Primary Health Properties H1 2026 Earnings Report

Primary Health Properties EPS Results

• Actual EPS: GBX 3.80
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Primary Health Properties Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Primary Health Properties Announcement Details

• Quarter: H1 2026
• Date: 7/30/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, July 30, 2026
• Conference Call Time: 6:30AM ET

PHP is a leading investor in critical healthcare infrastructure in the UK and Ireland. The overall objective of the group is to create progressive returns to shareholders through a combination of earnings growth and capital appreciation. PHP has an unbroken 30 year track record of dividend growth. To achieve this, PHP invests in healthcare real estate let on long-term leases, backed by secure underlying covenants where the majority of rental income is funded directly or indirectly by a government body.

Primary Health Properties H1 2026 Earnings Call Transcript

Key Takeaways

• PHP reported 9% growth in adjusted earnings per share to £0.038, supported by a full-period contribution from Assura, rental growth and disciplined cost control. The company said its projected 2026 dividend of £0.073 remains fully covered, marking its 30th consecutive year of dividend growth.
• Operational performance remained resilient, with rent reviews delivering a 6% uplift, equivalent to 3.2% annualized growth, alongside 29 asset-management transactions at roughly 6% yield on cost. Occupancy was 99%, the weighted average lease term was 10 years, and 76% of income was government-backed.
• More than 90% of Assura cost synergies have been delivered, reducing the EPRA cost ratio to 8.7%, with further savings expected in the second half. PHP also refinanced £1.2 billion of debt at credit margins approximately 40 basis points below the facilities replaced.
• PHP is in advanced exclusive discussions for a 50/50 joint venture covering its approximately £700 million private-hospital portfolio, expected to complete in the coming weeks. Proceeds should repay the remaining £260 million acquisition bridge facility and support near-term deleveraging, although the final transaction valuation and terms have not yet been disclosed.
• Management expects loan-to-value to move into the low-50% range in the short term, with a longer-term target below 50%, while progressing toward an investment-grade group rating and greater unsecured borrowing. The company remains confident in further rental growth and asset values, but acknowledged that higher interest rates could pressure financing costs and valuations.

Presentation

[Mark Davies, CEO at Primary Health Properties]

Everyone, thank you for joining us for PHP's interim results for the six months ended 30th of June 2026. It's been another busy period for us, delivering a robust operational performance, translating into strong financial results and good earnings growth. We've also made very good progress on our key strategic objectives, and I'll walk you through those shortly. First, moving on to the highlights of our results in the H1. The operational activity in our portfolio remains a key driver for us. Rental growth on our rent reviews are a high volume aspect of our business, which supports both earnings and dividend growth. We're again encouraged by the rental uplifts we have achieved in the period. This has been enhanced by the asset management and risk control development activity, which is vital to set evidence for these rent reviews in the future.

[Mark Davies, CEO at Primary Health Properties]

This activity, along with our disciplined cost control over overheads and financing, and the positive contribution from the Assura merger, has supported another period of strong earnings growth of +9%. Following the merger, we've retained a key focus on our strategic priorities of integration, delivering synergies, bringing our leverage back to our target range, and refinancing the acquisition bridge facilities. We'll come onto the details shortly. We have made substantial progress on all of this. Our plans remain firmly on track. We're of course very proud that 2026 is our 30th consecutive year of dividend growth. Our business is all about delivering strong, secure, recurring, growing cash flows for our shareholders. Finally, the best of both approach from the merger means we are now seeing opportunities to create more value in our portfolio of critical healthcare infrastructure assets.

[Mark Davies, CEO at Primary Health Properties]

The three markets we operate in, primary care U.K., primary care Ireland, private hospitals, all have strong structural demand and attractive investment characteristics, which give us confidence in delivering future growth for our shareholders. Moving on to some of the drivers of our operational and financial performance, which has enabled us to increase adjusted earnings per share by 9%. Up 9% to GBP 0.038 in the H1, supporting our fully covered projected dividend for 2026 of GBP 0.073. Firstly, we've seen a 6% increase in passing rent on the reviews settled in the period. This is equivalent to 3.2% on an annualized basis. We've signed 29 asset management deals across the portfolio. New projects, lease re-gears, new lettings, with a combined yield on cost around 6%, achieved on a relatively modest capital outlay.

[Mark Davies, CEO at Primary Health Properties]

Our EPRA cost ratio is now below 9%, reflecting the scale benefits of the Assura merger, the efficiency of how we run the business, and the speed at which we've been able to deliver merger synergies. The security and longevity of our income supports the stable valuations in our sector. This has delivered a modest valuation surplus. Our net initial yield has remained at 5.4%. Our adjusted NTA is unchanged at GBP 1.04 per share. At the time of the merger with Assura in late 2025, we very clearly laid out the strategic objectives we were focused on to ensure we delivered the expected value from this transaction. I'm pleased to report we've made substantial progress towards achieving all of these. Continue to focus on delivering for all stakeholders. The integration and delivery of cost synergies is almost complete.

