a n/a n/a n/a 23,169
Ivonne Cantú 25,000 — n/a n/a n/a n/a 25,000
Bina Rawal 27,5 49 — n/a n/a n/a n/a 27,5 49
1 Figure as at date of retirement as Chair.
2 Harry Hyman left the 2023 Sharesave scheme on leaving his role as CEO, but will receive a pro rata portion of these shares for his period of savings.
Shareholding guidelines
In accordance with the Policy, in order to ensure that the Executive Directors’ interests are aligned with those of shareholders, the shareholding
guideline (as a percentage of salary) for the Executive Directors is 200%. In addition, the Executive Directors are required to retain shares equal to the
level of this guideline (or if they have not reached the guideline, the shares that count at that point in time) for the two years following their departure.
The guideline shareholdings for the year ended 31 December 2024 are shown below:
Executive Director Requirement
Guideline
holding
Qualifying
holding
% of salary
held
Mark Davies 200% 1,125,402 287,610 55%
Harry Hyman* 200% 953,912 24,418,410 over 200%
Richard Howell 200% 829,582 544,459 141%
* As at date Mr Hyman retired as CEO.
The shareholding definition includes shares beneficially owned by the
Executive Directors and their connected persons, and shares subject
to a holding period, but net of tax if not yet exercised (e.g. shares
which have vested but are subject to a sale restriction and vested but
not exercised (net of tax)). The 31 December 2024 closing share price
has been used to determine the guideline holdings.
To the extent that there is a shortfall against the minimum holding
atany time during an Executive Director’s employment, he/she will
berequired to retain 50% of deferred bonus and LTIP shares (net of
taxes and exercise costs) until such time as the guideline is satisfied.
The shareholding guidelines will continue to apply for two years post
cessation of employment.
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Primary Health Properties PLC Annual Report 2024
105
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
CEO pay ratio
Although PHP does not have more than 250 employees, and is thus not formally required to publish the ratio of the CEO’s pay to the wider UK
workforce, we have decided to include this figure as good practice.
Our CEO to colleague pay ratio is set out in the table below. For comparative purposes, the analysis below represents actual amounts paid to
both Harry Hyman and Mark Davies in their role as CEO during the year and have been aggregated including salary, pension and bonuses:
Financial year Method used
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
2024 Option A 15.7:1 9.5:1 6.0:1
2023 Option A 11.5:1 6.8:1 4.4:1
2022 Option A 3.8:1 2.2:1 1.4:1
The Company has chosen to use Option A as the method for calculating the CEO pay ratio. This method had been selected because PHP has a
small number of employees, and this method is considered to be the most up to date and statistically accurate method of calculation. It is also
recommended by the UK Government and the Investment Association. The CEO pay ratio increased from 2023 to 2024 as a result of the CEO base
pay increasing in the period by 27%, higher than the average rate of increase for our workforce of 5%, reflecting an increased market adjustment
and full time nature of the role for the new CEO and a 3% inflationary salary increase (below the average workforce increase). Additionally for the
2024 period, the CEO’s bonus was 90% of his annualised base pay, compared to 20% for the wider workforce. The Company believes that the
median pay ratio is consistent with the pay, reward and progression policies for the Company’s UK employees taken as a whole.
2024
CEO
£
25th
£
50th
£
75th
£
Basic salary
1
558,070 52,000 78,000 102,000
Benefits 3,642 1,177 1,577 2,409
Pension 21,597 3,120 4,680 6,600
Annual Bonus Plan 455,292 10,000 25,000 61,997
Total pay 1,038,600 66,297 109,257 173,006
1 Mark Davies’s salary includes £56,535 he received under a consultancy agreement for the 3 month period before, and in anticipation of, him becoming CEO.
CEO pay for 2024 has been calculated for the period 1 January 2024
to 31 December 2024 based on the single figure remuneration. The
annualised salary and pension of the incumbent CEO has been
included within the analysis.
The calculation for the pay of employees at the different levels has
been calculated as at 31 December 2024. Where relevant, full-time
equivalent pay was calculated by applying a proportionate increase
to the pay and benefits of any part-time employees.
For the purpose of the calculations, the following elements of pay
were included in the total pay figure for the employee at each
quartile in the year to 31 December 2024:
• annual basic salary;
• bonus earned in the year;
• employer pension contributions;
• Sharesave; and
• life cover.
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Primary Health Properties PLC Annual Report 2024
106
Directors’ remuneration report continued
Part 2: Annual report on remuneration continued
Percentage change in remuneration of the Board of Directors
The table below shows the percentage change in remuneration of the Executive and Non-executive Directors against PHP employees as a
whole. For comparative purposes, the analysis represents actual amounts paid to Harry Hyman in aggregation in his roles as CEO and Chair
during the year. New joiners in the year have not been included given the movement in the year would be n/a.
% change 2023 to 2024 % change 2022 to 2023 % change 2021 to 2022 % change 2020 to 2021
Base
salary/
fees Benefits Bonus
Base
salary/
fees Benefits Bonus
Base
salary/
fees Benefits Bonus
Base
salary/
fees Benefits Bonus
Harry Hyman (33)% (63)% (70)% 57% 175% 0% 6% 0% (100)% 400% 0% 12%
Richard Howell 8% 8% (9)% 7% 116% 46% 5% 309% (43)% 7% 0% (24)%
Steven Owen
1
(66)% n/a n/a 5% n/a n/a 5% n/a n/a 32% n/a n/a
Ian Krieger
1
8% n/a n/a 12% n/a n/a 4% n/a n/a 11% n/a n/a
Ivonne Cantú
1
8% n/a n/a 9% n/a n/a n/a n/a n/a n/a n/a n/a
Laure Duhot
1
8% n/a n/a 13% n/a n/a 5% n/a n/a 9% n/a n/a
PHP employees 5% (4)% (24)% 10% 18% 7% 7% 135% (2)% n/a n/a n/a
1 The Non-executive Directors receive no benefits and do not participate in the annual bonus scheme.
Statement of shareholder voting
At the 2024 AGM, shareholder voting on the Directors’ Remuneration Report was as follows:
Number
of votes
% of
votes cast
Votes cast in favour 718,248,823 84.22
Votes cast against 134,558,949 15.78
Votes withheld
1
1,029,803 —
Total votes cast 853,837,575 —
At the 2024 AGM, shareholder voting on the Directors’ Remuneration Policy was as follows:
Number
of votes
% of
votes cast
Votes cast in favour 834,480,067 98.45
Votes cast against 13,150,253 1.55
Votes withheld
1
6,207,255 —
Total votes cast 853,837,575 —
1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes for or against a resolution.
Payments to past Directors or for loss of office
There have been no payments made to past Directors and no
payments made for loss of office in the year.
Approval
The Directors’ Remuneration Report has been approved by the Board
of Directors.
Signed on behalf of the Board of Directors
Ivonne Cantú
Chair of the Remuneration Committee
27 February 2025
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Primary Health Properties PLC Annual Report 2024
107
Directors’ report
The Directors present their Annual Report and Accounts, together
with the financial statements and the Auditor’s Report, for the year
ended 31 December 2024 to shareholders.
Company status
Primary Health Properties PLC is a public limited liability company
incorporated under the laws of England and Wales and is the holding
company of the Group, which has no branches. Its primary listing is
on the London Stock Exchange (equity shares (commercial companies)
category) (LON: PHP) and is a constituent of the FTSE 250 Index. It
also has a secondary listing on the Johannesburg Stock Exchange
(JSE: PHP) and is included in the FTSE/JSE All-Share Index and
All-Property Index.
Principal activity
The principal activity of the Group remains investment in primary
healthcare property in the United Kingdom and Ireland.
The purpose of the Annual Report is to provide information to the
members of the Company, as a body, that is a fair, balanced and
understandable assessment of the Group’s performance, business
model and strategy. A detailed review of the Group’s business and
performance during the year, the principal risks and uncertainties
facing the Group, its approach to responsible business, an indication
of future likely developments in the Company and details of important
events since the year ended 31 December 2024 are contained in the
Group’s Strategic Report on pages 1 to 59 and should be read as part
of this report.
The Company, its Directors, employees, agents or advisers do not
accept or assume responsibility to any other person to whom this
document is shown or into whose hands it may come and any such
responsibility or liability is expressly disclaimed. The Annual Report
contains certain forward-looking statements with respect to the
operations, performance and financial condition of the Group. By their
nature, these statements involve uncertainty since future events and
circumstances can cause results and developments to differ from
those anticipated. The forward-looking statements reflect
knowledgeand information available at the date of preparation
ofthis AnnualReport. Nothing in this Annual Report should be
construed asa profit forecast.
Tax status
The Group became a Real Estate Investment Trust (“UK REIT”) on
1January 2007. It is the opinion of the Directors that the Group has
conducted its affairs so as to be able to continue as a UK REIT.
Directors
The names and biographical information for the current Directors can
be found on pages 62 and 63. Details of the Directors who served
during the year and the interests of the Directors and their connected
persons in the Company’s Ordinary Shares can be found in the
Directors’ Remuneration Report on page 105.
The Company’s Articles require that Directors should submit
themselves for election at the first Annual General Meeting following
their appointment and thereafter for re-election at least every three
years. The Company has, however, adopted the requirements of the
UK Corporate Governance Code (the “Code”, specifically, Provision
18of the Code) in requiring the annual re-election of all Directors.
A proposal to re-elect such Directors is to be included within the
Notice calling the 2025 AGM. The Chair confirms to shareholders
that, following formal performance evaluation, all the Directors
standing for re-election continue to be effective and their
contribution is valuable and they demonstrate full commitment
toandindependence in their roles.
Appointment and removal of Directors
Unless and until otherwise determined by the Company by ordinary
resolution, the number of Directors (other than any alternate
Directors) shall not be less than two and there shall be no maximum
number of Directors.
Dividends
The results for the year are shown in the Group Statement
ofComprehensive Income on page 121.
The Company has paid four interim dividends each of 1.725 pence
perOrdinary Share of 12.5 pence (“Ordinary Shares”) for the year,
totalling 6.9 pence per share, each of which has been paid as
1.45pence by way of Property Income Distribution (“PID”) and
theremainder, being 0.275 pence, as an ordinary dividend.
Powers of Directors
Subject to the provisions of the Companies Act 2006 (the “Act”),
thememorandum and Articles of Association (the “Articles”) of the
Company and any directions given by special resolution, the business
of the Company shall be managed by the Board, which mayexercise
all the powers of the Company.
Appointment of Directors
Subject to the Articles, and without prejudice to the power of the
Company to appoint any person to be a Director, the Board has
power at any time to appoint any person who is willing to act as
aDirector, either to fill a vacancy or as an addition to the existing
Board, but the total number of Directors shall not exceed any
maximum number fixed in accordance with the Articles.
Any Director so appointed shall hold office only until the next Annual
General Meeting of the Company following such appointment and
shall then be eligible for election.
Retirement of Directors
Under the Articles at each Annual General Meeting any Director
whoshall have been a Director at each of the two preceding Annual
General Meetings is required to stand for re-election as a Director.
However, the Company has adopted the requirements of the Code
inrequiring the annual re-election of all Directors.
Removal of Directors
In addition to any powers of removal conferred by the Act, the
Company may by special resolution remove any Director before the
expiration of their period of office and may (subject to the Articles)
by ordinary resolution appoint another person to act in their place.
Indemnities
The Company has procured directors’ and officers’ liability insurance
in respect of itself, the Directors and the directors of its subsidiaries.
These indemnities are qualifying third-party indemnity provisions as
defined by Section 234 of the Act.
The Company has agreed to indemnify each Director against any
liability incurred in relation to acts or omissions arising in the ordinary
course of their duties. The indemnity only applies to the extent
permitted by law. A copy of the deed of indemnity is available for
inspection at PHP’s registered office and will be available at the 2025
AGM. No indemnity was provided and no payments were made
pursuant to these provisions during the year.
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Primary Health Properties PLC Annual Report 2024
108
Directors’ report continued
Substantial interests
As at 31 January 2025, the Company had been notified under the
Disclosure Rules or was otherwise aware of the following shareholders
who were directly or indirectly interested in 3% or more of the voting
rights in the Company’s issued share capital. These positions have not
materially changed since year end:
Name Shares %
BlackRock 111,502,674 8.34
Hargreaves Lansdown 92,574,662 6.93
Vanguard Group 74,240,694 5.55
Legal & General Investment
Management 69,934,595 5.23
Interactive Investor 47,926,7 35 3.59
Investec Wealth & Investment 47,855,5 49 3.58
Share capital
At the date of this report, the Company has one class of share in issue,
being 1,336,493,786 million Ordinary Shares of 12.5 pence each, each
carrying the right to one vote at general meetings of the Company
andto participate in any dividends declared in accordance with the
Articles. There are no Ordinary Shares held in treasury. No person has
any special rights of control over the Company’s share capital.
At the 2024 AGM shareholders authorised the Company to make
market purchases of Ordinary Shares representing up to 10% of its
issued share capital at the time to allot equity securities (as defined
by the Act) for cash. The Company did not purchase or acquire any
ofits Ordinary Shares during the year, nor did any nominee or third
party with the Company’s assistance acquire any shares on behalf
ofthe Company The authority to make market purchases referred to
above will expire at the 2025 AGM and it is proposed to seek renewal
of this authority at the 2025 AGM.
At the Annual General Meeting in 2024, the Directors were granted
authority: (i) to allot shares up to a maximum amount of £55,687,241,
representing approximately one-third of the Company’s issued
Ordinary Share capital; and (ii) to allot shares up to a maximum
nominal value of £16,706,172 (representing approximately 10% of the
Company’s issued share capital) without having to first offer those
shares to existing shareholders ((ii) being referred to as
the“Authority”).
The Directors were also granted authority to allot further shares up
to a maximum nominal value of £16,706,172 (representing approximately
10% of the Company’s issued share capital) without having to first
offer those shares to existing shareholders, where such authority is
used in connection with the financing (or refinancing, if the authority
is to be used within six months after the original transaction) of an
acquisition or specified capital investment (the “Additional Authority”).
In relation both to the Authority and the Additional Authority, the
Directors were also granted authority to allot shares up to a nominal
amount of 20% of any allotment pursuant to the Authority and for the
purposes of a “follow-on offer” as defined in paragraph 3 of Section
2B of the Pre-Emption Group’s Statement of Principles (November
2022), or a maximum of 2% of the Company’s issued share capital
ineach case.
The Directors made no use of these powers during the year.
Rights attaching to shares under the Articles
The Company’s Articles do not contain any specific restrictions on the
size of a shareholder’s holding.
Voting rights
Subject to any special rights or restrictions as to voting attached to
any shares by or in accordance with the Articles, on a show of hands
every member who is present in person or by proxy and entitled to
vote has one vote and on a poll every member who is present in
person or by proxy and entitled to vote has one vote for every share
of which he is the holder.
Restrictions on voting
There are no restrictions on exercising voting rights save in situations
where the Company is legally entitled to impose such restrictions,
such as if having been served with a notice under Section 793 of the
Act, a shareholder fails to disclose details of any past or present
beneficial interest. The Company is not aware of any arrangements
between shareholders that may result in restrictions on the transfer
of securities or voting rights.
Transfer
There are no restrictions on the transfer of Ordinary Shares, other
than certain restrictions imposed by laws and regulations which
restrict Directors and persons closely associated with them from
dealing in the Company’s securities without prior approval under
theCompany’s share dealing code.
The rights and obligations attaching to the Ordinary Shares,
inaddition to those conferred by law, are set out in the Articles.
Amendment of the Company’s Articles
Any amendments to the Company’s Articles may be made by special
resolution. There were no amendments made to the Articles in the year.
Change of control
Under the Group’s financing agreements, including the terms of
the£150 million 2.875% convertible bonds due 2025, repayment or
termination of the outstanding amounts on a change of control may
be required by the lenders or bondholders. There are no agreements
between the Company and the Directors providing compensation for
loss of office or employment or otherwise that occurs specifically
because of a change of control.
The Company’s share plans contain provisions that, as a result
ofachange of control, options and awards may vest or become
exercisable, in accordance with the rules of the plans.
Suppliers
The Group has not signed up to any specific supplier payment code.
ItisPHP’s policy to comply with the terms of payment agreed with
itssuppliers. Where specific payment terms are not agreed, the
Groupendeavours to adhere to the supplier’s standard payment terms
and aims to settle supplier accounts promptly in accordance with its
individual terms of business. The number of creditor days outstanding as
at 31 December 2024 was seven days (2023: eight days; 2022: ten days).
Annual General Meeting
The Annual General Meeting of PHP (“AGM”) will be held on 7 May
2025 at 10.30 a.m. The Notice convening the AGM and explanatory
notes for the resolutions sought will be sent to shareholders not less
than 21 clear days before the date of the meeting.
Full details will be set out in the Notice of AGM, but may need to
bealtered at short notice, in which case the Company will update
shareholders, as necessary, via a Regulatory Information Service and
the Company’s website at www.phpgroup.co.uk. Shareholders are
advised to check the Company’s website for updates.
Auditor
Deloitte LLP has expressed its willingness to continue in office as
auditor and a resolution to re-appoint it will be put to shareholders
atthe AGM.
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Primary Health Properties PLC Annual Report 2024
109
Directors’ report continued
Employees
As at 31 December 2024, the Group had 60 employees in the UK and
27 in Ireland.
Employees are encouraged to maximise their individual contribution
to the Group. In addition to competitive remuneration packages,
theyparticipate in an annual bonus scheme which links personal
contribution to the goals of the business.
In addition, all employees are eligible to participate in the PHP
Sharesave plan 2021 that was approved by shareholders at the 2021
AGM and seven staff members took up the offer to participate in the
plan in 2024, a lower figure than in prior years due to the fact most
employees are already participating. Employees are provided
regularly with information regarding the business and other matters
of concern to them at bi-weekly video-conference calls. In addition,
all staff are eligible to participate in a defined contribution pension
scheme. The views of employees are taken into account when making
decisions that might affect their interests. The Company encourages
openness and transparency, with staff having regular access to
senior management and being given the opportunity to express views
and opinions.
Further details of how the Directors engage with employees can be
found on pages 39 and 40 and in the Corporate Governance section
onpage 66.
The Group is committed to the promotion of equal opportunities,
supported by its Equality, Diversity and Inclusion policy which is
informed by and aligned with the Listing Rules. The policy reflects
both current legislation and best practice. It highlights the Group’s
obligations with respect to race, gender, socio-economic and
disability equality.
Full and fair consideration is given to applications for employment
from disabled persons and appropriate training and career
development are provided.
Donations
The Group does not make any political donations. Details of the
charitable donations made in the year are set out on page 38 in the
Responsible Business section.
Share service
The Shareholder Information section on page 165 provides details
ofthe share services available.
Financial instruments
The Group’s financial risk management objectives and policies are
discussed in Note 17.
Post balance sheet events
Details of events occurring since the year end are given in Note 25.
Going concern
The Group’s business activities together with the factors likely to
affect its future development, performance and position, along with
the financial position of the Group, its cash flows, liquidity position
and borrowing facilities, are set out in the Strategic Report.
The Group’s property portfolio is 99.1% occupied with over 89% ofits
income funded directly or indirectly from government sources and the
average WAULT across the Group’s portfolio is 9.4 years.
As at 31 December 2024, the Group had £271 million of headroom on
its debt facilities, after commitments to fund on properties under
construction through the course of 2024 with a further £3 million
ofcash. The weighted Group average unexpired loan term was
5.7years.
The Group’s consolidated loan to value ratio, including drawn,
unsecured debt, is 48.1% with all banking covenants being met during
the year and subsequent to the year end. In summary, at a Group
level values would need to fall by 37% and Group income
byapproximately 54% before the LTV ratio and income covenants
across the Group are at risk of being breached.
The Directors believe that the Group is well placed to manage its
business risks successfully. Having reviewed the Group’s business
activities, financial development, performance and position including
its cash flows, liquidity position, borrowing facilities (including
repayment of the convertible bond, if required) and covenant cover,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence and meet its
liabilities as they fall due for a period of at least twelve months from
the date of this report. For this reason, the Directors continue to
adopt the going concern basis of accounting in preparingthe
financial statements.
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Primary Health Properties PLC Annual Report 2024
110
Directors’ report continued
Regulatory disclosures
Additional information which is incorporated into this report by reference, including information required in accordance with the Companies Act 2006,
Listing Rule 9.8.4 and the Disclosure and Transparency Rules (“DTRs”), can be found on the following pages:
Review of business and future developments
Strategic Report
See pages 1 to 59
Principal risks
Risk Management section of the Strategic Report
See pages 52 to 58
Viability statement
See page 59
Directors’ details
Directors’ biographies
See pages 62 and 63
Directors’ share interests
Remuneration Committee Report
See page 105
Section 172 Statement
Responsible Business section of the Strategic Report
See page 51
Greenhouse gas emissions
Responsible Business section of the Strategic Report
See pages 28 to 43
Financial instruments
Note 16
See page 140
Financial risk management policies
Risk Management section of the Strategic Report
See pages 52 to 58
Related party transactions
Note 24
See page 144
Subsequent events
Note 25
See page 145
All other sub-sections of LR9.8.4 are not applicable. Information that
fulfils the requirements of LR 9.8.6(5) and 9.8.6(6) can be found in the
Corporate Governance Statement on pages 66 to 75 and is
incorporated into this Directors’ Report by reference.
Directors’ statement as to disclosure of information
toauditor
The Directors who were members of the Board at the time of
approving the Directors’ Report are listed on pages 62 and 63. Having
made enquiries of fellow Directors and of the Company’s auditor,
each of the Directors confirms that:
• so far as the Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
• the Director has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
The Directors’ Report, Strategic Report and Corporate Governance
Report were approved by the Board on 27 February 2025.
By order of the Board.
Toby Newman
Company Secretary and Chief Legal Officer
Primary Health Properties PLC
Registered office: 5th Floor, Burdett House,
15–16BuckinghamStreet, London WC2N 6DU
Registered in England Number: 3033634
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Primary Health Properties PLC Annual Report 2024
111
Directors’ responsibility statement
Statement of Directors’ responsibilities in respect of the
Group and Company financial statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required
toprepare the Group financial statements in accordance with
United Kingdom-adopted International Accounting Standards.
The financial statements also comply with International Financial
Reporting Standards (“IFRSs”) as issued by the International
Accounting Standards Board (“IASB”). The Directors have chosen to
prepare theParent Company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including FRS 101
Reduced Disclosure Framework. Under company law the Directors
must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and ofthe profit or loss of the Company for that period.
In preparing the Parent Company financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis
unlessit is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International Accounting
Standard 1 requires that the Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific
requirements of the financial reporting framework are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s financial
position and financial performance; and
• make an assessment of the Company’s ability to continue as
agoing concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
offraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
thecorporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit of the Company and
the undertakings included in the consolidation taken as a whole;
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face; and
• the Annual Report and Financial Statements, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position,
performance, business model and strategy.
This responsibility statement was approved by the Board of Directors
on 27 February 2025 and is signed on its behalf by:
Harry Hyman
Non-executive Chair
27 February 2025
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Primary Health Properties PLC Annual Report 2024
112
Independent auditor’s report
to the members of Primary Health Properties PLC
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of Primary Health Properties PLC (the ‘company’) and its subsidiaries (the
‘group’) give a true and fair view of the state of the group’s and of the company’s affairs as at 31
December 2024 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with United Kingdom
adopted international accounting standards;
• the company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced
Disclosure Framework”; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements which comprise:
• the group statement of comprehensive income;
• the group and company balance sheets;
• the group and company statements of changes in equity;
• the group cash flow statement;
• the related notes 1 to 26 to the group financial statements, and
• the related notes 1 to 18 to the company financial statements
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and United Kingdom adopted international accounting standards.
Thefinancial reporting framework that has been applied in the preparation of the company financial
statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced
Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section of our report.
We are independent of the group and the company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the
‘FRC’s’) Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. The non-audit services provided to the group and
company for the year are disclosed in note 4 to the financial statements. We confirm that we have not
provided any non-audit services prohibited by the FRC’s Ethical Standard to the group or the company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
3. Summary of our audit approach
Key audit matters The key audit matter that we identified in the current year was:
• Estimation of property yields, and rental values applied in the valuation of
investment property.
Materiality The materiality that we used for the group financial statements was
£27.5million which was determined on the basis of 2% of net assets.
Further to net assets, we considered EPRA Earnings to be a critical financial
performance measure for the group and we therefore applied a lower threshold
of 5% (£4.8 million) for the specific items that impact EPRA Earnings.
Scoping Our scope has remained consistent with the prior year. We performed full
scope audit procedures across the entire group.
The audit procedures to respond to the risks of material misstatement were
performed directly by the group audit engagement team.
Significant changes
inourapproach
There were no significant changes in our approach in the current year.
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group and company’s ability to continue to adopt the
going concern basis of accounting included:
• obtaining an understanding of relevant controls over management’s process for evaluating the group
and company’s ability to continue as a going concern, including the identification and evaluation of the
financial impact of relevant business risks and the method, model and assumptions applied by
management in assessing going concern;
• obtaining an understanding of the financing facilities available to the group and the company, including
maturity dates, interest costs and financial covenants such as loan to value and interest cover ratios;
• testing the mathematical accuracy of management’s going concern model, including the recalculation
ofcurrent and forecast covenant compliance, together with the impact on covenant compliance of the
sensitivities applied;
• performing a retrospective review of management’s historical forecasting accuracy;
• challenging the key assumptions applied in management’s going concern model, including forecast
valuation movements, rental income and capital expenditure with reference to market data and other
external information;
• challenging the appropriateness of the sensitivity analysis performed by the directors, including the
‘additional stress-testing’ performed by management with reference to the forecasts, historical
performance and other external data;
• assessing the level of headroom in the forecasts with reference to both liquidity and financial covenants
such as loan to value and interest cover ratios, and in particular the level of facilities available to allow
repayment of the £150m convertible bond in cash (if required) when it matures in July 2025.
• assessing whether any additional facts or information have become available since the date
management made their assessment; and
• evaluating the appropriateness of management’s going concern disclosures.
