Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2015 Earnings Presentation
38 slides from Primary Health Properties's earnings presentation, December 2015
Slide 1: 2015 annual results presentation
2015 annual results presentation December 2015 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. NHS and primary care update 5. Republic of Ireland 6. 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 / HSE generating government-funded long term secure cash flow FTSE All Share £309 million1 market capitalisation Fund not a developer or operator External investme
Slide 5: Highlights in the period
MedicX Fund Highlights in the period EPRA NAV 70.8 pps (30 September 2014: 65.4 pps) with dividends paid of 5.875 pps resulting in EPRA NAV total return 17.2%1 15.3% increase in EBITDA to £27.3 million2 (30 September 2014: £23.6 million) Dividend cover of 63.3% for the year3 (2014: 53.6%) Net capita
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Committed investment £559.5m1 Property valuation yield 5.46%2 EPRA NAV 70.8 pps2 EPRA NNNAV 62.7 pps2 DCF NAV 94.9 pps2 Average lease term 15.8 years1 Total drawn debt facilities £340.6m2 Average cost of debt 4.45%1 Average debt
Slide 7: Dividends
Dividends Progressive dividend policy Dividend cover of 63.3% for the year Strategy in place to grow dividend cover over the next three years Yield (%) Dividend1 5.9p Share price2 84.5p Yield on share 7.0% price2 Sept 2011 Mar 2012 Sept 2012 Mar 2013 Sept 2013 Mar 2014 Sept 2014 Mar 2015 Sept 2015 d
Slide 8: Investment adviser and property management fee structure
Investment adviser and property management fee structure Further reductions Lower investment adviser fees Annual base fee payable to the Investment Adviser will be held at £3.878 million until property assets equals or exceeds £782 million Will enable the Fund to increase its property assets by appr
Slide 9: Portfolio review
Portfolio review Specialist primary healthcare infrastructure fund 9
Slide 10: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 148 assets Contractual certainty of income Portfolio geographical spread 143 projects 100% 97% 5 projects 3% 0% Demand risk Availability risk Under construction Operational Security of tenure 100% 100% Freehold/long leasehold Ownership 1As a
Slide 11: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review as at 30 September 2015 Security of income by tenant type Security of income by lease expiry Modernity of assets Value per property Average unexpired lease term 15.7 years Average age 7.3 years Average value £4.0 million 11
Slide 12: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £35.8 million Rent review profile £33.7 million completed £2.1 million under construction £14.3 million passing rents under negotiation2 £8.5 million rent reviews agreed during the period2 Equivalent to 1.6% per annum increase a
Slide 13: 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 Year to Year to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 Sept 15 Passing rents agreed £1,814,809 £1,134,357 £3,198,193 £2,785,382 £3,374,636 £5,260,148 £3,219,169
Slide 14: Acquisitions and completions between Oct 2014 – Nov 2015
Acquisitions and completions between Oct 2014 – Nov 2015 Total investment of £41.2 million in 11 properties Acquisition Developer Investment £m Kingsbury GPI 4.8 Maidstone GPI 7.0 Streatham Intra Urban 2.9 Northampton MPA 2.5 Benllech GPI 2.9 Mullingar Feasible 7.2 Portfolio Medcentres 13.9 Buckley
Slide 15: Property valuation yields stable
MedicX Fund Property valuation yields stable1 1MedicX Fund property valuation as at 30 September 2015, IPD data as at 31 October 2015 and Gilt rate data as at 4 December 2015 15
Slide 16: Key financials
Key financials Specialist primary healthcare infrastructure fund 16
Slide 17: Key financials: income statement
Key financials Income statement 12 months to 30 Sept 2015 12 months to 30 Sept 2014 Change £000 £000 Rent receivable 32,811 28,085 17% Other income1 858 1,380 (38)% Total income 33,669 29,465 14% Direct property costs2 1,751 1,487 18% Investment advisory fee 3,725 3,363 11% Overheads 938 974 (4)% To
Slide 18: Key financials: balance sheet
Key financials Balance sheet As at 30 Sept 2015 As at 30 Sept 2015 £000 Pence per share Investment properties 553,479 151.6 Debt 338,308 92.7 Cash 56,910 15.6 Net debt 281,398 77.1 EPRA NAV1 258,428 70.8 EPRA NNNAV 228,885 62.7 DCF 346,339 94.9 Adjusted gearing1 50.2% 49.9% 1Adjusted to exclude defe
