Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2010 Earnings Presentation
37 slides from Primary Health Properties's earnings presentation, December 2010
Slide 1: Specialist primary healthcare infrastructure fund
Specialist primary healthcare infrastructure fund 2010 annual 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 • 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 £103 million* market capitalisation Guernsey based investment company • Not a developer
Slide 5: Attractive asset class
Attractive asset class £226.6 million committed investment in 57 properties *MedicX Fund cash yield, borrowing cost on £100m Aviva debt facility and 20 year gilt rate at 6 December 2010 5
Slide 6: Total return analysis
Total return analysis Dividend Sept 2009 Sept 2010 Movement Total return Total return p p p p p %** Share price 5.38p 73.00p 73.75p 0.75p 6.13p 8.6% Sept 2007 Sept 2008 Sept 2009 Sept 2010 To date Dividend declared per share 5.00p 5.20p 5.33p 5.40p 20.93p Increase 4.0% 2.5% 1.3% 8.0% RPI annual incr
Slide 7: Opportunity in primary care
Opportunity in primary care • Real terms increase in NHS funding in each year confirmed in Government Spending Review 2010 • Primary care remains the cornerstone of NHS policy: NHS White Paper Equality and Excellence – Liberating the NHS • Shift from secondary care in hospitals to primary care centr
Slide 8: Portfolio review
Portfolio review 8
Slide 9: Portfolio review
Portfolio geographically spread Portfolio review* Completed projects 57 assets Contractual certainty Under construction / committed projects 49 Projects of income 86% 100% 8 Projects 14% 0% Demand risk Under construction / Availability risk Operational committed projects Security of tenure 100% 100%
Slide 10: 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 18.6 years Average age 3.6 years Average value £3.8 million *As at 6 December 2010; includes completed value of properties under construction and
Slide 11: Rental uplifts
Rental uplifts* • £1.8 million rent reviews agreed during year • Equivalent to 2.1% per annum increase achieved • 1.8% open market reviews • 2.5% fixed uplifts • 2.6% RPI based • £4.4 million passing rents currently under negotiation** Rent review breakdown** *As at 30 September 2010 **As at 6 Decem
Slide 12: Rent reviews by period
Rent reviews by period* Year to Sept 07 Year to Sept 08 Year to Sept 09 Year to Sept 10 Number 18 11 25 8 Passing rent £1,593,059 £839,757 £1,673,024 £323,990 Annualised increase 3.2% 2.9% 1.9% 2.6% - Open market reviews 3.2% 2.6% 2.0% 2.5% - RPI 3.8% 3.9% 1.4% 2.6% - Fixed uplifts n/a 2.5% 2.5% n/a
Slide 13: Rent review profile
Rent review profile* • Total rent roll £13.6 million • Total rent under negotiation £4.4 million *As at 6 December 2010; includes completed value of properties under construction and terms agreed investments 13
Slide 14: Acquisitions in year
Acquisitions in year* Total committed investment of £27.3 million in seven properties Halifax Hounslow Apsley Clapham Bilborough Bermondsey Spa *As at 30 September 2010 14
Slide 15: Acquisitions post year-end
Acquisitions post year-end* Total committed investment of £14.5 million in two properties West Wirral Raynes Park Total committed investment since 1 October 2009 £41.9 million at an average cash yield of 6.22% *As at 6 December 2010 15
Slide 16: Asset management
Asset management • Three properties under construction completed during the year • Value enhancements completed during the year included – • Fit out of expansion space • Lease re-gear • Addition of a pharmacy • Addition of a podiatry suite 16
Slide 17: Key financials
Key financials 17
Slide 18: Key financials – income statement
Key financials – income statement 12 months to 30 Sept 2010 12 months to 30 Sept 2009 Change £000 £000 Rent receivable 10,825 8,804 23% Other income 249 633 (61)% Total income 11,074 9,437 17% Direct property costs* 521 435 20% Investment advisory fee** 2,250 2,226 1% Overheads 649 645 1% Total expe