Based on the work we have performed, we have not identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast significant doubt on the group and company’s
ability to continue as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to the directors’ statement in the financial
statements about whether the directors considered it appropriate to adopt the going concern basis
ofaccounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
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Report on the audit of the financial statements continued
5. Key audit matters continued
5.1. Estimation of property yields and rental values applied in the valuation of
investmentproperty
Key audit matter description The group primarily owns and manages a portfolio of primary healthcare
properties in the UK and Ireland. As stipulated by IAS 40 Investment
Property, the properties are remeasured to their fair value at each balance
sheet date. The portfolio is valued at £2,750.1 million as at 31 December 2024
(2023: £2,779.3 million).
The group involves professionally qualified independent external valuers to
perform the properties valuation bi-annually in accordance with Royal
Institution of Chartered Surveyors (‘RICS’) Valuation – Global Standards.
In determining the fair value of a property, assumptions for yields and rental
values are determined by considering several factors. Valuers first consider
property-specific factors, most notably the Weighted Average Unexpired
Lease Term (‘WAULT’), together with the age and specification of the asset.
These factors are then considered in combination with prevailing market
yields, comparable transactional evidence, and market sentiment in
determining property specific assumptions for yields and rental values.
The estimation of property yields and rental values is inherently subjective
and a small change in these assumptions can materially impact the valuation
of the property portfolio. We therefore consider these assumptions to
constitute a key audit matter. Furthermore, given the high level of estimation
involved, we have determined that there is potential for fraud through
possible manipulation of these inputs and therefore the valuation.
Please see the accounting policy in note 2.3 and investment property related
disclosures including the sensitivity of significant unobservable inputs in
note10 to the financial statements. The consideration of this risk by the
Audit Committee is described on page 78.
How the scope of our
auditresponded to the
keyaudit matter
We carried out the following audit procedures to address the risk associated
with the identified key audit matter:
• We obtained an understanding and tested the relevant controls established by
management to ensure the correct information is provided to the external
valuers, and to oversee and review the work performed by the external valuers.
• We assessed the competence, capabilities and objectivity of the external
valuers and read their terms of engagement with the group to determine
whether there were any matters that might affect their objectivity or may have
imposed scope limitations on their work. This included whether there had been
any change in their engagement terms in the year.
• We obtained and assessed the external valuation reports for all properties and
evaluated whether the valuation approach is consistent with the RICS
guidelines and therefore suitable for use in determining the fair value recorded
within the group’s balance sheet.
• We involved our real estate specialist to obtain an overall understanding of the
primary healthcare property markets in the UK and Ireland, and to support our
challenge of the work of the group’s external valuers. We discussed and
challenged the valuation process and assumptions used by the valuers, with a
principal focus on the yields and rental values adopted. We compared these to
publicly available information, including average yields quoted by competitors,
external evidence and (where applicable) comparable property transactions.
• We selected a sample of properties where the yields applied in the valuation
were outside our expectations, and challenged the explanations provided by
the external valuers with reference to transactional evidence or other
relevantinformation.
• To challenge the rental values, we tested the accuracy of rent reviews
completed in 2024 and compared management’s forecast rent reviews to the
rental values adopted by the external valuers. Where the valuers had
significantly increased their rental expectations, we obtained evidence to
support those changes.
• We assessed the integrity of the data provided to the external valuers. This
included tracing a sample of information provided to the external valuers to
underlying lease agreements.
• We assessed the appropriateness of the disclosures included in the Financial
Statements and considered whether the disclosures in relation to the key
estimates are reasonable.
Key observations Based on our work performed, we concluded that the assumptions applied in
relation to yields and rental values in arriving at the fair value of the group’s
investment property were appropriate.
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Report on the audit of the financial statements continued
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our audit work and in evaluating the results
ofour work.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Group financial statements Company financial statements
Materiality £27.5 million (2023: £28.5 million) and a
lower materiality of £4.8 million (2023:
£4.7 million) for balances impacting
EPRA Earnings.
£24.3 million (2023: £24.8 million)
Basis for determining
materiality
2% of net assets (2023: 2% of net assets)
The lower materiality used for balances
impacting EPRA earnings was
determined using 5% (2023: 5%) of
EPRAearnings.
2% of net assets (2023: 2% of net assets)
Rationale for the
benchmark applied
The overall level of materiality was
determined using net assets because
this is the primary focus of investors in
alisted real estate business.
In addition to net assets, we considered
EPRA Earnings to be a critical financial
performance measure for the group and
we applied a lower threshold of
£4.8million (2023: £4.7 million) for EPRA
Earnings impacting items.
The overall level of materiality was
determined using net assets as this is
determined to be the most appropriate and
stable base for setting materiality inline
with our understanding that the Company
is primarily an asset-based business.
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in
aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements
as a whole.
Group financial statements Company financial statements
Performance
materiality
70% (2023: 70%) of group materiality 70% (2023: 70%) of company materiality
Basis and rationale
fordetermining
performance
materiality
We set performance materiality at a level lower than materiality in order to
reduceto an appropriately low level the probability that the total of uncorrected
and undetected misstatements would result in material misstatement of the
financial statements.
In determining performance materiality, we considered the following factors:
• our understanding of the entity and the environment in which the entity operates;
• our risk assessment;
• our assessment of the group’s overall control environment including the degree
of centralization and common controls/processes; and
• our assessment of the nature, cause, and number of misstatements that were
accumulated in audits of the financial statements of prior periods, which has
been historically low.
NAV £1,376m Group materiality
£27.5m
Company
materiality £24.3m
Audit Committee
reporting threshold
£1.4m
Materiality for items
impacting EPRA
earnings £4.8m
Net Asset Value (“NAV”)
Group materiality
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Report on the audit of the financial statements continued
6. Our application of materiality continued
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in
excess of £1.4 million (2023: £1.4 million), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters
that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
The group was audited as a single component. Our audit scope encompassed obtaining an understanding
of the group and its environment, including group-wide controls and the financial reporting process, and
assessing the risks of material misstatement at the group level. A single audit team, led by the Senior
Statutory Auditor, performed the audit centrally at the registered office where the books and records
foreach entity within the group are maintained. For the audit of the parent company, management
deconsolidated the Group financial information to identify the relevant parent company-only balances
andtransactions such as intercompany balances.
7.2. Our consideration of the control environment
As part of our risk assessment procedures, we explicitly obtained an understanding of the control
environment which encompassed the entity’s processes and controls related to key business cycles
including the property valuations, revenue, cash, payroll, financial reporting and expenditure processes.
We performed procedures to evaluate the design and implementation of controls within these cycles.
Furthermore, where controls were deemed to have been designed and implemented effectively, we tested
the operating effectiveness of those controls to support our risk assessment and, ultimately, the nature,
timing, and extent of our substantive procedures. We placed reliance on the operating effectiveness of
controls where our assessment supported such reliance. Where we identified that control improvements
could be made, we reported these to the Audit Committee.
We note the Audit Committee’s discussion of the control environment, as presented in their report on
page79, including consideration of the changes to the UK Corporate Governance Code (through
Provision29) regarding the board’s responsibility with regards to the control environment.
7.3. Our consideration of climate related risks
The group remains committed to assessing and managing the potential impacts of climate change on its
operations and financial position. Management has undertaken an assessment of climate-related risks,
quantified potential financial impacts, and developed plans to mitigate these risks. The group continues to strive
towards its previously stated target of net zero carbon emissions by 2030 for all operational, development, and
asset management activities. Additionally, the group aims to support its occupiers in achieving net zero carbon
emissions by 2040, five years ahead of the NHS’s target of becoming the world’s first net zero carbon national
health system by 2045 and ten years ahead of the UK and Irish Governments’ target of 2050.
We considered as part of our risk assessment, the climate-related risks specific to the group, which could impact
the overall engagement risk assessment. Our audit procedures encompassed discussions with management to
understand any updates to their process for identifying, assessing, and mitigating climate-related risks, as well as
the potential impact on the financial statements. We reviewed management’s risk assessment process,
considering the potential impact of climate change on the group’s account balances and classes of transactions.
Furthermore, with the assistance of our climate change specialists, we evaluated the group’s climate-related
financial disclosures for continued alignment with the recommendations of the Task Force on Climate-Related
Financial Disclosures (TCFD) and assessed the consistency of these disclosures set out on pages 44 to 50 by the
ESG Committee in their report, with the financial statements and our understanding of the group’s operations.
8. Other information
The other information comprises the information included in the annual report, other than the financial
statements and our auditor’s report thereon. The directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information
is materially inconsistent with the financial statements, or our knowledge obtained in the course of the
audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves.
If,based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
company’s ability to continue as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the
group or the company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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Report on the audit of the financial statements continued
11. Extent to which the audit was considered capable of detecting irregularities,
includingfraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud
andnon-compliance with laws and regulations, we considered the following:
• the nature of the industry and sector, control environment and business performance including the
design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and
performance targets;
• results of our enquiries of management, those charged with governance and the Audit Committee about
their own identification and assessment of the risks of irregularities, including those that are specific to
the group’s sector;
• any matters we identified having obtained and reviewed the group’s documentation of their policies and
procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware of any
instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team and relevant internal specialists, including
real estate specialists regarding how and where fraud might occur in the financial statements and any
potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within
theorganisation for fraud and identified the greatest potential for fraud in the area of the estimation
ofproperty yields and rental values applied in the valuation of investment property. In common with
allaudits under ISAs (UK), we are also required to perform specific procedures to respond to the risk
ofmanagement override.
We also obtained an understanding of the legal and regulatory framework that the group operates in,
focusing on provisions of those laws and regulations that had a direct effect on the determination of
material amounts and disclosures in the financial statements The key laws and regulations we considered
in this context included the UK Companies Act, Listing Rules, REIT legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the
financial statements but compliance with which may be fundamental to the group’s ability to operate or to
avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified the estimation of property yields and rental values
applied in the valuation of investment property as a key audit matter related to the potential risk of fraud.
The key audit matters section of our report explains the matter in more detail and also describes the
specific procedures we performed in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on the
financial statements;
• enquiring of management, the Audit Committee and legal counsel concerning actual and potential
litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate
risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of
journal entries and other adjustments; assessing whether the judgements made in making accounting
estimates are indicative of a potential bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
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Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared
in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding of the group and the company and their environment
obtained in the course of the audit, we have not identified any material misstatements in the strategic
report or the directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the group’s compliance with the
provisions of the UK Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the Corporate Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis
of accounting and any material uncertainties identified set out on page 110;
• the directors’ explanation as to its assessment of the group’s prospects, the period this assessment
covers and why the period is appropriate set out on page 59;
• the directors’ statement on fair, balanced and understandable set out on page 79;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal
risks set out on page 54 to 58;
• the section of the annual report that describes the review of effectiveness of risk management and
internal control systems set out on page 79; and
• the section describing the work of the audit committee set out on pages 76 to 80.
14. Matters on which we are required to report by exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit
have not been received from branches not visited by us; or
• the company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’ remuneration have not been made or the part of the directors’ remuneration report to be audited
is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were re-appointed by the Board on
18October2022 to audit the financial statements for the year ending 31 December 2023 and subsequent
financial periods. The period of total uninterrupted engagement including previous renewals and
reappointments of the firm is 12 years, covering the years ending 31 December 2013 to 31 December 2024.
15.2. Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to
provide in accordance with ISAs (UK).
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Independent auditor’s report continued
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Report on other legal and regulatory requirements continued
16. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR)
4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic Format Annual Financial
Report filed on the National Storage Mechanism of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R.
This auditor’s report provides no assurance over whether the Electronic Format Annual Financial Report
has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
Daryl Winstone, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP,
Statutory Auditor
London,
United Kingdom
27 February 2025
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120
Group statement of comprehensive income
for the year ended 31 December 2024
20242023
Notes £m£m
Rental and related income
181. 7
Direct property expenses
(26.0)
(18.8)
Net rental and related income
3
155 .7
151 .0
Administrative expenses
(13 .0)
(12. 3)
Amortisation of intangible assets
(0 .9)
(0 .9)
Axis acquisition costs and JSE listing fees
—
(0.5)
Total administrative expenses
4
(1 3 .9)
(13 . 7)
Revaluation deficit on property portfolio
10
(3 8. 4)
(53.0)
Operating profit
4
103. 4
8 4.3
Finance income
5
—
0.2
Finance costs
6a
(46 .8)
(45. 2)
Early termination on bonds
(2 .0)
—
Fair value loss on derivative interest rate swaps and amortisation of hedging reserve
6b
( 7. 0)
(8. 4)
Fair value loss on convertible bond
6c
(0. 6)
(4. 8)
Profit before taxation
4 7. 0
26 .1
Taxation (charge)/credit
7
(5. 6)
1.2
Profit after taxation
1
41. 4
2 7. 3
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss
Amortisation of hedging reserve
21
2.5
4 .1
Exchange loss on translation of foreign balances
(0 .1)
(0.3)
Other comprehensive income net of tax
1
2.4
3.8
Total comprehensive income net of tax
1
43.8
3 1 .1
IFRS earnings per share
Basic
8
3 .1p
2 .0p
Diluted
8
3 .1p
2 .0p
Adjusted earnings per share
2
Basic
8
7. 0p
6.8p
Diluted
8
6. 7p
6.6p
1 Wholly attributable to equity shareholders of Primary Health Properties PLC.
2 See Glossary of terms on pages 166 to 168.
The above relates wholly to continuing operations.
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121
Group balance sheet
at 31 December 2024
20242023
Notes£m£m
Non-current assets
Investment properties
10
2 , 7 5 0 .1
2 , 7 7 9. 3
Derivative interest rate swaps
16
—
0 .9
Intangible assets
5.3
6 .2
Property, plant and equipment
0.6
0.5
2,756.0
2, 7 8 6 .9
Current assets
Properties held for sale
10
3.0
—
Trade and other receivables
11
2 7. 7
2 4 .9
Cash and cash equivalents
12
3.5
3.2
Derivative interest rate swaps
16
0.2
10.5
Developments work in progress
0 .9
1.4
35.3
40.0
Total assets
2,79 1.3
2 , 82 6 .9
Current liabilities
Deferred rental income
(3 1. 4)
(30 .4)
Trade and other payables
13
(3 0. 6)
(3 1 .7)
Borrowings: term loans and overdraft
14a
(3 . 4)
(2 .4)
Borrowings: bonds
14b
(14 8.3)
—
Derivative interest rate swaps
16
—
(6 . 7)
(2 13 .7)
(7 1. 2)
Non-current liabilities
Borrowings: term loans and overdraft
14a
(7 5 7. 2)
(6 6 4 .5)
Borrowings: bonds
14b
(4 2 9. 3)
(6 56.4)
Head lease liabilities
15
(3 . 0)
(3 .0)
Trade and other payables
13
(3 .1)
(4 .1)
Deferred tax liability
(9. 0)
(3. 8)
(1 ,201.6)
(1, 3 31. 8)
Total liabilities
(1,415 .3)
(1,4 03 .0)
Net assets
1,37 6.0
1 , 42 3 .9
20242023
Notes£m£m
Equity
Share capital
18
1 6 7. 1
1 6 7. 1
Share premium account
19
4 7 9. 4
4 7 9. 4
Merger and other reserves
20
415. 2
415.3
Hedging reserve
21
(4 .5)
(7. 0)
Retained earnings
22
31 8.8
3 6 9.1
Total equity
1
1,37 6.0
1 , 42 3 .9
Net asset value per share
IFRS net assets – basic and diluted
8
103 .0p
10 6.5p
Adjusted net tangible assets
2
– basic
8
105.0p
10 8.0p
Adjusted net tangible assets
2
– diluted
8
1 06 . 7p
1 0 9. 8p
1 Wholly attributable to equity shareholders of Primary Health Properties PLC.
2 See Glossary of terms on pages 166 to 168.
These financial statements were approved by the Board of Directors on 27 February 2025 and signed on
its behalf by:
Richard Howell
Chief Financial Officer
Registered in England Number: 3033634
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Primary Health Properties PLC Annual Report 2024
122
Group cash flow statement
for the year ended 31 December 2024
20242023
Notes £m£m
Operating activities
Profit on ordinary activities after tax
41. 4
2 7. 3
Adjustments to reconcile to operating profit before
financing costs:
Taxation charge/(credit)
7
5.6
(1. 2)
Finance income
5
—
(0. 2)
Finance costs including early termination fees
6a
4 8.8
45.2
Fair value loss on derivative interest rate swaps and
amortisation of hedging reserve
6b
7. 0
8.4
Fair value loss on convertible bond
6c
0.6
4.8
Operating profit before financing costs
103. 4
8 4.3
Adjustments to reconcile Group operating profit before
financing costs to net cash flows from operating activities:
Revaluation deficit on property portfolio
10
38.4
53.0
Axis acquisition costs and JSE listings fees
—
0.5
Amortisation of intangible assets
0 .9
0 .9
Fixed rent uplift
(0. 4)
(0 .7)
Tax (paid)
(0 .1)
(0.3)
Increase in trade and other receivables
(3. 4)
( 7. 1)
(Decrease)/increase in trade and other payables
(3 .6)
3 .0
Net cash flow from operating activities
135.2
1 33.6
Investing activities
Payments to acquire and improve investment properties
and fixed assets
(20 .6)
(3 9. 5)
Cash paid for acquisition of Axis
—
(5 .1)
Net cash flow used in investing activities
(20.6)
(4 4 . 6)
20242023
Notes £m£m
Financing activities
Term bank loan drawdowns
14
306.6
282 .4
Term bank loan repayments
14
(2 7 8 .9)
(30 0 .0)
Proceeds from bond issues
14
—
41 .2
Loan/bond arrangement and early termination fees
(3 .8)
(1.8)
Purchase of derivative financial instruments
—
(1 .9)
Net interest paid and similar charges
(4 6 .1)
(4 5. 3)
Equity dividends paid
9
(9 2 .1)
(8 9. 5)
Net cash flow from financing activities
(114 .3)
(1 1 4 .9)
Decrease in cash and cash equivalents for the year
0.3
(2 5 .9)
Cash and cash equivalents at start of year
3.2
2 9. 1
Cash and cash equivalents at end of year
12
3.5
3.2
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Primary Health Properties PLC Annual Report 2024
123
Group statement of changes in equity
for the year ended 31 December 2024
Merger
ShareShareand otherHedgingRetained
capitalpremiumreservesreserveearningsTotal
£m£m£m£m£m£m
1 January 2024
1 6 7. 1
4 7 9. 4
415. 3
(7. 0 )
3 6 9.1
1, 42 3 .9
Profit for the year
—
—
—
—
41.4
41. 4
Other comprehensive
income
Amortisation of hedging
reserve
—
—
—
2.5
—
2.5
Exchange loss on translation
of foreign balances
—
—
(0 .1)
—
—
( 0 .1 )
Total comprehensive income
—
—
(0 .1 )
2.5
41.4
43.8
Share-based awards (“LTIP”)
—
—
—
—
0.4
0. 4
Dividends paid
—
—
—
—
(92. 1 )
(92. 1 )
31 December 2024
1 6 7. 1
4 7 9. 4
415. 2
(4. 5)
318.8
1,376.0
Merger
ShareShareand otherHedgingRetained
capitalpremiumreservesreserveearningsTotal
£m£m£m£m£m£m
1 January 2023
1 6 7. 1
4 7 9. 4
416. 7
( 11 .1 )
4 3 0 .1
1,482.2
Profit for the year
—
—
—
—
2 7. 3
2 7. 3
Other comprehensive
income
Amortisation of hedging
reserve
—
—
—
4 .1
—
4 .1
Exchange (loss)/gain on
translation of foreign
balances
—
—
(1.4 )
—
1 .1
(0 .3 )
Total comprehensive income
—
—
(1. 4 )
4 .1
28. 4
3 1 .1
Share-based awards (“LTIP”)
—
—
—
—
0 .1
0 .1
Dividends paid
—
—
—
—
( 8 9. 5 )
( 8 9. 5 )
31 December 2023
1 6 7. 1
4 7 9. 4
415. 3
(7. 0 )
3 6 9.1
1, 42 3 .9
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Primary Health Properties PLC Annual Report 2024
124
Notes to the financial statements
1. Corporate information
The Group’s financial statements for the year ended 31 December 2024 were approved by the Board
of Directors on 27 February 2025 and the Group Balance Sheet was signed on the Board’s behalf by
the Chief Financial Officer, Richard Howell. Primary Health Properties PLC is a public limited company
incorporated in England and Wales and domiciled in the United Kingdom, limited by shares. The Company’s
Ordinary Shares are admitted to the Official List of the UK Listing Authority, a division of the Financial
Conduct Authority, and traded on the London Stock Exchange.
2. Accounting policies
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with UK adopted international
accounting standards in conformity with the requirements of the Companies Act 2006 and with
International Financial Reporting Standards (“IFRS”) as issued by the IASB. The Group’s financial
statements have been prepared on the historical cost basis, except for investment properties, including
investment properties under construction and land, the convertible bond and derivative financial instruments
that have been measured at fair value. The Group’s financial statements are prepared on the going
concern basis (see page 110 for further details) and presented in sterling rounded to the nearest million.
Statement of compliance
The consolidated financial statements for the Group have been prepared in accordance with United
Kingdom-adopted International Accounting Standards and applied in accordance with the Companies Act 2006.
2.2 Standards adopted during the year
The accounting policies adopted are consistent with those of the previous financial year except for the
following new and amended IFRSs effective for the Group as of 1 January 2024.
Amendments to IAS 1 Non-current liabilities with covenants
On 31 October 2022, the IASB issued Non-current liabilities with covenants (Amendments to IAS 1) to
clarify how conditions with which an entity must comply within twelve months after the reporting period
affect the classification of a liability. Under the amendments to the standard, the classification of certain
liabilities as current or non-current may change and companies may need to provide new disclosures for
liabilities subject to covenants.
Amendments to IFRS 16 Lease liability in a sale and leaseback
On 22 September 2022, the IASB issued Lease liability in a sale and leaseback (Amendments to IFRS 16)
with amendments that clarify how a seller-lessee subsequently measures sale and leaseback transactions
that satisfy the requirements in IFRS 15 to be accounted for as a sale.
None of the above have had a significant effect on the consolidated financial statements of the Group.
2.3 Summary of significant accounting policies
Basis of consolidation
The Group’s financial statements consolidate the financial statements of Primary Health Properties PLC
and its wholly owned subsidiary undertakings. Subsidiaries are consolidated from the date of their
acquisition, being the date on which the Group obtained control, and continue to be consolidated until
the date that such control ceases. Control is exercised if and only if an investor has all the following:
power over an investee; exposure, or rights, to variable returns from its involvement with the investee; and
the ability to use its power over the investee to affect the amount of the investor’s returns. The financial
statements of the subsidiary undertakings are prepared for the accounting reference period ending
31 December each year using consistent accounting policies. All intercompany balances and transactions,
including unrealised profits arising from them, are eliminated on consolidation.
The individual financial statements of Primary Health Properties PLC and each of its subsidiary
undertakings will be prepared under FRS 101. The use of IFRSs at Group level does not affect the
distributable reserves available to the Group.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment of business, being
investment property in the United Kingdom and Ireland leased principally to GPs, government healthcare
organisations and other associated healthcare users.
Foreign currency transactions
Each Group company presents its individual financial statements in its functional currency. The functional
currency of all UK subsidiaries (with the exception of PHP Euro Private Placement Limited and MXF
Properties Ireland Limited which operate in euros) is sterling and the functional currency of Primary
Health Properties ICAV and Axis Real Estate Group, our Irish domiciled subsidiaries, is the euro.
Transactions in currencies other than an individual entity’s functional currency (“foreign currencies”) are
recognised at the applicable exchange rate ruling on the transaction date. Exchange differences resulting
from settling these transactions, or from retranslating monetary assets and liabilities denominated in
foreign currencies, are included in the Group Statement of Comprehensive Income.
Foreign operations
In preparing the Group’s consolidated financial statements, the assets and liabilities of foreign entities are
translated into sterling at exchange rates prevailing on the balance sheet date. The income, expenses and cash
flows of a foreign entity are translated at the average exchange rate for the period, unless exchange rates
fluctuate significantly during the period, in which case the exchange rates at the date of transactions are used.
The exchange rates used to translate foreign currency amounts in 2024 are as follows:
• Group Balance Sheet: £1 = €1.209 (2023: €1.15355).
• Group Statement of Comprehensive Income: £1 = €1.18153 (2023: €1.15977).
Investment properties and investment properties under construction
The Group’s investment properties are held for long term investment. Investment properties and those
under construction are initially measured at cost, including transaction costs. Subsequent to initial
recognition, investment properties and investment properties under construction are stated at fair value
based on market data and a professional valuation made as of each reporting date. The fair value of
investment property does not reflect future capital expenditure that will improve or enhance the property
and does not reflect future benefits from this future expenditure.
Gains or losses arising from changes in the fair value of investment properties and investment properties under
construction are included in the Group Statement of Comprehensive Income in the year in which they arise.
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Primary Health Properties PLC Annual Report 2024
125
Notes to the financial statements continued
2. Accounting policies continued
2.3 Summary of significant accounting policies continued
Investment properties and investment properties under construction continued
Investment properties are recognised on acquisition upon completion of contract, which is when control of
the asset passes to the Group. Investment properties cease to be recognised when control of the property
passes to the purchaser, which is upon completion of the sales contract. Any gains and losses arising are
recognised in the Group Statement of Comprehensive Income in the year of disposal.
All costs associated with the purchase and construction of investment properties under construction
are capitalised including attributable interest and staff costs. Interest is calculated on the expenditure by
reference to the average rate of interest on the Group’s borrowings. When properties under construction
are completed, the capitalisation of costs ceases and they are reclassified as investment properties.
The Group may enter into a forward funding agreement with third-party developers in respect of certain
properties under development. In accordance with these agreements, the Group will make monthly stage
payments to the developer based on certified works on site at that time. Interest is charged to the developer
on all stage payments made during the construction period and on the cost of the land acquired by the
Group at the outset of the development and taken to the Group Statement of Comprehensive Income in
the year in which it accrues.
Property acquisitions and business combinations
Where a property is acquired through the acquisition of corporate interests, the Board considers the
substance of the assets and activities of the acquired entity in determining whether the acquisition
represents the acquisition of a business.
