Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2014 Earnings Presentation
34 slides from Primary Health Properties's earnings presentation, May 2014
Slide 1: 2014 interim results presentation
2014 interim results presentation May 2014 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. NHS and primary care update 5. Investment opportunity 2
Slide 3: Introduction
Introduction Specialist primary healthcare infrastructure fund 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 £294 million1 market capitalisation Fund not a developer or operator External investment adv
Slide 5: Highlights in the period
MedicX Fund Highlights in the period Total shareholder return of 9.5% for the period1 11.8% increase in EBITDA to £11.0 million2 (2013: £9.9 million) Capital appreciation of the portfolio of £5.2 million less £0.4 million of purchasers costs incurred on acquisitions generating a revaluation gain for
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Committed investment £500.5m1 Property valuation yield 5.75%2 Adjusted NAV plus debt 68.6p2 Average lease term 16.2 years1 Total drawn debt facilities £275.8m2 Average cost of debt 4.45%1 Average debt term 15.3 years2 Adjusted ge
Slide 7: Value drivers
MedicX Fund Value drivers Investment quality £43.8 million of new property invested with 16.8 year average unexpired lease term Financing capability Sector leading financing structure 11 active initiatives Asset management £1.4 million rent reviews agreed in the period with the equivalent of an aver
Slide 8: Shareholding returns
Shareholding returns Continuing to deliver consistent returns Dividends and Dividend growth share pricegrowth Mar 2014 9.5%1 Sept 2013 13.1%2 Sept 2012 9.0% Sept 2011 9.4% Sept 2010 8.6% Sept 2009 10.8% 10.0% per annum average total shareholder return over last five years1 1Share price at 31 March 2
Slide 9: Dividends
Dividends Progressive dividend policy Underlying dividend cover is adjusted to reflect completion of the properties under construction On full investment of fund raising proceeds at 5.8% and 60% gearing, underlying dividend cover would be c.73% Yield (%) Dividend1 5.8p Share price2 84.5p Yield on sh
Slide 10: Portfolio review
Portfolio review Specialist primary healthcare infrastructure fund 10
Slide 11: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 134 assets Contractual certainty of income Portfolio geographical spread 129 projects 100% 96% 5 projects 4% 0% Demand risk Availability risk Under construction Operational Security of tenure 100% 100% Freehold/long leasehold Ownership 1As a
Slide 12: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 Security of income by tenant type Security of income by lease expiry Modernity of assets Value per property Average unexpired lease term 16.2 years2 Average age 6.5 years2 Average value £3.7 million2 1As at 31 March 2014; includes comp
Slide 13: Portfolio of modern purpose built assets: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £31.6 million Rent review profile £30.0 million completed £1.6 million under construction £12.3 million passing rents currently under negotiation £1.4 million rent reviews agreed during the period2 Equivalent to 2.1% per annum i
Slide 14: Rent reviews by period
Rent reviews by period1 Consistent rental growth over time Year to Year to Year to Year to Year to Year to Year to Period to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Mar 14 Passing rents agreed £1,814,809 £1,134,357 £2,952,193 £2,223,484 £2,774,546 £3,256,373 £1,513,568 £622,241 Annua
Slide 15: Acquisitions since October 2013
Acquisitions since October 2013 Total investment of £43.8 million in 13 properties Investment Acquisition Developer Properties £m Lunn portfolio Lunn 24.6 9 Buckley HPC 7.6 1 Cardonald Safeway 3.2 1 Ynyshir MedicX 1.6 1 Peterborough GPI 6.7 1 15
Slide 16: Property valuation yields stable
MedicX Fund Property valuation yields stable1 1MedicX Fund property valuation as at 31 March 2014, IPD data as at 30 April 2014 and Gilt rate data as at 28 May 2014 16
Slide 17: Key financials
Key financials Specialist primary healthcare infrastructure fund 17
Slide 18: Key financials: Income statement
Key financials Income statement ‘Restated’ 6 months to 31 Mar 2014 6 months to 31 Mar 2013 Change £000 £000 Rent receivable 13,415 11,603 16% Other income1 436 589 (26)% Total income 13,851 12,192 14% Direct property costs2 718 449 60% Investment advisory fee 1,593 1,412 13% Overheads 497 457 9% Tot
