Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2009 Earnings Presentation
36 slides from Primary Health Properties's earnings presentation, June 2009
Slide 1: Specialist primary care infrastructure fund
Specialist primary care infrastructure fund 2009 interim results presentation
Slide 2: Agenda
Agenda • Strategy • Financial review • Portfolio update • Valuation analysis Keith Maddin Chairman MedicX Adviser Mike Adams CEO MedicX Adviser 1
Slide 3: Investment policy and objectives
Investment policy and objectives Primary care infrastructure Investment adviser MedicX Shareholder returns • Modern purpose-built • Specialist investor, • Current dividend yield properties developer and manager 7.7%* • Long term secure cash of primary care • Quarterly dividend flow infrastructure pa
Slide 4: Market update
Market update • Primary care remains cornerstone of NHS strategy • No reduction in NHS budget but focus on efficiency and value for money • Signs that prime property valuations are stabilising • Security of income and rental growth make sector very attractive to investors • Strong relative performan
Slide 5: Attractive yield differentials
Attractive yield differentials Source: MXF property valuations and Bank of England as at 27 May 2009 4
Slide 6: Lower property valuation volatility
Lower property valuation volatility Source: MXF property valuations and IPD net initial yield as at 31 March 2009 5
Slide 7: Year on year rental growth
Year on year rental growth Source: MXF annualised rent reviews and IPD year on year movements as at 31 March 2009 *IPD All property rent movement for six months to 31 March 2009 -4.6% 6
Slide 8: Financial review
Financial review 7
Slide 9: Highlights
Period ended 31 Mar 09 Year ended to 30 Sept 08 Highlights Pence per share Pence per share Adjusted NAV* 64.0 70.3 Adjusted NAV* incl. debt mark to market 76.4 87.9 Discounted cash flow NAV 99.5 107.3 Period ended 31 Mar 09 Period ended 31 Mar 08 Pence per share Pence per share Adjusted earnings* 0.
Slide 10: Key financials - income statement
Key financials - income statement 6 months to 31 Mar 09 6 months to 31 Mar 08 Change £000 £000 % Rent receivable/other income 4,615 3,689 25 Finance income 293 1,221 (76) Total income 4,908 4,910 0 Investment advisory fee 1,069 1,138 (6) Other fees & expenses 581 1,340 (57) Finance costs 2,537 2,556
Slide 11: Key financials - balance sheet
Key financials - balance sheet At 31 Mar 09 £000 Gross assets excl cash* 142,082 Debt 101,047 Cash 15,204 Net debt 85,843 Adjusted NAV* 50,953 At 31 Mar 09 Restrictions/ £000 covenants Adjusted gearing* 60.4% 65% DSCR 2.06 1.40 LTV 66.8% 75% *Adjusted to exclude goodwill and deferred tax not expecte
Slide 12: Fund raising balance sheet impact
Fund raising balance sheet impact • £14.5m net equity raised April 2009 • £100m 5% fixed rate 30 year interest only loan • Additional £25m debt headroom Post fund raising Cash £29.7m Net debt £71.3m Adjusted gearing 50.2% 11
Slide 13: Portfolio
Portfolio 12
Slide 14: MedicX Fund portfolio
MedicX Fund portfolio 13
Slide 15: Portfolio review
Portfolio review* Contractual certainty Asset status Security of tenure of income 43 Projects 2 Projects *As at 31 March 2009 14
Slide 16: Portfolio review
Portfolio review* Modernity of assets Security of income Security of income by by tenant type lease expiry More than 10 yrs old – 0.4% Less than 15 yrs - 8% 5 yrs to 10 yrs old - 25% Pharmacy - 6% Voids - 0% 15 - 20 yrs - 44% Less than 5 yrs old – 74.6% Other- 3% PCT/GPs- 91% More than 20 yrs - 48%
Slide 17: Portfolio update
Portfolio update • Lytham property development successfully completed on time on budget (£13m) • One property continuing under construction (£8m) • Two new acquisitions post April fund raising: – St Annes (£12m) and Abergele (£3m) • £181m of committed investment in 47 properties 16
Slide 18: Acquisition update