Where properties are acquired through the purchase of a corporate entity but the transaction does not
meet the definition of a business combination under IFRS 3, the purchase is treated as an asset acquisition.
Where the acquisition is considered a business combination, the excess of the consideration transferred
over the fair value of assets and liabilities acquired is held as goodwill, initially recognised at cost with
subsequent impairment assessments completed at least annually. Where the initial calculation of goodwill
arising is negative, this is recognised immediately in the Group Statement of Comprehensive Income.
Rather, the cost to acquire the corporate entity is allocated between the identifiable assets and liabilities
of the entity based on their relative fair values on the acquisition date. Accordingly, no goodwill or
additional deferred taxation arises. Where any excess of the purchase price of business combinations over
the fair value of the assets, liabilities and contingent liabilities is acquired, goodwill is recognised. This is
recognised as an asset and is reviewed for impairment at least annually. Any impairment is recognised
immediately in the Group Statement of Comprehensive Income.
Gains on sale of properties
Gains on sale of properties are recognised on the completion of the contract, and are calculated by
reference to the carrying value at the end of the previous reporting period, adjusted for subsequent capital
expenditure and sale costs.
Net rental income
Rental income arising from operating leases on investment properties is accounted for on a straight line
basis over the lease term. An adjustment to rental income is recognised from the rent review date of each
lease in relation to unsettled rent reviews. Such adjustments are accrued at 100% (2023: 100%) of the
additional rental income that is expected to result from the review. For leases which contain fixed or
minimum deemed uplifts, the rental income is recognised on a straight line basis over the lease term.
Incentives for lessees to enter into lease agreements are spread evenly over the lease terms, even if the
payments are not made on such a basis. Rental income is measured at the fair value of the consideration
receivable, excluding discounts, rebates, VAT and other sales taxes or duty. Net rental income is the rental
income receivable in the period after payment of direct property costs.
Interest income
Interest income is recognised as interest accrues, using the effective interest method (that is, the rate that
exactly discounts estimated future cash receipts through the expected life of the financial instrument to
the net carrying amount of the financial asset).
Financial instruments under IFRS 9
Trade receivables
Trade receivables are recognised at their transaction price and carried at amortised cost as the Group’s
business model is to collect the contractual cash flows due from tenants which are solely the payment of
principal and interest. A loss allowance is made based on the expected credit loss model which reflects
the Group’s historical credit loss experience over the past three years but also reflects the lifetime
expected credit loss.
Cash and cash equivalents
Cash and cash equivalents are defined as cash and short term deposits, with an original maturity of three
months or less, measured at amortised cost.
Trade and other payables
Trade payables are initially recognised at fair value and subsequently measured at amortised cost
inclusive of any VAT that may be applicable.
Bank loans and borrowings
All loans and borrowings are initially measured at fair value less directly attributable transaction costs.
After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised
cost, using the effective interest method.
The interest due and unpaid is accrued at the end of the year and presented as a current liability within
trade and other payables.
Borrowing costs
Borrowing costs that are separately identifiable and directly attributable to the acquisition or construction
of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are
capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and other costs the Group incurs in
connection with the borrowing of funds.
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Primary Health Properties PLC Annual Report 2024
126
Notes to the financial statements continued
2. Accounting policies continued
2.3 Summary of significant accounting policies continued
Financial instruments under IFRS 9 continued
Convertible bond
The convertible bond is designated as “at fair value through profit or loss” and so is presented on the
Group Balance Sheet at fair value with all gains and losses, including the write-off of issuance costs,
recognised in the Group Statement of Comprehensive Income. The fair value of the convertible bond is
assessed in accordance with level 1 valuation techniques as set out within “Fair value measurements”
within these accounting policies. The interest charge in respect of the coupon rate on the bond has been
recognised within the underlying component of net financing costs on an accruals basis. Refer to Note 14b
for further details. The amount of the change in fair value of the financial liability designated at fair value
through profit or loss that is attributable to changes in credit risk will be recognised in other
comprehensive income.
De-recognition of financial assets and liabilities
Financial assets
A financial asset (or where applicable a part of a financial asset or part of a group of similar financial
assets) is de-recognised where:
• the rights to receive cash flows from the asset have expired; or
• the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay
them in full without material delay to a third party under a “pass-through” arrangement; or
• the Group has transferred its right to receive cash flows from the asset and either: (a) has transferred
substantially all the risks and rewards of the asset; or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset; or
• the cash flows are significantly modified.
Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred
nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement
that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Group could be required
to repay.
Financial liabilities
A financial liability is de-recognised when the obligation under the liability is discharged or cancelled
or expires.
Where an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a de-recognition of the original liability and the recognition of a new liability, and the difference
in the respective carrying amounts is recognised in profit or loss.
When the exchange or modification of an existing financial liability is not accounted for as an
extinguishment, any costs or fees incurred adjust the liability’s carrying amount and are amortised
over the modified liability’s remaining term and any difference in the carrying amount after modification
is recognised as a modification gain or loss.
Hedge accounting
At the inception of a transaction the Group documents the relationship between hedging instruments and
hedged items, as well as its risk management objectives and strategy for undertaking various hedging
transactions. The Group also documents its assessment, both at inception and on an ongoing basis.
For cash flow hedging, the Group monitors the hedging instrument to check it continues to meet the
criteria of IAS 39, having applied the practical expedient on transition, for being described as “highly
effective” in offsetting changes in the fair values or cash flows of hedged items.
For net investment hedge relationships, the Group monitors the hedging instrument to check it continues
to meet the criteria of IAS 39 for being described as “highly effective”.
Derivative financial instruments (the “derivatives”)
The Group uses interest rate swaps to help manage its interest rate risk.
All interest rate derivatives are initially recognised at fair value at the date the derivative is entered into
and are subsequently remeasured at fair value. The fair values of the Group’s interest rate swaps are
calculated by Chatham (formally JCRA), an independent specialist which provides treasury management
services to the Group.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as
an effective hedging instrument:
• Where a derivative is designated as a hedge of the variability of a highly probable forecast transaction,
such as an interest payment, the element of the gain or loss on the derivative that is an “effective”
hedge is recognised directly in equity. When the forecast transaction subsequently results in the
recognition of a financial asset or a financial liability, the associated gains or losses that were
recognised directly in the cash flow hedging reserve are reclassified into the Group Statement
of Comprehensive Income in the same period or periods during which the asset acquired or liability
assumed affects the Group Statement of Comprehensive Income, i.e. when interest income or expense
is recognised.
• The gain or loss on derivatives that do not meet the strict criteria for being “effective” and so do
not qualify for hedge accounting and the non-qualifying element of derivatives that do qualify for
hedge accounting are recognised in the Group Statement of Comprehensive Income immediately.
The treatment does not alter the fact that the derivatives are economic hedges of the
underlying transaction.
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Primary Health Properties PLC Annual Report 2024
127
Notes to the financial statements continued
2. Accounting policies continued
2.3 Summary of significant accounting policies continued
De-recognition of financial assets and liabilities continued
Derivative financial instruments (the “derivatives”) continued
For swaps that have been cancelled which previously qualified for hedge accounting, the remaining value
within the cash flow hedging reserve at the date of cancellation is recycled to the Group Statement of
Comprehensive Income on a straight line basis from the date of cancellation to the original swap expiry
date where the hedged transaction is still expected to occur. If the swaps have been cancelled and the
hedged transaction is no longer expected to occur, the amount accumulated in the hedging reserve is
reclassified to profit and loss immediately.
Tax
Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and
deferred tax. Taxation is recognised in the Group Statement of Comprehensive Income except to the extent
that it relates to items recognised as direct movements in equity, in which case it is also recognised as
a direct movement in equity.
Current tax is the expected tax payable on any non-REIT taxable income for the period, using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect
of previous years.
Fair value measurements
The Group measures certain financial instruments, such as derivatives, the Group’s convertible bond and
non-financial assets such as investment property, at fair value at the end of each reporting period. Also,
fair values of financial instruments measured at amortised cost are disclosed in the financial statements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. The fair value measurement is based
on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• in the principal market for the asset or liability; or
• in the absence of a principal market, in the most advantageous market for the asset or liability.
The Group must be able to access the principal or the most advantageous market at the
measurement date.
The fair value of an asset or liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to
generate economic benefits using the asset in its highest and best use or by selling it to another market
participant that would use the asset in its highest and best use.
The Group uses valuation techniques at three levels that are appropriate in the circumstances and for
which sufficient data is available to measure fair value, maximising the use of relevant observable inputs
and minimising the use of unobservable inputs significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable.
Level 3: Valuation techniques for which the lowest input that is significant to the fair value measurement
is unobservable.
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group
determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation
at the end of each reporting period.
Leases – Group as a lessor
The vast majority of the Group’s properties are leased out under operating leases and are included within
investment properties. Rental income, including the effect of lease incentives, is recognised on a straight
line basis over the lease term.
Where the Group transfers substantially all the risks and benefits of ownership of the asset, the
arrangement is classified as a finance lease and a receivable is recognised for the initial direct costs
of the lease and the present value of the minimum lease payments. Finance income is recognised in the
Group Statement of Comprehensive Income so as to achieve a constant rate of return on the remaining
net investment in the lease. Interest income on finance leases is restricted to the amount of interest
actually received.
Employee costs
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans are charged to the Group Statement
of Comprehensive Income as incurred.
Share-based employee remuneration
The fair value of equity-settled share-based payments to employees is determined with reference to the
fair value of the equity instruments at the date of grant and is expensed on a straight line basis over the
vesting period, based on the Group’s estimate of shares or options that will eventually vest. The fair value
of awards is equal to the market value at grant date.
Capitalised salaries
Certain internal staff and associated costs directly attributable to the management of major projects
are capitalised. Internal staff costs are capitalised from the start of the project until the date of
practical completion.
Properties held for sale
Investment property (and disposal groups) classified as held for sale are measured at fair value consistent
with other investment properties.
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Primary Health Properties PLC Annual Report 2024
128
Notes to the financial statements continued
2. Accounting policies continued
2.3 Summary of significant accounting policies continued
Properties held for sale continued
Investment property and disposal groups are classified as held for sale if their carrying amount will be
recovered through a sale transaction rather than through continuing use. This condition is regarded as met
only when the sale is highly probable, and the asset (or disposal group) is available for immediate sale in
its present condition. Management must be committed to the sale which should be expected to qualify
for recognition as a completed sale within one year from the date of classification.
Capitalised costs
A capitalised cost is an expense added to the cost basis of a fixed asset on the balance sheet. Capitalised
costs are incurred when purchasing fixed assets following the matching principle of accounting to record
expenses in the same period as related revenues or useful life of an asset. The historical costs are
recorded on the balance sheet and depreciated over the useful life of an asset.
Intangible assets
Contract-based intangible assets comprise the value of customer contracts arising on business
combinations. Intangible assets arising on business combinations are initially recognised at fair value.
Intangible assets arising on business combinations are amortised on a straight line basis to the Group
Statement of Comprehensive Income over their expected useful lives, and are carried at amortised
historical cost.
2.4 Significant accounting estimates and judgements
The preparation of the Group financial statements requires management to make a number of estimates
and judgements that affect the reported amounts of assets and liabilities and may differ from future
actual results. The estimates and judgements that are considered most critical and that have a significant
inherent risk of causing a material adjustment to the carrying amounts of assets and liabilities are:
a) Estimates
Fair value of investment properties
Investment properties include: (i) completed investment properties; and (ii) investment properties under
construction. Completed investment properties comprise real estate held by the Group or leased by the
Group under a finance lease in order to earn rental income or for capital appreciation, or both. Investment
properties under construction are not material and therefore there is no estimation uncertainty.
The fair market value of a property is deemed by the independent property valuer appointed by the Group
to be the estimated amount for which a property should exchange, on the date of valuation, in an arm’s
length transaction. Properties have been valued on an individual basis, assuming that they will be sold
individually over time. Allowances are made to reflect the purchaser’s costs of professional fees and stamp
duty and tax.
In accordance with RICS Appraisal and Valuation Standards, factors taken into account are current market
conditions, annual rentals, state of repair, ground stability, contamination issues and fire and health and
safety legislation. Refer to Note 10 of the financial statements which includes further information on the
fair value assumptions and sensitivities.
Fair value of derivatives
In accordance with IFRS 9, the Group values its derivative financial instruments at fair value. Fair value is
estimated by Chatham on behalf of the Group, using a number of assumptions based upon market rates
and discounted future cash flows. The derivative financial instruments have been valued by reference to
the mid price of the yield curve prevailing on 31 December 2024. Fair value represents the net present
value of the difference between the cash flows produced by the contracted rate and the valuation rate.
Refer to Note 16 of the financial statements.
b) Judgements
In the process of applying the Group’s accounting policies, which are described above, the Directors do not
consider there to be significant judgements applied with regard to the policies adopted.
2.5 Standards issued but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following new
and revised IFRSs that have been issued but are not yet effective and in some cases have not yet been
adopted by the UK:
• amendments to IAS 21 Lack of exchangeability;
• amendments to SASB standards;
• amendments to the classification and measurement of financial instruments (amendments to IFRS 9
and IFRS 7); and
• amendments to IFRS 18 Presentation and disclosures in financial statements.
A number of new standards and amendments to standards and interpretations are effective for annual
periods beginning on or after 1 January 2025, but are not yet applicable to the Group and have not been
applied in preparing these consolidated financial statements. None of these are expected to have a
significant effect on the consolidated financial statements of the Group.
3. Rental and related income
Revenue comprises rental income receivable on property investments in the UK and Ireland, which is
exclusive of VAT, plus facilities and properties management income. Revenue is derived from one reportable
operating segment, with £139.8 million and £14.1 million of contracted rent roll derived from the UK and
Ireland respectively. Details of the lease income are given below.
Group as a lessor
a) The future minimum lease payments under non-cancellable operating leases receivable by the Group are
as follows:
Less than One to Two to Three to Four to More than
one year two years three years four years five years five years Total
£m £m £m £m £m £m £m
2024
146.3
139.0
131.3
123.8
113.6
773.2
1,427.2
2023
145.0
139.9
135.4
128.0
120.7
862.8
1,531.8
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
129
Notes to the financial statements continued
3. Rental and related income continued
Group as a lessor continued
b) The rental income earned on operating leases is recognised on a straight line basis over the lease term.
The Group leases medical centres to GPs, NHS organisations, the HSE in Ireland and other healthcare
users, typically on long term occupational leases which provide for regular reviews of rent on an effectively
upwards-only basis.
4. Group operating profit
Operating profit is stated after charging administrative expense of £13.0 million (31 December 2023: £12.3 million)
and amortisation of intangible assets of £0.9 million (31 December 2023: £0.9 million). Administrative expenses as
a proportion of rental and related income were 7.2% (31 December 2023: 7.2%). The Group’s EPRA cost ratio has
increased to 10.8%, compared to 10.7% for the same period in 2023.
Administrative expenses include staff costs of £7.9 million (31 December 2023: £7.5 million).
In 2023 PHP acquired Axis, an Irish property management business. In the period Axis contributed £11.3 million
(2023: £5.7 million) of related income and incurred direct property expenses of £9.2 million (2023: £3.9 million),
contributing £2.1 million (2023: £1.8 million) of net related income. After the deduction of £0.9 million (2023:
£0.7 million) of administrative expenses Axis generated an operating profit of £1.2 million (2023: £1.1 million).
Group operating profit is stated after charging:
2024 2023
£m £m
Administrative expenses including:
Staff costs (Note 4a)
7.9
7.5
Directors’ fees
0.5
0.4
Audit fees
Fees payable to the Company’s auditor and its associates for the audit
of the Company’s annual accounts
0.5
0.5
Fees payable to the Company’s auditor and its associates for the audit
of the Company’s subsidiaries
0.1
0.1
Total audit fees
0.6
0.6
Total audit and assurance services
0.6
0.6
Non-audit fees
Fees payable to the Company’s auditor and its associates for the
interim review
0.1
0.1
Advisory services
—
—
Total non-audit fees
0.1
0.1
Total fees
0.7
0.7
Please refer to page 80 of the Audit Committee Report for analysis of non-audit fees.
a) Staff costs
2024 2023
£m £m
Wages and salaries
8.0
7.9
Less staff costs capitalised in respect of development and asset
management projects
(1.7)
(1.5)
Social security costs
0.7
0.7
Pension costs
0.3
0.3
Equity-settled share-based payments
0.6
0.1
7.9
7.5
In addition to the above, there were £0.9 million (31 December 2023: £0.9 million) of direct salaries
recognised within property costs for Axis employees. The Group operates a defined contribution
pension scheme for all employees. The Group contribution to the scheme during the year was £0.3 million
(2023: £0.3 million), which represents the total expense recognised through the Group Statement of
Comprehensive Income. As at 31 December 2024, there were no contributions (2023: £nil) due in respect
of the reporting period that had not been paid over to the plan.
The average monthly number of Group employees during the year was 60 which included 55 full-time and
five part-time employees (2023: 62 which included 60 full time and two part time), and as at 31 December
2024 was 60 (2023: 58). In addition to this, the average number of employees in the Axis team during the
year was 28 (2023: 27), with 27 (2023: 28) employees as at 31 December 2024.
The Executive Directors and Non-executive Directors are the key management personnel. Full disclosure of
Directors’ emoluments, as required by the Companies Act 2006, can be found in the Remuneration Report
on pages 87 to 107.
The Group’s equity-settled share-based payments comprise the following:
Scheme
Fair value measure
Long Term Incentive Plan (“LTIP”)
Face value at grant date
Save As You Earn (“SAYE”)
Face value at grant date
The Group expenses an estimate of how many shares are likely to vest based on the market price at the
date of grant, taking account of expected performance against the relevant performance targets and
service periods, which are discussed in further detail in the Remuneration Report.
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Primary Health Properties PLC Annual Report 2024
130
Notes to the financial statements continued
5. Finance income
2024 2023
£m £m
Interest income on financial assets
Development loan interest
—
0.2
—
0.2
6. Finance costs
2024 2023
£m £m
Interest expense and similar charges on financial liabilities
a) Interest
Bank loan interest
29.5
27.4
Swap interest
(5.0)
(4.6)
Bond interest
20.5
20.0
Bank facility non-utilisation fees
2.2
2.2
Bank charges and loan arrangement fees
3.2
3.3
50.4
48.3
Interest capitalised
(0.6)
(0.1)
49.8
48.2
Amortisation of MedicX debt MtM on acquisition
(3.0)
(3.0)
46.8
45.2
2024 2023
£m £m
b) Derivatives
Net fair value loss on interest rate swaps
4.5
4.3
Amortisation of cash flow hedging reserve
2.5
4.1
7.0
8.4
The fair value movement on derivatives recognised in the Group Statement of Comprehensive Income has
arisen from the interest rate swaps for which hedge accounting does not apply.
2024 2023
£m £m
c) Convertible bond
Fair value loss on existing convertible bond
0.6
4.8
0.6
4.8
The fair value movement in the convertible bond is recognised in the Group Statement of Comprehensive
Income within profit before taxation and is excluded from the calculation of EPRA earnings and EPRA NTA.
Refer to Note 14 for further details about the convertible bonds.
2024 2023
£m £m
Net finance costs
Finance income (Note 5)
—
0.2
Finance costs (as per above)
(50.4)
(48.3)
(50.4)
(48.1)
Interest capitalised
0.6
0.1
(49.8)
(48.0)
Amortisation of MedicX debt MtM on acquisition
3.0
3.0
(46.8)
(45.0)
7. Taxation
a) Taxation charge in the Group Statement of Comprehensive Income
The taxation charge is made up as follows:
2024 2023
£m £m
Current tax
UK corporation tax
—
—
Irish corporation tax
—
0.1
Deferred tax on Irish activities
5.6
(1.3)
Total tax charge/(credit)
5.6
(1.2)
The UK corporation tax rate of 25% (2023: 25%) and the Irish corporation tax rate of 19% (2023: 19%)
have been applied in the measurement of the Group’s UK and Ireland related activities tax liability at
31 December 2024.
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Primary Health Properties PLC Annual Report 2024
131
Notes to the financial statements continued
7. Taxation continued
b) Factors affecting the tax charge for the year
The tax assessed for the year is lower than (2023: lower than) the standard rate of corporation tax
in the UK. The differences are explained below:
2024 2023
£m £m
Profit on ordinary activities before taxation
47.0
26.1
Standard tax at UK corporation tax rate of 25% (2023: 23.5%)
11.8
6.1
REIT exempt income
(17.1)
(16.5)
Transfer pricing adjustment
9.0
8.5
Fair value loss on convertible bond
0.1
0.5
Non-taxable items
0.2
0.8
Losses brought forward utilised
0.9
0.1
Difference in Irish tax rates
0.7
(0.7)
Taxation charge/(credit) (Note 7a)
5.6
(1.2)
The UK REIT rules exempt the profits of the Group’s property rental business from corporation tax.
c) Basis of taxation
The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt
the profits of the Group’s property rental business from corporation tax. Gains on properties are also exempt
from tax, provided they are not held for trading or sold in the three years post completion of development.
The corporation tax rate for the Group as at 31 December 2024 was 25% (2023: 25%). The effective rate
during the year was 25% (2023: 23.5%) as the rate for the whole year remained at 25% (2023: 23.5% –
January to April 19%, 1 April 25%).
Acquired companies are effectively converted to UK REIT status from the date on which they become
a member of the Group.
As a UK REIT, the Company is required to pay Property Income Distributions (“PIDs”) equal to at least
90% of the Group’s rental profit calculated by reference to tax rules rather than accounting standards.
To remain as a UK REIT there are a number of conditions to be met in respect of the principal company of
the Group, the Group’s qualifying activities and the balance of its business. The Group remains compliant
as at 31 December 2024.
The Group’s activities in Ireland are conducted via Irish companies, a Guernsey company and an Irish
Collective Asset Vehicle (“ICAV”). The Irish companies pay Irish corporation tax on trading activities and
deferred tax is calculated on the increase in capital values. The Guernsey company pays tax on its net
rental income. The ICAV does not pay any Irish corporation tax on its profits but a 20% withholding tax
is paid on distributions to owners.
8. Earnings per share
Performance measures
In the tables below, we present earnings per share and net assets per share calculated in accordance with
IFRSs, together with our own adjusted measure and certain measures defined by the European Public Real
Estate Association (“EPRA”), which have been included to assist comparison between European property
companies. Two of the Group’s key financial performance measures are adjusted earnings per share and
adjusted net tangible assets per share.
Adjusted earnings, which is a tax adjusted measure of revenue profit, is the basis for the calculation
of adjusted earnings per share. We believe adjusted earnings and adjusted earnings per share provide
further insight into the results of the Group’s operational performance to stakeholders as they focus on
the net rental income performance of the business and exclude capital and other items which can vary
significantly from year to year.
Earnings per share
2024
2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
earnings earnings earnings earnings earnings earnings
£m £m £m £m £m £m
Profit after taxation
41.4
41.4
41.4
27. 3
27.3
27.3
Adjustments to remove:
Revaluation deficit
on property portfolio
—
38.4
38.4
—
53.0
53.0
Fair value movement
on derivatives
—
7.0
7.0
—
8.4
8.4
Fair value movement
and issue costs on
convertible bond
—
0.6
0.6
—
4.8
4.8
Taxation charge/(credit)
—
5.6
5.6
—
(1.2 )
(1.2 )
JSE listing fees
—
—
—
—
0.2
0.2
Amortisation of
intangible assets
—
0.9
0.9
—
0.9
0.9
Axis acquisition costs
—
—
—
—
0.3
0.3
Early termination fees on
bonds
—
2.0
2.0
—
—
—
Amortisation of MtM loss
on debt acquired
—
(3 .0 )
—
—
(3 . 0 )
—
Basic earnings
41.4
92.9
95.9
27.3
90.7
93.7
Dilutive effect of
convertible bond
—
4.3
4.3
—
4.3
4.3
Diluted earnings
41.4
97.2
100.2
27. 3
95.0
98.0
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Primary Health Properties PLC Annual Report 2024
132
Notes to the financial statements continued
8. Earnings per share continued
Number of shares
2024 weighted average
2023 weighted average
million
million
million
million
million
million
Ordinary Shares
1,336.5
1,336.5
1,336.5
1,336.5
1,336.5
1,336.5
Dilutive effect of
convertible bond
—
119.4
119.4
—
113.9
113.9
Diluted Ordinary Shares
1,336.5
1,455.9
1,455.9
1,336.5
1,450.4
1,450.4
Profit/(loss) per share attributable to shareholders:
2024
2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
Basic
3.1
7.0
7.2
2.0
6.8
7.0
Diluted
3.1
6.7
6.9
2.0
6.6
6.8
In the years ended 31 December 2024 and 31 December 2023 the effect of the convertible bond has been
excluded from the diluted profit and weighted average diluted number of shares when calculating IFRS
diluted profit per share because they are anti-dilutive.
Net assets per share
31 December 2024
31 December 2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
Net assets attributable
to shareholders
1,376.0
1,376.0
1,376.0
1,423.9
1,423.9
1,423.9
Derivative interest rate
swaps liability
—
(0 .2 )
(0 .2 )
—
(4 .7 )
(4 .7 )
Deferred tax
—
9.0
9.0
—
3.8
3.8
Intangible assets
—
(5.3 )
(5 .3 )
—
(6 . 2 )
(6 . 2 )
Cumulative convertible
bond fair value movement
—
(1. 7 )
(1.7 )
—
(2 .3 )
(2. 3 )
MtM on MedicX debt net
of amortisation
—
25.4
—
—
28.5
—
Net tangible assets (“NTA”)
1,376.0
1,403.2
1,37
7.8
1,423.9
1,443.0
1,414.5
Intangible assets
—
—
5.3
—
—
6.2
Real estate transfer taxes
—
—
181.4
—
—
184.4
31 December 2024
31 December 2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
Net reinstatement
value (“NRV”)
1,376.0
1,403.2
1,564.5
1,423.9
1,443.0
1,605.1
Fixed rate debt and swap
MtM value
—
—
149.3
—
—
137.0
Deferred tax
—
—
( 9. 0 )
—
—
(3. 8 )
Cumulative convertible
bond fair value movement
—
—
1.7
—
—
2.3
Real estate transfer taxes
—
—
(181. 4 )
—
—
(184 .4 )
Net disposal value (“NDV”)
1,376.0
1,403.2
1,525.1
1,423.9
1,443.0
1,556.2
Ordinary Shares
31 December 2024
31 December 2023
million
million
million
million
million
million
Issued share capital
1,336.5
1,336.5
1,336.5
1,336.5
1,336.5
1,336.5
Basic net asset value per share
1
31 December 2024
31 December 2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
Net tangible assets (“NTA”)
103.0
105.0
103.1
106.5
108.0
105.8
Net reinstatement value
(“NRV”)
—
—
117.1
—
—
120.1
Net disposal value (“NDV”)
—
—
114.1
—
—
116.4
1 The above are calculated on a “basic” basis without the adjustment for the impact of the convertible bond which is shown in
the diluted basis table below.