Slide 19: Key financials – balance sheet
Key financials – balance sheet As at 30 Sept 2010 As at 30 Sept 2010 £000 Pence per share Gross assets excluding cash* 189,811 134.3 Debt 100,908 71.4 Cash 17,289 12.2 Net debt 83,619 59.2 Adjusted NAV** 92,860 65.7 Adjusted NAV plus debt benefit** 100,901 71.4 DCF 129,252 91.5 As at 30 Sept 2010 Re
Slide 20: Property valuation yields
Property valuation yields* *MedicX Fund property valuation as at 30 September 2010, IPD data as at 31 October 2010 and Gilt rate data as at 6 December 2010 20
Slide 21: Impact of property revaluations
Impact of property revaluations* *Cumulative impact of property revaluation gain/loss and impairment provision compared to November 2006 valuation and based on 142,417,110 shares as at 6 December 2010. A yield shift to 5.55% would eliminate the £11.9 million cumulative loss 21
Slide 22: Non-dilutive equity raising
Non-dilutive equity raising Number of shares Price Net funds raised Month 000’s p £m October 2009 500 72.50 0.4 March 2010 34,291 72.00 24.1 June 2010 500 72.50 0.4 August 2010 500 72.50 0.4 September 2010 750 72.50 0.5 November 2010 1,100 72.75 0.8 Total / average* 37,641 72.05 26.5 Committed inves
Slide 23: 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% 4.2%* Hedging activities n/a Swap Loan to value draw do
Slide 24: Dividend cover
Dividend cover 12 months to 30 Sept 2010 12 months to 30 Sept 2009 Change £000 £000 Dividends paid 6,593 6,146 7% Adjusted earnings excluding revaluation 2,673 1,383 93% Dividend cover 41% 22% 80% Adjusted earnings including revaluation 8,854 (828) 1,169% Dividend cover including revaluation 134% (1
Slide 25: DCF NAV sensitivity
DCF NAV sensitivity* DCF Share price Pence per share 91.5p 73.8p Weighted discount rate 7.2% 9.7% Risk premium to 20 year gilt rate 3.2% n/a Rental growth per annum 2.5% (0.6)% Capital appreciation per annum 1.0% (1.7)% DCF reconciliation Adjusted NAV plus debt benefit 71.4p Purchasers costs at 5.75
Slide 26: 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 6.0 102 98 94 91 88 -1.0 65 71 77 85 92 Capital 7.0 100 96 93 89 86 0.0 72 78 84 91 99 8.0 99 95 9
Slide 27: Investment opportunity
Investment opportunity 27
Slide 28: Acquisition opportunities
Acquisition opportunities • Substantial pipeline circa £95 million • Widening role of primary care expanding potential targets • Government-funded cash flows not to be less than 80% of passing rents of overall portfolio • Opportunity to buy assets at attractive prices 28
Slide 29: 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 • Considering fund raising in the New Year 29
Slide 30: Appendix
Appendix 30
Slide 31: 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 £7.2 billion of primary care estate*** constraints growing 60% of GPs work from unsuitable premises** population 78% GP owned*** *NHS The Informati
Slide 32: General medical statistics in England
General medical statistics in England* 2009 1995 Change • Number of practices 8,228 9,188 -10% • Single-handed practices 1,266 2,919 -57% • Number of GPs 35,917 27,465 +31% • Number of part-time GPs 31%** 14% + +17% • GPs aged 60 and over 10% 6% +4% • Contracted GPs (GMS) 50% 98% -48% • Salaried GPs
Slide 33: Sector comparison
Share price total return Sector comparison* Dividend yield *As at 6 December 2010 – Collins Stewart / DataStream 33
Slide 34: Infrastructure comparison
Share price total return Infrastructure comparison* Dividend yield *As at 6 December 2010 – Collins Stewart / DataStream 34
Slide 35: 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 142,417,110 shares as at 6 December 2010 35
Slide 36: 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 37: 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