Financial Performance of Primary Health Properties PLC

This presentation provides information on the financial performance of Primary Health Properties PLC, including financial ratios and share price valuation. It also offers recommendations for buying, holding, or selling shares.

Real Estate Industry
PRIMARY HEALTH PROPERTIES PLC

Introduction
 The presentation provides information regarding the current financial
performance of PRIMARY HEALTH PROPERTIES PLC by using
 Financial ratios
 Share price valuation
 Comparing the ratios with the industry
 Analysing the share price trend
 After analysing the financial performance and detecting the current share price
trend of PRIMARY HEALTH PROPERTIES PLC adequate recommendation is
provided for Buy, Holding or selling its shares.

Economic Background
 The current economic background of United
Kingdom is volatile, as the country is going
through the process of Brexit.
 The figure provides information regarding the
household spending, fixed investments and GDP
of United Kingdom.
 The economic conditions of UK indicate a slight
decline in GDP and Household spending in 2019,
while increment in fixed investment is present in
2019 (Pwc.co.uk. 2019).
 The GDP, Household and fixed investment of UK
in 2020 is anticipated to increase.

Sector Background
 The current real estate industry in UK has been increasing over the period of time,
which indicates the positive growth in the sector.
 The real estate industry has been flourishing due to the increment in demand from
rental property in UK.
 However, the Brexit has negative impact on the sector, which is negatively
affecting the performance of healthcare property.

Analyzing UK Property Total Return
12/1/2000
8/1/2001
4/1/2002
12/1/2002
8/1/2003
4/1/2004
12/1/2004
8/1/2005
4/1/2006
12/1/2006
8/1/2007
4/1/2008
12/1/2008
8/1/2009
4/1/2010
12/1/2010
8/1/2011
4/1/2012
12/1/2012
8/1/2013
4/1/2014
12/1/2014
8/1/2015
4/1/2016
12/1/2016
8/1/2017
0
200
400
600
800
1000
1200
1400
1600
1800
UK Property Total Return
 The figure provides information regarding the
UK property total returns that has been
generated over the period of 17 years.
 The returns of UK property has been
increasing, where relevant decline was
witnessed during 2007 when the financial
recession hit the world economy
 The UK Property market has been table even
after the announcement of Brexit, which
indicates the future prospects that is present in
the sector (Bloomberg.com 2019).

Analysing the firms focus
 The main focus of primary health properties to invest in flexible, modern
properties for local primary healthcare facilities.
 The organisation aims in increasing their exposure in the healthcare facilities,
which improves their revenue generation capability.
 The company focusses in letting out the acquired property to healthcare facilities
for improving the level of income, which is generated from rents.
 The firm also focuses on creating progressive returns for shareholders by
investing and letting out long term leases to different government bodies.

Analysing the firms future strategy
 The main future strategy of primary health properties is to
maintain the business model, which improves their current
operations.
 The company has been aiming to improve their exposure
in investment activities, rental growth and asset
management projects
 The model used by primary health properties increases the
possibility of growing the property and managing the
investment funds (Phpgroup.co.uk 2019).

Analysing the financial performance
relative to comparable firms
 The analysis is based on the financial ratios of Primary Health Properties PLC and
Industry to detect the financial performance of the organization. The financial
performance of Primary Health Properties PLC is compared by analyzing the
following ratios.
 Profitability
 Asset Efficiency
 Liquidity
 Capital Structure
 Market Performance

Profitability
Ratio Name PHP Industry
Profitability
Net profit margin 93.47% 42.60%
Gross profit 95.98% 64.83%
Return on assets 5.16% 6.85%
Return on equity 9.44% 14.83%
 The profitability ratio of Primary Health Properties PLC indicates a
profitable condition of the organization in comparison to the
industry.
 The net profit margin is higher than 93.47% in comparison to
42.60% the industry average
 The Gross profit margin is also higher than industry average, as the
organizational gross profit is 95.98%, while 64.83% is the industry
average (Phpgroup.co.uk 2019).
 Both return on assets and equity is lower for Primary Health
Properties PLC in comparison to industry average.