[Mark Davies, CEO at Primary Health Properties]

The enlarged business is working together well across the portfolio, led by the new ExCo, and over 90% of cost synergies have now been delivered. Our de-leveraging plan remains on track, primarily through the establishment of a planned private hospital joint venture, which I will talk you through shortly. We will also complete the planned transfer of GBP 103 million of PHP assets into our joint venture with USS, and have also completed GBP 8 million worth of targeted disposals, with more to follow. The acquisition bridging facility has largely been repaid and refinanced. We thank our banking partners, both existing and new for their support on this. With the final GBP 260 million of bridging facilities to be repaid when we realize the proceeds from our private hospital joint venture transaction in the next few weeks.

[Mark Davies, CEO at Primary Health Properties]

It was very pleasing that we saw reduced credit margins of approximately 40 basis points on these new facilities, evidencing yet again the scale benefits of the enlarged business. I'll give you an update on the joint venture we are establishing on our GBP 0.7 billion private hospital portfolio. Terms have been agreed on an exclusive basis with a global, long-term institutional investor, and we are currently well advanced through due diligence. The terms which we've agreed are for the JV to be on a 50/50 ownership basis on day one, with optionality to adjust the ratio in the future, with PHP acting as the asset manager to the joint venture. This is an important long-term strategic partnership for PHP with a high-quality investor.

[Mark Davies, CEO at Primary Health Properties]

As well as progressing on our de-leveraging objective, this will allow us to retain a meaningful financial interest in these growth assets, which are performing well in a resilient market with future growth potential. As well as improving our returns through ongoing management fees, we have the ability to earn development and performance fees over time. We continue to advance discussions and are on target to complete later in the summer as we set out previously. The proceeds we receive will land at a perfect time, and we will repay our bridging facilities in the next few weeks. We are very excited about this partnership and look forward to announcing a successful completion in the coming weeks.

[Mark Davies, CEO at Primary Health Properties]

Before I hand over to Richard, I just wanted to set out where PHP currently sits in respect of our financial policies, our future targets, and where we expect these important metrics to move in the short and medium term. Firstly, we continue on our journey to be a fully unsecured borrower, and we've made strong progress in this regard over recent months, and we expect to be 80% unsecured in the near term with a 90% target. Our LTV will be positively impacted by our disposals into the joint ventures, as well as the positive valuation impact from delivering rental growth. This will take our loan-to-value short term into the low 50s, and from there, we will deliver additional capital recycling and valuation gains over time with below 50% LTV as our future target.

[Mark Davies, CEO at Primary Health Properties]

Similarly, and equally as important, our net debt to EBITDA ratio and interest cover will improve from already robust levels as we progress through the de-leveraging steps I've set out on previous slides. We seek a strong investment-grade credit rating on the whole group in the near future. At this point in the cycle, with secure government-backed income and the stability and future growth in our portfolio valuation, we are very comfortable with our LTV being above target in the short term. Our weighted average interest rate will come down as we repay the acquisition bridging facilities, and we will return to a greater proportion of our debt being fixed or hedged. Overriding all of this is a secure income portfolio with over 80% of future income government-backed with a strong investment-grade underpin.

[Mark Davies, CEO at Primary Health Properties]

I will now hand you over to Richard to talk you through a strong set of financial results. Thank you.

[Richard Howell, CFO at Primary Health Properties]

Thank you, Mark, and good morning to everybody online. Firstly, looking at the financial highlights for the first six months of 2025. The benefits of the combination with Assura are now flowing through to the enlarged group with strong earnings growth and operational performance in the first six months of the year. Adjusted earnings increased to GBP 98 million, driven by a full six-month contribution from the acquisition of Assura, which added an additional GBP 50 million of income. The adjusted earnings per share increased by 9% to GBP 0.038. Like for like rental growth generated an extra GBP 4 million of income, an increase of 6% over the previous passing rent, or just over 3% on an annualized basis, driven primarily by rent review growth. To date, we have delivered over GBP 8 million or 92% of the cost-saving synergies identified on the combination with Assura.

