Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2018 Earnings Presentation
42 slides from Primary Health Properties's earnings presentation, March 2018
Slide 1: Interim Results Presentation 2018
BUILDING A BRIGHTER FUTURE FOR HEALTHCARE INVESTMENT INTERIM RESULTS PRESENTATION 2018
Slide 2: Introduction
INTRODUCTION Interim results presentation 2018
Slide 3: Summary
02 MedicX Fund Limited SUMMARY • High quality portfolio delivered 8.0%1 total return on EPRA NAV for the six months ending 31 March 2018 • Transformation underway at MedicX to better position the business for the long term • Helen Mahy appointed as new Chairman in February 2018 • REIT conversion in
Slide 4: A leading investor in modern purpose-built primary healthcare properties
03 MedicX Fund Limited A LEADING INVESTOR IN MODERN PURPOSE-BUILT PRIMARY HEALTHCARE PROPERTIES IN THE UK AND REPUBLIC OF IRELAND Key Performance Indicators Portfolio Metrics 31-Mar-18 31-Mar-18 Portfolio valuation £719.7m Rent roll £40.7m UK Net Initial Yield 4.99% Average property age 9.1yrs EPRA
Slide 5: Delivering long term returns
04 MedicX Fund Limited DELIVERING LONG TERM RETURNS Dividend Profile and EPRA NAV growth1 Dividends declared (pps) 12.00 11.28 7.00 9.30 10.00 9.08 8.72 8.34 6.00 5.38 Guide 8.00 3.30 3.68 5.77 2.92 3.02 5.00 4.42 2.39 3.28 6.00 Guide 0.27 3.02 4.00 3.13 4.00 5.40 5.50 5.60 5.70 5.80 5.90 5.95 6.00
Slide 6: Disciplined investment approach
05 MedicX Fund Limited DISCIPLINED INVESTMENT APPROACH • 11 year successful track record of stock selection by our highly experienced management team AVERAGE LOT SIZE VALUE • Central investment criteria is asset quality • Focus on larger and locally strategic premises £5.8m OF ACQUISITIONS IN 6Ms TO
Slide 7: Outlook and Strategy
OUTLOOK AND STRATEGY Interim results presentation 2018
Slide 8: The market
07 MedicX Fund Limited THE MARKET • Modern purpose-built primary healthcare premises remains a priority for the UK and the Irish health systems to support ageing populations with increasingly complex care needs • GPs and other health providers are encouraged to work together at scale, in delivering
Slide 9: Competitive landscape
08 MedicX Fund Limited COMPETITIVE LANDSCAPE Consistent attractive returns driving yield compression Rent review profile improving1 7.00% 4.5% 4.0% 6.00% 3.5% 5.00% 3.0% 4.00% 2.5% 3.00% 2.0% 1.5% 2.00% 1.0% 1.00% 0.5% 0.00% 0.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2010 2011 2012 2013 2014
Slide 10: Dividend cover
09 MedicX Fund Limited DIVIDEND COVER1 • Measures to grow dividend cover over time 6.10 6.04p 100% 6.00p 5.96p 90% 5.90 5.90p • First mover into the Republic of Ireland with 5.80p 80% 5.70p 70% significantly wider spread 5.70 5.60p 60% 5.50p • Work on rent reviews showing positive signs 5.50 50% 5.4
Slide 11: Why are we proposing a fully covered dividend?
010 MedicX Fund Limited WHY ARE WE PROPOSING A FULLY COVERED DIVIDEND? • The Board believes that moving towards a covered dividend will attract a wider range of investors which should be reflected in an improved share rating thereby enabling the Company to grow and further reduce its ongoing charge
Slide 12: Illustration 1 – What does this mean for dividends?
011 MedicX Fund Limited ILLUSTRATION1 – WHAT DOES THIS MEAN FOR DIVIDENDS? Period Status Paid Amount Q2’18 (Mar 18) Declared 29 Jun 18 1.51p Q3’18 (Jun 18) Intended 28 Sep 18 1.51p* Q4’18 (Sep 18) Intended 31 Dec 18 1.51p* Q1’19 (Dec 18) Illustrative 29 Mar 19 0.875p** Q2’19 (Mar 19) Illustrative 28
Slide 13: What does this mean for returns?
