Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2017 Earnings Presentation
38 slides from Primary Health Properties's earnings presentation, May 2017
Slide 1: Interim results
Interim results Six months ended 31 March 2017 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 investor 3
Slide 4: MedicX Fund: Objectives and overview
MedicX Fund Objectives and overview Leading investor in modern purpose-built primary healthcare properties in the UK and Republic of Ireland 89% of rent from government-funded doctors, the NHS or HSE generating long term secure cash flow Investor but not a developer or operator - Asset and property
Slide 5: Highlights for the period
MedicX Fund Highlights for the period Total return on EPRA NAV1 of 5.7% from 1.2 pence per share increase in EPRA NAV to 74.4 pence per share (30 September 2016: 73.2 pence per share) and dividends paid of 2.9875 pence per share New committed investment in six properties since 1 October 2016 of £48.
Slide 6: Robust financial position
MedicX Fund Robust financial position1 Property yield vs borrowing cost Portfolio valuation £660.3 m Property valuation yield 5.17%2 EPRA NAV 74.4 pps EPRA NNNAV 62.2 pps DCF NAV 98.4 pps Average lease term 14.3 years Total drawn debt £346.3 m Average cost of debt 4.38% Average debt term 13.2 years
Slide 7: Fund raising in the period
Fund raising in the period Accretive to ERPA NAV Continued high demand for new shares met through tap issuance from second block of 17.8 million shares £20.2 million net proceeds raised between 1 October 2016 and 31 March 2017 from issuance of 23.25 million shares at an average price of 87.7 pence p
Slide 8: Shareholder returns
Shareholder returns Continuing to deliver consistent returns 11.9% per annum average total shareholder return over last five years Dividends and Dividend growth share pricegrowth Mar 2017 3.7%1 Sept 2016 22.5% Sept 2015 (0.4)% Sept 2014 12.0% Sept 2013 13.1% Sept 2012 9.0% Sept 2011 9.4% 1For for th
Slide 9: Dividends
Dividends Progressive dividend policy Dividend cover of 59% for six months ended 31 March 2017 Temporary reduction of 3.2% in dividend cover caused by investment in Ireland funded through equity Strategies in place to grow dividend cover over the next three years Dividend, price 2017 and yield Divid
Slide 10: Portfolio review
Portfolio review Specialist primary healthcare infrastructure investor 10
Slide 11: Portfolio of modern purpose-built assets
Portfolio of modern purpose-built assets Portfolio review as at 23 May 2017 Portfolio geographical spread Crumlin Health Centre 157 primary care centres 152 projects 97% Tallaght Health Centre 5 projects 3% Under development Completed investments 11
Slide 12: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review as at 31 March 2017 Security of income Security of income by tenant type by lease expiry Average unexpired lease term 14.3 years Value per Modernity of property assets Average age 8.5 years Average value £4.3 million 12
Slide 13: Acquisitions and completions between Oct 2016 – May 2017
Acquisitions and completions between Oct 2016 – May 2017 Total investment of £48.8 million in 6 properties Acquisition Scheme Developer Brynmawr Forward funded GPI Leavesden Income producing Bellway Homes Bloxwich Income producing (Private vendor) Handsworth Income producing (Private vendor) Cromer
Slide 14: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £40.0 million1 Rent review profile £37.9 million completed £2.1 million under construction £22.8 million passing rents under negotiation2 £5.3 million rent reviews agreed during the period2 Equivalent to 1.1% per annum increase
Slide 15: 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 Period to Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 Sept 15 Sept 16 Mar 17 Passing rents agreed £1,134,357 £3,198,193 £2,925,882 £3,592,636 £5,429,476 £4,3
Slide 16: Asset managing the existing portfolio
Asset managing the existing portfolio Robin Lane Health and Wellbeing Centre - Pudsey Lease re-gear from 6 years unexpired to new 25 year lease with GPs and pharmacy Works commenced Feb 2017 (completion Oct 17) Total refurbishment + 7 new clinical rooms Project Value £775,000 Scheme enables increase
Slide 17: Key financials
Key financials Specialist primary healthcare infrastructure investor 17
Slide 18: Key financials: Income statement
Key financials Income statement 6 months to 31 Mar 2017 6 months to 31 Mar 2016 Change £000 £000 Rent receivable 18,591 17,746 5% Other income1 73 179 (59)% Direct property expenses (838) (508) 65% Net rental income 17,826 17,417 2% Property management fee 452 440 3% Investment advisory fee 1,941 1,
