Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2016 Earnings Presentation
36 slides from Primary Health Properties's earnings presentation, May 2016
Slide 1: 2016 interim results presentation
2016 interim results presentation May 2016 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 leased to doctors and the NHS / HSE generating government-funded long term secure cash flow FTSE All Share £329 million1 market capitalisation Investor but not a developer or operator Guernsey
Slide 5: Highlights for the period
MedicX Fund Highlights for the period EPRA NAV 71.2 pence per share (30 September 2015: 70.8 pence per share) increase of 0.4 pps with dividends paid of 2.96 pps resulting in a EPRA NAV total return1 of 4.7% 4.8% increase in EBITDA to £14.4 million2 (31 March 2015: £13.8 million) New committed inves
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Committed investment £573.0 m1 Property valuation yield 5.36%2 EPRA NAV 71.2 pps2 EPRA NNNAV 60.3 pps2 DCF NAV 95.8 pps2 Average lease term 15.7 years2 Total drawn debt facilities £337.4 m2 Average cost of debt 4.45%1 Average deb
Slide 7: Shareholder returns
Shareholder returns Continuing to deliver consistent returns Dividends and share pricegrowth Dividend growth Mar 20161 16.9%1 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% 9.4% per annum average total shareholder return over last five y
Slide 8: Dividends
Dividends Progressive dividend policy Dividend cover of 63% for the first half of the year Strategy in place to grow dividend cover over the next three years Dividend, price 2016 and yield Dividend1 5.95p Share price2 87.5p Yield on share 6.8% price2 Sept 2011 Mar 2012 Sept 2012 Mar 2013 Sept 2013 M
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 31 March 2016 151 assets Contractual certainty of income Portfolio geographical spread 144 projects 100% 95% 7 projects 5% 0% Demand risk Availability risk Under construction Operational Security of tenure 100% 100% Freehold/long leaseh
Slide 11: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review as at 31 March 2016 Security of income Security of income by tenant type by lease expiry Average unexpired lease term 15.7 years Value per Modernity of property assets Average age 7.6 years Average value £4.0 million 11
Slide 12: Acquisitions and completions between Oct 2015 – May 2016
Acquisitions and completions between Oct 2015 – May 2016 Total investment of £27.4 million in 8 properties Acquisition Developer Investment £m Fakenham Salisbury Medcentres 12.6 Wymondham Abergele Woodingdean Medcentres 1.9 Brynhyfryd HPC 2.9 Crumlin St Agnes Medical 5.9 Woodingdean Briton Ferry Car
Slide 13: Portfolio of modern purpose built assets: Rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £36.7 million1 Rent review profile £34.8 million completed £1.9 million under construction2 £16.7 million passing rents under negotiation2 £3.1 million rent reviews agreed during the period2 Equivalent to 1.2% per annum increase
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 Period to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 Sept 15 Mar 16 Passing rents agreed £1,814,809 £1,134,357 £3,198,193 £2,925,882 £3,592,636 £5,2
Slide 15: Property valuation yields – resilient and stable
MedicX Fund Property valuation yields – resilient and stable1 1MedicX Fund property valuation as at 31 March 2016, IPD data as at 30 April 2016 and Gilt rate data as at 19 May 2016 15
Slide 16: Key financials
Key financials Specialist primary healthcare infrastructure investor 16
Slide 17: Key financials: Income statement
Key financials Income statement 6 months to 31 Mar 2016 6 months to 31 Mar 2015 Change £000 £000 Rent receivable 17,746 16,652 7% Other income1 179 382 (53)% Total income 17,925 17,034 5% Direct property costs2 948 892 6% Investment advisory fee 1,968 1,845 7% Overheads 567 514 10% Total expenses 3,
Slide 18: Key financials: Balance sheet
Key financials Balance sheet As at 31 Mar 2016 As at 31 Mar 2016 As at 30 Sept 2015 As at 30 Sept 2015 £000 Pence per share £000 Pence per share Investment properties 589,020 156.9 553,479 151.6 Debt 337,383 89.9 338,308 92.7 Cash 25,793 6.9 56,910 15.6 Net debt 311,590 83.0 281,398 77.1 EPRA NAV1 2
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 14.51 years, close to unexpired lease term of the investment properties In addition, there is a £25 million revolving loan facility with the Royal Bank of Scotland Plc which at current rates is ex
Slide 20: Long term debt protection
Key financials Long term debt protection Sep 2014 Mar 2015 Sept 2015 Mar 2016 Debt £286.3m £289.5m £338.3m £337.4m Weighted average maturity 13.3 years 14.0 years1 15.0 years2 14.4 years3 Weighted average cost of debt 4.35% 4.42%1 4.45%2 4.45%3 1As at 7 May 2015 2 As at 30 September 2015 20 3 As at
Slide 21: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure investor 21
Slide 22: Political and NHS perspectives
NHS and primary care update Political and NHS perspectives NHS General Practice Forward View Estates and Technology Fund April 2016 Cross party support for primary care investment £750 million of capital to invest in premises and technology, Primary Care budget increasing £2.4 billion from 7% to 11%
Slide 23: Premises and new models of care
NHS and primary care update Premises and new models of care GP Landscape Premises Opportunities Accelerating pace of change – partners retiring and need for c.4,000 of the 7,962 GP surgeries in England and Wales are new models of care considered by medical professionals to be unfit for purpose1 Trad
Slide 24: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure investor 24
Slide 25: Pipeline and strategy
Pipeline and strategy1 Pipeline of new opportunities Investment Adviser with proprietary market access and deal flow Forward funding framework with a range of developers in UK and Republic of Ireland Selectively buying high quality dominant assets Partnering with GPs, Commissioners and Provider Grou
Slide 26: Investment opportunity: Conclusion
Investment opportunity Conclusion Total pipeline of £144 million of acquisitions when fully developed including £26 million in legals All debt fixed and long term at average rate of 4.45% and average remaining term of 14.5 years Investment adviser fee frozen for next c.£1931 million of new investmen
Slide 27: Appendices
Appendices Specialist primary healthcare infrastructure investor 27
Slide 28: 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 29: 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 equals or exceeds £782 million Will enable the Fund to increase its prope
Slide 30: EPRA NAV Movement for six months ended
Key financials EPRA NAV Movement for six months ended 31 March 2016 30
Slide 31: EPRA NNNAV sensitivities
MedicX Fund EPRA NNNAV sensitivities1 EPRA NNNAV EPRA NNNAV penceper share Cost of20 year debt (bps) pence per share ERV % --20 - +20 +50 +100 % -1% - +1% +2% +3% 6.00 44.2 46.4 48.6 51.7 56.7 6.00 42.1 43.6 45.0 46.4 47.8 5.75 49.2 51.5 53.7 56.8 61.8 5.75 48.2 49.7 51.1 52.6 54.1 Net initial yield
Slide 32: 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 6.0 107 102 97 93 88 -1.0 69 74 80 86 92 Capital 7.0 106 101 96 92 88 0.0 76 82 87 93
Slide 33: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 95.8p 87.5p Weighted discount rate 7.1% 8.0%2 Risk premium to 20 year gilt rate 4.7% n/a Rental growth per annum 2.5% 1.0%2 Capital appreciation per annum 1.0% 0.0%2 DCF reconciliation EPRA NAV 71.2p Purchasers costs at 6.80% +10.7p
Slide 34: MedicX Fund performance: Sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 19 May 2016 – Date sourced Thomson Reuters 34
Slide 35: 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 36: 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