Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2010 Earnings Presentation
34 slides from Primary Health Properties's earnings presentation, May 2010
Slide 1: Specialist primary healthcare infrastructure fund: 2010 interim results
Specialist primary healthcare infrastructure fund 2010 interim results presentation
Slide 2: Agenda
Agenda • Introduction • Financial overview • Portfolio • Valuation analysis • Appendix Keith Maddin Chairman MedicX Adviser Mike Adams CEO MedicX Adviser 2
Slide 3: Introduction
Introduction
Slide 4: MedicX Fund
MedicX Fund • A leading investor in primary healthcare infrastructure • FTSE All Share Guernsey investment company • Not a developer or operator • Strong portfolio of 55 modern purpose-built medical centres: average age 3.5 years; lease length remaining 18.8 years; 92.0% of rents from government fun
Slide 5: Total return index comparison
Total return index comparison* p *Collins Stewart / DataStream as at 24 May 2010 5
Slide 6: Opportunity in primary care
Opportunity in primary care • Primary care is the cornerstone of NHS policy attracting 33% NHS budget* • New NHS g guidelines encouraging g g multi-use and co-location of services • Decline of traditional owning GP • Increasing role for the private sector The current UK estate Service transfer to £7
Slide 7: Property yields
Property p yy yields* *MedicX Fund property valuations and cash yield as at 31 March 2010; IPD All properties data and 10 year gilt as at 30 April 2010; IPD Healthcare data as at 30 December 2009 7
Slide 8: Financial overview
Financial overview
Slide 9: Key financials – income statement
Key y financials – income statement 6 months to 31 March 10 6 months to 31 March 09 Change £000 £000 R t receivable Rent i bl 5 515 5,515 4 254 4,254 30% Other income 158 361 (56)% Total income 5,673 4,615 23% Direct property costs* 227 233 (2)% Investment advisory fee 1,125 1,069 5% Overheads 325 3
Slide 10: Dividend cover
Dividend cover 6 months to 31 6 months to 31 March 10 March 09 Change g £000 £000 Dividends paid 2,817 2,070 36% Adjusted earnings excluding revaluation 1 478 1,478 721 105% Dividend cover 52% 35% 49% Adjusted j earnings g including g revaluation g gain 8,511 , ((2,963) , ) 387% Dividend cover inclu
Slide 11: Key financials – balance sheet
Key y financials – balance sheet As at 31 March 10 £000 Pence per share Gross assets excl cash 182,432 131.0 Debt 100,776 72.3 Cash 27,108 19.5 Net debt 73,668 52.9 Adjusted NAV* 94,945 68.2 Adjusted NAV plus debt benefit* 111,152 79.8 Restrictions/ As at 31 March 10 covenants Adjusted gearing* 42%
Slide 12: Updated debt financing
Updated p debt financing g Deutsche Postbank Aviva facility facility Facility size £100 million £25.5 million Drawn £100 million £0.5 million Expiry December 2036 April 2015 Margin 0.9% 2.0% Interest rate 5.0% 4.24%* Hedging activities N\A Swap Loan to value drawdown 65% 65% Repayment terms Interest
Slide 13: Portfolio
Portfolio
Slide 14: Portfolio review
Portfolio geographically Portfolio review* spread C Completed l t d projects j t Asset status Contractual certainty Under construction / committed projects 47 Projects of income 85% 100% 8 Projects 15% 0% Demand risk Under construction / A il bilit risk Availability i k Operational committed project
Slide 15: Portfolio review
Portfolio review* Security of income Security of income by tenant type by lease expiry Average unexpired lease term 18.8 years Modernity y of assets Value per property y Average age 3.5 years Average value £3.6 million *As at 24 May 2010; based on rents on completed properties under construction and
Slide 16: Rental uplifts
Rental uplifts* p • £0.9 million rent reviews agreed during the period • Equivalent to 2.3% % per annum increase achieved 2.2% open market reviews 2.5% RPI based • £4.0 million passing rents currentlyy under negotiation *As at 24 May 2010 16