Asset Efficiency
Ratio Name PHP Industry
Asset Efficiency
Total asset turnover 0.06 0.18
 The asset efficiency of Primary Health Properties PLC is relevantly
lower than the industry average.
 The total assets turnover ratio of Primary Health Properties PLC is
at the levels of 0.06, as the income is not been generated to
improve the total asset turnover ratio.
 Thus, management of Primary Health Properties PLC needs to
improve their returns to match the industry average

Liquidity
Ratio Name PHP Industry
Liquidity
Current Ratio 0.08 0.39
Cash flow ratio 0.51 1.09
 The liquidity ratio of Primary Health Properties PLC is evaluated
by using current ratio and cash flow ratio.
 The current ratio is at the levels of 0.08 for PHP, while the industry
levels at 0.39.
 The cash flow ratio for PHP is at 0.51, while the industry average is
1.09 (Phpgroup.co.uk 2019).
 Hence, the improvements in liquidity ratio needs to be conducted
by the management of PHP for raising its financial performance.

Capital Structure
Ratio Name PHP Industry
Capital Structure
Total Debt to equity ratio 0.92 0.8483
Debt ratio 0.48 0.4741
Equity ratio 0.52 0.5259
 The capital structure of Primary Health Properties PLC is adequate in
comparison to the industry.
 The Primary Health Properties PLC uses both debt and equity ratio
for supporting its operations.
 The debt ratio is at 0.48, which is appropriate, as it indicates low
level of financial cost incurred for operations (Phpgroup.co.uk 2019).
 Both equity and debt composition of the company is appropriate,
which does not raise concerns for insolvency.

Market performance
Ratio Name PHP Industry
Market performance
Earnings per share 0.11 0.092
Dividend yield 0.05 2.78%
P/E ratio 10.57 41
 The market performance of Primary Health Properties PLC is
considered adequate in comparison to the industry average.
 The earnings per share is higher, which depicts about the rising
profitability of the organization.
 The high dividend yield indicates about the wealth distribution
strategy of Primary Health Properties PLC.
 The P/E ratio is lower in comparison to the industry.

Analysing the operating and financial
performance
 The financial analysis conducted for the past four years starting from 2015 to
2018.
 The financial ratios can gauge into the current financial condition of the company
and detect whether it a viable investment option.
 The financial performance of Primary Health Properties PLC is evaluated by
using the following ratios
 Profitability
 Asset Efficiency
 Liquidity
 Capital Structure
 Market Performance

Profitability
 The net profit margin has increased from the levels
of 91.03% to 93.47% in 2018. whoever, during
2017 the values increased to the levels of 126.76%,
which was due to the increment in Net result on
property portfolio.
 The gross profit margin has declined from 98.65%
to 95.98%, as the direct property expenses increased
during the past years (Phpgroup.co.uk 2019).
 Both return on equity and return on assets have
declined during the past financial years, as the
organization continued to increase the accumulation
of assets and equity, while the net profits remained
at marginal levels
2018 2017 2016 2015
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
Profitability

Asset Efficiency
 The asset efficiency of Primary Health
Properties PLC has deteriorated during the past
four financial years.
 The values declined from 0.059 in 2015 to
0.055 in 2018.
 This decline is witnessed due to the
improvements in the accumulation of total
assets and low increment in total revenues
2018 2017 2016 2015
0.053
0.054
0.055
0.056
0.057
0.058
0.059
Asset Efficiency

Liquidity
 The current ratio of Primary Health Properties
PLC increased to the levels of 0.3093 in 2017
before falling to 0.07807 in 2018.
 The cash flow ratio of Primary Health Properties
PLC has declined from the levels of 1.64 in 2015
to 0.51 in 2018 (Phpgroup.co.uk 2019).
 This indicates that the management needs to
improve their current financial liquidity to
support their short term obligations.
 Increment in the accumulation of current assets
needs to be conducted by the management.
2018 2017 2016 2015
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Liquidity

