Primary Health Properties PLC on Wednesday reported a sharp drop in annual profit, due to a revaluation deficit.

The London-based healthcare facility investor said net rental income edged up by 3.5% to £141.5 million in 2022 from £136.7 million the year before.

Pretax profit, however, dropped 60% to £56.9 million from £141.6 million. This was due to a revaluation deficit on its property portfolio of £64.4 million, compared to a surplus of £110.2 million a year before.

The company said the valuation deficit was driven by net initial yield widening of 18 basis points in the year, equivalent to a valuation reduction of around £134 million, ‘albeit this was partially offset by gains equivalent to £70 million arising from rental growth and asset management projects’.

Operating profit fell to £70.4 million from £236.7 million a year earlier.

Dividend payments rose 4.8% to 6.5 pence per share in 2022 from 6.2p in 2021.

‘We are encouraged by the increasingly firmer tone of rental growth and believe PHP in the medium term will be a beneficiary of the current inflationary environment both through open market and index-linked reviews,’ said Chair Steven Owen.

Primary Health Properties said contracted annualised rent roll increased by 3.3% to £145.3 million from £140.7 million a year ago.

The total value of its property portfolio stood at just under £2.8 billion on December 31, unchanged from last year.

Adjusted net tangible asset per share was112.6 pence, down 3.5% from 116.7p a year before.

Looking ahead, Primary Health Properties said it is encouraged by the ‘firmer tone’ of rental growth experienced in 2022, and looks forward to 2023 with confidence.

Shares were down 1.7% at 106.99 pence each on Wednesday morning in London.

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