PRIMARY HEALTH PROPERTIES PLC: A Financial Performance Evaluation

This report presents a comprehensive financial analysis of PRIMARY HEALTH PROPERTIES PLC (PHP PLC), evaluating its performance using financial ratios, share price valuation, and industry comparisons. The analysis examines the economic and sector backgrounds, focusing on the real estate industry and UK property market trends, and provides insights into PHP PLC's focus and future strategies. The financial performance is assessed through profitability, asset efficiency, liquidity, capital structure, and market performance ratios, comparing them to industry averages and historical trends from 2015 to 2018. The report also includes a share price valuation using the Capital Asset Pricing Model (CAPM) and a trend analysis to determine a buy, hold, or sell recommendation. The report concludes with a recommendation to buy PHP PLC shares based on positive financial indicators, an undervalued share price, and a positive market trend.

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.