Capital Structure
 The capital structure of Primary Health Properties
PLC has improved from during the past four
financial years.
 The focus of the company on debt for supporting
its operations declined, while increment in equity
is witnessed during 2018.
 The debt ration declined from 0.69 to 0.48 in
2018, while the equity ratio increased from 0.31
to 0.52 (Phpgroup.co.uk 2019).
 The solvency position of Primary Health
Properties PLC is stable.
2018 2017 2016 2015
-
0.50
1.00
1.50
2.00
2.50
Capital Structure

Market performance
 The market performance ratio indicates a positive
attribute about the P/E ratio of Primary Health
Properties PLC.
 The EPS value has declined from the levels of 0.13
to 0.11, while the dividend yield has reduced from
the levels of 5.41% to 4.86%.
 However, the market performance of Primary Health
Properties PLC has improved.
 Both the EPS and dividend has declined due to the
increment in number of shares issued by the
company. 2018 2017 2016 2015
-
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
Market performance

Valuation
Particulars Value
Rf 1.10%
Rm 7.96%
Beta 0.37
CAPM 3.64%
Dividend 0.0554
Growth 2.60%
CAPM 3.64%
Share price of PHP 5.4684
Current share price 1.2860
 The table provides information regarding the
theoretical share price valuation of Primary Health
Properties PLC.
 The CAPM calculation indicates a expected return of
3.64%
 The growth rate is acquired by analyzing the dividend
payments
 The theoretical share price value is at 5.4684, while
the current share price is at 1.2860 (Phpgroup.co.uk
2019).
 Hence, it is anticipated that the current share value of
Primary Health Properties PLC will increase in future.

Target share price
 The graph represents the share price pattern of Primary
Health Properties PLC for the past 2 years.
 The rising share values states that a positive trend is
current present, where higher highs is been made with
lower highs.
 The uptrend indicates that the current share price value of
Primary Health Properties PLC will increase in future.
 The values generated from the valuation model is at the
levels of 5.4684, while the current share price is at
1.2860.
 Hence, the share value is anticipated to increase towards
to levels of 5.4684

Recommendation to buy, hold and sell
 The positive attributes presented in the analysis has
indicated that that investors need to buy the stock of
Primary Health Properties PLC.
 The Valuation of Primary Health Properties PLC also
indicates a buy signal, as the current share value is
undervalued.
 The Chart analysis also indicates an uptrend, where
the share price will eventually increase in value.

Conclusion
 The share price analysis is conducted for detecting the
future prospects of Primary Health Properties PLC.
 The ratio analysis also indicates positive financial
conduction of Primary Health Properties PLC.
 The valuation calculation depicts that the current share
price is undervalued.
 The trend analysis indicates an uptrend, where share
price will increase and raise investors return from
investment.
 Thus, investors need to buy shares of Primary Health
Properties PLC, as share price is undervalued and current
trend is positive.

Reference
 Bloomberg.com. 2019. Bloomberg - Are you a robot?. [online] Available at:
https://www.bloomberg.com/markets/rates-bonds/government-bonds/uk [Accessed 8
Apr. 2019].
 Phpgroup.co.uk. 2019. [online] Available at:
https://www.phpgroup.co.uk/application/files/6515/4953/0672/Primary_Health_Propert
ies_PLC_Annual_Report_2018.pdf [Accessed 8 Apr. 2019].
 Phpgroup.co.uk. 2019. Primary Health Properties PLC (LSE: PHP) :: Key
performance indicators. [online] Available at:
https://www.phpgroup.co.uk/investors/key-performance-indicators [Accessed 8 Apr.
2019].
 Pwc.co.uk. 2019. UK Economic Outlook. [online] Available at:
https://www.pwc.co.uk/services/economics-policy/insights/uk-economic-outlook.html
[Accessed 8 Apr. 2019].

Thank You