Diluted net asset value per share
2
31 December 2024 31 December 2023
IFRS Adjusted EPRA IFRS Adjusted EPRA
pence pence pence pence pence pence
Net tangible assets (“NTA”)
104.8
106.7
103.1
108.5
109.8
105.8
Net reinstatement value
(“NRV”)
—
—
117.1
—
—
120.1
Net disposal value (“NDV”)
—
—
114.1
—
—
116.4
2 The Company assesses the dilutive impact of the unsecured convertible bond, issued by the Group on 15 July 2019, on its net
asset value per share with a current exchange price of 125.64 pence (31 December 2023: 131.72 pence). This effect is
anti-dilutive, with both basic and diluted IFRS NTA presented as equal on the balance sheet.
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Primary Health Properties PLC Annual Report 2024
133
Notes to the financial statements continued
8. Earnings per share continued
Diluted net asset value per share continued
Conversion of the convertible bond would result in the issue of 119.4 million (31 December 2023:
113.9 million)
new Ordinary Shares. The IFRS net asset value and EPRA NDV would increase by £148.3 million
(31 December 2023:
£147.7 million) and the EPRA NTA, adjusted NTA and EPRA NRV would increase by
£150.0 million (31 December 2023: £150.0 million). The resulting diluted net asset values per share are
anti-dilutive to all measures and are set out in the table above.
In accordance with IAS 33 Earnings per share the Company is required to assess and disclose the dilutive
impact of the contingently issuable shares within the convertible bond. The impact is not recognised where
it is anti-dilutive.
Headline earnings per share
The JSE listing conditions require the calculation of headline earnings (calculated in accordance with
Circular 1/2021 – Headline Earnings as issued by the South African Institute of Chartered Accountants) and
disclosure of a detailed reconciliation of headline earnings to the earnings numbers used in the calculation
of basic earnings per share in accordance with the requirements of IAS 33 Earnings per share. Disclosure
of headline earnings is not a requirement of IFRS.
2024 2023
Reconciliation of profit for the period to headline earnings £m £m
Basic earnings
41.4
27.3
Adjustments to calculate headline earnings:
JSE listing fees and Axis acquisition costs
—
0.5
Amortisation of intangible assets
0.9
0.9
Revaluation deficit
38.4
53.0
Deferred tax on Irish activities
5.6
(1.3)
Headline earnings
86.3
80.4
Corporation tax
—
0.1
Fair value loss on derivative financial instruments and convertible bond
7.6
13.2
Non-recurring items
(1.0)
(3.0)
Adjusted earnings
92.9
90.7
Diluted basic earnings
41.4
27.3
Diluted headline earnings
91.2
89.5
Basic earnings per share
3.1
2.0
Headline earnings per share
6.5
6.0
Adjusted earnings per share
7.0
6.8
Diluted basic earnings per share
3.1
2.0
Diluted headline earnings per share
6.3
6.2
Reconciliation of profit for the period to headline earnings
2024
2023
Number of shares
1,336.5
1,336.5
Weighted average number of Ordinary Shares for headline, basic and
adjusted earnings per share
1,336.5
1,336.5
Weighted average number of Ordinary Shares for diluted basic and
headline earnings per share
1,455.9
1,450.4
9. Dividends
Amounts recognised as distributions to equity holders in the year:
2024 2023
£m £m
Quarterly interim dividend paid 23 February 2024
23.1
—
Quarterly interim dividend paid 17 May 2024
23.0
—
Quarterly interim dividend paid 16 August 2024
23.0
—
Quarterly interim dividend paid 22 November 2024
23.0
—
Quarterly interim dividend paid 23 February 2023
—
22.4
Quarterly interim dividend paid 19 May 2023
—
22.4
Quarterly interim dividend paid 18 August 2023
—
22.3
Quarterly interim dividend paid 24 November 2023
—
22.4
Total dividends distributed in the year
92.1
89.5
Per share
6.9p
6.7p
On 2 January 2025, the Board declared an interim dividend of 1.775 pence per Ordinary Share with regard
to the year ended 31 December 2024, payable on 21 February 2025. This dividend will consist wholly of an
ordinary dividend of 0.4 pence and Property Income Distribution (“PID”) of 1.375 pence.
10. Investment properties and investment properties under construction
Properties have been independently valued at fair value by Avison Young (UK) Limited, Jones Lang LaSalle
and CBRE Chartered Surveyors and Valuers, as at the balance sheet date in accordance with accounting
standards. The valuers have confirmed that they have valued the properties in accordance with the
Practice Statements in the RICS Appraisal and Valuation Standards 2024 (the “Red Book”). There were no
changes to the valuation techniques during the year. The valuers are appropriately qualified and have
sufficient market knowledge and relevant experience of the location and category of investment property
and have had full regard to market evidence when determining the values. The properties are 99.1% let
(2023: 99.3%). The valuations reflected a 5.22% (2023: 5.05%) net initial yield and a 5.27% (2023: 5.06%)
true equivalent yield. Where properties have outstanding rent reviews, an estimate is made of the likely
rent on review in line with market expectations and the knowledge of the valuers.
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Primary Health Properties PLC Annual Report 2024
134
Notes to the financial statements continued
10. Investment properties and investment properties under construction continued
In accordance with IAS 40, investment properties under construction have also been valued at fair value
by the valuers. In determining the fair value, the valuers are required to value development property as if
complete, deduct the costs remaining to be paid to complete the development and consider the significant
risks which are relevant to the development process including, but not limited to, construction and letting
risks and the impact they may have on fair value. In the case of the Group’s portfolio under construction,
where the sites are pre-let and construction risk remains with the builder/developer, the valuers have
deemed that the residual risk to the Group is minimal. As required by the Red Book, the valuers have
deducted the outstanding cost to the Group through to the completion of construction of £2.5 million
(2023: £5.4 million) in arriving at the fair value to be included in the financial statements.
In addition to the above, capital commitments have been entered into amounting to £33.9 million
(2023: £7.1 million) which have not been provided for in the financial statements.
A fair value decrease of £1.2 million (2023: decrease of £4.2 million) in respect of investment property under
construction has been recognised in the Group Statement of Comprehensive Income, as part of the overall
total net valuation loss on the property portfolio in the year of £38.4 million (2023: £53.0 million loss).
Of the £2,750.1 million (2023: £2,776.3 million) valuation, £2,494.8 million (90.7%) (2023: £2,531.7 million)
relates to investment properties in the UK and £255.3 million (9.3%) (2023: £244.6 million) relates to
investment properties in Ireland.
In line with accounting policies, the Group assessed whether the acquisitions during the year were asset
purchases or business combinations.
Investment
Investment Investment properties –
properties – properties – under
freehold
1
long leasehold construction Total
£m £m £m £m
As at 1 January 2024
2,195.1
583.2
1.0
2,779.3
Property additions
13.7
0.4
7.9
22.0
Impact of lease incentive adjustment
0.3
1.3
—
1.6
Foreign exchange movements
(9.4)
(2.0)
—
(11.4)
Lease ground rent adjustment
—
—
—
—
2,199.7
582.9
8.9
2,791.5
Revaluations for the year
(31.4)
(5.8)
(1.2)
(38.4)
Properties held for sale (reclassified to
current assets)
(3.0)
—
—
(3.0)
As at 31 December 2024
2,165.3
577.1
7. 7
2,750.1
Investment
Investment Investment properties –
properties – properties – under
freehold
1
long leasehold construction Total
£m £m £m £m
As at 1 January 2023
2,214.5
57 7. 3
4.5
2,796.3
Property additions
10.3
28.3
1.4
40.0
Reclassification of freehold and leasehold
and land
2.1
(1.4 )
(0. 7 )
—
Impact of lease incentive adjustment
0.4
0.5
—
0.9
Foreign exchange movements
(3 .8 )
( 0 .9 )
—
(4 . 7 )
Lease ground rent adjustment
—
(0 .2 )
—
(0.2 )
2,223.5
603.6
5.2
2,832.3
Revaluations for the year
(28 .4 )
(20.4 )
(4.2 )
(53.0 )
As at 31 December 2023
2,195.1
583.2
1.0
2,779.3
1 Includes development land held at £0.7 million (31 December 2023: £0.7 million).
Bank borrowings, bonds and interest rate swaps are secured on investment properties with a value of
£2,702.8 million (2023: £2,739.3 million).
Right of use assets
In accordance with IFRS 16 Leases, the Group has recognised a £3.0 million head lease liability and an
equal and opposite finance lease asset which is included in non-current assets.
Fair value hierarchy
All of the Group’s properties are level 3, as defined by IFRS 13, in the fair value hierarchy as at
31 December 2024 and 31 December 2023. There were no transfers between levels during the year or
during 2023. Level 3 inputs used in valuing the properties are those which are unobservable, as opposed
to level 1 (inputs from quoted prices) and level 2 (non-quoted observable inputs either directly (i.e. as
prices) or indirectly (i.e. derived from prices)).
Valuation techniques used to derive level 3 fair values
The valuations have been prepared on the basis of fair market value (“FMV”) which is defined in the RICS
Valuation Standards as:
“The estimated amount for which a property should exchange on the date of valuation between a willing
buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had
each acted knowledgeably, prudently and without compulsion.”
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Primary Health Properties PLC Annual Report 2024
135
Notes to the financial statements continued
10. Investment properties and investment properties under construction continued
Valuation techniques
Under the market comparable approach, a property’s fair value is estimated based on comparable
transactions on an arm’s length basis, using certain unobservable inputs. These inputs are detailed below.
Unobservable input: estimated rental value (“ERV”)
The rent at which space could be let in the market conditions prevailing at the date of valuation. ERV is
also used in determining expected rental uplift on outstanding rent reviews.
2024
2023
ERV – range of the portfolio
£29,000–£1,515,482
£27,500–£1,515,482
per annum per annum
Unobservable input: equivalent yield
The equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming
a rise to ERV at the next review date, but with no further rental growth.
2024
2023
True equivalent yield – range of the portfolio
2.80%–13.43%
2.77%–16.10%
Unobservable input: physical condition of the property
The properties are physically inspected by the valuers on a three-year rotating basis.
Unobservable input: net initial yield (“NIY”)
The NIY is the annualised rental income based on the cash rents passing at the balance sheet date, less
non-recoverable property operating expenses, divided by the market value of the property, increased with
(estimated) purchaser’s costs.
Unobservable input: rental growth
The estimated average increase in rent based on both market estimations and contractual situations.
Sensitivity of measurement of significant unobservable inputs
During 2024 the Group experienced a 17bps increase in the portfolio net initial yield, reducing investment
property by £38.4 million (1.4% reduction), before reflecting gains as a result of rental growth and asset
management projects. We have therefore applied the following sensitivities:
• A decrease in the estimated annual rent will decrease the fair value. A 2% decrease/increase in annual rent
would result in an approximately £55.0 million decrease/increase in the investment property valuation.
• A decrease in the equivalent yield will increase the fair value. A 25bps shift of equivalent yield would
have an approximately £124.1 million impact on the investment property valuation, either an increase
or decrease.
• A deterioration in the physical condition of the property will decrease the fair value.
• An increase in the net initial yield will decrease fair value. A further 25bps shift in the net initial yield
would have an approximately £125.6 million impact on the investment property valuation, either an
increase or decrease.
11. Trade and other receivables
2024 2023
£m £m
Trade receivables (net of loss allowance)
16.6
16.3
Prepayments and accrued income
10.3
7.9
Other debtors
0.8
0.7
27.7
24.9
The expected credit losses are estimated using a provision matrix by reference to past experience and an
analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor on
the recoverability, general economic conditions of the industry and an assessment of both the current and
the forecast direction of conditions at the reporting date. Payment default is where PHP assesses there
could be a probable failure of a tenant making a contractual payment of rent. The Group has therefore not
recognised a significant loss allowance because historical experience has indicated that the risk profile of
trade receivables is deemed low, and any loss allowance would therefore be insignificant.
The Group’s principal customers are invoiced and pay quarterly in advance, usually on English, Scottish and
Gale quarter days. There is no significant concentration of credit risk with respect to trade receivables, as
the Group has a large number of tenants.
12. Cash and cash equivalents
2024 2023
£m £m
Cash held at bank
3.5
3.2
3.5
3.2
Bank interest is earned at floating rates depending upon the bank deposit rate. Short term deposits may be
made for varying periods of between one day and three months, dependent on available cash and
forthcoming cash requirements of the Group. These deposits earn interest at various short term deposit rates.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
136
Notes to the financial statements continued
13. Trade and other payables
2024 2023
£m £m
Non-current liabilities
Other payables
3.1
4.1
3.1
4.1
Current liabilities
Trade payables
1.8
2.5
Bank and bond loan interest accrual
7.5
6.5
Other payables
8.4
8.6
VAT
6.8
6.7
Accruals
6.1
7.4
30.6
31.7
14. Borrowings
a) Term loans and overdrafts
The table indicates amounts drawn and undrawn from each individual facility as at 31 December:
Facility
Amounts drawn
Undrawn
2024 2023 2024 2023 2024 2023
Expiry date £m £m £m £m £m £m
Current
RBS overdraft
Jun 2025
5.0
5.0
0.9
—
4.1
5.0
Aviva MXF loan
Sep 2033
2.5
2.4
2.5
2.4
—
—
7.5
7.4
3.4
2.4
4.1
5.0
Non-current
Aviva loan
Oct 2036
200.0
200.0
200.0
200.0
0.0
—
Aviva loan
Nov 2028
75.0
75.0
75.0
75.0
0.0
—
Barclays loan
Oct 2027
170.0
100.0
105.0
—
65.0
100.0
HSBC loan
Dec 2027
100.0
100.0
39.0
64.4
61.0
35.6
Lloyds loan
Oct 2027
100.0
100.0
18.5
1.8
81.5
98.2
NatWest loan
Oct 2026
100.0
100.0
33.5
31.8
66.5
68.2
Santander loan
Jan 2026
50.0
50.0
24.4
24.4
25.6
25.6
Aviva MXF loan
Sep 2033
218.0
220.5
218.0
220.5
—
—
Aviva MXF loan
Sep 2028
30.8
30.8
30.8
30.8
—
—
1,043.8
976.3
744.2
648.7
299.6
327.6
Total
1,051.3
983.7
747.6
651.1
303.7
332.6
At 31 December 2024, total facilities of £1,630.4 million (2023: £1,642.5 million) were available to the
Group. This included a £100.0 million secured bond, a £150.0 million nominal value convertible bond,
£42.3 million, £57.9 million, £62.0 million and £39.5 million euro denominated bonds, a £50.0 million Ignis
loan note, a £77.5 million Standard Life loan note and a £5.0 million overdraft facility. Of these facilities, as
at 31 December 2024, £1,326.7 million was drawn (2023: £1,309.9 million). On 30 September 2024, the
Group completed a new £170.0 million facility with Barclays with £70.0 million of the proceeds from the
new facility being used to repay the variable rate bond ahead of maturity in December 2025. The new
facility can be drawn in sterling and euros, and has an interest rate of 1.60% plus SONIA or EURIBOR and a
term of three years with the option to extend by a further two years. The Group has also agreed terms
with Lloyds to extend its £100.0 million facility for a further three years with an option to extend by a
further two years as well as increase the size to £125.0 million. The £100.0 million HSBC facility was also
extended for a further year.
Costs associated with the arrangement and extension of the facilities, including legal advice and loan
arrangement fees, are amortised using the effective interest rate.
Any amounts unamortised as at the period end are offset against amounts drawn on the facilities as
shown in the table below:
2024 2023
£m £m
Term loans drawn: due within one year
3.4
2.4
Term loans drawn: due in greater than one year
744.2
648.7
Total term loans drawn
747.6
651.1
Plus: MtM on loans net of amortisation
22.5
24.9
Less: unamortised borrowing costs
(9.5)
(9.1)
Total term loans per the Group Balance Sheet
760.6
666.9
The Group has been in compliance with all of the financial covenants of the above facilities as applicable
through the year. Further details are shown in Note 17e.
The Group has entered into interest rate swaps to manage its exposure to interest rate fluctuations.
These are set out in Note 16.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
137
Notes to the financial statements continued
14. Borrowings continued
b) Bonds
2024 2023
£m £m
Unsecured:
Convertible bond July 2025 at fair value
148.3
147.7
Less: unamortised costs
—
—
Total unsecured bonds
148.3
147.7
Secured:
Secured bond December 2025
—
70.0
Secured bond March 2027
100.0
100.0
€51.0 million secured bond (Euro private placement) December 2028–30
42.3
44.2
€70.0 million secured bond (Euro private placement) September 2031
57.9
60.7
€75.0 million secured bond (Euro private placement) February 2034
62.0
65.0
€47.8 million secured bond (Euro private placement) December 2033
39.5
41.4
Ignis loan note December 2028
50.0
50.0
Standard Life loan note September 2028
77.5
7 7.5
Less: unamortised bond issue costs
(2.7)
(3.6)
Plus: MtM on loans net of amortisation
2.8
3.5
Total secured bonds
429.3
508.7
Total bonds
577.6
656.4
There were no bond conversions during the year (2023: £nil).
Secured bonds
On 18 December 2013, PHP successfully listed the floating rate guaranteed secured bonds issued on
4 November 2013 (the “secured bonds”) on the London Stock Exchange. The secured bonds have a nominal
value of £70.0 million and mature on 30 December 2025. The secured bonds incur interest at an annualised
rate of 220bps plus a credit spread adjustment of 28bps above six-month SONIA, payable semi-annually in
arrears. The secured bonds were fully redeemed on 25 September 2024.
On 21 March 2017, a £100.0 million secured bond was issued for a ten-year term at a fixed coupon of 2.83%
that matures on 21 March 2027. Interest is paid semi-annually in arrears.
On 20 December 2018, senior secured notes for a total of €51.0 million (£42.3 million) were issued at a
blended fixed rate of 2.4793% and a weighted average maturity of 10.4 years. Interest is paid semi-annually
in arrears. The notes represent PHP’s first euro denominated transaction in the private placement market.
The secured notes were placed with UK and Irish institutional investors in two tranches:
• €40.0 million 2.46% senior notes due December 2028; and
• €11.0 million 2.633% senior notes due December 2030.
On 16 September 2019, new senior secured notes for a total of €70.0 million (£57.9 million) were issued at
a fixed rate of 1.509% and a maturity of twelve years. Interest is paid semi-annually in arrears. The secured
notes are guaranteed by the Company and were placed with UK and Irish institutional investors.
On 11 February 2022, the Group issued a new €75.0 million (£62.0 million) secured private placement loan
note to MetLife for a twelve-year term at a fixed rate of 1.64%. The loan notes have the option to be
increased by a further €75.0 million to €150.0 million over the next three years at MetLife’s discretion.
On 19 December 2023, new senior secured notes for a total of €47.8 million (£39.5 million) were issued
at a fixed rate of 4.195% and a maturity of ten years. Interest is paid semi-annually in arrears. The secured
notes are guaranteed by the Company and were placed with UK and Canadian institutional investors.
Ignis and Standard Life loan notes
On 14 March 2019, the loan notes were added to the portfolio as a part of the MedicX acquisition.
The Ignis loan note of £50.0 million incurs a fixed coupon of 3.99% payable semi-annually in arrears
and matures on 7 December 2028.
The Standard Life loan note matures on 30 September 2028 and is split into two tranches, £50.0 million
and £27.5 million at fixed coupon rates of 3.84% and 3.00% respectively. Interest is payable semi-annually
in arrears.
Convertible bonds
On 15 July 2019, PHP Finance (Jersey No 2) Limited (the “issuer”), a wholly owned subsidiary of the Group,
issued £150.0 million of 2.875% convertible bonds (the “bonds”) for a six-year term and if not previously
converted, redeemed or purchased and cancelled, the bonds will be redeemed at par on maturity in July
2025. The net proceeds were partially used to repay the Company’s £75.0 million 5.375% senior unsecured
retail bonds at maturity and otherwise for general corporate purposes.
Subject to certain conditions, the bonds will be convertible into fully paid Ordinary Shares of the Company
and the initial exchange price was set at 153.25 pence, a premium of 15% above the volume weighted
average price of the Company’s shares on 18 June 2019, being 133.26 pence. Under the terms of the bonds,
the Company will have the right to elect to settle exercise of any conversion rights entirely in shares or
cash, or with a combination of shares and cash. The exchange price is subject to adjustment if dividends
paid per share exceed 2.8 pence per annum and other certain circumstances and consequently the
exchange price has been adjusted to 125.64 pence as at 31 December 2024 (2023: 131.72 pence).
2024 2023
£m £m
Opening balance – fair value
147.7
142.9
Issued in the year
—
—
Fair value movement in convertible bond
0.6
4.8
Closing balance – fair value
148.3
147.7
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
138
Notes to the financial statements continued
14. Borrowings continued
b) Bonds continued
Convertible bond continued
The fair value of the bonds at 31 December 2024 and 31 December 2023 was established by obtaining
quoted market prices. The fair value movement is recognised in the Group Statement of Comprehensive
Income within profit before taxation and is excluded from the calculation of EPRA earnings and EPRA NTA
(replacing EPRA NAV).
c) Total borrowings
2024 2023
£m £m
Current liabilities:
Term loans and overdrafts
3.4
2.4
Bonds
150.0
—
MtM on convertible bond
(1.7)
—
Total current liabilities
151.7
2.4
Non-current liabilities:
Term loans
744.2
648.7
MtM on loans net of amortisation
22.5
24.9
Less: unamortised loan issue costs
(9.5)
(9.1)
Total non-current liabilities
757.2
664.5
Bonds
429.2
658.8
MtM on bonds net of amortisation
2.8
3.5
MtM on convertible bond
—
(2.3)
Less: unamortised bond issue costs
(2.7)
(3.6)
Total non-current bonds
429.3
656.4
Total borrowings
1,338.2
1,323.3
2024 2023
£m £m
Balance as at 1 January
1,325.1
1,299.1
Changes from financing activities
Proceeds from bond issues
—
41.2
Term bank loan drawdowns
306.6
282.4
New facilities drawn
306.6
323.6
Repayments of mortgage principal
(2.3)
(2.3)
2024 2023
£m £m
Repayments of term bank loans
(276.6)
(297.7 )
Repayments of term loan borrowings
(278.9)
(300.0)
Loan and bond interest paid
(50.0)
(47.0)
Swap interest received
6.0
3.9
Non-utilisation fees paid
(2.1)
(2.2)
Purchase of derivative financial instrument
—
(1.9)
Loan arrangement fees & early termination fees
(3.8)
(1.8)
(49.9)
(49.0)
Total changes from financing cash flows
(22.2)
(25.4)
Other non-cash changes
Loan and bond interest expense
50.0
47.4
Swap interest income
(5.0)
(4.6)
Fair value movement on derivatives interest rate swaps
4.5
4.3
Fair value movement on convertible bond
0.6
4.8
MtM on loans net of amortisation
(3.0)
(3.0)
Amortisation of debt issue costs, non-utilisation & early termination fees
6.5
6.6
Exchange gain on translation of foreign balances
(11.0)
(4.1)
Total other changes
42.6
51.4
Balance as at 31 December
1,345.5
1,325.1
15. Head lease liabilities
The Group holds certain long leasehold properties which are classified as investment properties. The head
leases are accounted for as finance leases. These leases typically have lease terms between 25 years and
perpetuity and fixed rentals.
2024 2023
£m £m
Due within one year
0.1
0.1
Due after one year
2.9
2.9
Closing balance – fair value
3.0
3.0
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
139
Notes to the financial statements continued
16. Derivatives and other financial instruments
It is Group policy to maintain the proportion of floating rate interest exposure at between 20% and 40%
of total debt facilities. The Group uses interest rate swaps to mitigate its remaining exposure to interest
rate risk in line with this policy. The fair value of these contracts is recorded in the balance sheet and is
determined by discounting future cash flows at the prevailing market rates at the balance sheet date.
2024 2023
£m £m
Fair value of interest rate swaps not qualifying as cash flow hedges
under IAS 39:
Current assets
0.2
10.5
Non-current assets
—
0.9
Current liabilities
—
(6.7)
Non-current liabilities
—
—
Total fair value of interest rate swaps
0.2
4.7
Changes in the fair value of the contracts that do not meet the strict IAS 39 criteria to be designated as
effective hedging instruments are taken to the Group Statement of Comprehensive Income. For contracts
that meet the IAS 39 criteria and are designated as “effective” cash flow hedges, the change in fair value
of the contract is recognised in the Group Statement of Changes in Equity through the cash flow hedging
reserve. The result recognised in the Group Statement of Comprehensive Income relates to the amortisation
of the cash flow hedging reserve of £2.5 million (2023: £4.1 million).
Interest rate swaps and caps with a contract value of £49.6 million (2023: £152.0 million) were in effect at
31 December 2024. Details of all floating to fixed rate interest rate swap contracts held are as follows:
Fixed interest
Contract value
Product
Start date
Maturity
per annum %
2024
€20.0 million (£16.5 million)
Euro cap
April 2023
October 2025
2.0000
€20.0 million (£16.5 million)
Euro cap
April 2023
October 2025
2.0000
€20.0 million (£16.6 million)
Euro cap
April 2023
October 2025
2.0000
£49.6 million
2023
€20.0 million (£17.3 million)
Euro cap
April 2023
October 2025
2.0000
€20.0 million (£17.3 million)
Euro cap
April 2023
October 2025
2.0000
€20.0 million (£17.4 million)
Euro cap
April 2023
October 2025
2.0000
£100.0 million
Swap
October 2021
November 2024
0.0699
£(66.0) million
Reverse swap
October 2021
November 2024
2.5200
£66.0 million
Cap
October 2021
November 2024
1.2500
£(67.0) million
Reverse swap
October 2021
November 2024
2.5200
£67.0 million
Cap
October 2021
November 2024
1.2500
£(67.0) million
Reverse swap
October 2021
November 2024
2.5200
£67.0 million
Cap
October 2021
November 2024
1.2500
£152.0 million
On 28 October 2021 the HSBC £100.0 million variable leg of the LIBOR swap was converted to SONIA.