[Richard Howell, CFO at Primary Health Properties]

Together with our continued tight control on costs, has resulted in net per cost ratio falling from around 10%-8.7% in the first six months of the year. The underlying portfolio generated a valuation surplus of GBP 18 million, driven by rental growth, which generated GBP 29 million of value, offset by just one basis point of yield expansion or a deficit of GBP 11 million. The yields across the portfolio have generally remained flat in the H1, which is consistent with the H2 of last year. Notwithstanding increased U.K. gilt rates and volatility in the interest rate market, we have not seen any impact on values in our sector, which continue to benefit from the security of our predominantly government-backed income and near full occupancy.

[Richard Howell, CFO at Primary Health Properties]

The investment portfolio and adjusted net tangible asset both remain unchanged at GBP 6 billion and GBP 1.04 respectively. The portfolio continues to benefit from strong fundamentals with 99% occupancy, a long 10-year WAULT, and 76% government-backed income, supported by a strong debt, demographic, and political backdrop. Looking at the financing, PHP has continued to receive strong support from both existing and new lenders to the group. We have made good progress in the first six months of 2026 to refinance the majority of the bridging facility put in place to finance the acquisition of Assura, together with a number of short-term bank facilities across both PHP and Assura, which marks an important step on the group's journey to becoming a fully unsecured borrower.

[Richard Howell, CFO at Primary Health Properties]

A total of GBP 1.2 billion has been refinanced, including an GBP 800 million term involving credit facility with a club of eight banks, including three new lenders to the group. We've taken on a new GBP 400 million, two-year term loan to refinance most of the bridging facility. This now leaves just under GBP 260 million outstanding, which is expected to be repaid from the proceeds arising from our deleveraging in the H2 of the year. The new debt facilities also reflect some of the benefits of scale arising from the combination with credit margins 40 basis points cheaper than the facilities being replaced. The group's average cost of debt remains broadly unchanged at a low 3.8% and is expected to fall further to 3.5% in the H2 of the year once we have completed the deleveraging activities.

[Richard Howell, CFO at Primary Health Properties]

The group now has GBP 300 million of undrawn liquidity headroom after capital commitments. Turning to rental growth, we continue to be encouraged by the improving organic rental growth outlook generated by the portfolio. In the first six months of 2026, we delivered an extra GBP 4 million of additional rental income, derived mainly from rent review activities, which delivered an annualized growth rate of 3.2%, slightly ahead of previous guidance at 3%. Open market reviews delivered an uplift of 6.3% over the previous passing rent. The rent review teams are now fully integrated and sharing rent review evidence across the enlarged portfolio, which will assist with future negotiations and a significant future synergy for the enlarged group. The rental growth benefits arising from the combination will flow through into future years.

[Richard Howell, CFO at Primary Health Properties]

The portfolio is currently let off a low weighted average rent of GBP 200 per square meter, with our asset management activities seeing rents rebased with uplifts of around 15% being achieved. Five new developments completed in 2025, delivered an average rent of GBP 260 per square meter. The new development pipeline established in 2026 across four schemes is seeing rents rebased even higher to a weighted average of GBP 280 per square meter. This new rental evidence clearly sets a positive outlook for future rental growth. We believe the reversionary potential of the portfolio remains strong as new rental evidence is set. We continue to target growth in excess of 3% per annum. PHP has now achieved its 30-year anniversary of consecutive dividend growth. We approach the future determined to grow earnings to support the group's progressive dividend policy on a fully covered basis.

[Richard Howell, CFO at Primary Health Properties]

There are three key pillars to achieving future earnings growth. A portfolio with strong reversionary potential that will deliver future rental growth, supported by the security of our long-term, predominantly government-backed income stream. A strong focus on cost control with one of the lowest EPRA cost ratios in the sector. We've already delivered the majority of the GBP 9 million of cost-saving synergies forecast and expect the future ratio to be below 9%. A strong track record in balance sheet liability management with strong support and good access to various sources of capital. In the H1 of the year, we've already managed to capitalize on the benefits of scale with credit margins 40 basis points lower on GBP 1.2 billion of debt refinance, with more refinancing initiatives expected in the H2 of the year.

[Richard Howell, CFO at Primary Health Properties]

I will now hand you back to Mark, who will take a closer look at the group's property portfolio.

[Mark Davies, CEO at Primary Health Properties]

Thank you, Richard. It's a proud moment for Richard and I to be presenting such strong results to you this morning, and this being the first period of full consolidation of the PHP and Assura business. Now I'd like to spend some time highlighting the attractiveness of the healthcare markets we operate in and some of the asset value-creating activities we're currently working on. PHP operates in three resilient healthcare markets, and the majority of our portfolio is primary care assets in the U.K. Since 2016, PHP's also built the leading primary care portfolio in Ireland, and the merger with Assura saw us inherit a quality portfolio of private hospitals. The team that have come across to PHP during the merger have a leading expertise in private hospitals, having invested in the space for nearly 10 years.

