Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2016 Earnings Presentation
42 slides from Primary Health Properties's earnings presentation, December 2016
Slide 1: 2016 annual results presentation
2016 annual results presentation December 2016 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. NHS and primary care update 5. Investment opportunity 6. GPI Joint Venture 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 FTSE All Share £358 million1 market capitalisation Guernsey ba
Slide 5: Highlights for the period
MedicX Fund Highlights for the period EPRA NAV 73.2 pence per share (30 September 2015: 70.8 pence per share) increase of 2.4 pps with dividends paid of 5.94 pps resulting in a EPRA NAV total return1 of 11.8% New committed investment in ten properties since 1 October 2015 of £40.7 million2 Portfolio
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Portfolio valuation £612.3 m1 Property valuation yield 5.25%1 EPRA NAV 73.2 pps1 EPRA NNNAV 56.4 pps1 DCF NAV 96.6 pps1 Average lease term 15.5 years1 Total drawn debt £336.3 m1 Average cost of debt 4.45%1 Average debt term 14.0
Slide 7: Shareholder returns
Shareholder returns Continuing to deliver consistent returns Dividends and share pricegrowth Dividend growth Sept 2016 22.5% Sept 2015 (0.4)% Sept 2014 12.0% Sept 2013 13.1% Sept 2012 9.0% Sept 2011 9.4% Sept 2010 8.6% Sept 2009 10.8% 11.0% per annum average total shareholder return over last five y
Slide 8: Dividends
Dividends Progressive dividend policy Dividend cover of 64% for the year Strategy in place to grow dividend cover over the next three years Dividend, price 2016 and yield Dividend1 5.95p Share price2 88.75p Yield on share 6.7% price2 Mar 2012 Sept 2012 Mar 2013 Sept 2013 Mar 2014 Sept 2014 Mar 2015
Slide 9: Portfolio review
Portfolio review Specialist primary healthcare infrastructure investor 9
Slide 10: Portfolio of modern purpose-built assets
Portfolio of modern purpose-built assets Portfolio review as at 7 December 2016 153 assets Contractual certainty of income Portfolio geographical spread 147 projects 100% 96% 6 projects 0% 4% Demand risk Availability risk Under construction Operational Security of tenure 100% 100% Freehold/long leas
Slide 11: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review as at 30 September 2016 Security of income Security of income by tenant type by lease expiry Average unexpired lease term 15.5 years Value per Modernity of property assets Average age 8.0 years Average value £4.1 million 11
Slide 12: Acquisitions and completions between Oct 2015 – Dec 2016
Acquisitions and completions between Oct 2015 – Dec 2016 Total investment of £40.7 million in 10 properties Acquisition Scheme Developer Fakenham Salisbury Standing let Medcentres Wymondham Abergele Woodingdean Standing let Medcentres Brynhyfryd Forward funded HPC Crumlin Forward funded St Agnes Med
Slide 13: Portfolio of modern purpose built assets: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £37.2 million1 Rent review profile £35.2 million completed £2.0 million under construction £16.1 million passing rents under negotiation1 £6.1 million rent reviews agreed during the year1 Equivalent to 1.2% per annum increase ac
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 Year to Year to Year to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 Sept 15 Sept 16 Passing rents agreed £1,814,809 £1,134,357 £3,198,193 £2,925,882 £3,592,636 £5,37
Slide 15: Property valuation yields – resilient and stable
MedicX Fund Property valuation yields – resilient and stable1 1MedicX Fund property valuation as at 30 September 2016, IPD data as at 31 October 2016 and Gilt rate data as at 7 December 2016 15
Slide 16: Key financials
Key financials Specialist primary healthcare infrastructure investor 16
Slide 17: Key financials: Income statement
Key financials Income statement 12 months to 30 Sept 2016 12 months to 30 Sept 2015 Change £000 £000 Rent receivable 35,145 32,811 7% Other income 372 858 (57)% Direct property expenses (1,195) (902) 32% Net rental income 34,322 32,767 5% Investment advisory fee (3,852) (3,725) 3% Property Managemen
Slide 18: Key financials: Balance sheet
Key financials Balance sheet As at 30 Sept 2016 As at 30 Sept 2016 As at 31 Mar 2016 As at 31 Mar 2016 £000 Pence per share £000 Pence per share Investment properties 612,264 157.8 589,020 156.9 Debt 336,290 86.7 337,383 89.9 Cash 20,968 5.4 25,793 6.9 Net debt 315,322 81.3 311,590 83.0 EPRA NAV1 28
Slide 19: Key financials: Debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.45% and an average unexpired term of 14.01 years, close to unexpired lease term of the investment properties In addition, there is a £20 million unsecured RCF with the Royal Bank of Scotland Plc, with an option to extend subject to b
Slide 20: Key financials: Long term debt protection
Key financials Long term debt protection Sep 2014 Mar 2015 Sept 2015 Mar 2016 Sept 2016 Debt £286.3m £289.5m £338.3m £337.4m £336.3m Weighted average maturity 13.3 years 14.0 years1 15.0 years2 14.4 years3 14.0 years4 Weighted average cost of debt 4.35% 4.42%1 4.45%2 4.45%3 4.45%4 1As at 7 May 2015