The term and fixed rate were unchanged at November 2024 expiry and 0.0699%. This expired and was not
renewed in the reporting period.
On 27 October 2021 three new swap agreements were entered into totalling £200.0 million. All were
effective until 29 November 2024 and received a fixed rate of 2.52%, with variable rates payable. These
included a £66.0 million swap agreement with HSBC paying a variable of SONIA + 1.6275%, a £67.0 million
swap agreement with Barclays paying a variable of SONIA + 1.575% and a £67.0 million swap agreement
with NatWest paying a variable of SONIA + 1.5849%. A one-off payment of £1.8 million across all three
new swap agreements was made to cap SONIA at 1.25% for the length of the agreement, equivalent to
0.1 pence per share on an adjusted net tangible asset value basis. Those expired and were not renewed in
the reporting period.
On 18 April 2023, the Group converted €60.0 million (£51.6 million) of sterling equivalent denominated debt
into euros across its various revolving credit facilities. The Group purchased 2.0% caps on €60 million
nominal value for a period of 2.5 years until October 2025 for an all-in premium of €2.2 million (£1.9 million).
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
140
Notes to the financial statements continued
17. Financial risk management
In pursuing its investment objectives, the Group is exposed to a variety of risks that could impact net
assets or distributable profits.
The Group’s principal financial liabilities, other than interest rate swaps, are loans and borrowings hedged
by these swaps. The main purpose of the Group’s loans and borrowings is to finance the acquisition and
development of the Group’s property portfolio. The Group has trade and other receivables, trade and other
payables and cash and short term deposits that arise directly from its operations.
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out
in the Strategic Report. This Note provides further detail on financial risk management and includes
quantitative information on specific financial risks.
Financial risk factors
a) Interest rate risk
Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates
relates primarily to the Group’s long term debt obligations with floating rates as the Group, generally,
does not hold significant cash balances, with short term borrowings being used when required. To manage
its interest rate risk, the Group enters into interest rate swaps, in which the Group agrees to exchange,
at specified intervals, the difference between fixed and variable rate interest amounts calculated by
reference to an agreed-upon principal amount. Note 16 provides details of interest swap contracts
in effect at the year end.
Interest rate exposure
The analysis of the Group’s exposure to interest rate risk in its debt portfolio as at 31 December 2024
is as follows:
Facilities
Net debt drawn
£m
%
£m
%
Fixed rate debt
1,105.4
67.8
1,105.4
83.5
Hedged by fixed rate interest rate swaps
1
200.0
12.3
200.0
15.1
Hedged by fixed to floating rate interest
rate swaps
49.6
3.0
49.6
3.8
Total fixed rate debt
1,355.0
83.1
1,355.0
102.4
Hedged by interest rate caps
—
—
—
—
Floating rate debt – unhedged
275.4
16.9
(31.8)
(2.4)
Total
1,630.4
100.0
1,323.2
100.0
1 Including the impact of post year-end hedging completed.
The following sensitivity analysis shows the impact on profit before tax and equity of reasonably possible
movements in interest rates with all other variables held constant. It should be noted that the impact of
movement in the interest rate variable is not necessarily linear.
The fair value is arrived at with reference to the difference between the contracted rate of a swap and the
market rate for the remaining duration at the time the valuation is performed. As market rates increase
and this difference reduces, the associated fair value also decreases.
Impact on Total impact
income statement on equity
£m £m
2024
Sterling Overnight Index Average Rate
Increase of 50 basis points
(1.0)
(1.0)
Sterling Overnight Index Average Rate
Decrease of 50 basis points
1.0
1.0
2023
Sterling Overnight Index Average Rate
Increase of 50 basis points
(1.0)
(1.0)
Sterling Overnight Index Average Rate
Decrease of 50 basis points
1.0
1.0
b) Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under financial instruments or
customer contracts, leading to a financial loss. The Group is exposed to credit risk from its principal
financial assets, cash and cash equivalents, and trade and other receivables (see Notes 11 and 12).
Trade receivables
Trade receivables, primarily tenant rentals, are recognised and carried at amortised cost and presented
in the balance sheet net of loss allowances and are monitored on a case-by-case basis. Impairment losses
are recognised through the expected credit loss model. Credit risk is primarily managed by requiring
tenants to pay rentals in advance.
The Group has policies in place to ensure that rental contracts are entered into only with lessees with an
appropriate credit history.
Banks and financial institutions
One of the principal credit risks of the Group arises from financial derivative instruments and deposits with
banks and financial institutions. The Board of Directors believes that the credit risk on short term deposits
and interest rate swaps is limited because the counterparties are banks, which are committed lenders to
the Group, with reputable credit ratings assigned by international credit rating agencies.
c) Liquidity risk
The liquidity risk is that the Group will encounter difficulty in meeting obligations associated with its
financial liabilities as the majority of the Group’s assets are property investments and are therefore not
readily realisable. The Group’s objective is to maintain a mixture of available cash and committed bank
facilities that is designed to ensure that the Group has sufficient available funds for its operations and to
fund its committed capital expenditure. This is achieved by continuous monitoring of forecast and actual
cash flows.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
141
Notes to the financial statements continued
17. Financial risk management continued
Financial risk factors continued
c) Liquidity risk continued
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments including interest.
Less than Three to One to More than
On demand three months twelve months five years five years Total
£m £m £m £m £m £m
2024
Interest-bearing loans
and borrowings
—
12.5
38.5
869.9
657.9
1,578.8
Trade and other payables
3.5
15.6
4.8
0.2
1.7
25.8
Lease liabilities
—
—
0.1
0.6
15.3
16.0
3.5
28.1
43.4
870.7
674.9
1,620.6
2023
Interest-bearing loans
and borrowings
—
12.7
38.6
848.9
688.4
1,588.6
Trade and other payables
2.0
18.3
4.5
1.4
1.3
27.5
Lease liabilities
—
—
0.1
0.6
15.4
16.1
2.0
31.0
43.2
850.9
705.1
1,632.2
The Group’s borrowings have financial covenants which, if breached, could result in the borrowings
becoming repayable immediately. Details of the covenants are given under (e) Capital risk management
and are disclosed to the facility providers on a quarterly basis. There have been no breaches during the
year (2023: none).
d) Market risk
Market risk is the risk that fair values of financial instruments will fluctuate because of changes in market
prices. The Board of Directors has identified two elements of market risk that principally affect the Group
– interest rate risk and price risk.
Interest rate risk
Interest rate risk is outlined above. The Board assesses the exposure to other price risks when making each
investment decision and monitors the overall level of market risk on the investment portfolio on an ongoing
basis through a discounted cash flow analysis. Details of this analysis can be found in the Strategic Report
and the previous pages.
Price risk
The Group is exposed to price risk in respect of property price risk including property rentals risk. Refer
to Note 2.3 for more information. The Group has no significant exposure to price risk in respect of financial
instruments other than the convertible bond and interest rate derivatives (see also Note 16), as it does not
hold any equity securities or commodities.
Fair values
Set out below is a comparison by class of the carrying amount and fair values of the Group’s financial
instruments that are carried in the financial statements.
Book value Fair value Book value Fair value
2024 2024 2023 2023
£m £m £m £m
Financial assets
Trade and other receivables
17.5
17.5
17.0
17.0
Ineffective interest rate swaps
0.2
0.2
11.4
11.4
Cash and short term deposits
3.5
3.5
3.2
3.2
Financial liabilities
Interest-bearing loans and borrowings
(1,338.2)
(1,201.3)
(1,323.3)
(1,203.8)
Ineffective interest rate swaps
—
—
(6.7)
(6.7)
Trade and other payables
(25.8)
(25.8)
(27.5)
(27.5)
Lease liabilities
(3.0)
(3.0)
(3.0)
(3.0)
The fair value of the financial assets and liabilities is included as an estimate of the amount at which the
instruments could be exchanged in a current transaction between willing parties, other than a forced sale.
The following methods and assumptions were used to estimate fair values:
• the fair values of the Group’s cash and cash equivalents and trade payables and receivables are not
materially different from those at which they are carried in the financial statements due to the short
term nature of these instruments;
• the fair value of floating rate borrowings is estimated by discounting future cash flows using rates
currently available for instruments with similar terms and remaining maturities. The fair value
approximates their carrying values, gross of unamortised transaction costs;
• the fair value of fixed rate debt is estimated using the mid yield to maturity on the reporting date. The
valuations are on a clean basis, which excludes accrued interest from the previous settlement date to
the reporting date; and
• the fair values of the derivative interest rate swap contracts are estimated by discounting expected
future cash flows using market interest rates and yield curves over the remaining term of the instrument.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different
levels are defined as follows:
Level 1: Quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
142
Notes to the financial statements continued
17. Financial risk management continued
Financial risk factors continued
d) Market risk continued
Fair value hierarchy continued
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are
not based on observable market data.
Fair value measurements at 31 December 2024 were as follows:
Level 1 Level 2 Level 3 Total
Recurring fair value measurements £m £m £m £m
Financial assets
Derivative interest rate swaps
—
0.2
—
0.2
Financial liabilities
Derivative interest rate swaps
—
—
—
—
Convertible bond
(148.3)
—
—
(148.3)
Fixed rate debt
—
(831.7)
—
(831.7)
Fair value measurements at 31 December 2023 were as follows:
Level 1 Level 2 Level 3 Total
Recurring fair value measurements £m £m £m £m
Financial assets
Derivative interest rate swaps
—
11.4
—
11.4
Financial liabilities
Derivative interest rate swaps
—
(6.7)
—
(6.7)
Convertible bond
(147.7 )
—
—
(147.7 )
Fixed rate debt
—
(863.7)
—
(863.7)
The interest rate swaps whose fair values include the use of level 2 inputs are valued by discounting
expected future cash flows using market interest rates and yield curves over the remaining term of the
instrument. The following inputs are used in arriving at the valuation:
• interest rates;
• yield curves;
• swaption volatility;
• observable credit spreads;
• credit default swap curve; and
• observable market data.
e) Capital risk management
The primary objectives of the Group’s capital management are to ensure that it remains a going concern,
operates within its quantitative banking covenants and meets the criteria so as to continue to qualify for
UK REIT status.
The capital structure of the Group consists of shareholders’ equity and net borrowings. The type and
maturity of the Group’s borrowings are analysed further in Notes 14 and 16 and the Group’s equity is
analysed into its various components in the Group Statement of Changes in Equity. The Board monitors
and reviews the Group’s capital so as to promote the long term success of the business, to facilitate
expansion and to maintain sustainable returns for shareholders.
Under several of its debt facilities, the Group is subject to a covenant whereby consolidated Group rental
income must exceed Group borrowing costs by the ratio 1.3:1 (2023: 1.3:1). No debt facility has a Group
loan to value covenant.
Facility-level covenants also operate with regard to specific pools of property assets provided to lenders
to secure individual loan facilities. These range as follows:
• interest cover
1
: 1.15 to 2.25 (2023: 1.15 to 2.25); and
• loan to value
1
: 55% to 75% (2023: 55% to 75%).
UK REIT compliance tests include loan to property value and gearing tests. The Group must satisfy these
tests in order to continue trading as a UK REIT. This is also an internal requirement imposed by the Articles
of Association.
During the year the Group has complied with all of the requirements set out above.
1 See Glossary of terms.
2024 2023
Group loan to value ratio £m £m
Fair value of completed investment properties
2,739.4
2,775.3
Fair value of development properties
7.7
1.0
Ground rent recognised as finance leases
3.0
3.0
2,750.1
2,779.3
Interest-bearing loans and borrowings (with convertible bond at
nominal value)
1,326.7
1,309.9
Less cash held
(3.5)
(3.2)
Nominal amount of interest-bearing loans and borrowings
1,323.2
1,306.7
Group loan to value ratio
48.1%
47.0%
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
143
Notes to the financial statements continued
18. Share capital
Ordinary Shares issued, authorised and fully paid at 12.5 pence each
2024
2023
Number – Number –
million
£m
million
£m
Balance at 1 January
1,336.5
167.1
1,336.5
167.1
Balance at 31 December
1,336.5
167.1
1,336.5
167.1
19. Share premium
2024 2023
£m £m
Balance at 1 January
479.4
479.4
Balance at 31 December
479.4
479.4
20. Merger and other reserves
The merger and other reserves are made up of the capital reserve which is held to finance any proposed
repurchases of Ordinary Shares, following approval of the High Court in 1998, the foreign exchange translation
reserve and the premium on shares issued for the MXF Fund Limited merger and the Nexus merger.
2024 2023
£m £m
Capital reserve
Balance at 1 January and 31 December
1.6
1.6
Foreign exchange translation reserve
Balance at 1 January
(0.4)
1.0
Exchange differences on translation of foreign balances
(0.1)
(1.4)
Balance at 31 December
(0.5)
(0.4)
Merger reserve
Balance at 1 January and 31 December
414.1
414.1
Balance of merger and other reserves at 31 December
415.2
415.3
21. Hedging reserve
Information on the Group’s hedging policy and interest rate swaps is provided in Note 16.
The transfer to the Group Statement of Comprehensive Income can be analysed as follows:
2024 2023
£m £m
Balance at 1 January
(7.0)
(11.1)
Amortisation of cash flow hedging reserve
2.5
4.1
Balance at 31 December
(4.5)
(7.0)
The balance within the cash flow hedge reserve relating to cancelled swaps will be amortised through the Group
Statement of Comprehensive Income over the remainder of the original contract period (see Note 6b).
22. Retained earnings
2024 2023
£m £m
Balance at 1 January
369.1
430.1
Retained profit for the year
41.4
27.3
Dividends paid
(92.1)
(89.5)
Exchange differences on translation of foreign balances
—
1.1
Share-based awards (“LTIP”)
0.4
0.1
Balance at 31 December
318.8
369.1
23. Capital commitments
As at 31 December 2024, the Group has entered into forward funding development agreements with
third parties for the development of primary healthcare properties in the UK and Ireland. The Group
has acquired the land and advances funds to the developers as the construction progresses. Total
consideration of £2.5 million (2023: £5.4 million) remains to be funded with regard to these properties.
Additionally as at 31 December 2024, the Group has capital commitments totalling £33.8 million (2023:
£7.1 million), being the cost to acquire the Laya Healthcare facility in Cork with the cost to complete asset
management projects on site.
24. Related party transactions
Harry Hyman, Chair, is a Director and the ultimate beneficial owner of a number of Nexus entities and is
considered to be a related party. Following the acquisition of certain Nexus entities on the internalisation
of management structure on 5 January 2021, the Group continued to share certain operational services
with a Nexus entity, Nexus Central Management Services Limited, until April 2024. Harry Hyman is a current
Director and ultimate controlling party of Nexus Central Management Services Limited.
Amounts paid during the period in relation to shared services totalled £nil (31 December 2023: £nil).
As at 31 December 2024, outstanding fees payable to Nexus totalled £nil (31 December 2023: £nil).
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
144
Notes to the financial statements continued
25. Subsequent events
Post year end, in January 2025, the Group fixed, for two years, £200 million of nominal debt at a rate of
3.0% for an all-in premium of £4.5 million. the hedges are effective until 20 January 2027 with a fixed rate
of 3.0% payable across all agreements, receiving variable SONIA. In January 2025, the Group additionally
entered into an FX forward hedge (fixed at 1.1459:£1) for a two-year period to cover approximate euro
denominated net annual income of 10 million per annum.
On 26 February 2025 we acquired the Laya Healthcare facility, Cork, Ireland’s second largest provider
of private health insurance and clinical services for €22.0 million/£18.2 million excluding purchaser costs.
26. Audit exemptions taken for subsidiaries
The following subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the
audit of individual accounts by virtue of Section 479A of the Act.
Name
Companies House registration number
GP Property One Ltd
10801028
PHP SPV Limited
12256431
PHP Primary Properties (Haymarket) Limited
08304612
MXF Properties Bridlington Limited
07763871
PHP Tradeco Holdings Limited
09642987
PHP Health Solutions Limited
06949900
PHP Tradeco Limited
07685933
PHP Property Management Services Limited
02877191
PHP Primary Care Developments Limited
11862233
PHP Croft Limited
13938144
PHP Bond Finance Limited
08684414
PHP St. Johns Limited
08192779
PHIP (Stourbridge) Limited
08155250
PHP (Project Finance) Limited
08188279
PHP Healthcare Investments Limited
07289496
PHP Clinics Limited
08188277
Gracemount Medical Centre Limited (Scotland)
SC262690
PHP AssetCo (2011) Limited
07652728
PHP Medical Properties Limited
04246742
PHP Development Holdings Limited
14158160
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
145
Notes
2024
£m
2023
£m
Non-current assets
Investment in subsidiaries 8 864.5 866.3
Property, plant and equipment 0.3 0.4
Trade and other receivables 9 797.5 813.4
1,662.3 1,680.1
Current assets
Trade and other receivables 9 0.3 0.6
Cash and cash equivalents 10 0.3 0.3
0.6 0.9
Total assets 1,662.9 1,681.0
Current liabilities
Trade and other payables 11 (295.7) (286.5)
Borrowings: bonds 12 (150.5) —
(446.2) (286.5)
Non-current liabilities
Borrowings: bonds 12 — (153.4)
— (153.4)
Total liabilities (446.2) (439.9)
Net assets 1,216.7 1,241.1
Equity
Share capital 14 167.1 167.1
Share premium 479.4 479.4
Merger and other reserves 415.6 415.6
Retained earnings 15 154.6 179.0
Total equity 1,216.7 1,241.1
In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company
has not presented its own income statement or statement of comprehensive income.
The Company’s profit for the year was £59 .1 million (2023: loss of £15.6 million).
These financial statements were approved by the Board of Directors on 27 February 2025 and signed on
its behalf by:
Richard Howell
Chief Financial Officer
Registered in England Number: 3033634
Company balance sheet
at 31 December 2024
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
146
Company statement of changes in equity
for the year ended 31 December 2024
Share
capital
£m
Share
premium
£m
Merger
and other
reserves
£m
Retained
earnings
£m
Total
equity
£m
1 January 2024 167.1 479.4 415.6 179.0 1,241.1
Profit attributable to equity holders — — — 59.1 59.1
Exchange gain on translation of foreign
balances — — — 8.2 8.2
Total comprehensive income — — — 67.3 67.3
Share-based awards (“LTIP”) — — — 0.4 0.4
Dividends paid — — — (92.1) (92.1)
Scrip dividend in lieu of cash — — — — —
31 December 2024 167.1 479.4 415.6 154.6 1,216.7
Share
capital
£m
Share
premium
£m
Merger
and other
reserves
£m
Retained
earnings
£m
Total
equity
£m
1 January 2023 167.1 479.4 415.6 285.7 1,3 47.8
Loss attributable to equity holders — — — (15.6) (15.6)
Exchange loss on translation of foreign
balances — — — (1.7) (1.7)
Total comprehensive income — — — (17.3) (17.3)
Share-based awards (“LTIP”) — — — 0.1 0.1
Dividends paid — — — (89.5) (89.5)
Scrip dividend in lieu of cash — — — — —
31 December 2023 167.1 479.4 415.6 179.0 1,241.1
1. Accounting policies
The Company is a public limited company incorporated in England and Wales in accordance with the
Companies Act 2006, limited by shares. These financial statements are presented in Sterling because that
is the currency of the primary economic environment in which the Company operates.
Basis of accounting/statement of compliance
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (“FRS
100”) issued by the Financial Reporting Council. The financial statements have therefore been prepared
inaccordance with FRS 101 Reduced Disclosure Framework as issued by the Financial Reporting Council.
As permitted by FRS 101, exemptions from applying the following requirements have been adopted:
• IFRS 7 Financial instruments: disclosures;
• IFRS 13 Fair value measurement, paragraphs 91 to 99;
• IAS 1 Presentation of financial statements, paragraphs 10(d), 10(f), 38 to 40, 76, 79(d) and 134 to 136;
• IAS 7 Statement of cash flows;
• IAS 24 Related party disclosures, paragraphs 17 and 18A; and
• IAS 36 Impairment of assets, paragraphs 130(f)(ii), 130(f)(iii), 134(d) to (f) and 135(c) to (e).
The Company has also taken advantage of the exemption from the requirements in IAS 24 Related party
disclosures to disclose related party transactions entered into between two or more members of the Group
where those party to the transaction are wholly owned by a member of the Group.
The financial statements have been prepared under the historical cost convention except for the
convertible bond.
Statement of comprehensive income
The Company has taken advantage of the exemption in the Companies Act from presenting a Company
Statement of Comprehensive Income together with related notes.
Cash flow statement
The Directors have taken advantage of the exemption in FRS 101 from including a cash flow statement in
the financial statements on the grounds that a Consolidated Cash Flow Statement is presented in the
Group financial statements of PHP.
Income
Revenue is recognised in the financial statements as follows:
Interest income: Revenue is recognised as interest accrues using the effective interest method, which is
therate that exactly discounts estimated future cash receipts through the expected life of the financial
instrument to the net carrying amount of the financial asset.
Dividends: Dividend income is recognised in the period in which it received Board approval and, hence,
when the Company’s right to the payment is established.
Notes to the Company financial statements
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
147
1. Accounting policies continued
Investment in subsidiaries
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date that such control ceases.
Investments in subsidiary undertakings are stated at cost in the Company’s Statement of Financial Position
less impairment. The carrying values of investments are reviewed for impairment when events or changes
in circumstances indicate the carrying value may not be recoverable.
Taxation
Taxation on the profit or loss for the period not exempt under UK REIT regulations comprises current and
deferred tax. Taxation is recognised in the Group Statement of Comprehensive Income except to the extent
that it relates to items recognised as direct movements in equity, in which case it is also recognised as
adirect movement in equity.
Current tax is the expected tax payable on any non-REIT taxable income for the period, using tax rates
enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect
of previous years.
Employee costs
The fair value of equity-settled share-based payments to employees is determined at the date of grant and
is expensed on a straight line basis over the vesting period, based on the Company’s estimate of shares or
options that will eventually vest. The fair value of awards is equal to the market value at grant date.
2. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 1, the Directors
arerequired to make judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that
period, or in the period of the revision and future periods if the revision affects both current and future
periods. No revisions were recognised in the period. There are no critical accounting judgements or key
sources of estimation uncertainty in the Company’s accounts.
3. Foreign currencies
The functional and presentation currency of the Company is Sterling. Transactions in currencies other than
Sterling are recognised at the applicable exchange rate ruling on the transaction date. Exchange
differences resulting from settling these transactions, or from retranslating monetary assets and liabilities
denominated in foreign currencies, are included in the Group Statement of Comprehensive Income.
4. Revenue
The Company operates under one business segment and one geographical segment, being the holding
company of subsidiaries that invest in primary healthcare property within the United Kingdom and the
Republic of Ireland.
5. Staff costs
2024
£m
2023
£m
Wages and salaries, pension and bonus 2.7 2.8
Social security costs 0.1 0.1
Equity-settled share-based payments 0.5 0.2
3.3 3.1
The Company operates a defined contribution pension scheme for all employees. The Company
contribution to the scheme during the year was £0.1 million (2023: £nil), which represents the total expense
recognised through the income statement. As at 31 December 2024, there were no contributions (2023: £nil)
due in respect of the reporting period that had not been paid over to the plan.
The average monthly number of Company employees was two (2023: two).
The Executive Directors and Non-executive Directors are the key management personnel. Full disclosure of
Directors’ emoluments, as required by the Companies Act 2006, can be found in the Remuneration Report
on pages 87 to 107.
The Company’s equity-settled share-based payments comprise the following:
Scheme Fair value measure
Long Term Incentive Plan (“LTIP”) Face value at grant date
Save As You Earn (“SAYE”) Face value at grant date
The Company expenses an estimate of how many shares are likely to vest based on the market price at
the date of grant, taking account of expected performance against the relevant performance targets and
service periods, which are discussed in further detail in the Remuneration Report.
6. Taxation
a) Taxation charge/(credit) in the Group Statement of Comprehensive Income
The taxation charge is made up as follows:
2024
£m
2023
£m
Deferred tax charge/(credit) 3.6 (0.6)
The Company holds an investment in an Irish Collective Asset Vehicle (“ICAV”). The ICAV does not pay any
Irish corporation tax on its profits but a 20% withholding tax is paid on distributions to owners.
Notes to the Company financial statements continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
148
6. Taxation continued
b) Factors affecting the tax charge/(credit) for the year
The tax assessed for the year is lower than (2023: higher than) the standard rate of corporation tax in the
UK. The differences are explained below:
2024
£m
2023
£m
Profit/(loss) on ordinary activities before taxation 62.7 (16.2)
Standard tax at UK corporation tax rate of 25% (2023: 23.5%) 15.7 (3.8)
REIT exempt income — —
Transfer pricing adjustments 0.5 0.7
Fair value loss on convertible bond (1.0) 0.5
Non-taxable items (17.2) 1.3
Impact of taxes in the Republic of Ireland 3.6 (0.6)
Loss relief 2.0 1.3
Taxation charge/(credit) (Note 6a) 3.6 (0.6)
7. Dividends
Amounts recognised as distributions to equity holders in the year:
2024
£m
2023
£m
Quarterly interim dividend paid 23 February 2024 23.1 —
Quarterly interim dividend paid 17 May 2024 23.0 —
Quarterly interim dividend paid 16 August 2024 23.0 —
Quarterly interim dividend paid 22 November 2024 23.0 —
Quarterly interim dividend paid 23 February 2023 — 22.4
Quarterly interim dividend paid 19 May 2023 — 22.4
Quarterly interim dividend paid 18 August 2023 — 22.3
Quarterly interim dividend paid 24 November 2023 — 22.4
Total dividends distributed in the year 92.1 89.5
Per share 6.9p 6.7p
8. Investment in subsidiaries
£m
As at 1 January 2024 866.3
Incorporation of PHP Development Holdings Limited —
Incorporation of PHP Finance (Jersey No. 3) Limited —
ICAV Recapitalisation 1.7
Impairment of subsidiary undertakings (3.5)
As at 31 December 2024 864.5
As at 1 January 2023 870.9
Acquisition of Axis Real Estate Group Limited 7.7
Liquidation of PHP Liverpool Holding Company Limited (2.1)
Liquidation of PHP Chiswick Limited (9.9)
Liquidation of PHP Cardiff Limited (2.2)
ICAV Recapitalisation 2.1
Impairment of subsidiary undertakings (0.2)
As at 31 December 2023 866.3
All subsidiaries of the Company are 100% owned and listed on the following pages. All are incorporated in
the UK and their registered office is Burdett House, 15–16 Buckingham Street, London WC2N 6DU, except
as noted.
