Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2012 Earnings Presentation
37 slides from Primary Health Properties's earnings presentation, May 2012
Slide 1: Specialist primary healthcare infrastructure fund: 2012 interim results
Specialist primary healthcare infrastructure fund 2012 interim results presentation 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. Investment opportunity 2
Slide 3: Introduction
Introduction 3
Slide 4: MedicX Fund objectives and overview
MedicX Fund objectives and overview • Leading investor in modern purpose-built primary healthcare properties leased to doctors and the NHS generating government- funded long term secure cash flow • FTSE All Share £192 million* market capitalisation • Fund not a developer or operator • External inves
Slide 5: Highlights
Highlights* • £294 million committed investment in 73 properties at a valuation net initial yield of 5.87% compared to 20 year Gilt rate of 3.07% • £46 million committed in last six months at a cash yield of 6.01% • New £50 million 20 year debt facility secured with Aviva at a fixed all-in interest
Slide 6: Dividend growth year-on-year
Dividend growth year-on-year 6
Slide 7: Portfolio review
Portfolio review 7
Slide 8: Portfolio review
Portfolio geographical spread Portfolio review* Under construction 73 assets Contractual certainty Completed projects 61 projects of income 84% 100% 12 projects 16% 0% Under construction Demand risk Availability risk Operational Security of tenure 100% 100% Freehold/long Ownership leasehold *As at 2
Slide 9: Portfolio review
Portfolio review* Security of income Security of income by tenant type by lease expiry Modernity of assets Value per property Average unexpired lease term 18.0 years Average age 4.2 years Average value £3.9 million *As at 31 March 2012; includes completed value of properties under construction 9
Slide 10: Rental reviews
Rental reviews* • Total rent roll £18.3 million − £14.8 million completed − £3.5 million under construction • £4.0 million passing rents currently under negotiation • £2.6 million rent reviews agreed during the period • Equivalent to 3.2% per annum increase achieved Increasing inflation link − 3.2%
Slide 11: Rent reviews by period
Rent reviews by period* Year to Year to Year to Year to Year to 6 months to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Mar 12 Number 20 12 33 29 17 5 Passing rent £1,814,809 £969,757 £2,917,782 £1,651,714 £1,348,566 £1,097,383 Annualised increase 3.1% 2.8% 1.8% 3.1% 3.1% 3.4% - Open market reviews 3.0%
Slide 12: Property valuation yields
Property valuation yields* *MedicX Fund property valuation as at 31 March 2012, IPD data as at 30 April 2012 and Gilt rate data as at 23 May 2012 12
Slide 13: Forward funding investments
Forward funding investments Methil Monkseaton Caerphilly Tooting Kingston Uckfield Total investment of £25 million in 6 forward funding properties 13
Slide 14: Acquisitions
Acquisitions Ilkeston Saltburn Linthorpe Birkwood Skelton Total investment of £21 million in 5 completed properties 14
Slide 15: Completed investments
Completed investments Woolwich Hounslow West Wirral Corby Glen Total investment of £15 million in 4 completed properties 15
Slide 16: NHS and primary care update
NHS and primary care update • NHS Bill has finally passed into law • Clinical Commissioning Groups now involve wider community and only impact on 50% of the NHS budget (originally 80%) • The new NHS structure is gradually coming into place with the PCTs abolished by 2013-and the NHS Board appointmen
Slide 17: Key financials
Key financials 17
Slide 18: Key financials – income statement
Key financials – income statement 6 months to 31 Mar 6 months to 31 Mar 2012 2011 Change £000 £000 Rent receivable 6,917 5,890 17% Other income 455 257 77% Total income 7,372 6,147 20% Direct property costs* 326 281 16% Investment advisory fee** 1,125 1,125 0% Overheads 341 337 1% Total expenses* 1,
Slide 19: Historic dividend cover
Historic dividend cover 6 months to 12 months 12 months 12 months 31 Mar to 30 Sep to 30 Sep to 30 Sep 2012 2011 2010 2009 £000 £000 £000 £000 Dividends paid 5,359 9,131 6,593 6,146 Adjusted earnings excluding capital appreciation 2,552 4,043 2,674 1,383 Dividend cover 48%* 44% 41% 22% Capital appre
Slide 20: Key financials – balance sheet