Slide 19: Key financials: Balance sheet
Key financials Balance sheet As at 31 Mar 2014 As at 31 Mar 2014 £000 Pence per share Gross assets excluding cash 490,851 141.6 Debt 274,265 80.0 Cash 25,573 7.5 Net debt 248,692 72.6 Adjusted NAV1 221,808 64.7 Adjusted NAV plus debt MtM1 235,034 68.6 DCF 318,997 93.1 As at 31 Mar 2014 Restrictions
Slide 20: Key financials: Debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.45% and an average unexpired term of 15.31 years, close to unexpired lease term of the investment properties In addition, there is a £25 million revolving loan facility with the Royal Bank of Scotland Plc which at current rates is ex
Slide 21: Adjusted NAV plus debt benefit
Key financials Adjusted NAV plus debt benefit 1Adjusted to exclude goodwill, the impact of deferred tax not expected to crystallise, financial derivatives, and the post year-end impact of resetting debt interest costs 21
Slide 22: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure fund 22
Slide 23: Primary care in need of additional and upgraded infrastructure
NHS and primary care update Primary care in need of additional and upgraded infrastructure Capitalised value of rent at GP estate over £10.5 billion1 Existing assets deemed not-fit-for purpose 40,395 GPs in 10,265 surgeries Primary care estate age, 2012/134 15% increase in the last five years to 300
Slide 24: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure fund 24
Slide 25: Pipeline of new opportunities
Pipeline1 Pipeline of new opportunities Investment Adviser with proprietary market access and deal flow Forward funding framework with developers MedicX Property and GPI Strong pipeline of c.£100 million potential acquisitions when fully developed including £25 million in legals Circa £7 million ren
Slide 26: Investment opportunity: Conclusion
Investment opportunity Conclusion Strong pipeline of c.£100 million potential acquisitions when fully developed Earnings enhanced as MedicX Fund grows Management well placed to take advantage of opportunities Attractive total return proposition and track record 6.9% dividend yield at 84.0 pence per
Slide 27: Appendices
Appendices Specialist primary healthcare infrastructure fund 27
Slide 28: Rental growth prospects and supply and demand in primary care
Rental growth prospects Supply and demand in primary care Rental growth driven by construction costs and new build rental evidence 300 BIS Output Price Index for New Construction Construction costs1 250 RPI Index Economic activity now increasing 200 The BIS Output Price Index for All Work (2010): al
Slide 29: Investment adviser and property management fee structure
Investment adviser and property management fee structure Further reductions Lower investment adviser and property management fees Fees on healthcare property assets only rather than gross assets (excluding cash) Reduced investment adviser fee of 0.33% above £1 billion gross assets Property managemen
Slide 30: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 93.1p 84.5p Weighted discount rate 7.0% 8.0% Risk premium to 20 year gilt rate 3.5% n/a Rental growth per annum 2.5% 1.0% Capital appreciation per annum 1.0% (0.1)% DCF reconciliation Adjusted NAV plus debt benefit 68.6p Purchasers
Slide 31: DCF NAV sensitivities
Key financials DCF NAV sensitivities1 Discount rate Rental and capital value increases per annum NAV penceper NAV penceper Completed share Rental share % 0.5 1.5 2.5 3.5 4.5 % 6.0 6.5 7.0 7.5 8.0 Under construction 6.0 104 99 94 90 86 -1.0 67 72 78 85 92 Capital 7.0 103 98 94 89 85 0.0 74 79 85 92 9
Slide 32: MedicX Fund performance: Sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 28 May 2014 – Canaccord Genuity / DataStream 32
Slide 33: Board of Directors
MedicX Fund Board of Directors David Staples, Chairman Guernsey based quoted Fund Director (FCA, CTA) Christopher Bennett, Director Jersey based Real Estate Financier and quoted Fund Director (MRICS) John Hearle, Director Chairman and Head of Healthcare Division of Aitchison Raffety (FRICS) Shelagh
Slide 34: Important notice
MedicX Fund Important notice This document has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000, as amended. Reliance on this document for the purpose of engaging in any investment activity may expose an individual to a significant risk of l