Notes to the Company financial statements continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
149
8. Investment in subsidiaries continued
Subsidiaries held directly by the Company
Name Principal activity Name Principal activity
Primary Health Investment Properties Limited Property investment/financing company PHP Bond Finance Limited Issuer of bonds
Primary Health Investment Properties (No. 2) Limited Property investment PHP Medical InvestmentsLimited Property investment/financing company
Primary Health Investment Properties (No. 3) Limited Property investment PHP SB Limited Investment holding/issuer of bonds
PHP Healthcare (Holdings)Limited Investment holding PHIP (Milton Keynes) Limited Dormant
Primary Health Investment Properties (No. 4) Limited Investment holding/financing company Primary Health Properties ICAV
2
Property investment/investment holding
PHIP (5) Limited Property investment/financing company Carden Medical InvestmentsLimited
4
Property investment
PHP Finance (Jersey No 2) Limited
1
Issuer of bonds Chelmsley Associates Limited Property investment
PHP Euro Private Placement MLLtd Property investment/financing company PHP STL Limited Investment holding/financing company
PHP SPV Limited Property investment PHP Euro Private PlacementLimited Issuer of bonds
MXF Fund Limited
5
Investment holding PHP Primary Properties (Haymarket) Limited Subletting of leased real estate
PHP Development HoldingsLimited Property investment PHP Tradeco Holdings Limited Investment holding
Axis Real Estate Group Limited
6
Investment holding PHP Health Solutions Limited Property investment
PHP Croft Limited Property investment MXF Properties BridlingtonLimited Property investment
PHP Finance (Jersey No 3) Limited
1
Issuer of bonds PHPI Navan Road Limited
3
Dormant
Subsidiaries held indirectly by the Company
Name Principal activity Name Principal activity
PHP (Bingham) Limited Property investment PHP Investments No. 2 Limited Property investment
Anchor Meadow Limited Property investment Leighton Health Limited Property investment
PHP AV Lending Limited Financing company PHP Healthcare InvestmentsLimited Property investment
PHP Investments No. 1 Limited Property investment PHP St. Johns Limited Property investment
PHP (Project Finance) Limited Property investment PHP Clinics Limited Property investment
PatientFirst Partnerships Limited Property investment PHIP (Stourbridge) Limited Property investment
PHP Glen Spean Limited Property investment Gracemount Medical CentreLimited
4
Property investment
PHP Empire Holdings Limited Property investment PHP AssetCo (2011) Limited Property investment
Health Investments Limited Property investment PHP Primary Properties Limited Property investment
PHP Medical Properties Limited Property investment/investment holding Crestdown Limited Property investment
PatientFirst (Hinckley) Limited Property investment Primary Health Investment Properties (No. 6) Limited Property investment
PatientFirst (Burnley) Limited Property investment GP Property Limited
5
Investment holding
PHP Investments (2011) Limited Property investment MXF Properties OM Limited Property investment
PHIP (Chester) Limited Property investment GPG No. 5 Limited Property investment
MXF Properties I Limited
5
Property investment GP Property One Ltd Property investment
MXF Properties III Limited Property investment MXF Properties II Limited Property investment
Notes to the Company financial statements continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
150
Name Principal activity Name Principal activity
MXF Properties V Limited
5
Property investment MXF Properties IV Limited Property investment
MXF Properties VII Limited
5
Property investment/investment holding MXF Properties VI Limited
5
Property investment/issuer of bonds
Primary Medical Property Investments Limited Property investment MXF Properties VIII Limited
5
Property investment/issuer of bonds
MXF Properties Ireland Limited
5
Property investment MXF GPG Holdings Limited
5
Property investment
MXF Properties IX Limited Investment holding/financing company MXF (Fakenham) Limited Property investment
PHP Property Management Services Limited Operations management PHP Tradeco Limited Operations management
Axis Technical Services Limited
6
Property and facility management PHP Primary Care Developments Limited Property investment
1 Subsidiary company registered in Jersey. Registered office: 3rd Floor, 44 Esplanade, St Helier, Jersey JE4 9WG.
2 An Irish Collective Asset-management Vehicle established in Ireland.
3 Subsidiary company registered in Ireland. Registered office: Riverside 1, Sir John Rogerson’s Quay, Dublin 2, Ireland.
4 Subsidiary company registered in Scotland. Registered office: 4th Floor, 20 Castle Terrace, Edinburgh, Scotland EH1 2EN.
5 Subsidiary company registered in Guernsey. Registered office: Oak House, Hirzel Street, St Peter Port, Guernsey GY1 1NP.
6 Subsidiary company registered in Ireland. Registered office: 12 Eastgate Way, Little Island. Co. Cork, Ireland.
100% of all voting rights and Ordinary Shares are held directly or indirectly by the Company.
Notes to the Company financial statements continued
8. Investment in subsidiaries continued
Subsidiaries held indirectly by the Company continued
9. Trade and other receivables
2024
£m
2023
£m
Non-current
Amounts due from Group undertakings 797.5 813.4
Current
Amounts due from Group undertakings — —
Other receivables 0.3 0.6
797.8 814.0
Based on the IFRS 9 expected credit loss model, a £5.3 million (2023: £12.8 million) impairment provision
wasrecognised on amounts due from Group undertakings. Expected credit loss is measured on a
twelve-month basis.
Amounts due from Group undertakings are unsecured, interest free and repayable on demand.
10. Cash at bank and in hand
2024
£m
2023
£m
Cash at bank and in hand 0.3 0.3
11. Trade and other payables
2024
£m
2023
£m
Current
Amounts owed to Group undertakings 284.8 276.4
Trade and other payables 10.9 10.1
295.7 286.5
Amounts owed to Group undertakings are unsecured, interest free and repayable on demand.
12. Borrowings
2024
£m
2023
£m
Intra-group loan with PHP Finance (Jersey No 2) Limited (Note 13) 149.5 148.5
Option to convert (Note 13) 1.0 4.9
150.5 153.4
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
151
13. Intra-group loan with PHP Finance (Jersey No 2) Limited
On 15 July 2019, PHP Finance (Jersey No 2) Limited (the “issuer”), a wholly owned subsidiary of the Group,
issued £150.0 million of 2.875% convertible bonds (the “bonds”) for a six-year term and if not previously
converted, redeemed or purchased and cancelled, the bonds will be redeemed at par on maturity in
July2025. The proceeds have been loaned to the Company and the Company has unconditionally and
irrevocably guaranteed the due and punctual performance by the Issuer of all of its obligations (including
payments) in respect of the bonds.
Subject to their terms, the bonds are/were convertible into preference shares of the Issuer which are/were
automatically transferred to the Company in exchange for Ordinary Shares in the Company or, at the
Company’s election, any combination of Ordinary Shares and cash.
The intra-group loan between the Issuer and the Company arising from the transfer of the loan proceeds
was initially recognised at fair value, net of capitalised issue costs, and is accounted for using the
amortised cost method.
In addition to the intra-group loan, the Company has effectively entered into a derivative contract due
toits guarantee of the obligations of the Issuer in respect of the bonds and the commitment to provide
shares or a combination of shares and cash on conversion of the bonds. This derivative contract is
includedwithin the balance sheet as a liability carried at fair value through profit and loss.
See Note 14 in the Group financial statements for further details about the convertible bond.
14. Share capital
Issued and fully paid at 12.5 pence each
2024 2023
Number
– million £m
Number
– million £m
As at 1 January 1,336.5 167.1 1,336.5 167.1
As at 31 December 1,336.5 167.1 1,336.5 167.1
15. Retained earnings
2024
£m
2023
£m
As at 1 January 179.0 285.7
Profit/(loss) for the year 59.1 (15.6)
Dividends paid (92.1) (89.5)
Exchange differences on translation of foreign balances 8.2 (1.7)
Long Term Incentive Plan 0.4 0.1
As at 31 December 154.6 179.0
16. Contingent liabilities
The Company has guaranteed the performance of its subsidiaries in respect of development agreements
totalling £nil (2023: £nil). The Company is guarantor to several of its subsidiaries’ debt facilities totalling
£1.1 billion (2023: £1.1 billion).
17. Related party transactions
Details of related party transactions are provided in the Directors’ Report, the Directors’ Remuneration
Report and Note 24 to the Group financial statements on page 144. The Directors are listed in the Board
ofDirectors section.
The Company has also taken advantage of the exemption from the requirements in IAS 24 Related party
disclosures to disclose related party transactions entered into between two or more members of the Group
where those party to the transaction are wholly owned by a member of the Group.
18. Subsequent events
There have been no significant events affecting the Company since the period ended 31 December 2024.
Notes to the Company financial statements continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
152
Wednesday, 7 May 2025 at 10:30 a.m. (UK time)/12:30 p.m. (South Africa time)
To be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place,
78CannonStreet, London EC4N 6AF
THIS DOCUMENT AND THE ENCLOSED FORM OF PROXY ARE IMPORTANT AND REQUIRE YOUR
IMMEDIATE ATTENTION.
If you are in any doubt about the contents of this document or about what action you should take, you
should seek your own financial advice from your stockbroker or other independent adviser authorised
under the Financial Services and Markets Act, 2000.
If you have sold or otherwise transferred all of your Ordinary Shares, please forward this document,
together with the accompanying documents, as soon as possible either to the purchaser or transferee or
to the person who arranged the sale or transfer so they can pass these documents to the person who now
holds the Ordinary Shares.
Whether or not you propose to attend the Annual General Meeting, please complete and submit a Form
ofProxy in accordance with the instructions printed on the enclosed form.
The Form of Proxy must be received by the Registrar, Equiniti, by no later than 10:30 a.m. (UK time)/12:30 p.m.
(South Africa time) on 2 May 2025.
Primary Health Properties PLC
(incorporated and registered in England and Wales under number 03033634)
A map showing the location of the venue and how to get there is set out below.
Venue
The offices of CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street,
LondonEC4N 6AF.
Travel information
Underground and rail
By train: Cannon Street station is serviced by the Southeastern train line.
By London Underground (tube)/Docklands Light Railway (“DLR”): It is approximately a three-minute walk
from Bank Station underground (tube) station on the Central, Waterloo & City and Northern lines. Bank is
also a DLR station. It is above Cannon Street underground (tube) station on the Circle and District lines.
Notice of Annual General Meeting 2025
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St Paul’s
CANNON
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THAMES
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KING WILLIAM ST
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
153
LETTER FROM THE CHAIR
To all shareholders 13 March 2025
Notice of Annual General Meeting
Dear shareholder,
I am pleased to invite you to our 2025 Annual General Meeting (“AGM”), which will be held on Wednesday,
7 May at 10:30 a.m. (UK time)/12:30 p.m. (South Africa time) as a hybrid meeting, with shareholders
invitedto join physically at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place,
78Cannon Street, London EC4N 6AF or listen remotely via secure telephone line (please see further below).
The formal Notice of AGM, which sets out the resolutions to be proposed, can be found on pages 155 to 157
ofour 2024 Annual Report. An explanation of the resolutions can be found on pages 157 to 162. A copy of our
2024Annual Report, which includes the Notice of AGM, can also be found on our website (www.phpgroup.co.uk).
Your vote and participation in the AGM are important to us. We strongly encourage you to vote on all
resolutions either electronically, in advance of the meeting, or by appointing the Chairman as your proxy.
Ifyou cast your vote by proxy in advance, this will not prevent you from voting on the day.
Actions to be taken in respect of the AGM
There is a secure telephone line so that shareholders can listen to the AGM and also ask any questions
relating to the business of the meeting. Please note you will not be able to vote by telephone. If you would
like to attend the meeting by telephone, please contact the Company Secretary at cosec@phpgroup.co.uk.
Requests must be received by no later than 10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on 2 May 2025.
The telephone line will open shortly before 10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on the day
of the meeting. In addition to your secure dial-in details, you will need your Shareholder Reference Number,
which can be found on your Form of Proxy/Voting Instruction Form, Dividend Confirmation Statement or
Share Certificate, in order to access the meeting.
Unfortunately, there will not be a facility to vote by telephone. We recommend that shareholders who
would like to vote appoint the Chair of the meeting as their proxy and register a voting instruction using
their Form of Proxy/Voting Instruction Form ahead of the meeting. Details about how to vote are included
in the documents sent to you.
If you are unable to attend the AGM (whether in person or remotely) and vote on the day, the ways to vote
are as follows:
1. Register your vote electronically by logging into Equiniti Limited’s (“Equiniti”) website, www.sharevote.
co.uk. If you have already registered with Equiniti’s online portfolio service, Shareview, you can submit
your proxy by logging on to your portfolio at www.shareview.co.uk and following the instructions.
Please note that votes submitted electronically in this manner should be submitted by no later than
10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on 2 May 2025.
2. Appoint a proxy to vote on your behalf. Fill in the Form of Proxy enclosed with this document (“Form of
Proxy”) and return it to Equiniti as detailed in Note 4 on page 162, appoint your proxy electronically as
detailed in Note 4 on page 162, or if you are a CREST member, appoint your proxy through the CREST
proxy appointment service as detailed in Note 5 on pages 162 to 163. Shareholders who wish to
appoint a proxy are recommended to appoint the Chair of the meeting as their proxy.
3. If you are an institutional investor, you may be able to appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the Company and approved by Equiniti. For further
information regarding Proxymity, please go to www.proxymity.io. Before you can appoint a proxy via
this process, you will need to have agreed to Proxymity’s terms and conditions. It is important that you
read these carefully, as you will be bound by them and they will govern the electronic appointment of
your proxy.
Proxy appointments should be completed as soon as possible and must be received by 10:30 a.m.
(UKtime)/12:30 p.m. (South Africa time) on 2 May 2025, whether this is via Proxymity or otherwise.
Voting electronically or the completion and return of the Form of Proxy will not prevent you from attending
and voting at the AGM, or any adjournment of the AGM, whether in person or remotely, should you wish to
do so. As all our resolutions at the AGM will be taken on a poll vote, so as to accurately record all votes
made either at the meeting or via proxy, shareholders attending the meeting will be asked to vote their
shares by poll. Full guidance will be given on the day. The results of the AGM will be notified to the London
and Johannesburg Stock Exchanges and posted on our website as soon as possible after the AGM.
Recommendation
The Directors consider that the resolutions are in the best interests of the Company and are most likely to
promote the success of the Company for the benefit of shareholders as a whole. Accordingly, the Directors
unanimously recommend that you vote in favour of all the resolutions, as they intend to do so in respect of
their own beneficial holdings, which, as at 11 March 2025 (being the last practicable date prior to
publication of this document), amount in aggregate to 25,520,380 Ordinary Shares, representing
approximately 1.91%. of the Ordinary Shares of the Company currently in issue.
On behalf of the Board, I thank you for your continued support.
Yours sincerely,
Harry Hyman
Non-executive Chair
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
154
NOTICE OF ANNUAL GENERAL MEETING
PRIMARY HEALTH PROPERTIES PLC
(incorporated and registered in England and Wales with registered number 03033634)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Primary Health Properties PLC (the
“Company”) will be held at the offices of CMS Cameron McKenna Nabarro Olswang LLP at Cannon Place,
78 Cannon Street, London EC4N 6AF, on 7 May 2025 at 10:30 a.m. (UK time)/12:30 p.m. (South Africa time)
(the “AGM”). Shareholders will be asked to consider and, if thought fit, pass the resolutions as set out
below (the “resolutions”). Resolutions 15 to 18 (inclusive) will be proposed as special resolutions. Allother
resolutions will be proposed as ordinary resolutions. Voting on the resolutions will be by way ofapoll.
Ordinary resolutions
Resolution 1: Annual Report and Accounts
To receive the Company’s Annual Report and Accounts of the Directors of the Company (the “Directors”)
and of the auditor to the Company for the financial year ended 31 December 2024.
Resolution 2: Directors’ remuneration report
To approve the Directors’ Remuneration Report (excluding the Directors’ Remuneration Policy) as contained
in the Company’s Annual Report and Accounts for the financial year ended 31 December 2024.
Resolution 3: Dividend policy
To approve the Company’s dividend policy, as set out in the explanatory notes that accompany this
Noticeof AGM.
Resolution 4: Re-appointment of the auditor
To re-appoint Deloitte LLP as auditor of the Company to hold office from the conclusion of this meeting
until the conclusion of the next general meeting of the Company at which accounts are laid before
theCompany.
Resolution 5: Auditor’s remuneration
To authorise the Audit Committee of the Company, for and on behalf of the Directors, to determine the
remuneration of the auditor.
Resolution 6: Re-election of Harry Hyman
To re-elect Harry Hyman as a Director of the Company.
Resolution 7: Re-election of Mark Davies
To re-elect Mark Davies as a Director of the Company.
Resolution 8: Re-election of Richard Howell
To re-elect Richard Howell as a Director of the Company.
Resolution 9: Re-election of Laure Duhot
To re-elect Laure Duhot as a Director of the Company.
Resolution 10: Re-election of Ian Krieger
To re-elect Ian Krieger as a Director of the Company.
Resolution 11: Re-election of Ivonne Cantú
To re-elect Ivonne Cantú as a Director of the Company.
Resolution 12: Re-election of Dr Bandhana (Bina) Rawal
To re-elect Bina Rawal as a Director of the Company.
Resolution 13: Political expenditure or donations
To authorise the Company and all companies that are its subsidiaries at any time during the period for
which this Resolution 13 has effect for the purposes of Sections 366 and 367 of the Companies Act 2006
(the “2006 Act”) to:
(A) make political donations to political parties or independent election candidates (as such terms are
defined in the 2006 Act), not exceeding £40,000 in aggregate;
(B) make political donations to political organisations other than political parties (as such terms are
defined in the 2006 Act), not exceeding £40,000 in aggregate; and
(C) incur political expenditure (as such term is defined in the 2006 Act), not exceeding £40,000
inaggregate,
during the period beginning with the date of the passing of this Resolution 13 and ending with the
conclusion of the next Annual General Meeting of the Company (or, if earlier, on the date which is 15
months after the date of the AGM) provided that the maximum amounts referred to in (A), (B) and (C) may
comprise one or more sums in different currencies which shall be converted at such rate as the Board of
Directors of the Company (the “Board”) may in its absolute discretion determine to be appropriate.
Resolution 14: Authority to allot shares
That the Directors be and are hereby generally and unconditionally authorised in accordance with Section
551 of the 2006 Act, in substitution for all existing authorities:
(A) to exercise all the powers of the Company to allot shares and to make offers or agreements to allot
shares in the Company or grant rights to subscribe for or to convert any security into shares in the
Company (together “Relevant Securities”) up to an aggregate nominal amount of £55,687,241; and
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
155
NOTICE OF ANNUAL GENERAL MEETING continued
Ordinary resolutions continued
Resolution 14: Authority to allot shares continued
(B) to exercise all the powers of the Company to allot equity securities (as defined in Section 560(1) of
the2006 Act) up to an additional aggregate nominal amount of £55,687,241 provided that this
authority may only be used in connection with a rights issue in favour of holders of Ordinary Shares
of12.5 pence each in the capital of the Company (“Ordinary Shares”) and other persons entitled to
participate therein, where the equity securities respectively attributable to the interests of all those
persons at such record dates as the Directors may determine are proportionate (as nearly as may be)
to the respective numbers of equity securities held or deemed to be held by them or are otherwise
allotted in accordance with the rights attaching to such equity securities, subject to such exclusions
orother arrangements as the Directors may consider necessary or expedient to deal with fractional
entitlements or legal difficulties under the laws of any territory or the requirements of a regulatory
body or stock exchange by virtue of shares being represented by depositary receipts or any other
matter whatsoever,
PROVIDED that such authorities shall expire (unless renewed, varied or revoked by the Company in a
general meeting) at the conclusion of the next Annual General Meeting of the Company after the passing
of this Resolution 14 or, if earlier, on the date which is 15 months after the date of the AGM, but in each
case, prior to its expiry, the Company may make offers and enter into agreements which would, or might,
require Relevant Securities or equity securities as the case may be to be allotted (and treasury shares to
be sold) after the authority expires and the Directors may allot Relevant Securities or equity securities
(and sell treasury shares) in pursuance of any such offer or agreement as if the authority in question had
not expired.
Special resolutions
Resolution 15: Disapplication of pre-emption rights
That, subject to the passing of Resolution 14, the Directors be and are hereby authorised, pursuant to
Sections 570 and 573 of the 2006 Act, to allot equity securities (as defined in Section 560(1) of the 2006 Act)
for cash under the authority given by Resolution 14 and/or to sell Ordinary Shares held by the Company
astreasury shares for cash as if Section 561 of the 2006 Act did not apply to any such allotment or sale,
provided that this power shall be limited to:
(A) the allotment of equity securities and/or sale of treasury shares for cash in connection with an offer
of, or invitation to apply for, equity securities made (but in the case of the authority conferred by
Resolution 14(B), by way of a rights issue only) to holders of Ordinary Shares at such record dates as
the Directors may determine in proportion (as nearly as may be practicable) to their existing holdings
and to holders of other equity securities as required by the rights of those securities or, if the Directors
otherwise consider necessary, as permitted by the rights of those securities, and so that the Directors
may impose any limits or restrictions and make any arrangements which they consider necessary or
appropriate to deal with any treasury shares, fractional entitlements, record dates, or legal, regulatory
or practical problems in, or under the laws of, any territory or any other matter;
(B) the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (A)
above) up to an aggregate nominal amount of £16,706,172; and
(C) the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (A) or
paragraph (B) above) up to a nominal amount equal to 20% of any allotment of equity securities or sale
of treasury shares from time to time under paragraph (B) above, such authority to be used only for the
purposes of making a follow-on offer which the Board determines to be of a kind contemplated by
paragraph 3 of Section 2B of the Statement of Principles on Disapplying Pre-Emption Rights most
recently published by the Pre-Emption Group prior to the date of this notice,
and shall expire at the conclusion of the next Annual General Meeting of the Company after the passing
ofthis Resolution 15 or, if earlier, on the date which is 15 months after the date of the AGM but in each
case, prior to its expiry, the Company may make offers and enter into agreements which would, or might,
require Relevant Securities or equity securities as the case may be to be allotted (and treasury shares to
be sold) after the authority expires and the Directors may allot equity securities (and sell treasury shares)
in pursuance of any such offer or agreement as if the authority in question had not expired.
Resolution 16: Further disapplication
That subject to the passing of Resolution 14, the Directors be and are hereby authorised, in addition to any
authority granted under Resolution 15, to allot equity securities (as defined in Section 560(1) of the 2006
Act) for cash under the authority given by Resolution 14 and/or to sell Ordinary Shares held by the
Company as treasury shares for cash as if Section 561 of the 2006 Act did not apply to any such allotment
or sale, provided that this power shall be limited to:
(A) the allotment of equity securities or sale of treasury shares up to an aggregate nominal amount
of£16,706,172 and used only for the purposes of financing (or refinancing, if the authority is to be used
within twelve months after the original transaction) a transaction which the Board determines to be
either an acquisition or a specified capital investment of a kind contemplated by the Statement of
Principles on Disapplying Pre-Emption Rights most recently published by the Pre-Emption Group prior
to the date of this notice; and
(B) the allotment of equity securities or sale of treasury shares (otherwise than under paragraph (A)
above) up to a nominal amount equal to 20% of any allotment of equity securities or sale of treasury
shares from time to time under paragraph (A) above, such authority to be used only for the purposes
of making a follow-on offer which the Board determines to be of a kind contemplated by paragraph 3
of Section 2B of the Statement of Principles on Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of this notice,
and shall expire at the conclusion of the next Annual General Meeting of the Company after the passing
ofthis Resolution 16 or, if earlier, on the date which is 15 months after the date of the AGM but in each
case, prior to its expiry, the Company may make offers and enter into agreements which would, or might,
require equity securities to be allotted (and treasury shares to be sold) after the authority expires and the
Directors may allot equity securities (and sell treasury shares) in pursuance of any such offer or agreement
as if the authority in question had not expired.
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
156
NOTICE OF ANNUAL GENERAL MEETING continued
Special resolutions continued
Resolution 17: Notice of general meetings
That the Company is authorised to call any general meeting of the Company, other than an Annual
General Meeting, on not less than 14 clear days’ notice during the period beginning on the date of
thepassing of this Resolution 17 and ending on the conclusion of the next Annual General Meeting
oftheCompany.
Resolution 18: Purchase of own shares
That the Company be generally and unconditionally authorised to make one or more market purchases
(within the meaning of Section 693(4) of the 2006 Act) of Ordinary Shares on such terms and in such
manner as the Directors may from time to time determine, provided that:
(A) the maximum aggregate number of Ordinary Shares that may be purchased is 133,649,378
(representing approximately 10% of the issued Ordinary Share capital of the Company as at the latest
practicable date prior to publication of this document);
(B) the minimum price (excluding expenses payable by the Company) which may be paid for each Ordinary
Share is 12.5 pence;
(C) the maximum price (excluding expenses payable by the Company) which may be paid for each
Ordinary Share is the higher of: i) an amount equal to 105% of the average of the middle market
quotations for an Ordinary Share, as derived from the London Stock Exchange Daily Official List,
forthe five business days immediately prior to the day the purchase is made; and ii) an amount equal
tothe higher of the price of the last independent trade of an Ordinary Share and the highest current
independent bid for an Ordinary Share as derived from the London Stock Exchange Trading System; and
(D) this authority shall expire at the conclusion of the Company’s next Annual General Meeting after the
passing of this Resolution 18 or, if earlier, on the date which is 15 months after the date of the AGM,
save that the Company may, before the expiry of this authority, enter into a contract to purchase
Ordinary Shares which will or may be executed wholly or partly after the expiry of such authority,
andmay make a purchase of Ordinary Shares in pursuance of any such contract.