Slide 17: Rent review profile
Rent review profile p • £12.8m annualised current rent falling due for review by year* *As at 24 May 2010; based on rents 17
Slide 18: Latest acquisitions
Latest acquisitions* q • Combined investment £30 9 million £30.9 illi att a 6.24% cash yield • 3-yearly reviews and over 22 years average lease length Bilborough Bermondsey Spa R b Ruabon H Hounslow l *Since 30 September 2009 18
Slide 19: Acquisition vs disposal
Acquisition q vs disposal p Gwrych Medical Centre Aird Medical Centre Abergele Ab l Beauly B l Acquired 2010 Disposed 2008 Investment es e value a ue £3 £3.3m 3 Sale Sa e price p ce £ £1.4m Cash yield 6.3% Cash yield 5.3% 19
Slide 20: Valuation analysis
Valuation analysis y
Slide 21: Valuation analysis
Valuation analysis y Explanation NAV PPS Market capitalisation* £103.8m 74.5p IFRS basis adjusted to exclude goodwill and deferred tax not Adjusted NAV** expected to crystallise. £94.9m 68.2p Based on 5 5.83% 83% net initial yield yield. Market valuation of the fixed rate Adjusted NAV plus debt** de
Slide 22: DCF NAV sensitivities
DCF NAV sensitivities* Rental and capital value Discount rate increases p p.a a NAV p per Completed NAV p per Rental share share % 6.0 6.5 7.0 7.5 8.0 % 0.5 1.5 2.5 3.5 4.5 6.0 95p 91p 87p 84p 81p -1.0 64p 69p 75p 81p 88p Under Capital construction 7.0 95p 91p 87p 84p 80p 0.0 70p 75p 80p 87p 94p 8.0
Slide 23: DCF NAV sensitivity, adjusted NAV plus debt sensitivity, entry level
DCF NAV sensitivity DCF Share price Pence per share 87.1p 73.5p* Weighted discount rate 7.0% 9.1% R t l growth Rental th per annum 2 5% 2.5% (0 1)% (0.1)% Capital appreciation per annum 1.0% (1.2)% Adjusted NAV plus debt sensitivity Adjusted NAV plus debt Share price Pence per share 79.8p 73.5p* Net
Slide 24: Conclusion
Conclusion • Strategy gy implementation p and p performance on track • Prime assets with secure long term income • Strong pipeline with capital available for growth • Continuing to grow dividends plus increase in net asset value 24
Slide 25: Appendix
Appendix pp
Slide 26: General medical statistics in England
General medical statistics in England* g 2009 1995 Ch Change • Number of practices 8,228 9,188 -10% • Single handed practices Single-handed 1 266 1,266 2 919 2,919 -57% 57% • Number of GPs 35,917 27,465 +31% • Number of p part-time GPs 31%** 14% +17% • GPs aged 60 and over 10% 6% +4% • Contracted GP
Slide 27: Sector comparison
Sector Share price total return comparison* Dividend yield *Collins Stewart / DataStream as at 24 May 2010 27
Slide 28: Infrastructure comparison
Infrastructure Share price total return comparison* Dividend yield *Collins Stewart / DataStream as at 24 May 2010 28
Slide 29: Impact of property revaluations
Impact p of property p p y revaluations* *Cumulative impact of property revaluation gain/loss and impairment provision compared to November 2006 valuation 29
Slide 30: 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 139,312,243 shares 30
Slide 31: Rent reviews for period
Rent reviews for period* p Year to Year to Year to 6 months to Sept 07 Sept 08 Sept 09 Mar 10 Number 15 9 14 3 Passing rent £1 186 309 £1,186,309 £653 207 £653,207 £810 198 £810,198 £78 703 £78,703 Annualised increase 3.7% 3.1% 2.0% 2.6% - Open p market reviews 3.7% 3.0% 2.5% n/a - RPI 3.8% 4.0% 1.2
Slide 32: MedicX Fund Board of Directors
MedicX Fund Board of Directors • David Staples, p , Chairman Guernsey based quoted Fund Director (FCA, CTA) • John Hearle, Director Chairman and Head of Healthcare Division of Aitchison Raffety Group (FRICS) • Shelagh Mason, Director Guernsey based Commercial Property Lawyer and quoted Fund Director
Slide 33: Important notice
Important p 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
Slide 34: Slide 34