[Mark Davies, CEO at Primary Health Properties]

You can see on this slide the fundamentally strong investment characteristics of each of these markets. Strong demand Fundamental tailwinds in the market, long leases, tenants offering a secure covenant, rental growth often linked to inflation, and high-quality community-based assets which are well invested with high return prospects. Crucially, all three of these markets can be accessed using PHP's unique platform in a growth sector, which has been enhanced through our best of both approach to the merger, and we have good market share, giving us size and scale advantages. I'd now like to move on to neighbourhood health centres, which is an exciting growth opportunity which will enhance PHP's future prospects. We were pleased to see that in April 2026, the NHS published its final guidance on what makes a neighbourhood health centre of the future.

[Mark Davies, CEO at Primary Health Properties]

This is a further step forward on the plans to move services out of hospitals and into the community, following on from the NHS 10-year plan, published in 2025. The Labour government have continued to place a high priority on improving the NHS, and the new Prime Minister has a longstanding belief in prevention being better than treatment. Alongside the launch of the guidance the first wave of 27 existing buildings identified as neighborhood health centers were announced, including three PHP assets which I visited with the team recently. And, I felt really excited about this opportunity for the future. These are all expected to have government grant capital available to improve the assets, extend the range of health services available to be delivered from our neighborhood health center.

[Mark Davies, CEO at Primary Health Properties]

We will continue to work closely with local NHS stakeholders to assist in meeting their needs. We expect this to present opportunities for PHP over the coming years, as I will show you as we walk through this morning's case studies. Firstly, to Weston-super-Mare. The right time to present some of the value-creating work we are doing in our portfolio. Weston-super-Mare is a really good example of a new build development capable of being designated as a neighborhood health center when we complete this in 2027. I visited this asset under construction three weeks ago. It's a large five-story community healthcare asset bringing together GPs, the local health board, including the relocation of a number of specialist healthcare teams into this new facility and a community interest company supporting adult and child health services.

[Mark Davies, CEO at Primary Health Properties]

It's a great example of how PHP can work with capital from our primary care joint venture with USS to deliver returns for shareholders and critical new healthcare infrastructure for the NHS. This is a GBP 90 million project, part-funded by an NHS grant, and only requires GBP 2.3 million worth of PHP investment. The rental yield on this investment is boosted by PHP earning ongoing asset management fees as well as an attractive development fee, meaning our income returns are expected to be over 8%, total returns well into double digits. Most importantly, it also provides strong rental tone, in this case, in the mid to high 200s rent per square meter, and that captures build cost inflation for rent reviews on other medical centers in the county of Somerset and beyond.

[Mark Davies, CEO at Primary Health Properties]

Working with a joint venture in this way is capital light, it's risk-controlled, and for PHP shareholders, delivers attractive returns and vital rental evidence, and demand for future rental values. Next to the Tetbury Medical Center in Gloucestershire. This GBP 5 million neighborhood scheme in Tetbury is also being funded through the joint venture with USS, and the benefits are similar to Weston-super-Mare. It's capital light, risk-controlled. Our returns are boosted by the development fees the ongoing asset management fees, and it sets a helpful rental tone in this region where PHP has a good representation and a portfolio of assets. Tetbury is a good working example of opportunities we will continue to see around the country where new housing developments require new healthcare infrastructure to meet their Section 106 requirements. Our experience tells us that no one is better at unlocking these opportunities than PHP.

[Mark Davies, CEO at Primary Health Properties]

We work with the NHS, both locally and nationally to deliver these schemes, which then allows the housing development to go ahead. The growing population of Tetbury get a brand-new purpose-built medical center, a new pharmacy. We get a 30-year lease, fixed rental uplifts, a high yield on cost in excess of 9%, and double-digit total returns, unlocking vital rental evidence along the way. Tetbury is a great scheme, and the team is well-placed to do more of these in the future. I am also pleased to report that in addition to Weston-super-Mare and Tetbury, with a growing pipeline of U.K. primary care schemes that we expect to be funded through our joint venture with Brockworth and Coleford, the next schemes we hope to get over the line and the yield on costs projected to be in excess of 12%.

[Mark Davies, CEO at Primary Health Properties]

The benefits for PHP are clear, with strong rental evidence generated, risk control through capital-light projects, with corresponding stronger returns aided by our ability to generate value through development and ongoing asset management fees. I would just like to conclude on this part of the presentation by saying the following. These opportunities are only created because of the expertise and the relationship that PHP has developed over many, many years, and the Assura merger has enhanced the reach and depth of these opportunities. These particular schemes are inflation-linked, removing ourselves and the NHS from any future district valuer constraints, enabling development to be set at higher rents per square meter, providing longevity and certainty to future cash flows. The USS JV is the perfect partner to build this model with size and scale, and has an effective cost of capital.