By order of the Board
Toby Newman
Company Secretary
13 March 2025
Primary Health Properties PLC
Registered office: 5th Floor, Burdett House, 15-16 Buckingham Street, London WC2N 6DU
Registered in England & Wales No: 03033634
Important notes regarding your general right to appoint a proxy and voting can be found on pages 162 to 164.
EXPLANATORY NOTES TO THE RESOLUTIONS
These notes are intended to explain the business to be transacted at the AGM to be held at 10:30 a.m.
(UKtime)/12:30 p.m. (South Africa time) on 2 May 2025 at the offices of CMS Cameron McKenna Nabarro
Olswang LLP at Cannon Place, 78 Cannon Street, London EC4N 6AF (the “AGM”). Resolutions 15 to 18 (inclusive)
are proposed as special resolutions. This means that for each of those resolutions to be passed, at least
three-quarters of the votes cast must be in favour of the resolution. All other resolutions are proposed as
ordinary resolutions, so that for each of those resolutions to be passed, more than half of the votes cast
must be in favour of the resolution.
Accounts (Resolution 1)
By company law the Directors must present to the AGM the Annual Report 2024 for adoption. The Board
will welcome any questions and discussion on the Annual Report 2024 at the AGM.
Directors’ Remuneration Report (Resolution 2)
Resolution 2 seeks shareholders’ approval for the Directors’ Remuneration Report as contained on pages 87
to107 of the Annual Report 2024, which gives details of Directors’ remuneration paid for the year ended
31December 2024 in accordance with the Remuneration Policy approved by shareholders in 2023.
Theauditor has audited those parts of the Directors’ Remuneration Report that are required to be audited.
This resolution is proposed as an ordinary resolution. The vote is advisory in nature, which means that the
Directors’ entitlement to remuneration is not conditional on it.
Dividend policy (Resolution 3)
Resolution 3 is proposed to seek shareholders’ approval of the Company’s dividend policy. Despite the
continuing uncertainty and volatility in the economic environment, we have continued to deliver a strong
androbust operational and financial performance over the course of 2024. This has allowed the Company
tocontinue to pay an increasing level of dividend to its shareholders over the last 28 years.
The Company’s policy is to make all of its dividend payments (currently four per annum) as interim dividends.
This enables the fourth dividend payment to be made approximately two months earlier than would be the
case if that dividend were categorised as a “final dividend” and therefore had to await shareholder approval
at the Annual General Meeting. This arrangement is made in the interests of shareholders, enabling them to
benefit from the earlier receipt of the fourth dividend. As we believe it is important for shareholders to have
an opportunity to consider this policy annually, and in accordance with the principles of good corporate
governance, a resolution to approve the Company’s dividend policy is included as Resolution 3 in the
accompanying Notice of AGM.
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
157
EXPLANATORY NOTES TO THE RESOLUTIONS continued
Re-appointment and remuneration of auditor (Resolutions 4 and 5)
Resolution 4 proposes to re-appoint Deloitte LLP as auditor of the Company to hold office from the
conclusion of the AGM until the conclusion of the next general meeting of the Company at which accounts
are laid.
Resolution 5 proposes to authorise the Audit Committee, for and on behalf of the Directors, to determine
the remuneration of the auditor.
Election and re-election of Directors (Resolutions 6 to 12)
In accordance with the recommendations of the UK Corporate Governance Code, all the Directors have
resolved that they will offer themselves for re-election by shareholders at the AGM.
Separate resolutions are being proposed to elect or re-elect each of the Directors standing for election.
Resolutions 6 to 12 are being proposed as ordinary resolutions.
Re-election of Harry Hyman (Resolution 6)
Outgoing Chief Executive Officer: Founder of the Company and Director since 1996, proposed for
re-election as a Non-executive Director, as further explained in the Annual Report 2024 on page 61.
Biography
Details of Harry’s background and experience are set out on page 62 of the Annual Report 2024.
Other external relationships
Non-executive Chair of Biopharma Credit PLC.
Contribution and reasons for re-election
Harry has extensive experience in investing in the primary healthcare sector, and the value of his contribution
to the Company is demonstrated by his having developed the Company’s business from inception 26 years
ago to its current position in the FTSE 250, with an investment portfolio of over £2.5 billion. Harry brings to
the Board a unique combination of experience in the primary healthcare sector, a background in finance and
entrepreneurial flair having established a number of successful private companies. The Board believes that
Harry Hyman’s appointment as Non-executive Chair is in the best interests of the Group and all of its
stakeholders, particularly as Harry’s knowledge and expertise gained over nearly 30 years in the primary
care property sector will continue to be invaluable and highly relevant to the Group’s future success. On his
appointment as Non-executive Chair in 2024, the Board determined that the term will be a maximum of three
years, subject to: (a) annual review by the Company’s experienced and robust group of independent
Non-executive Directors; and (b) with the Board’s recommendation following such review, re-appointment by
shareholders at the Company’s Annual General Meeting each year for that period.
Independent
No
Re-election of Mark Davies (Resolution 7)
Chief Executive Officer with effect from the conclusion of the Company’s 2024 Annual General Meeting.
Biography
Details of Mark’s background and experience are set out on page 62 of the Annual Report 2024.
Other external relationships
Senior Independent Non-executive Director of Palace Capital plc.
Contribution and reasons for re-election
Mark is a highly experienced FTSE 250 Executive, having held CEO and CFO roles in listed companies and
private equity. He was a Co-founder Director of NewRiver REIT plc (“NewRiver”) in 2009 and played an
important role in taking the company from IPO to the FTSE 250 in seven years. He was CFO of NewRiver
for over twelve years and, alongside his role as CFO, was also CEO/Executive Chair of Hawthorn Leisure
Limited (“Hawthorn”) for five years. Mark stood down from the board of NewRiver following the successful
sale of Hawthorn in July 2021 to private equity at a premium price.
Mark has considerable capital markets experience and over the last 14 years has raised over £3billion of
equity and debt in public and private markets.
Independent
No
Re-election of Richard Howell (Resolution 8)
Chief Financial Officer: Appointed as a Director from 1 April 2017.
Biography
Details of Richard’s background and experience are set out on page 62 of the Annual Report 2024.
Other external relationships
Non-executive Director of Life Science REIT plc.
Contribution and reasons for re-election
Richard has been Chief Financial Officer during a time of significant change for the Company’s corporate
group and has played a key role in effectively managing the Company’s corporate group’s capital raising
activities from both financial institutions and the public markets. Richard’s extensive finance experience
and deep understanding of the markets in which the Company operates, having previously held senior
accounting positions within listed property companies operating across the UK, mean he continues to
contribute greatly to the long term success of the Company’s corporate group.
Independent
No
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
158
EXPLANATORY NOTES TO THE RESOLUTIONS continued
Re-election of Laure Duhot (Resolution 9)
Non-executive Director: Appointed as a Director on 14 March 2019.
Biography
Details of Laure’s background and experience are set out on page 62 of the Annual Report 2024.
Other external relationships
Non-executive Director at Safestore Holdings plc and NB Global Monthly Income Fund Limited (until July 2024).
Contribution and reasons for re-election
Laure brings over 30 years of property and finance experience to the Board, including insights from her
international property investment experience. Laure has specialised in investment in alternative real estate
assets and was a Non-executive Director at MedicX Limited. Laure makes an effective and valuable
contribution to the Board, including as Chair of the ESG Committee. Laure has demonstrated commitment,
including devoting an appropriate amount of time, to the role.
Independent
Yes
Re-election of Ian Krieger (Resolution 10)
Senior Independent Non-executive Director: Appointed as a Director on 15 February 2017.
Biography
Details of Ian’s background and experience are set out on page 63 of the Annual Report 2024.
Other external relationships
Senior Independent Non-executive Director and Chair of the Audit Committee at Safestore Holdings plc
and Capital & Regional plc until his retirement from the board of each during 2024.
Contribution and reasons for re-election
Ian brings to the Board a wealth of specialised financial and accounting skills and expertise from his
experience in the audit profession and in previously chairing the audit committees of two other listed
companies in the property sector. His extensive financial expertise, coupled with his insight and
governance experience of other listed companies, makes him ideally placed to serve as Chair of the Audit
Committee. Ian makes an effective and valuable contribution to the Board, including through his role of
Chair of the Audit Committee, and demonstrates a high degree of commitment, including devoting an
appropriate amount of time, to the role.
Independent
Yes
Re-election of Ivonne Cantú (Resolution 11)
Independent Non-executive Director. Appointed as a Director on 1 January 2022.
Biography
Details of Ivonne’s background and experience are set out on page 63 of the Annual Report 2024.
Other external relationships
Non-executive Director at Creo Medical Group plc.
Contribution and reasons for re-election
Ivonne has significant public company and corporate finance experience, having spent over 20 years
advising listed businesses. She is currently the Director of Investor Relations, Communications and
Sustainability as well as a Member of the Executive Management Team and the Sustainability Committee
of Benchmark Holdings Limited, a biotechnology aquaculture company. She is also a Non-executive
Director and Chair of the Remuneration Committee at Creo Medical Group plc.
Independent
Yes
Re-election of Dr Bandhana (Bina) Rawal (Resolution 12)
Independent Non-executive Director. Appointed as a Director on 27 February 2024.
Biography
Details of Bina’s background and experience are set out on page 63 of the Annual Report 2024.
Other external relationships
Non-executive Director at Worldwide Healthcare Trust plc.
Contribution and reasons for re-election
Bina brings to the Board a wide breadth of experience spanning patient care, digital and population
health, ESG, strategy, partnerships and EDI, alongside extensive networks in UK healthcare through her
senior level executive and non-executive roles to date in large, complex organisations within the public,
private and not-for-profit sectors.
Independent
Yes
Notice of Annual General Meeting 2025 continued
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Primary Health Properties PLC Annual Report 2024
159
EXPLANATORY NOTES TO THE RESOLUTIONS continued
Political expenditure or donations (Resolution 13)
Under the 2006 Act, political donations made by a company and its subsidiaries to political parties,
toother political organisations or to an independent election candidate, or political expenditure incurred
by a company of more than £5,000 in any twelve month period, is prohibited unless they have been
authorised in advance to make donations by the company’s shareholders.
It is the policy of the Company not to make donations to political parties, other political organisations
orindependent election candidates and the Directors have no intention of changing that policy.
However, as a result of the wide definition of political organisations under the 2006 Act, normal
expenditure (such as expenditure on organisations concerned with matters of public policy, law reform
andrepresentation of the business community) and business activities (such as communicating with the
government and political parties at local, national and European level) might be construed as political
expenditure or as a donation to a political party or other political organisation and therefore fall within
therestrictions of the 2006 Act.
Consequently, the Directors have concluded that, in common with many other listed companies, it would
be prudent to seek authority from shareholders to allow them to make political donations and incur political
expenditure (up to £40,000 in the specified period) to ensure that the Group does not inadvertently
breach the Companies Act 2006. Any political donation made or political expenditure incurred which is in
excess of £200 will be disclosed in the Company’s Annual Report and Accounts for next year, as required
by the 2006 Act. Resolution 13 will not be used to make political donations within the normal meaning of
that expression.
Directors’ authority to allot shares (Resolution 14)
Further to the Articles of Association of the Company (the “Articles”) and the provisions of the 2006 Act,
the Directors may only allot Ordinary Shares or grant rights over Ordinary Shares if authorised to do so
byshareholders.
Accordingly, the authority in Resolution 14, paragraph (A) will allow the Directors to allot shares or grant
rights to subscribe for, or convert any security into, shares in the Company, up to a maximum nominal
amount of £55,687,241, representing approximately one-third of the Company’s issued Ordinary
Sharecapital calculated as at 11 March 2025 (being the latest practicable date prior to publication of this
document). The authority in Resolution 14, paragraph (B) will allow the Directors, only in connection with
apre-emptive rights issue, to allot shares or grant rights to subscribe for, or convert any securities into,
shares in the Company, up to a maximum nominal amount of £55,687,241 in addition to the nominal amount
of any shares allotted or rights granted to subscribe for, or to convert any security into, shares under
paragraph (A), together representing approximately two-thirds of the Company’s issued Ordinary Share
capital calculated as at 11 March 2025 (being the latest practicable date prior to publication of this
document). This is in line with corporate governance guidelines.
This authority will last until the conclusion of the next Annual General Meeting of the Company or, if
earlier, on the date which is 15 months after the date of the AGM. The Directors intend to renew this
authority annually at each Annual General Meeting of the Company. The Directors have no present
intention of exercising this authority other than pursuant to legally binding obligations to do so or, if
applicable, on conversion of the 2.875% guaranteed convertible bonds due 2025 (the “convertible bonds”)
issued by the Company’s subsidiary PHP Finance (Jersey No. 3) Limited. However, it is considered prudent
to maintain the flexibility that this authority provides.
As at 11 March 2025 (being the latest practicable date prior to the publication of this document),
theCompany held no Ordinary Shares in treasury and there were £150,000,000 convertible bonds
outstanding, which at the current exercise price would require the issue of 119,388,730 Ordinary Shares if
all the outstanding convertible bonds exercised the right to convert.
1
Directors’ authority to disapply pre-emption rights (Resolutions 15 and 16)
Under the 2006 Act, when new shares are proposed to be issued for cash, other than in connection
withacompany share option plan, they must first be offered to existing shareholders pro rata to their
percentage holdings at such time, unless shareholders have waived this right either generally or in respect
of a particular issue. The Directors consider it desirable to have the maximum flexibility permitted by
corporate governance guidelines to respond to market developments and to enable allotments to take
place to finance business opportunities without making a pre-emptive offer to existing shareholders. The
purpose of Resolution 16, therefore, is to enable shareholders to waive their pre-emption rights and allow
the Directors to allot shares for cash without such shares being first offered to existing shareholders.
The Statement of Principles, as revised by the Pre-emption Group in November 2022, allows non-pre-
emptive issues capped at 10% for an unrestricted purpose, and at 10% for use only in connection with an
acquisition or specified capital investment. In addition, the Statement of Principles allows companies to
seek a further disapplication of up to 2% in each case for the purposes of a “follow-on offer”, as defined in
paragraph 3 of Section 2B of the Statement of Principles. In summary, this constitutes an offer announced
at the same time as, or as soon as reasonably practicable after, the non-pre-emptive placing, of shares not
exceeding 20% of those issued in the non-pre-emptive placing, made only to existing shareholders as at a
record date prior to announcement of the non-pre-emptive placing (excluding any shareholder allocated
shares in that placing), entitling them to subscribe for shares up to a monetary cap of £30,000 per
ultimate beneficial owner, at a price which is equal to, or less than, the offer price in the non-pre-emptive
placing. This is designed to facilitate participation by retail investors in secondary issuances.
Accordingly, Resolution 15 will, if passed by special resolution, give the Directors authority to allot shares
pursuant to the authority granted in Resolution 14 for cash on a non-pre-emptive basis. This authority will
permit the Directors to allot shares for cash: (A) in connection with a rights issue or any other pre-emptive
offer concerning equity securities; or (B) otherwise than in connection with a rights issue or any other
pre-emptive offer for shares in the Company up to a maximum nominal value of £16,706,172, representing
approximately 10% of the Company’s issued Ordinary Share capital as at 11 March 2025 (being the latest
practicable date prior to the publication of this document).
Notice of Annual General Meeting 2025 continued
1 To be updated for any new CLN information when confirmed (assuming the new CLN arrangements are entered into prior to
the latest practicable date of this document, which we understand to be as per the intended timeframe).
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
160
EXPLANATORY NOTES TO THE RESOLUTIONS continued
Directors’ authority to disapply pre-emption rights (Resolutions 15 and 16) continued
Resolution 15(C) will, if passed by special resolution, also give the Directors authority to allot shares
(orselltreasury shares) pursuant to the authority granted in Resolution 14 for cash on a non-pre-emptive
basis. This disapplication will permit the Directors to allot shares, or sell treasury shares, for cash otherwise
than in connection with a rights issue or any other pre-emptive offer for shares in the Company up to a
maximum nominal value representing approximately 20% of any allotment of equity securities (or sale of
treasury shares) made from time to time pursuant to the authority granted in Resolution 15(B) to be used
only for a follow-on offer which the Board determines to be of a kind contemplated by paragraph 3 of
Section 2B of the Statement of Principles on Disapplying Pre-Emption Rights most recently published by
the Pre-Emption Group.
For the purposes of Resolution 15, the nominal amount of any securities shall be taken to be, in the case of
rights to subscribe for or convert any securities into shares of the Company, the nominal amount of such
shares which may be allotted pursuant to such rights.
Resolution 16 additionally authorises the Directors to allot new shares (or sell treasury shares) for cash,
without the shares being offered first to existing shareholders, in connection with the financing (or refinancing,
if the authority is to be used within twelve months after the original transaction) of an acquisition or
specified capital investment which is announced contemporaneously with the allotment or which has taken
place in the preceding twelve-month period and is disclosed in the announcement of the allotment. The
authority under Resolution 16 is limited to a nominal value of £16,706,172, representing approximately 10%
of the Company’s issued Ordinary Share capital as at 11 March 2025 (being the latest practicable date
prior to the publication of this document).
Resolution 16(B) also will, if passed by special resolution, give the Directors authority to allot shares
(orselltreasury shares) pursuant to the authority granted in Resolution 14 for cash on a non-pre-emptive
basis, provided that such allotment or sale is up to a maximum nominal value representing approximately
20% of any allotment of equity securities (or sale of treasury shares) made from time to time pursuant to
the authority granted in Resolution 16(A) to be used only for a follow-on offer which the Board determines
to be of a kind contemplated by paragraph 3 of Section 2B of the Statement of Principles on Disapplying
Pre-Emption Rights most recently published by the Pre-Emption Group.
The Board intends to adhere to the provisions in the Pre-Emption Group’s Statement of Principles, as updated
in November 2022, and will seek to limit the discount applied to any non-pre-emptive issue to 5%, including
expenses. Notwithstanding the above, the Directors consider it desirable and believe it appropriate to
have the maximum flexibility permitted by corporate governance guidelines to enable non-pre-emptive
allotments to take place to finance business opportunities.
The provisions of Resolutions 15 and 16 comply with the Share Capital Management Guidelines issued by
the Investment Association in July 2016 and the disapplication of pre-emption rights resolutions follow the
resolution templates issued by the Pre-emption Group in November 2022.
If Resolutions 15 and 16 are passed, the authorities will expire at the conclusion of the next Annual General
Meeting of the Company or, if earlier, on the date which is 15 months after the date of the AGM. The Directors
intend to renew this authority annually at each AGM of the Company. The Directors have no immediate
plans to make use of this authority, other than in connection with the issue of Ordinary Shares under the
scrip dividend scheme or if applicable on conversion of the convertible bonds.
As at 11 March 2025 (being the latest practicable date prior to the publication of this document), the
Company did not hold any treasury shares. If the Company were to create treasury shares, for example
through the market purchase of its own shares, the subsequent sale of any treasury shares would be
counted as equivalent to the issue of new shares for the purpose of the limitations on the issue of new
shares included in Resolution 18.
Notice of general meetings, other than Annual General Meetings (Resolution 17)
Under the 2006 Act, the minimum notice period for general meetings of listed companies is 21 days.
Companies may reduce this period to 14 days (other than for Annual General Meetings) provided that two
conditions are met: (i) the company offers a facility for shareholders to vote by electronic means (which
ismet if the company offers a facility, accessible to all shareholders, to appoint a proxy by means of a
website); and (ii) there is an annual resolution of shareholders approving the reduction of the minimum
notice period from 21 days to 14 days.
The Board is therefore proposing, in common with many other listed companies, Resolution 17 as a special
resolution to approve 14 days as the minimum period of notice for all general meetings other than Annual
General Meetings. The approval will be effective until the Company’s next Annual General Meeting, when
itis intended that the approval be renewed. The Board will consider on a case-by-case basis whether the
use of the flexibility offered by the shorter notice period is merited. The shorter notice period will be used
in accordance with all relevant corporate governance guidelines applicable at the time. In particular, it will
only be used where flexibility is merited by the business of the meeting and is thought to be to the
advantage of shareholders as a whole.
Purchase of own shares (Resolution 18)
Resolution 18 seeks authority for the Company to make market purchases of its own Ordinary Shares
aspermitted by the 2006 Act and is proposed as a special resolution. If passed, the resolution gives
authority for the Company to purchase up to 133,649,378 of its Ordinary Shares, representing
approximately 10% of the Company’s issued Ordinary Share capital as at 11 March 2025 (being the latest
practicable date prior to the publication of this document).
This authority is commonly sought by listed companies and the Board considers it prudent to obtain the
flexibility this resolution provides. In considering whether to use this authority, the Board will take into
account factors including the financial resources of the Company, the Company’s share price and future
funding opportunities. It will be exercised only if the Board believes that to do so would result in an
increase in earnings per share and would be in the best interests of shareholders generally and that the
purchase can be expected to result in an increase in earnings per Ordinary Share.
Notice of Annual General Meeting 2025 continued
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161
EXPLANATORY NOTES TO THE RESOLUTIONS continued
Purchase of own shares (Resolution 18) continued
The Directors have no present intention of exercising the authority granted by Resolution 18.
The resolution specifies the minimum and maximum prices which may be paid for any Ordinary Shares
purchased under this authority. The authority will expire at the conclusion of the next Annual General
Meeting of the Company or, if earlier, on the date which is 15 months after the date of the AGM.
The Company may either cancel any Ordinary Shares it purchases under this authority or transfer them
into treasury (and subsequently sell or transfer them out of treasury or cancel them). No dividends are
paid on shares in treasury and no voting rights attach to treasury shares. If the Ordinary Shares that the
Company buys back under this authority are held in treasury, this would give the Company the ability to
re-issue treasury shares quickly and cost-effectively, providing the Company with additional flexibility in
the management of its capital.
As at 11 March 2025 (being the latest practicable date prior to the publication of this document), save
forthe £150,000,000 convertible bonds outstanding, there are no warrants or options to subscribe for
Ordinary Shares that are outstanding.
GUIDANCE NOTES FOR THE AGM AND ON APPOINTMENT
OFPROXIES
1. General:
A copy of this Notice of AGM and other information regarding the AGM, required by Section 311A
ofthe2006 Act (including a copy of the Annual Report 2024 posted to shareholders with this notice),
areavailable from the Company’s website at www.phpgroup.co.uk. Shareholders who have not elected
toreceive these documents in printed form may obtain copies by writing to the Company Secretary at the
Company’s registered office. Shareholders who wish to receive the printed Annual Report and Accounts
forfuture years should write to the Company’s Registrar, Equiniti Limited, Aspect House, Spencer Road,
Lancing BN99 6DA.
2. Entitlement to vote:
Under the Articles, the holders of Ordinary Shares are entitled to attend the AGM and to speak and vote
at the AGM. Duly appointed proxies are entitled also to attend, speak and vote at the AGM.
Only those holders of Ordinary Shares registered in the register of members of the Company as at 6:30 p.m.
(UK time)/8:30 p.m. (South Africa time) on Friday 2 May 2025 (or, if the AGM is adjourned, 6:30 p.m. (UK
time)/8:30 p.m. (South Africa time) on the day that is 48 hours before any adjourned meeting (excluding any
part of any day that is not a working day)) shall be entitled to attend (either in person, remotely or
byproxy) and vote at the AGM, or any adjourned meeting, in respect of the number of shares registered
intheir names at that time. Any changes to the register of members after the relevant deadline shall be
disregarded in determining the right of any person to attend and vote at the AGM or an adjourned meeting.
3. Entitlement to appoint proxies:
Shareholders are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak
and vote on their behalf at the AGM. A shareholder may appoint more than one proxy in relation to the
AGM provided that each proxy is appointed to exercise the rights attached to a different share or shares
held by that shareholder. If a proxy is submitted without indicating how the proxy should vote on any
resolution, the proxy will exercise his or her discretion as to whether and, if so, how to vote. To appoint
more than one proxy you may photocopy the Form of Proxy. A proxy need not be a shareholder of
theCompany.
The Form of Proxy which may be used to make such appointment and give proxy instructions accompanies
this Notice of AGM. If you do not have a Form of Proxy and believe that you should have one, or if you
require additional forms, please contact Equiniti Limited, Aspect House, Spencer Road, Lancing BN99 6DA.
The return of a completed Form of Proxy, or other such instrument or any CREST Proxy Instruction (as described
in Note 5 below), will not prevent a shareholder attending the AGM and voting.
In the case of joint shareholders, the signature of only one of the joint holders is required on the Form of
Proxy but the vote of the first named on the register of members will be accepted to the exclusion of the
other joint holders.
4. Validity of proxies:
To be valid a Form of Proxy or other instrument appointing a proxy must be received by one of the
following methods:
a. by posting the reply-paid proxy or otherwise by post (in which case postage will be payable) or
(duringnormal business hours only) by hand at Equiniti Limited, Aspect House, Spencer Road,
LancingBN99 6DA;
b. in the case of CREST members, by utilising the CREST electronic proxy appointment services in
accordance with the procedures set out in paragraph 5 below; or
c. as an alternative to completing and returning the printed Form of Proxy, you may submit your proxy
electronically by accessing the Sharevote website provided by Equiniti Limited. Shareholders may
submit an electronic proxy online, using the reference numbers printed on the Form of Proxy,
atwww.sharevote.co.uk, where details of the voting procedures are shown.
IMPORTANT: in any case, the Form of Proxy must be received by or lodged with the Company
by10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on Friday 2 May 2025 (or, if the AGM is
adjourned, not later than 48 hours before the time fixed for the adjourned meeting (excluding
anypart of any day that is not a working day)).
