Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2013 Earnings Presentation
39 slides from Primary Health Properties's earnings presentation, December 2013
Slide 1: 2013 annual results presentation
2013 annual results presentation December 2013 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 £273 million1 market capitalisation Fund not a developer or operator External investment adv
Slide 5: Highlights in the year
MedicX Fund Highlights in the year Total shareholder return of 13.1% for the year (2012: 9.0%)1 65.3% increase in EBITDA to £20.8 million2 (2012: £12.6 million) Dividend and underlying dividend cover 63.8% and 70.7% respectively (30 September 2012: 42% and 68%)3 New committed investment and approved
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Committed investment £456.7m1 Property valuation yield 5.79%2 Adjusted NAV plus debt 69.4p2 Average lease term 17.0 years1 Total drawn debt facilities £275.7m2 Average cost of debt 4.45%1 Average debt term 15.8 years2 Adjusted ge
Slide 7: Value drivers
MedicX Fund Value drivers Investment quality £66.7 million of new property invested with average age 0.5 years and 20.9 year average unexpired lease term £34.7 million debt acquired at an average rate of 4.47% with 14.8 year average unexpired lease term Financing capability New £25 million revolving
Slide 8: Shareholding returns
Shareholding returns Continuing to deliver consistent returns Dividends and Dividend growth share pricegrowth Sept 2013 13.1%1 Sept 2012 9.0% Sept 2011 9.4% Sept 2010 8.6% Sept 2009 10.8% 10.2% per annum average total shareholder return over last five years 1As at 30 September 2013 8
Slide 9: Dividends
Dividends Progressive dividend policy Underlying dividend cover is adjusted to reflect completion of the properties under construction Yield (%) Dividend1 5.7p Share price2 80.0p Yield on share price 7.1% Sept 2011 Mar 2012 Sept 2012 Mar 2013 Sept 2013 dividend dividend dividend dividend dividend Sc
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 121 assets Contractual certainty of income Portfolio geographical spread 111 projects 100% 92% 10 projects 8% 0% Demand risk Under construction Availability risk Operational Security of tenure 100% 100% Freehold/long leasehold Ownership 1As
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 17.0 years2 Average age 6.0 years2 Average value £3.7 million2 1As at 30 September 2013; includes
Slide 13: Portfolio: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £28.8 million £26.3 million completed Increasing RPI link £2.5 million under construction £9.7 million passing rents currently under negotiation £3.4 million rent reviews agreed during the period2 Equivalent to 1.7% per annum in
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 Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Passing rents agreed £1,814,809 £1,134,357 £2,952,193 £2,129,484 £2,662,646 £2,935,773 £1,345,024 Annualised increase 3.1% 2.4% 1
Slide 15: Rental growth prospects
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 16: Property valuation yields stable
MedicX Fund Property valuation yields stable1 1MedicX Fund property valuation as at 30 September 2013, IPD data as at 31 October 2013 and Gilt rate data as at 6 December 2013 16
Slide 17: GPI portfolio acquisition
Corporate transaction GPI portfolio acquisition Total committed investment of £44.7 million in 14 properties Earnings enhancing acquisition GPI portfolio acquisition lease type1 Impact on adjusted NAV + debt mark-to-market on acquisition neutral Seven properties completed / operational and seven pro
Slide 18: Recent primary care property acquisitions
Recent primary care property acquisitions Total investment of £22.0 million in four properties Average cash yield of 5.96% on the four recent primary care property acquisitions Cambridge Primary CareCentre Prenton Primary CareCentre Watford Primary Care Centre Wigston Primary CareCentre Lot size NIA
Slide 19: Recent primary care property disposals
Recent primary care property disposals Active asset management of the portfolio Four properties sold for an average of 5% over the most recent valuation Three further properties under offer with a combined value of £3.4 million MaidaVale Primary Care Centre Chandlers Ford Primary Care Centre Wheatha
Slide 20: Asset management
Asset management Strategic portfolio management Property Overview Timing Retford Pharmacy extension and GP refurbishment Hoveton & Wroxham GP extension 2014 Wood Green Pharmacy extension and GPrefurbishment 2014 Eastbourne GP and pharmacy extension 2014 Sutton GP extension 2014 Richmond Redevelopmen
Slide 21: Key financials
Key financials Specialist primary healthcare infrastructure fund 21
Slide 22: Income statement
Key financials Income statement ‘Restated’ 12 months to 30 Sept 2013 12 months to 30 Sept 2012 Change £000 £000 Rent receivable 24,201 15,642 55% Other income1 1,492 860 73% Total income 25,693 16,502 56% Direct property costs2 1,052 719 46% Investment advisory fee 2,957 2,384 24% Overheads 912 836
Slide 23: Balance sheet
Key financials Balance sheet Gearing following fund raising c.45% As at 30 Sept 2013 As at 30 Sept 2013 £000 Pence per share Gross assets excluding cash 437,653 159.2 Debt 273,744 99.6 Cash 27,063 9.8 Net debt 246,681 89.7 Adjusted NAV1 173,342 63.1 Adjusted NAV plus debt MtM1 190,676 69.4 DCF 266,6
Slide 24: Debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.45% and an average unexpired term of 15.81 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 25: 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 25
Slide 26: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure fund 26
Slide 27: Pressure on primary care estate
NHS and primary care update Pressure on primary care estate Political drivers Pressure on GP’s Pressure on premises Health and Social Care Act 2013 in place Ageing population leading to increased 20% of premises inspected by CQC non- Focus on integrated and colocation of demand1 compliant3 services
Slide 28: Transformational strategy
NHS and primary care update Transformational strategy Integration Co-location of services Change from a reactive to proactive service Increased personal responsibility for health Demographic change – the elderly and chronic disease Intermediate care – hospital admission avoidance 28
Slide 29: Primary care rental streams 2015
NHS and primary care update Primary care rental streams 2015 NHS ENGLAND PROJECT APPRAISAL UNIT CCG HEALTH AND LOCAL AREA TEAMS WELLNESS BOARDS NHS PROPCO COMMISSIONING SUPPORT UNIT GPs 29
Slide 30: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure fund 30
Slide 31: 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 £30 million in legals Circa £6 million ren
Slide 32: 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 7.1% dividend yield at 80.25 pence per
Slide 33: Appendices
Appendices Specialist primary healthcare infrastructure fund 33
Slide 34: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 97.0p 80.0p Weighted discount rate 7.1% 8.9% Risk premium to 20 year gilt rate 3.6% n/a Rental growth per annum 2.5% (0.1)% Capital appreciation per annum 1.0% (1.1)% DCF reconciliation Adjusted NAV plus debt benefit 69.4p Purchaser
Slide 35: 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 36: DCF NAV sensitivities
Key financials DCF NAV sensitivites1 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 6.0 111 105 100 96 91 -1.0 67 73 80 88 97 Capital 7.0 109 104 98 94 89 0.0 75 81 88 96
Slide 37: Sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 6 December 2013 – Canaccord Genuity / DataStream 37
Slide 38: 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 39: 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