Slide 19: Key financials: debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.45% and an average unexpired term of 15.01 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 20: Long term debt position
Key financials Long term debt position Sep 2014 Mar 2015 Sept 2015 Debt £286.3m £289.5m £338.3m Weighted average maturity 13.3 years 14.0 years1 15.0 years2 Weighted average cost of debt 4.35% 4.42%1 4.45%2 1As at 7 May 2015 2 As at 30 September 2015 20
Slide 21: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure fund 21
Slide 22: Political and NHS perspectives
NHS and primary care update Political and NHS perspectives Five year forward plan BPF Quality Buildings Quality Care October 2014 November 2015 Cross party support for primary care investment Investment in healthcare real estate can help improve patient care Simons Stevens, NHS Chief Executive “A ne
Slide 23: Premises and new models of care
NHS and primary care update Premises and new models of care Premises New models of care BMA review underpins the need for new infrastructure Super practices 70% of existing premises regarded as unfit by GPs to One Health Partnerships 50 practices with 275,000 patients expand or sustain services1 Fed
Slide 24: Republic of Ireland
Republic of Ireland Specialist primary healthcare infrastructure fund 24
Slide 25: Republic of Ireland: Opportunity
Republic of Ireland Opportunity Modern integrated primary care centres leased to Health Service Executive (“HSE”) (NHS equivalent) and GPs / pharmacies HSE backed 25 year CPI leases for 60 - 80% of income with 5 yearly rent review GP 25 year CPI leases for 10 - 30% of income with 5 yearly rent revie
Slide 26: Republic of Ireland – key benefits
MedicX Fund Republic of Ireland – key benefits Quality of assets Modern, fit for purpose, dominant assets in locations chosen by HSE Income security 25 year HSE backed leases on majority of space Relative value Attractive relative prices compared to UK primary care Financing capability Bank appetite
Slide 27: Republic of Ireland – risks and other considerations
MedicX Fund Republic of Ireland – risks and other considerations Irish economy Fastest growth rate in Europe (5% year on year) Euro exposure Partial natural hedge through matched debt Political risk Core long term infrastructure. Majority government backed Tax Tax advice to manage tax leakage throug
Slide 28: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure fund 28
Slide 29: Pipeline of new opportunities
Pipeline1 Pipeline of new opportunities Investment Adviser with proprietary market access and deal flow Forward funding framework with developers Octopus Healthcare Property and GPI UK pipeline of c.£91 million potential acquisitions when fully developed Irish pipeline of c.€50 million potential acq
Slide 30: Investment opportunity: Conclusion
Investment opportunity Conclusion Total pipeline of £126 million of acquisitions when fully developed including £29 million in legals All debt fixed and long term at average rate of 4.45% and average term of 15 years Investment adviser fee frozen for next £215 million of new investment Management we
Slide 31: Appendices
Appendices Specialist primary healthcare infrastructure fund 31
Slide 32: Republic of Ireland opportunity: Comparison with UK
Republic of Ireland opportunity Comparison with UK – primary care Ireland UK Population 4.6 million Population 64 million Department of Health led by Minister for Health Department of Health led by Minister for Health Health Service Executive (“HSE”) NHS England/Scotland/Wales/Northern Ireland c.58%
Slide 33: EPRA NAV bridge
33 30 Sept 14 65.4p Key financials EPRA NAV Capital Adjusted appreciation earnings on existing excluding assets revaluation Premium on new issue Acquisition costs during period Dividend 30 Sept 15 70.8p
Slide 34: EPRA NNNAV sensitivities
MedicX Fund EPRA NNNAV sensitivities1 EPRA NNNAV EPRA NNNAV penceper share Cost of20 year debt (bps) pence per share ERV % --20 - +20 +50 +100 % -1% - +1% +2% +3% 6.25 44.3 46.5 48.8 51.9 56.9 6.25 41.8 43.2 44.5 45.9 47.2 6.00 48.9 51.2 53.4 56.6 61.6 6.00 47.4 48.8 50.2 51.6 53.0 Net initial yield
Slide 35: 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 6.0 106 102 96 92 87 -1.0 68 73 79 85 92 Capital 7.0 106 100 95 91 87 0.0 75 81 86 93
Slide 36: MedicX Fund performance: Sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 4 December 2015 – Date sourced Thomson Reuters 36
Slide 37: 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 Steve Le Page,
Slide 38: 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