Acquisition update Cost: £11.9m Review Terms: 3 yearly 3.5% p.a fixed uplifts Lease Length: 27 years St Annes Cost: £3.3m Review Terms: 3 yearly open market reviews Lease Length: 20 years Abergele 17
Slide 19: Completion of Lytham
Completion of Lytham 18
Slide 20: Rent review profile
Rent review profile £10.6m annualised current rent falling due for review by year* • £1.8m passing rents currently under negotiation • 3.5% per annum achieved during period excluding 2.5% fixed uplift reviews • Portfolio now includes 16% fixed reviews at 3.0% per annum and 7% RPI *As at 31 March 200
Slide 21: Valuation analysis
Valuation analysis 20
Slide 22: NAV analysis
NAV analysis NAV NAV p per share Market capitalisation* £70.5m 69.5p Adjusted NAV** £51.0m 64.0p Adjusted NAV plus debt** £60.8m 76.4p DCF NAV £79.3m 99.5p Weighted discount rate 7.13% Risk premium to 10 year gilt 3.32% *As at 27 May 2009 **Adjusted to exclude goodwill and deferred tax not expected
Slide 23: Adjusted NAV plus debt benefit
Adjusted NAV plus debt benefit 22
Slide 24: DCF NAV per share
DCF NAV per share 0.3p 30 Sept 08 107.3p 31 Mar 09 99.5p Completed Rental growth Revised rent Impact of Dividend Performance properties assumption at property 2.5% revaluation
Slide 25: DCF NAV sensitivities – discount rate
DCF NAV sensitivities – discount rate NAV p per share Completed 6.0% 6.5% 7.0% 7.5% 8.0% 6.0% 113p 108p 103p 98p 94p 7.0% 111p 106p 101p 96p 92p Under construction 8.0% 110p 104p 100p 95p 91p 9.0% 109p 103p 98p 94p 90p 10.0% 107p 102p 97p 93p 89p 24
Slide 26: DCF sensitivities – rental and capital value increases p.a.
DCF sensitivities – rental and capital value increases p.a. NAV p per share Rental* 0.5% 1.5% 2.5% 3.5% 4.5% -1.0% 64p 72p 82p 92p 103p 0.0% 73p 81p 90p 100p 112p Capital 1.0% 82p 90p 100p 110p 121p 2.0% 93p 101p 110p 121p 132p 3.0% 106p 114p 123p 133p 144p *DCF conservatively reduced to 2.5% per an
Slide 27: DCF NAV sensitivity
DCF NAV sensitivity 31 March 2009 NAV p per share 99.5p 69.5p* Weighted discount rate 7.13% 10.77% Rental growth per annum 2.50% (1.33)% Capital appreciation per annum 1.00% (2.87)% DCF post fund raising and new acquisitions NAV p per share 91.6p Weighted discount rate 7.28% *MXF share price as at 2
Slide 28: Summary and outlook
Summary and outlook • Attractive asset class with long term secure growing income • Matched with low cost fixed rate debt • Positive £15m non-dilutive equity raising post period end • Strong pipeline and funding opportunities • Dividend yield 7.7% and 9% discount to Adjusted NAV* incl. debt mark to
Slide 29: Appendix
Appendix 28
Slide 30: Quality of primary care estate in England and Wales
Quality of primary care estate in England and Wales • Too small 80% • Purpose built 40% • Adapted residential building/shop 50% • Co-located pharmacy/social services 5% Source: Department of Health 2008 29
Slide 31: General medical services in England statistics
General medical services in England statistics 2007 1995 Change • Number of practices 8,261 9,188 -10.1% • Single-handed practices 1,154 2,919 -60.5% • Number of GPs 33,364 27,645 +20.7% • Women 42% 30% +12.0% • Aged 60 and over 9.0% 6.3% +2.7% • Contracted (GMS) 21,780* 26,829 -18.8% • Salaried (PM
Slide 32: Index comparison
Index comparison Source: UBS/Datastream as at 27 May 2009 31
Slide 33: Impact of property revaluations
Impact of property revaluations* *Cumulative impact of property revaluation gain/loss and impairment provision based on 79,621,215 shares 32
Slide 34: Debt mark to market
Debt mark to market* *Compared to 5% all in fixed rate £100 million 30 year interest only loan and based on 79,621,215 shares 33
Slide 35: MedicX Fund Board of Directors
MedicX Fund Board of Directors • David Staples, Chairman (51) Guernsey based quoted Fund Director (FCA, CTA) • John Hearle, Director (56) Chairman and Head of Healthcare Division of Aitchison Raffety Group (FRICS) • Shelagh Mason, Director (49) Guernsey based Commercial Property Lawyer and quoted Fu
Slide 36: 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