Key financials – balance sheet As at 31 Mar 2012 As at 31 Mar 2012 £000 Pence per share Gross assets excluding cash* 259,303 105.0 Debt 157,323 63.7 Cash 75,404 30.5 Net debt 81,919 33.2 Adjusted NAV** 161,748 65.5 Adjusted NAV plus debt MtM** 169,480 68.6 DCF 222,400 90.1 As at 31 Mar 2012 Restrict
Slide 21: Debt funding
Debt funding Deutsche Postbank Aviva facility New Aviva facility facility Facility size £100 million £37.2 million £50 million Committed December 2006 December 2009 February 2012 Drawn £100 million £7.5 million £50 million Expiry December 2036 April 2015 February 2032 Margin 0.9% 2.0% 1.85% Interest
Slide 22: Investment opportunity
Investment opportunity 22
Slide 23: Pipeline
Pipeline • Investment adviser with proprietary market access and deal flow • £14 million of investment approved and a strong pipeline of £135 million • Over £9 million rent roll • 47 properties including nine properties from investment adviser development arm • Further completed property acquisition
Slide 24: Conclusion
Conclusion • Able to buy assets at attractive prices • Lowly geared with long-term low fixed rate debt • Earnings and dividend cover enhanced as MedicX Fund grows • Management well placed to take advantage of opportunities • Attractive total return proposition − 7.3% dividend yield at 77.0 pence per
Slide 25: Appendix
Appendix 25
Slide 26: Unprecedented yield differential
Unprecedented yield differential *Credit approved term sheet. Interest rate based on 2028 Gilt rate as at 23 May 2012 26
Slide 27: Revised investment adviser fee structure
Revised investment adviser fee structure Investment adviser Gross assets previous fee case First £300 million (min £2.25 million) 0.75% Greater than £300 million 0.75% Investment adviser Gross assets Saving revised fee case First £300 million (min £2.25 million) 0.75% 0.00% Between £300 million and
Slide 28: Disposals in the period
Disposals in the period Churchside Medical Centre sold April 2012 for £1.2 million Churchside 28
Slide 29: Adjusted NAV plus debt benefit
Adjusted NAV plus debt benefit 29
Slide 30: DCF NAV sensitivity
DCF NAV sensitivity* DCF Share price Pence per share 90.1p 76.5p Weighted discount rate 7.2% 9.9% Risk premium to 20 year gilt rate 3.7% n/a Rental growth per annum 2.5% (0.6)% Capital appreciation per annum 1.0% (1.5)% DCF reconciliation Adjusted NAV plus debt benefit 68.6p Purchasers costs at 5.80
Slide 31: DCF NAV sensitivities
DCF NAV sensitivities* Discount rate Rental and capital value increases per annum NAV NAV pence Completed pence Rental per share per share % 6.0 6.5 7.0 7.5 8.0 % 0.5 1.5 2.5 3.5 4.5 Under construction 6.0 98 95 92 90 87 1.0 70 74 79 84 90 Capital 7.0 97 94 91 89 86 0.0 75 79 84 89 95 8.0 96 93 90 8
Slide 32: Pressure on primary care estate
Pressure on primary care estate The current UK estate Service transfer to 75% of GPs unhappy with their premises* primary care _ £8.1 billion of primary care estate*** + NHS budget Ageing and constraints growing population 60% of GPs work from unsuitable premises** 72% GP owned*** *NHS The Informati
Slide 33: General medical statistics in England
General medical statistics in England* 2011 1995 Change • Number of practices 8,316 9,188 -9% • Single-handed practices 1,147 2,919 -61% • Number of GPs 35,415 27,465 +29% • Number of part-time GPs 31%** 14% +17% • GPs aged 60 and over 10% 6% +4% • Contracted GPs (GMS) 51% 98% -47% • Salaried GPs (P
Slide 34: Infrastructure comparison
Share price total return Infrastructure comparison* Dividend yield *As at 23 May 2012 – Canaccord Genuity / DataStream 34
Slide 35: Sector comparison
Share price total return Sector comparison* Dividend yield *As at 23 May 2012 – Canaccord Genuity / DataStream 35
Slide 36: MedicX Fund Board of Directors
MedicX Fund Board of Directors • David Staples, Chairman Guernsey based quoted Fund Director (FCA, CTA) • John Hearle, Director Chairman and Head of Healthcare Division of Aitchison Raffety (FRICS) • Shelagh Mason, Director Guernsey based Commercial Property Lawyer and quoted Fund Director • Christo
Slide 37: Important notice
Important notice These presentation materials (the “Presentation Materials”) are being solely issued to and directed at persons having professional experience in matters relating to investments and who are investment professionals as specified in Article 19(5) of the Financial Services and Markets A