Primary Health Properties PLC (LSE:PHP, OTC:PHPRF) (PHP) is poised to benefit from the current inflationary environment and the significant rise in construction costs, according to CEO Harry Hyman.
He believes these factors will drive rental growth and contribute to the company's income.
In the first half of 2023, PHP, which develops and rents surgeries and clinics used by GPs, saw an improvement in rental growth, and expects to deliver over £4 million of extra income during the year.
This continues the trend seen in recent years. The company's debt is 97% fixed or hedged for an average period of just under seven years, limiting exposure to further cost increases and development risk.
For the six months ended 30 June 2023, PHP reported a 6.2% increase in net rental income to £75.5 million, and a 2.7% rise in adjusted earnings to £45.9 million. The company's contracted annualised rent roll increased by 1.4% to £147.4 million.
Hyman attributes the company's predictable cash flows to the security and longevity of its income, near full occupancy, and stronger rental growth.
This, in turn, has allowed PHP to declare dividends totalling 5.025p per share in the year-to-date, marking the company's 27th consecutive year of growing the payout. The company said it intends to maintain its strategy of paying a progressive dividend fully covered by adjusted earnings.
Looking ahead, CEO Hyman told investors: "We believe PHP will be a beneficiary of both the current inflationary environment and the significant rise in construction costs seen in recent years both through open market and index-linked reviews.
"Furthermore, with 97% of PHP's debt either fixed or hedged for a weighted average period of just under seven years, a strong control on costs and just one development on site we have limited exposure to further cost increases and development risk."