Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2011 Earnings Presentation
33 slides from Primary Health Properties's earnings presentation, May 2011
Slide 1: Specialist primary healthcare infrastructure fund
Specialist primary healthcare infrastructure fund 2011 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 • Launched November 2006 • 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 £147 million* market capitalisation Guernsey based investment c
Slide 5: Attractive asset class
Attractive asset class £235.5 million committed investment in 58 properties *MedicX Fund cash yield, as at 31 March 2011, borrowing cost on £100m Aviva debt facility and 20 year gilt rate at 24 May 2011 5
Slide 6: Successful fund raising
Successful fund raising • March 2011 MedicX Fund issued 47.7 million shares at 72 pence per share by way of placing open offer and offer • Issue generated net proceeds of £33.4 million • Largest fundraising since IPO in November 2006 • £32.7 million* of acquisitions approved following the fundraisin
Slide 7: Total return analysis
Total return analysis Dividend Sept 2010 May 2011* Movement Total return Total return p p p p p %** Share price 2.725p 73.75p 77.00p 3.25p 5.975p 16.4% Sept 2007 Sept 2008 Sept 2009 Sept 2010 Sept 2011 To date Dividend declared per share 5.00p 5.20p 5.33p 5.40p 5. 50p 26.43p Increase 4.0% 2.5% 1.3%
Slide 8: NHS and primary care update
NHS and primary care update • NHS Bill progress slow and now in a “listening exercise” • Concerns about GPs alone commissioning services • Timetable now extended into the Autumn • Strong pressure to increase services at a local level likely to increase demand for modern, purpose built premises • Con
Slide 9: Portfolio review
Portfolio review 9
Slide 10: Portfolio review
Portfolio geographically spread Portfolio review* Completed projects 58 assets Contractual certainty Under construction / committed projects 50 Projects of income 86% 100% 8 Projects 14% 0% Demand risk Under construction / Availability risk Operational committed projects Security of tenure 100% 100%
Slide 11: 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 18.4 years Average age 3.8 years Average value £3.8 million *As at 31 March 2011 ; includes completed value of properties under construction and
Slide 12: Rental uplifts
Rental uplifts* • Total rent roll £14.3 million • £1.6 million rent reviews agreed during the period • Equivalent to 2.6% per annum increase achieved • 1.9% open market reviews • 2.5% fixed uplifts • 4.2% RPI based • £4.3 million passing rents currently under negotiation Rent review breakdown *Perio
Slide 13: Rent reviews by period
Rent reviews by period* Year to Year to Year to Year to 6 months to Sept 07 Sept 08 Sept 09 Sept 10 Mar 11 Number 19 11 29 11 5 Passing rent £1,683,809 £839,757 £2,136,274 £387,490 £496,689 Annualised increase 3.1% 2.9% 1.8% 2.5% 3.3% - Open market reviews 3.1% 2.6% 1.8% 2.1% n/a - RPI 3.8% 3.9% 1.4
Slide 14: Acquisitions mid-year
Acquisitions mid-year* Total committed investment of £24.3 million in four properties at average cash yield of 6.21% Immingham Woolwich West Wirral Raynes Park *As at 31 March 2011 14
Slide 15: Key financials
Key financials 15
Slide 16: Key financials – income statement
Key financials – income statement 6 months to 31 Mar 2011 6 months to 31 Mar 2010 Change £000 £000 Rent receivable 5,890 5,515 7% Other income 257 158 63% Total income 6,147 5,673 8% Direct property costs* 281 227 23% Investment advisory fee** 1,125 1,125 0% Overheads 337 325 4% Total expenses* 1,74
Slide 17: Property valuation yields
Property valuation yields* *MedicX Fund property valuation as at 31 March 2011, IPD data as at 30 April 2011 and Gilt rate data as at 24 May 2011 17
Slide 18: Dividend cover
Dividend cover 6 months to 12 months to 12 months to 31 Mar 2011 30 Sep 2010 30 Sep 2009 £000 £000 £000 Dividends paid 3,868 6,593 6,146 Adjusted earnings excluding revaluation 1,964 2,674 1,383 Dividend cover 51% 41% 22% Revaluation 1,283 6,180 (1,499) Adjusted earnings including revaluation 3,247
Slide 19: Key financials – balance sheet
Key financials – balance sheet As at 31 Mar 2011 As at 31 Mar 2011 £000 Pence per share Gross assets excluding cash* 207,372 109.0 Debt 100,973 53.1 Cash 32,844 17.3 Net debt 68,129 35.8 Adjusted NAV** 126,625 66.5 Adjusted NAV plus debt benefit** 141,058 74.1 DCF 164,848 86.6 As at 31 Mar 2011 Rest
Slide 20: Additional debt funding
Additional debt funding Aviva facility Deutsche Postbank facility Facility size £100 million £25.5 million Committed December 2006 December 2009 Drawn £100 million £0.5 million Expiry December 2036 April 2015 Margin 0.9% 2.0% Interest rate 5.0% 4.3%* Hedging activities n/a Swap Loan to value draw do
Slide 21: Adjusted NAV plus debt benefit
Adjusted NAV plus debt benefit 21
Slide 22: DCF NAV sensitivity
DCF NAV sensitivity* DCF Share price Pence per share 86.6p 73.5p Weighted discount rate 7.2% 9.2% Risk premium to 20 year gilt rate 2.7% n/a Rental growth per annum 2.5% (0.3)% Capital appreciation per annum 1.0% (1.3)% DCF reconciliation Adjusted NAV plus debt benefit 74.1p Purchasers costs at 5.80
Slide 23: DCF NAV sensitivities
DCF NAV sensitivities* Discount rate Rental and capital value increases per annum NAV NAV pence per Completed pence per Rental share 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 97 93 90 87 84 -1.0 65 70 75 81 87 Capital 7.0 95 91 88 85 82 0.0 70 75 80 86 93 8.0 93 90 87
Slide 24: Investment opportunity
Investment opportunity 24
Slide 25: Investment opportunity
Investment opportunity • Approved acquisitions of £33 million • Strong pipeline approximately £59 million • Opportunity to buy assets at attractive prices • Borrowing costs remain below asset yields • No increase in investment adviser fees expected until 2012* • Earnings enhanced as the fund grows *
Slide 26: Conclusion
Conclusion • Attractive asset class • Stable and growing cash flows • Strong pipeline and market access • Management well placed to take advantage of opportunities • Attractive total return proposition and dividend yield • 7.1% dividend yield* • 25 basis point shift in property yield adds 5.3p to 74
Slide 27: Appendix
Appendix 27
Slide 28: Pressure on primary care estate
Pressure on primary care estate The current UK estate Service transfer to primary care 75% of GPs unhappy with their premises* Ageing and _ + NHS budget £8.1 billion of primary care estate*** constraints growing 60% of GPs work from unsuitable premises** population 72% GP owned*** *NHS The Informati
Slide 29: General medical statistics in England
General medical statistics in England* 2010 1995 Change • Number of practices 8,230 9,188 -9% • Single-handed practices 1,203 2,919 -59% • Number of GPs 35,120 27,465 +28% • Number of part-time GPs 31%** 14% +17% • GPs aged 60 and over 10% 6% +4% • Contracted GPs (GMS) 50% 98% -48% • Salaried GPs (P
Slide 30: Sector comparison
Share price total return Sector comparison* Dividend yield *As at 24 May 2011 - Collins Stewart / DataStream 30
Slide 31: Infrastructure comparison
Share price total return Infrastructure comparison* Dividend yield *As at 24 May 2011 – Collins Stewart / DataStream 31
Slide 32: 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 33: 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