[Mark Davies, CEO at Primary Health Properties]

They bring a strong understanding of infrastructure investing and a strong social impact that we provide from PHP, the expertise, and the platform for growth to co-invest. It is an exciting win-win situation for all stakeholders, and it is our pleasure to present these opportunities to you today. I also wanted to case study some of the good work we are doing on the asset management side of the business. This includes a 100%-owned asset in Wakefield, Yorkshire. It illustrates how PHP's proven capability in asset management can drive value in the portfolio. The Trinity Medical Center serves over 27,000 patients. It was coming to the end of its lease cycle. We have worked in collaboration with the local practice, the local health board. We have worked up a scheme to extend and refurbish the property, adding 13 additional clinical rooms.

[Mark Davies, CEO at Primary Health Properties]

This increases the capacity for additional community-based services, including a minor operations suite, out-of-hours services, maternity, midwifery, and the local MSK team. As well as an improved rental tone of the property, we have a new 25-year lease in place, a strong valuation gain in excess of the GBP 4 million invested in the property, and improved energy efficiency. This project has delivered an attractive yield on cost and double-digit profit on cost. The final asset I wanted to highlight to you today is our GBP 21 million development of a new private hospital and day surgery clinic in Peterborough. Building on a strong relationship with the tenant, Ramsay Health Care, for whom we have now developed six new build schemes. The unit will create additional capacity in the area. Primarily for NHS referred procedures such as orthopedics, as well as accommodating an outpatient clinic and diagnostics unit.

[Mark Davies, CEO at Primary Health Properties]

Private hospital schemes such as this offer long 25 or 30 year leases with strong inflation-linked growth on rent reviews, being run by a proven operator, experiencing growing demand, supporting a healthy rent cover. This asset is expected to transfer into the new private hospital joint venture when complete, and the PHP team and I are looking forward to attending the topping out ceremony on the 12th of August. Before I reach my concluding remarks, I wanted to remind you of the PHP investment case, which has been significantly enhanced by the transformational merger with Assura, our joint ventures in primary care and private hospitals, and our lower cost of capital going forward.

[Mark Davies, CEO at Primary Health Properties]

Many of you will be familiar with the specific points on this slide, I won't go through each and every one, but our portfolio of modern healthcare infrastructure assets offer investors the rare opportunity to access a specialist asset class with exceptionally high quality, secure cash flows in a resilient healthcare market that is a growth sector. Over a sustained 30-year period, the management team have demonstrated an ability to deliver sector-leading financial performance and returns for investors. This is a really exciting time for PHP shareholders. The strength of the platform is second to none and the future growth prospects are compelling. To conclude, we've delivered another strong set of results and our post-transaction objectives remain on track. The synergies are materially delivered. The integration is substantially complete. Our de-leveraging is well on track.

[Mark Davies, CEO at Primary Health Properties]

Our refinancing plans are well progressed, our bridge facilities will be repaid in the next few weeks. PHP's 30-year track record of dividend growth is driven by the quality of our portfolio Our expert team, operational excellence and close to full occupancy. PHP is an income compounder. Our portfolio offers infrastructure-like characteristics with long leases, secure income, almost no vacancy. Our earnings growth is supported by our operational capability, which drives recurring value with a positive trend in rental growth, enhanced volume of asset management deals, very close control on costs, a growing pipeline of risk-controlled development opportunities we see continued momentum across the group. I'd like to conclude by saying whilst there's been a lot of recent corporate activity at PHP, we remain very focused on the task to deliver shareholder value and a growing dividend backed by a portfolio of secure, long-term, and predictable income.

[Mark Davies, CEO at Primary Health Properties]

That concludes our presentation today. Thank you very much for taking the time to attend, this will now be an opportunity where we invite you to ask the management team any questions. Thank you.

[Operator]

Thank you. Ladies and gentlemen, if you wish to ask a question over the phone, please signal by pressing star, one on your telephone keypad. You may also submit your questions via the webcast platform. Again, it is star one to ask a question over the phone. We will now take our first question from Chris Millington from Deutsche Bank. Please go ahead.

[Chris Millington, Analyst at Deutsche Bank]

Thank you. Thanks for the presentation and taking my questions, gentlemen. I've got two really relating to the direction of leverage and just one on cost. The first one I wanted to ask really is it contingent on you hitting your LTV target of 40%-50% in order to get an investment-grade credit rating? I'll go one at a time, in order to make it a bit easier.