Slide 19: Key financials: Balance sheet
Key financials Balance sheet As at 31 March 2017 As at 31 March 2017 As at 30 Sept 2016 As at 30 Sept 2016 £000 Pence per share £000 Pence per share Investment properties 660,284 160.3 612,264 157.8 Debt 346,372 84.1 336,290 86.7 Cash 9,347 2.3 20,968 5.4 Net debt 337,025 81.8 315,322 81.3 EPRA NAV1
Slide 20: Key financials: Debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.38% and an average unexpired term of 13.21 years, close to unexpired lease term of the investment properties In addition, there is a Revolving Credit Facility with the Royal Bank of Scotland Plc extended to £30 million in May 2017. £
Slide 21: Key financials: Long term debt protection
Key financials Long term debt protection Sep 2014 Mar 2015 Sept 2015 Mar 2016 Sept 2016 Mar 2017 Debt £286.3m £289.5m £338.3m £337.4m £336.3m £346.4m Weighted average maturity 13.3 years 14.0 years1 15.0 years2 14.4 years3 14.0 years4 13.2 years5 Weighted average cost of debt 4.35% 4.42%1 4.45%2 4.4
Slide 22: NHS update
NHS update Specialist primary healthcare infrastructure investor 22
Slide 23: The Naylor review of NHS property
NHS and primary care update The Naylor review of NHS property1 The Naylor report – “NHS Property and Estates; Why the estate matters for patients” Published March 2017 Highlights include: Establish a powerful new NHS Property Board Encourage and incentivise local action – STPs must develop affordabl
Slide 24: GPs and the NHS Five Year Forward View
NHS and primary care update GPs and the NHS Five Year Forward View Next steps on the NHS Five Year Forward View GPs Update published in March 2017 90% of all patient contacts occur in primary care Reinforces need to modernise primary care premises £500 million ring fenced to continue to drive new mo
Slide 25: Premises and new models of care
NHS and primary care update Premises and new models of care1 Sustainability and Transformation Plans Premises opportunities 44 STP groups formed to help deliver the Five Year Forward View c.4,000 of the 7,962 GP surgeries in England and Wales are considered Five key aims – focus on service improveme
Slide 26: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure investor 26
Slide 27: Pipeline and strategy
Pipeline and strategy1 Outlook and focus Selectively buying high quality dominant assets and forward funding new assets under framework agreements with a range of experienced developers in UK and Republic of Ireland Irish opportunity accelerates growth improving economies of scale and diversificatio
Slide 28: Appendices
Appendices Specialist primary healthcare infrastructure investor 28
Slide 29: Property valuation yields – resilient and stable
MedicX Fund Property valuation yields – resilient and stable1 1MedicX Fund property valuation as at 31 March 2017, IPD data as at 30 April 2017 and Gilt rate data as at 23 May 2017 29
Slide 30: Real Estate Investment Trust (REIT) considerations
MedicX Fund Real Estate Investment Trust (“REIT”) considerations Board have announced intention to convert to a REIT with effect from 1 October 2017 following an EGM in the Autumn As the MedicX Fund Group matures, it generates increasing taxable profits and so tax losses are running out; it is there
Slide 31: Investment adviser and property management fee structure
Investment adviser and property management fee structure Further reductions with asset growth Lower investment adviser fees Annual base fee payable to the Investment Adviser will be held at £3.878 million until property assets equal or exceed £782 million Will enable the Fund to increase its propert
Slide 32: EPRA NAV Movement for six months ended
Key financials EPRA NAV Movement for six months ended 31 March 2017 32
Slide 33: 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 6.0 109 104 99 95 90 -1.0 71 76 82 88 95 Capital 7.0 109 104 99 94 90 0.0 78 84 90 96
Slide 34: EPRA NNNAV sensitivities
MedicX Fund EPRA NNNAV sensitivities1 EPRANNNAV EPRANNNAV pencepershare Cost of20 year debt (bps) pencepershare ERV % --20 - +20 +50 +100 % -1% - +1% +2% +3% 6.00 43.7 45.7 47.6 50.5 54.9 6.00 39.0 40.4 41.8 43.1 44.5 5.75 48.1 50.2 52.1 54.9 59.3 5.75 44.9 46.3 47.7 49.1 50.5 Net initial yield Net
Slide 35: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 98.4p 89.0p Weighted discount rate 7.0% 8.1%2 Risk premium to 20 year gilt rate 5.2% n/a Rental growth per annum 2.5% 0.8%2 Capital appreciation per annum 1.0% (0.1)%2 DCF reconciliation EPRA NAV 74.4p Purchasers costs at 6.80% +10.
Slide 36: MedicX Fund performance
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 23 May 2017 – Data 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