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26 September 2013
Primary Health Properties plc ("PHP" or the "Company")
Amended terms of the provision of advisory services
The Board of PHP announces that it has agreed revised arrangements in respect of the provision of administrative and accounting services. Under the revised agreement Nexus Tradeco Limited ("Nexus") will assume responsibility for providing these services on terms more favourable to the Company.
Nexus and J O Hambro Capital Management Limited ("JOHCM") have delivered advisory services to the Company for over 17 years under the terms of a joint agreement and during this time have generated significant annual returns for shareholders. Nexus identifies suitable properties, negotiates the terms of the purchase of those properties, subject to Board approval, and provides property management services to the PHP group, through the Company's Managing Director, Mr Harry Hyman and Nexus's retained team of property professionals. JOHCM has provided administrative and accounting services to the PHP group as well as acting as the Company Secretary.
Amended terms
The Company has amended the terms of the advisory agreement to combine the two aforementioned roles, with Nexus assuming responsibility for providing those services previously supplied by JOHCM with effect from 30 April 2014. The Board estimates that these changes will result in an annualised saving of approximately £860,000 per annum. JOHCM has agreed to the Company's request to continue in its role until this time to facilitate the transition, and the Company will then pay a contractual termination payment to JOHCM as compensation for the remainder of the two year notice period under the existing agreement upon the revised management agreement becoming effective (the "Effective Date"). Nexus has agreed to make a contribution towards this compensation cost by way of reduced monthly fees for the two years following the Effective Date, such that the total termination payment to JOHM net of Nexus' contribution is expected to be approximately £2.1m.
The principal reason for which the Board has resolved to change the terms of the advisory agreement is a desire to move away from paying a gross asset value-linked administration and Company Secretarial fee. Under the revised terms the Company will pay Nexus a fixed annual fee in relation to these services which may be increased or decreased by up to 5% subject to movements in the Retail Price Index (or such other appropriate independent index agreed by Nexus and the Company).
Not only will the revised agreement represent a meaningful cost saving for the Company, but the Board also believes that combining the provision of these advisory services into one body will increase the opportunities for synergy, eliminate certain duplication of work, allow for more efficient and better communication and enhance internal control. Overall, the Board therefore believes that there will be clear cost and quality improvements.
Graeme Elliot, Chairman, said "The Board is pleased with the outcome of these negotiations which are of significant benefit to our shareholders. We would like to thank JOHCM for their considerable work over the past 17 years, and significant contribution to the success of PHP. We are likewise grateful for their recognition that the proposed changes to the advisory agreement are in shareholders' best interests, and are grateful for their positive approach."
For further information contact:
Primary Health Properties PLC 020 7451 7050
Harry Hyman
Pelham Bell Pottinger 020 7861 3925
David Rydell
Victoria Geoghegan
Elizabeth Snow
