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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.
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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.
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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
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Primary Health Properties PLC Annual Report 2024
44