5. Electronic proxy appointment:
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment
service may do so by using the procedures described in the CREST Manual (available via www.euroclear.
com). CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider, should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
Notice of Annual General Meeting 2025 continued
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162
Notice of Annual General Meeting 2025 continued
GUIDANCE NOTES FOR THE AGM AND ON APPOINTMENT
OFPROXIES continued
5. Electronic proxy appointment: continued
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate
CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear
UK & International Limited’s specifications and must contain the information required for such instruction,
as described in the CREST Manual (available via www.euroclear.com). The message, regardless of whether
it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously
appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID
number RA19) not later than 10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on Friday 2 May 2025 (or, if
the AGM is adjourned, not later than 48 hours before the time fixed for the adjourned meeting (excluding
any part of any day that is not a working day)). For this purpose, the time of receipt will be taken to be
thetime (as determined by the time stamp applied to the message by the CREST Applications Host) from
which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed
byCREST. After this time any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors, or voting service provider(s) should note
thatEuroclear UK & International Limited does not make available special procedures in CREST for any
particular message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s),
to procure that his/her CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting system provider(s) are referred, in
particular, to those sections of the CREST Manual concerning practical limitations of the CREST system
and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the CREST Regulations.
If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity
platform, a process which has been agreed by the Company and approved by Equiniti Limited. For further
information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by not later
than 10:30 a.m. (UK time)/12:30 p.m. (South Africa time) on Friday 2 May 2025 (or, if the AGM is adjourned,
not later than 48 hours before the time fixed for the adjourned meeting) in order to be considered valid.
Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated
terms and conditions. It is important that you read these carefully as you will be bound by them and they
will govern the electronic appointment of your proxy.
6. Corporate representatives:
Any corporation which is a member may by resolution of its Directors or other governing body authorise
one or more person(s) to act as its representative who may exercise, on its behalf, all its powers as a
member, provided that they do not do so in relation to the same shares. A certified copy of any such
resolution must be deposited at the registered office of the Company not less than 48 hours before the
time appointed for the AGM to be valid (excluding any part of any day that is not a working day).
7. Nominated persons:
Any person to whom this document is sent who is a person nominated under Section 146 of the 2006 Act
to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the
shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the AGM. If a Nominated Person has no such proxy appointment right or does
not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the
shareholder as to the exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of proxies at Notes 2, 3, 4,
and5 above does not apply to Nominated Persons. The rights described in those paragraphs can only
beexercised by shareholders of the Company. If you have been nominated to receive general shareholder
communications directly from the Company, it is important to remember that your main contact in terms of
your investment remains the registered shareholder or custodian or broker who administers the investment
on your behalf. Therefore, any changes or queries relating to your personal details and holding (including
any administration) must continue to be directed to your existing contact at your investment manager or
custodian. The Company cannot guarantee to deal with matters that are directed to it in error. The only
exception to this is where the Company, in exercising one of its powers under the 2006 Act, writes to you
directly for a response.
8. Electronic communication:
Please note that the Company takes all reasonable precautions to ensure no viruses are present in any
electronic communication it sends out but the Company cannot accept responsibility for loss or damage
arising from the opening or use of any email or attachments from the Company and recommends that the
shareholders subject all messages to virus checking procedures prior to use. Any electronic communication
received by the Company, including the lodgement of an electronic Form of Proxy, that is found to contain
any virus will not be accepted.
9. Voting and voting rights:
As at 5:00 p.m. on 11 March 2025 (being the latest business day prior to the publication of this document),
the Company’s issued share capital consists of 1,336,493,786 Ordinary Shares, carrying one vote each.
Therefore, the total number of voting rights in the Company as at 5:00 p.m. on 11 March 2025 is
1,336,493,786. The website referred to in Note 1 will include information on the number of Ordinary Shares
and voting rights.
Voting on the resolutions will be conducted by way of a poll rather than on a show of hands, as this is
considered by the Board to reflect the views of shareholders more accurately. As soon as practicable
following the AGM, the results of voting at the AGM and the numbers of proxy votes cast for and against
and the number of votes actively withheld in respect of each resolution will be announced via a Regulatory
Information Service and also placed on the Company’s website referred to in Note 1 above.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
163
Notice of Annual General Meeting 2025 continued
GUIDANCE NOTES FOR THE AGM AND ON APPOINTMENT
OFPROXIES continued
10. Right to ask questions:
Any shareholder attending the AGM has the right to ask questions. The secure telephone line will enable
shareholders who attend the AGM remotely to ask questions during the meeting. Further details on how to
ask a question via the phone line will be made available to shareholders who notify the Company
Secretary at cosec@phpgroup.co.uk to request individual secure dial-in details.
The Company must cause to be answered any such question relating to the business being dealt with
atthe AGM but no such answer need be given if:
• to do so would interfere unduly with the preparation for the AGM or involve the disclosure of
confidential information; or
• the answer has already been given on a website in the form of an answer to a question; or
• it is undesirable in the interests of the Company or the good order of the AGM that the question
beanswered.
11. Audit concerns:
Under Section 527 of the 2006 Act a shareholder or shareholders meeting the threshold requirements
setout in that Section have the right to require the Company to publish on a website a statement setting
out any matter relating to: (i) the audit of the Company’s accounts (including the Auditor’s Report and
theconduct of the audit) that are to be laid before the meeting; or (ii) any circumstance connected with
the auditor of the Company ceasing to hold office since the previous meeting at which annual accounts
andreports were laid in accordance with Section 437 of the 2006 Act. The Company cannot require the
shareholders requesting any such website publication to pay its expenses in complying with Sections 527
or 528 of the 2006 Act. Where the Company is required to place a statement on a website under Section
527 of the 2006 Act, it must forward the statement to the Company’s auditor not later than the time when
it makes the statement available on the website. The business which may be dealt with at the AGM
includes any statement that the Company has been required under Section 527 of the 2006 Act to publish
on a website.
The request may be in hard copy form or in electronic form (stating your name and address and in the case
of an electronic communication stating Annual General Meeting in the subject line of the email); must
either set out the statement in full or, if supporting a statement sent by another shareholder, clearly
identify the statement which is being supported; must be authenticated by the person or persons making
it; and must be received by the Company at least one week before the AGM.
12. Communication with the Company:
You may not use any electronic address provided either in this Notice of AGM or any related documents
(including the Form of Proxy accompanying this document) to communicate with the Company for any
purposes other than those expressly stated. All communication with the Company in relation to the AGM
should be by writing to Equiniti Limited, Aspect House, Spencer Road, Lancing BN99 6DA or to the
Company Secretary at the registered office of the Company set out at the foot of the Notice of AGM.
13. Shareholders’ right to require the Company to give notice of a resolution and include a
matter in the business of the meeting:
Under Sections 338 and 338A of the Companies Act 2006, shareholders meeting the threshold
requirements set out in those sections may, subject to conditions, require the Company to give to
shareholders notice of a resolution which may properly be moved and is intended to be moved at that
meeting and/or to include in the business to be dealt with at the meeting any matter (other than a
proposed resolution) which may properly be included in the business at that meeting.
A resolution may properly be moved or a matter may properly be included in the business of the AGM
unless: (i) (in the case of a resolution only) it would, if passed, be ineffective (whether by reason of
inconsistency with any enactment or the Company’s constitution or otherwise); (ii) it is defamatory of any
person; or (iii) it is frivolous or vexatious. Such a request may be in hard copy or electronic form; must
identify the resolution of which notice is to be given or the matter to be included in the business; must be
authenticated by the person or persons making it; must be sent to the Company at cosec@phpgroup.co.uk
not later than 13 March 2025, being the date six clear weeks before the AGM; and (in the case of a matter
to be included in the business at the meeting only) must be accompanied by a statement setting out the
grounds for the request.
14. Inspection of documents:
The following documents, which are available for inspection at an agreed time during normal business
hours at the registered office of the Company on any weekday (Saturdays, Sundays and public holidays
excluded), will also be available for inspection at the place of the AGM from 9:30 a.m. on the day of the
AGM until the end of the meeting:
i. copies of the service contracts of the Executive Directors under which they are employed by the
Company and the letters of appointment (and other related documents) of the Non-executive
Directors; and
ii. the Articles of Association of the Company.
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
164
Corporate calendar 2025
Annual General Meeting 7 May 2025
Announcement of half year results 28 July 2025
Dividends
The Company intends to make quarterly dividend payments to shareholders in February, May, August
andNovember. The first quarterly dividend in 2025 (for which the record date was 10 January 2025)
waspaid on 21 February 2025.
Further distributions are expected to be paid in May, August and November 2025.
Distributions from the Company may comprise PIDs (see below), ordinary cash dividends or a combination
of the two. PIDs have been paid by the Group since 1 January 2007.
Payment of dividends
If you would like your dividend/interest paid directly into your bank or building society account, you should
write to the Registrar including details of your nominated account. Although this will enable your dividend/
interest to be paid directly into your account, your tax voucher will be sent to your registered address.
Dividend Reinvestment Plan (“DRIP”)
The Company offers a DRIP, provided by Equiniti Financial Services Limited, enabling shareholders to use
their cash dividend to buy further Ordinary Shares. For information on how to apply for the DRIP, as well
asits terms and conditions, please visit www.shareview.co.uk.
Scrip dividend scheme
The optional scrip dividend scheme previously offered to shareholders has been suspended.
Investment account
The Company has made arrangements for Equiniti Financial Services Limited to provide an investment
account to allow lump sum and regular savings to facilitate the purchase of the Company’s Ordinary
Shares. Details and the forms required for this service can be accessed from the Company’s website
oralternatively at: www.shareview.co.uk/dealing.
For details of the service please contact Equiniti on +44 (0) 371 384 2030.
Equiniti Financial Services Limited is authorised and regulated by the Financial Conduct Authority. Aswith
all stock market investments, the price of shares can go down as well as up and on sale investors may not
get back the full amount they invested.
Taxation status
The REIT regulations require an REIT to distribute at least 90% of its exempt rental income (as calculated
for tax purposes) as a PID.
PIDs are paid out under deduction of withholding tax at the basic rate, currently 20%. Certain classes
ofshareholders, including UK companies, charities, local authorities and UK pension schemes, may receive
PIDs without deduction of withholding tax, if a valid claim is lodged with the Company by a qualifying
shareholder. Shareholders who wish to apply for a tax exemption form should contact the Registrar.
The above is a general guide only and shareholders who have any doubt about their tax position should
consult their own appropriate independent professional adviser.
Registrar
The Company’s Registrar is Equiniti. In the event of any queries regarding your holding of shares,
pleasecontact the Registrar free of charge on +44 (0) 371 384 2030 (lines are open 8:30 a.m. to5:30p.m.
Monday to Friday), or in writing to: Equiniti, Aspect House, Spencer Road, Lancing, WestSussexBN99 6DA.
Changes of name or address must be notified to the Registrar in writing.
Equiniti Shareview dealing services
A quick and easy share dealing service is available to either sell or buy PHP shares. To deal online or by
telephone all you need is your Shareholder Reference Number, full postcode and date of birth. Your
Shareholder Reference Number can be found on your latest dividend statement. For further information on
this service, or to buy and sell shares, please contact Equiniti customer services on +44 (0) 371 384 2030
(8:30 a.m. to 5:30 p.m. Monday to Friday) or access www.shareview.co.uk/dealing.
Forward-looking statements
This document contains certain statements that are neither reported financial results nor other historical
information. These statements are forward looking in nature and are subject to risks and uncertainties.
Actual future results may differ materially from those expressed in or implied by these statements.
Manyof these risks and uncertainties relate to factors that are beyond PHP’s ability to control or estimate
precisely, such as future market conditions, the behaviour of other market participants, the actions of
governmental regulators and other risk factors such as the Company’s ability to continue to obtain
financing to meet its liquidity needs, and changes in the political, social and regulatory framework in
whichthe Company operates or in economic or technological trends or conditions, including inflation
andconsumer confidence, on a global, regional or national basis. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date of this document.
PHP does not undertake any obligation to publicly release any revisions to these forward-looking
statements to reflect events or circumstances after the date of this document.
Information contained in this document relating to the Company should not be relied upon as a guide to
future performance.
Shareholder information
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
165
Adjusted earnings is EPRA earnings excluding the contract
termination fee and amortisation of MtM adjustments for fixed rate
debt acquired on the merger with MedicX.
Adjusted earnings per share is adjusted earnings divided by the
weighted average number of shares in issue during the year.
Adjusted net tangible assets (“adjusted NTA”) (which has replaced
the former adjusted EPRA net asset value alternative performance
measure) is EPRA net tangible asset value excluding the MtM
adjustment of the fixed rate debt, net of amortisation, acquired on
the merger with MedicX. The objective of the adjusted NTA measure
is to highlight the value of net assets on a long term basis and it
excludes assets and liabilities that are not expected to crystallise
innormal circumstances and continues to be used as a measure to
determine the PIF payment.
Adjusted NTA per share is adjusted NTA divided by the number
ofshares in issue at the balance sheet date.
Annualised rental income on a like-for-like basis is the contracted
rent on a per annum basis assuming a consistent number of
properties between each year.
Average cost of debt is the total interest cost of drawn debt and
swaps, divided by the amount of drawn debt.
Axis is Axis Technical Services Limited.
Building Research Establishment Environmental Assessment
Method (“BREEAM”) assesses the sustainability of buildings against
a range of criteria.
Clinical Commissioning Groups (“CCGs”) are the groups of GPs and
other healthcare professionals that are responsible for designing
local health services in England with effect from 1 April 2013.
Company and/or Parent is Primary Health Properties PLC (“PHP”).
CSRD is Corporate Sustainability Reporting Directive.
Direct property costs comprise ground rents payable under head
leases, void costs, other direct irrecoverable property expenses, rent
review fees and valuation fees.
District Valuer (“DV”) is the District Valuer Service, being the
commercial arm of the Valuation Office Agency (“VOA”). It provides
professional property advice across the public sector and in respect
of primary healthcare represents NHS bodies on matters of valuation,
rent reviews and initial rents on new developments.
Dividend cover is the number of times the dividend payable
(onanannual basis) is covered by adjusted earnings.
Earnings per Ordinary Share from continuing operations (“EPS”)
isthe profit attributable to equity holders of the Parent divided by
the weighted average number of shares in issue during the year.
EBITDA is operating profit excluding amortisation of intangibles,
Axisacquisition costs and investment property revaluations.
EPC is an Energy Performance Certificate.
European Public Real Estate Association (“EPRA”) is a real estate
industry body, which has issued Best Practice Recommendations
inorder to provide consistency and transparency in real estate
reporting across Europe.
EPRA cost ratio is the ratio of net overheads and operating expenses
against gross rental income (with both amounts excluding ground
rents payable). Net overheads and operating expenses relate to all
administrative and operating expenses, net of any service fees,
recharges or other income specifically intended to cover overhead
and property expenses.
EPRA earnings is the profit after taxation excluding investment and
development property revaluations, gains/losses on disposals,
changes in the fair value of financial instruments and associated
close-out costs and their related taxation and amortisation of
non-monetary items such as intangible assets.
EPRA earnings per share is EPRA earnings divided by the weighted
average number of shares in issue during the year.
EPRA net assets (“EPRA NAV”) is the balance sheet net assets
excluding own shares held, the MtM value of derivative financial
instruments and the convertible bond fair value movement and
intangible assets.
EPRA NAV per share is the balance sheet net assets excluding own
shares held, the MtM value of derivative financial instruments and the
convertible bond fair value movement and intangible assets, divided
by the number of shares in issue at the balance sheet date.
EPRA NNNAV is adjusted EPRA NAV including the MtM value of fixed
rate debt and derivatives.
EPRA net reinstatement value (“EPRA NRV”) is the balance sheet
net assets including real estate transfer taxes but excluding the
MtMvalue of derivative financial instruments, deferred tax and
theconvertible bond fair value movement. The aim of the metric is
toreflect the value that would be required to recreate the Company
through the investment markets based on its current capital and
financing structure. Refer to Note 8.
EPRA NRV per share is the EPRA net reinstatement value divided
bythe number of shares in issue at the balance sheet date. Refer to
Note 8.
EPRA net disposal value (“EPRA NDV”) (replacing EPRA NNNAV) is
adjusted EPRA NRV including deferred tax and the MtM value of fixed
rate debt and derivatives. The aim of the metric is to reflect the value
that would be realised under a disposal scenario. Refer to Note 8.
EPRA net tangible assets (“NTA”) (which has replaced the former
EPRA net asset value alternative performance measure) is the
balance sheet net assets but excluding the MtM value of derivative
financial instruments, deferred tax and the convertible bond fair value
movement. The aim of the metric is to reflect the fair value of the
assets and liabilities of the Group that it intends to hold and does
notintend in the long run to sell. Refer to Note 8.
EPRA NTA per share is the EPRA net tangible assets divided by the
number of shares in issue at the balance sheet date. Refer to Note 8.
EPRA vacancy rate is, as a percentage, the ERV of vacant space in the
Group’s property portfolio divided by the ERV of the whole portfolio.
Equivalent yield (true and nominal) is a weighted average of the net
initial yield and reversionary yield and represents the return a
property will produce based upon the timing of the income received.
The true equivalent yield assumes rents are received quarterly in
advance. The nominal equivalent assumes rents are received annually
in arrears.
Estimated rental value (“ERV”) is the external valuers’ opinion as
tothe open market rent which, on the date of valuation, could
reasonably be expected to be obtained on a new letting or rent
review of a property.
Glossary of terms
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
166
Gross rental income is the gross accounting rent receivable.
Group is Primary Health Properties PLC (“PHP”) and its subsidiaries.
Headline earnings is the profit after taxation excluding investment
and development property revaluations, gains/losses on disposals
and their related taxation.
HSE or the Health Service Executive is the executive agency of the
Irish government responsible for health and social services for people
living in Ireland.
IASs are International Accounting Standards as adopted by the
United Kingdom.
IFRSs are International Financial Reporting Standards as adopted
bythe United Kingdom.
IFRS or basic net asset value per share (“IFRS NAV”) is the balance
sheet net assets, excluding own shares held, divided by the number
ofshares in issue at the balance sheet date.
Interest cover is the number of times net interest payable is covered
by net rental income.
Interest rate swap is a contract to exchange fixed payments for
floating payments linked to an interest rate, and is generally used
tomanage exposure to fluctuations in interest rates.
JSE is Johannesburg Stock Exchange, the largest stock exchange
inAfrica.
Like for like compares prior year to current year excluding
acquisitions, disposals and developments.
London Interbank Offered Rate (“LIBOR”) is the interest rate
charged by one bank to another for lending money.
Loan to value (“LTV”) is the ratio of net debt to the total value
ofproperties.
Mark-to-market (“MtM”) is the difference between the book value
ofan asset or liability and its market value.
MedicX is MXF Fund Limited and its subsidiaries.
MSCI (IPD) provides performance analysis for most types of real
estate and produces an independent benchmark of property returns.
MSCI (IPD) Healthcare is the UK Annual Healthcare Property Index.
MSCI (IPD) total return is calculated as the change in capital value,
less any capital expenditure incurred, plus net income, expressed as
apercentage of capital employed over the period, as calculated by
MSCI (IPD).
Net asset value (“NAV”) is the value of the Group’s assets minus the
value of its liabilities.
Net debt is total drawn debt, less cash and cash equivalents.
Net initial yield (“NIY”) is the annualised rents generated by
anasset, after the deduction of an estimate of annual recurring
irrecoverable property outgoings, expressed as a percentage
oftheasset valuation (after notional purchasers’ costs).
Net related income is the related income after the payment of direct
property costs, which include service charge payments.
Net rental and related income is the sum of net rental income and
net related income.
Net rental income is the rental income receivable in the period after
payment of direct property costs. Net rental income is quoted on an
accounting basis.
Net zero carbon refers to the point at which a process, activity or
system, etc. produces net zero carbon emissions, through emissions
reduction, use of low or zero carbon energy and removal or offsetting
of residual emissions. In the context of buildings and activities
associated with the construction, refurbishment, maintenance and
operation of buildings, PHP refers to the UK Green Building Council’s
“Net zero carbon, a framework definition”.
NHSPS is NHS Property Services Limited, the company wholly owned
and funded by the Department of Health, which, as of 1 April 2013,
has taken on all property obligations formerly borne by primary
caretrusts.
Occupancy is the level of units occupied, after deducting the ERV
vacancy rate.
Parity value is calculated based on dividing the convertible bond
value by the exchange price.
Progressive returns is where returns are expected to continue to rise
eachyear.
Progressive dividends is where dividends are expected to continue
to rise each year on a per share basis.
Property Income Distribution (“PID”) is the required distribution
ofincome as dividends under the REIT regime. It is calculated as 90%
of exempted net income.
Real Estate Investment Trust (“REIT”) is a listed property company
which qualifies for and has elected into a tax regime which exempts
qualifying UK profits arising from property rental income and gains on
investment property disposals from corporation tax, but which has a
number of specific requirements.
Related income is the property and service charge income generated
from the Axis business.
Rent reviews take place at intervals agreed in the lease and their
purpose is usually to adjust the rent to the current market level at
thereview date.
Rent roll is the passing rent, being the total of all the contracted
rents reserved under the leases.
Reversionary yield is the anticipated yield which the initial yield will
rise to once the rent reaches the ERV and when the property is fully
let. It is calculated by dividing the ERV by the valuation.
Retail Price Index (“RPI”) is the official measure of the general level
of inflation as reflected in the retail price of a basket of goods and
services such as energy, food, petrol, housing, household goods,
travelling fare, etc. RPI is commonly computed on a monthly and
annual basis.
RICS is the Royal Institution of Chartered Surveyors.
RPI linked leases are those leases which have rent reviews which
arelinked to changes in the RPI.
Special reserve is a distributable reserve.
Sterling Overnight Interbank Average Rate (“SONIA”) is the
effective overnight interest rate paid by banks for unsecured
transactions in the British Sterling market.
Glossary of terms continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
167
Total expense ratio (“TER”) is calculated as total administrative
costs for the year divided by the average total asset value during
theyear.
Total property return is the overall return generated by properties
on a debt-free basis. It is calculated as the net rental income
generated by the portfolio plus the change in market values, divided
by opening property assets plus additions.
£m
Net rental and related income (A) 155.6
Revaluation deficit and profit on sales (B) (38.4)
Total return (C) 117.2
Opening property assets 2,779.3
Weighted additions in the period 9.1
Total weighted average closing property assets (D) 2,788.4
Income return (A/D) 5.5%
Property return (B/D) (1.3)%
Total property return (C/D) 4.2%
Total adjusted NTA return is calculated as the movement in adjusted
net tangible asset value for the period plus the dividends paid,
divided by opening EPRA net tangible asset value.
Adjusted NTA
per share
At 31 December 2023 108.0p
At 31 December 2024 105.0p
Increase/(decrease) (3.0)p
Add: dividends paid
Q1 interim 1.725p
Q2 interim 1.725p
Q3 interim 1.725p
Q4 interim 1.725p
Total 6.9p
Total adjusted NTA return 3.6%
Total shareholder return is calculated as the movement in the share
price for the period plus the dividends paid, divided by the opening
share price.
Weighted average facility maturity is calculated by multiplying
each tranche of Group debt by the remaining period to its maturity
and dividing the result by total Group debt in issue at the year end.
Weighted average unexpired lease term (“WAULT”) is the average
lease term remaining to first break, or expiry, across the portfolio
weighted by contracted rental income.
Yield on cost is the estimated annual rent of a completed
development divided by the total cost of development, including site
value and finance costs expressed as a percentage return.
Yield shift is a movement (usually expressed in basis points) in the
yield of a property asset, or like-for-like portfolio, over a given period.
Yield compression is a commonly used term for a reduction in yields.
Glossary of terms continued
Strategic report Governance Financial statements Shareholder information
Primary Health Properties PLC Annual Report 2024
168
Primary Health Properties plc’s commitment to environmental issues is
reflected in this Annual Report, which has been printed on UPM Finesse
Silk, an FSC
®
certified material. This document was printed by Opal X
using its environmental print technology, which minimises the impact
ofprinting on the environment, with 99% of dry waste diverted from
landfill. Both the printer and the paper mill are registered to ISO 14001.
Stockbrokers
Deutsche Numis
45 Gresham Street
London EC2V 7BF
Peel Hunt LLP
7th Floor
100 Liverpool Street
London EC2M 2AT
JP Morgan Cazenove
25 Bank Street
London EC3M 7AU
Solicitors
CMS Cameron McKenna Nabarro Olswang
LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
Gowling WLG (UK) LLP
4 More London Riverside
London SE1 2AU
TLT LLP
20 Gresham Street
London EC2V 7JE
McCann FitzGerald
Riverside One
Sir John Rogerson’s Quay
Dublin 2
Pinsent Masons
30 Crown Place
Earl Street
London EC24 4ES
Auditor
Deloitte LLP
1 New Street Square
London EC4A 3HQ
Bankers
Allied Irish Bank PLC
St Helens
1 Undershaft
London EC3A 8AB
Aviva Public Private Finance Limited
St Helens
1 Undershaft
London EC3P 3DQ
Barclays Bank PLC
1 Churchill Place
London E14 5HP
HSBC Bank PLC
8 Canada Square
London E14 5HQ
Lloyds Bank PLC
25 Gresham Street
London EC2V 7HN
Santander UK PLC
2 Triton Square
Regent’s Place
London NW1 3AN
The Royal Bank of Scotland PLC
250 Bishopsgate
London EC2M 4AA
Building and environmental consultant
Simpson Hilder Associates Limited
67a High Street, Lyndhurst
Hampshire SO43 7BE
Property valuers
Avison Young (UK) Limited
65 Gresham Street
London EC2V 7NQ
Jones Lang LaSalle Limited
30 Warwick Street
London W1B 5NH
CBRE
Connaught House
Number One Burlington Road
Dublin 4
Financial risk management consultant
Chatham
12 St James’s Square, St James’s
London SW1Y 4LB
Advisers and bankers
CBP029527
Primary Health Properties PLC Annual Report 2024
169
Shareholder informationFinancial statementsGovernanceStrategic report
Primary Health Properties PLC
Registered office:
5th Floor, Burdett House
15–16 Buckingham Street
London WC2N 6DU
Website:
www.phpgroup.co.uk
Registered in England Number:
3033634
Primary Health Properties PLC Annual Report 2024