Slide 21: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure investor 21
Slide 22: GPs under growing pressure
NHS and primary care update GPs under growing pressure GP landscape in transition One year into the five year NHS General Practice Forward View Practices under pressure – regulatory (CQC), workforce challenges programme supporting transformation of general practice through (recruitment, changes in p
Slide 23: Premises and new models of care
NHS and primary care update Premises and new models of care 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 Aim to improve health and social care servi
Slide 24: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure investor 24
Slide 25: Outlook and pipeline of new opportunities
Pipeline and strategy1 Outlook and pipeline of new opportunities Forward funding frameworks with a range of developers in UK and Republic of Ireland Partnering with GPs, Commissioners and Provider Groups UK pipeline of c.£58 million potential acquisitions when fully developed Irish pipeline of c.€67
Slide 26: Investment opportunity: Conclusion
Investment opportunity Conclusion Selectively buying high quality dominant assets Total pipeline of £108 million of acquisitions when fully developed including £31 million in legals All debt fixed and long term at average rate of 4.45% and average remaining term of 14.0 years Investment adviser fee
Slide 27: GPI Joint Venture
GPI Joint Venture Specialist primary healthcare infrastructure investor 27
Slide 28: GPI Framework overview and update
MedicX Fund GPI Framework overview and update General Practice Investment Corporation Limited (“GPI”) is a leading developer of primary healthcare centres having delivered over 200 schemes Under current framework GPI have provided MedicX Fund (“MXF”) c.£77 million of modern purpose-built primary hea
Slide 29: New Joint Venture Agreement with GPI
MedicX Fund New Joint Venture Agreement with GPI New HoldCo JV vehicle owned 50/50 by MedicX Fund (“MXF”) and GPI Initial MXF commitment £15m on a project by project basis – further commitments above the initial £15 million will be subject to shareholder approval MXF to receive priority return of 8%
Slide 30: New Joint Venture Agreement with GPI
MedicX Fund New Joint Venture Agreement with GPI Any new development opportunities arising out of strategic acquisitions in HoldCo JV either: forward funded by MXF under existing framework agreement, with development margin shared 50/50 between HoldCo JV and GPI; or retained by HoldCo JV if MXF crit
Slide 31: Strategic input from Octopus Healthcare and GPI
MedicX Fund Strategic input from Octopus Healthcare and GPI Octopus Healthcare to provide leads and opportunities from primary care mapping system/intelligence and relationships with primary healthcare providers and commissioners Octopus Healthcare to provide property management, rent collection and
Slide 32: Appendices
Appendices Specialist primary healthcare infrastructure investor 32
Slide 33: REIT considerations
MedicX Fund Real Estate Investment Trust (“REIT”) considerations MedicX Fund group consists of Guernsey and UK investment companies which to date have incurred no current tax by utilising tax losses and capital allowances As the MedicX Fund group matures, it generates increasing taxable profits and
Slide 34: 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 35: EPRA NAV Movement
Key financials EPRA NAV Movement for 12 months ended 30 September 2016 35
Slide 36: EPRA NNNAV sensitivities
MedicX Fund EPRA NNNAV sensitivities1 EPRA NNNAV EPRA NNNAV penceper share Cost of20 year debt (bps) penceper share ERV % --20 - +20 +50 +100 % -1% - +1% +2% +3% 6.00 38.3 40.6 42.9 46.1 51.2 6.00 35.5 36.9 38.3 39.6 41.0 5.75 43.1 45.4 47.7 50.9 56.0 5.75 41.4 42.8 44.3 45.7 47.1 Net initial yield
Slide 37: 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 6.0 108 103 98 93 89 -1.0 69 75 80 86 93 Capital 7.0 107 102 97 93 89 0.0 77 82 88 94
Slide 38: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 96.6p 88.75p Weighted discount rate 7.1% 7.9%2 Risk premium to 20 year gilt rate 5.5% n/a Rental growth per annum 2.5% 1.1%2 Capital appreciation per annum 1.0% 0.1%2 DCF reconciliation EPRA NAV 73.2p Purchasers costs at 6.80% +10.6
Slide 39: Republic of Ireland opportunity
Republic of Ireland opportunity Comparison with UK – primary care Ireland UK Population 4.6 million Population 64 million Department of Health led by Minister for Health Department of Health led by Minister for Health Health Service Executive (“HSE”) NHS England/Scotland/Wales/Northern Ireland c.58%
Slide 40: MedicX Fund performance: Sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 7 December 2016 – Data sourced Thomson Reuters 40
Slide 41: 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 42: 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