[Mark Davies, CEO at Primary Health Properties]

Me to pick that up. I'm sure Richard will be eager to chip in as well. Thank you, Chris. The Assura bonds that we inherited as part of the merger have a strong investment-grade credit rating that we've retained. In due course, as I said on an earlier slide PHP is on a journey to be an unsecured borrower, and we expect to continue with that progress. Fitch are the credit rating agency that rate the bonds and the company. Interesting for them, when we read their analysis, some of which was updated quite recently, they very much look more closely at net debt EBITDA than they do to LTV. We as a company do particularly well on net debt EBITDA because of our profitability.

[Mark Davies, CEO at Primary Health Properties]

The answer to your question is strong investment grade determined by LTV and that being below 50%, the answer is no, it's not. Net debt EBITDA is of greater importance, but of course, as a company, we have our financial policies for a reason. We have a loan-to-value policy as well as a net debt EBITDA policy. Do you want to add to that?

[Richard Howell, CFO at Primary Health Properties]

Yeah. It's probably just worth confirming that Fitch have just recently reconfirmed Assura's credit rating at BBB+ with a negative outlook, and that is likely to change to a stable outlook in the coming months as we deliver the JV deleveraging initiatives, which is positive and obviously working with Fitch on a wider group credit rating, which I think we'd expect to be around the same when it finally gets published and we've delivered the deleveraging.

[Chris Millington, Analyst at Deutsche Bank]

Thank you, Mark, Richard. The next one's just about the disposals which are going to be required to take you down to that 40%-50% LTV range. Just what your confidence is in achieving values around NAV in a world where we've got a slightly higher cost of capital.

[Mark Davies, CEO at Primary Health Properties]

Yeah, we can only answer that question with what we see in front of us. Of course, we're live in the market. We are about to sell a portfolio of primary care assets into the USS joint venture. Obviously the private hospital portfolio, which is well rehearsed and well known. We won't be saying today exactly what value those assets will go into the joint venture. Bear with us a few weeks and we'll be able to tell you. I think we can say with confidence that the market won't be disappointed with the value at which we're transferring those assets into the joint venture. I was asked earlier by somebody about the general investment market. I think the debt market's been very strong, and that's underpinned a fairly robust investment market. Of course in healthcare, barriers to entry are typically quite high.

[Mark Davies, CEO at Primary Health Properties]

The opportunities to acquire assets in healthcare infrastructure is often very appealing. We see good demand for our portfolio, for the assets that we own. Therefore we can say with confidence that we're able to sell those assets at close to book value. Just give us a few weeks and we'll be able to tell you for sure. We're clearly confident about the general market conditions at a time of volatility, of course.

[Chris Millington, Analyst at Deutsche Bank]

No, that's very clear. Thank you. The last one's just about the cost base. You've got a very efficient EPRA cost ratio, which you outline. Do you think it's now a question of increased scale to get that lower? Are there other internal proactive things you can do rather than just scale?

[Mark Davies, CEO at Primary Health Properties]

Yeah, I think it's a good question because we've always had a low cost ratio here at PHP. For many, many years, it's been a very well-run, efficiently managed business, and that legacy will continue. I'm absolutely sure about that. The improvements that you are seeing in the period on which we've just reported are principally down to the merger and the size and the scale of the business. I've got no doubt if we were to continue to grow, from within the existing portfolio, particularly, then we can become more efficient. I believe on latest information available in the market, we've got I think, the second lowest cost ratio. It would be nice to have the lowest cost ratio. I think we did have that at one point. Look, size and scale is very important. Not all of our portfolio is triple net.

[Mark Davies, CEO at Primary Health Properties]

We do everything we can to run the business as efficiently as we're able to. The merger's obviously made us even more efficient than we were. Does that address your three questions, Chris?

[Chris Millington, Analyst at Deutsche Bank]

Yes, it does. Thank you. Yes. Thanks so much.

[Mark Davies, CEO at Primary Health Properties]

Pleasure.

[Operator]

Thank you. The next question is from Kanad Mitra from Barclays. Please go ahead.

[Kanad Mitra, Analyst at Barclays]

Hi, team. Thanks for taking my question. I just have one on disposals. Obviously, we are supportive of keeping a higher economic interest in the hospitals joint venture of 50%. That also means you probably have to dispose a little bit more from the rest of the portfolio. Just wanted to get some color on what you're thinking on those lines. Are they going to go into USS JV, and is there enough scope to get them into the JV, or will the JV max out?

[Mark Davies, CEO at Primary Health Properties]

Yeah, thank you. That's a good question. We've told the market this morning where we've updated on the joint venture on private hospitals, that we are in exclusive and advanced stage discussions with due diligence very well progressed. We've also said, which clearly you've picked up, that on day one of this joint venture we will be 50/50. There is the ability for that to change in the future, based on both parties agreeing to do that. That obviously is always an option that's available to us. On USS, this is a well-established joint venture now. They're a great partner to have because they understand critical social infrastructure, so we have a great alignment with them. They have a very efficient cost of capital.

[Mark Davies, CEO at Primary Health Properties]

With this particular transaction that we're doing and those new developments I described earlier, all coming into the JV imminently, that'll take us to over GBP 300 million. I'm sure if USS were in the room with us today, they would say they'd like to see that increase further. We will engage with them no doubt, in the near future about putting more assets into that JV. Possibly expand the strategy and the remit of that joint venture to accommodate that, which will help us with the disposals if and should we decide to dispose more into that joint venture. The other thing that's going on in the market is we've seen some new entrants. We've seen local authority pension funds of size and scale with stated and ambitious targets to deploy about GBP 1 billion of capital into primary care real estate. That's another option.

[Mark Davies, CEO at Primary Health Properties]

Of course, we're confident about our valuation performance for the future. If nothing else, we're going to deliver rental growth that will come through to valuation. We feel comfortable about having a load to value in the low 50s. It's certainly more comfortable than when we were in the high 50s. We think there are a number of options available to us within our existing portfolio as a pathway to LTV being below 50%. Also, as I said, going back to Chris' first question, highlighting the importance of net debt EBITDA as well. We think we can get there quite quickly. Then we can decide what we do from there.

[Kanad Mitra, Analyst at Barclays]

Sure. Thanks for the answer.

[Operator]

Thank you. It appears there are currently no further questions over the phone. With this, I'd like to hand the call back over to Mark for any webcast questions.

[Mark Davies, CEO at Primary Health Properties]

Yep. We've got quite a few by the looks of it. In no particular order, Bjorn from Panmure Gordon. Thank you, Bjorn. You're asking two questions. I'll read this out. Is your preferred route to reducing LTV through more JV opportunities or rather through outright disposals? I hope you think Bjorn, I've just answered that with the previous question, but if not, you and I and Richard can pick that up separately. Your second question. You mentioned that 92% of the GBP 9 million of annual cost synergies have now been delivered. Should we expect a further benefit in H2 from annualizing those synergies, or has H1 already reflected the majority of the run rate savings? Do you want to pick that one up?

[Richard Howell, CFO at Primary Health Properties]

There is more to come, Bjorn, in the H2 in particular around property costs. We've recently internalized the Assura facilities management function, which they had outsourced, and we're just digesting that at the moment. We know there's some significant cost savings to come through looking at it in a bit more detail in the H2 of the year. Hopefully, when we report the full year results in early 2027, we'll be able to give you an update, but we do expect more to come.

[Mark Davies, CEO at Primary Health Properties]

Thank you, Bjorn. Next question is from James Carswell, Peel Hunt. Thank you, James. Great to see the progress on refinancing and deleveraging. Could you give some guidance on where the cost of debt will trend over the next few years? Just looking back to one of Richard's earlier slides, you'll have seen, James, average cost of debt currently running at 3.8%. With the activities that we've described, we've told the market this morning, that's moving to 3.5%. Question is how much further do you want us to go? I guess take a longer term view. The way we think about that, Richard is that we've got access to a much wider pool of capital now the bond market and beyond. We've described the 40 basis points reduction in credit margins that we've achieved. We're very confident we can retain a strong investment grade credit rating, as we described.

[Mark Davies, CEO at Primary Health Properties]

I think we see good stability in our future cost of debt.

[Richard Howell, CFO at Primary Health Properties]

No, I would agree with that, Mark, I think the other key thing to note is obviously we're not immune to rising interest rates, but obviously the rental growth and reversionary potential of the portfolio should more than offset the impact of any future interest rate increases in the future.

[Mark Davies, CEO at Primary Health Properties]

That's a good point, actually. Thanks for mentioning that. Thank you, James. Next question is from Vensi from Astella Capital. I appreciate the resilient cash flow of the assets. How do you feel about asset valuations in light of net yields below all in new cost of debt? That's a question that comes up a lot. The first thing I would say, for a portfolio of high quality, secure income, healthcare infrastructure assets to be valued at 5.4% net initial yield, I think demonstrates real value. We think potential upside not just from rental growth, but potentially yield compression in the future. Look, absolutely, if we had to refinance all of our debt, which is just under GBP 3 billion, tomorrow at today's cost of debt the dynamics of that would be questionable. That's not the way we're structured. We've got a very good capital structure.

[Mark Davies, CEO at Primary Health Properties]

It was strong before Assura. It's even stronger now. Not just the maturity profile, but the access to capital that we have. I think if there's any further questions around what that means to our cost of debt going forward, I think hopefully Richard and I, you feel have addressed that adequately from the previous question. Thank you for that, I think we've got one further question coming in. It's from a shareholder, so we'd better deal with this in a good way. This is from Shane from Gravis Capital. How competitive was the process to find a JV partner? How many parties expressed an interest? I'll just pause for one second while I think of how to answer that. As you can tell, I'm reading these out off a screen. I haven't seen any of these questions before.

[Mark Davies, CEO at Primary Health Properties]

These processes, if I could describe it as a process are always sensitive. You never want to breach any commercial sensitivity. Let me start by saying, first of all, the PHP Assura merger was a very high profile transaction. Competitive, often in the public domain. It was well known to the market that we'd taken on some elevated leverage to complete that transaction. The market knew that we had an intention and a stated intention to sell some assets, and the obvious way for us to do that, as we flagged in August through to October last year, was to realize some proceeds through our private hospital joint venture. All of that was in the market, so we had a number of proactive approaches. We were not running a process at that time. Very credible counterparties who wanted to work with us on that hospital portfolio.

[Mark Davies, CEO at Primary Health Properties]

We did appoint an advisor. We did not run a beauty parade type process. It came to our attention there were one or two extremely high quality, long-term, global institutional investors that wanted to work with us. Those types of investors, because of their reputation, the strength and depth of the capital that they manage, and their way of working, they don't typically participate in a big, wide beauty type process. We kept it very tight. It wasn't the world's biggest secret that we were intending to do a joint venture on our private hospital portfolio. We were really delighted with the approaches that we had at the time, which has put us in a position to say here with confidence today that we are in advanced discussions on an exclusive basis. Often, some people need to be reminded.

[Mark Davies, CEO at Primary Health Properties]

We said we'd get this JV done originally within 18 months, which would have been 31st of December 2026. We're going to do that earlier, and we will get this done in the next few weeks, as I've repeated throughout the presentation. That's quite a long answer to your question Shane, it is an important question that you asked. The second part of your question, how many parties expressed an interest? It's quite a long list, that's not because we ran a process. That's because, I think, in many ways, the high profile nature of the transaction we did last year. Thanks again for your question. Bjorn, I can see you've come back on. You've noted that you're seeing stronger rental evidence. Are you finding this is translating into higher rental values being supported by the district valuer across the wider portfolio?

[Mark Davies, CEO at Primary Health Properties]

This could be a break. Do you want to just pick up on that?

[Richard Howell, CFO at Primary Health Properties]

Yeah, sure. I think we said in the presentation, asset management and development activities are seeing rental rebase 15%-30% higher than the current passing rent across the portfolio. We need to convert that through the rent review team into rental growth across the wider portfolio. There's obviously the benefit of combining the evidence across the combined portfolio. Clearly a lot of work for us to do to deliver that reversion in the portfolio, but we think there's a lot of reversion to come, and that's why we're sort of quite confident about our outlook on rental growth for the future.

[Mark Davies, CEO at Primary Health Properties]

Yeah. Good response, Richard. If I could just add to that, Bjorn. When I was presenting earlier, the case study slides, development, and asset management. With the exception of Wakefield, all of those schemes were inflation-linked or fixed uplift projects, and I think it's quite important to point that out. Very recently, our Head of Development, Rob James, attended on the company's behalf, the Health Select Committee at Portcullis House in the House of Commons. Interesting enough, we had NHS England on the phone yesterday as a follow-up from that committee saying, "Look, we've seen what you're doing in Weston-super-Mare and all these places that you describe. Can we have a wider conversation with you about that, and how we can drive more efficiency into the system?" Particularly capturing from our perspective that opportunity, that growth that Richard described.

[Mark Davies, CEO at Primary Health Properties]

Looking through the lens of the NHS and the delivery of the 10-year plan and the new neighborhood health centers, we are providing new critical, modern healthcare infrastructure to the NHS. That's good for them and it's good for us and good for our shareholders. I'm glad you've given us the opportunity to point that out. There's no further questions coming through on the forum. I think on that note, unless there's any further questions coming through by phone, I'd just like to take the opportunity to thank everybody for their attendance on a very busy day for the market, not just for real estate. I think someone described it to me. One of our shareholders this morning, as Super Thursday. Your time and attention is gratefully appreciated. You can see that management are very focused.

[Mark Davies, CEO at Primary Health Properties]

We've got plenty to do over the next few weeks. We're looking forward to making future announcements. Thanks for your support and look forward to seeing you next time.

Participants

Executives

• Mark Davies, CEO
• Richard Howell, CFO

Analysts

• Chris Millington, Analyst at Deutsche Bank
• Kanad Mitra, Analyst at Barclays