012 MedicX Fund Limited WHAT DOES THIS MEAN FOR RETURNS? Current uncovered dividend and EPRA NAV Illustrative covered dividend and EPRA NAV profile1 profile1 6.00 110.00 6.00 110.00 5.00 100.00 5.00 1.94 100.00 2.24 2.47 4.00 90.00 2.06 Guide 2.69 3.02 4.00 3.07 3.26 90.00 3.00 80.00 3.21 3.00 80.00
Slide 14: Portfolio Review
PORTFOLIO REVIEW Interim results presentation 2018
Slide 15: Property yield vs borrowing cost
014 MedicX Fund Limited PROPERTY YIELD VS BORROWING COST1 8% MedicX Fund Irish Projected Yield MedicX Fund Cost of Debt 7% MedicX Fund UK Property NIY 6% 5% 4% 3% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (6m) 1 As at 31 March 2018
Slide 16: Portfolio of modern purpose-built assets
015 MedicX Fund Limited PORTFOLIO OF MODERN PURPOSE-BUILT ASSETS1 SECURITY OF INCOME BY LEASE EXPIRY PORTFOLIO VALUATION PROFILE PROPERTY AGE SECURITY OF INCOME BY TENANT 20% 9% 12% 11% 26% 4% 1% 41% 32% 28% 57% 36% 33% 90% Less than 10 years More than £5m Less than 5 yrs NHS / HSE / GPs 10 - 15 yea
Slide 17: Rent reviews profile
016 MedicX Fund Limited RENT REVIEWS PROFILE1 • Total rent roll £40.7 million2 ─ £39.5 million completed 4% ─ £1.2 million under construction 28% • £24.2 million passing rents under negotiation • £4.3 million rent reviews agreed during the period • Equivalent to 1.5% per annum increase achieved ─ 0.
Slide 18: Rent review by period
017 MedicX Fund Limited RENT REVIEW BY PERIOD Open market reviews 4.5% Average of all rent reviews Passing rents 4.0% Year to Passing rents under review Blended RPI and fixed agreed uplifts to be agreed 3.5% 3.0% Sept 2010 £2.9m - 2.5% Sept 2011 £3.6m - 2.0% 1.5% Sept 2012 £5.7m - 1.0% Sept 2013 £5.
Slide 19: Acquisitions and Disposals
ACQUISITIONS AND DISPOSALS Interim results presentation 2018
Slide 20: Active pipeline
019 MedicX Fund Limited ACTIVE PIPELINE1 • Strong short term pipeline of c.£174 million of opportunities • Opportunity to complete a corporate portfolio acquisition of £64 million in June 2018 and further £60 million in solicitors’ hands • Opportunities in solicitors’ hands comprise £41 million in U
Slide 21: Portfolio opportunity
020 MedicX Fund Limited PORTFOLIO OPPORTUNITY • One Medical portfolio is an off-market corporate acquisition due to complete 8 June 2018 subject to proposed fundraise • Good strategic fit, comprising larger, locally important premises • 12 operational and fully let primary care centres for headline
Slide 22: Properties under construction
021 MedicX Fund Limited PROPERTIES UNDER CONSTRUCTION • 3 properties under construction in UK all expected to complete in next 12 months – Brynmawr, Peterborough and Vale of Neath – 2 developed by framework developers 2016: £0.2m • 1 Primary Care Centre under construction in Central Dublin due to co
Slide 23: Disposals – constantly improving the portfolio
022 MedicX Fund Limited DISPOSALS – CONSTANTLY IMPROVING THE PORTFOLIO GRIMSBY WOOLSTON Property Sale value Wolverhampton £1.1 million Woolston £1.5 million Shorne £0.8 million Leicester £1.1 million Grimsby £1.1 million Total £5.6 million • Sale completed of 5 smaller properties (with average lot s
Slide 24: Key Financials
KEY FINANCIALS Interim results presentation 2018
Slide 25: Highlights – portfolio management
024 MedicX Fund Limited HIGHLIGHTS – PORTFOLIO MANAGEMENT EPRA NAV PER RENT RECEIVABLE ORDINARY SHARE 79.6p +4.1% £19.6m +5.4% Sept 2017: 76.5p Mar 2017: £18.6m PROPERTY EPRA EPS VALUATION +5.8% +5.7% £719.7m 1.85pps Sept 2017: £680.4m Mar 2017: 1.75pps
Slide 26: Income statement
025 MedicX Fund Limited INCOME STATEMENT Ongoing charges including direct 6 months to 6 months to Change property costs v EPRA NAV 31-Mar-18 31-Mar-17 % 1.60% £’000 £’000 Rent receivable 19,591 18,591 5.4% Other income1 406 73 456.2% 1.50% Direct property expenses (836) (838) (0.2)% Net rental incom
Slide 27: Financial position
026 MedicX Fund Limited FINANCIAL POSITION 31-Mar-18 31-Mar-18 30-Sep-17 30-Sep-17 Change % £’000 Pence per share £’000 Pence per share Pence per share Investment properties 720,759 168.0 681,390 159.0 5.7% Debt 380,064 88.6 372,796 87.0 1.8% Cash 19,090 4.5 32,145 7.5 (40.0)% Net debt 360,974 84.1
Slide 28: Debt portfolio
027 MedicX Fund Limited DEBT PORTFOLIO1 Aviva £100m Aviva £50m Acquired Aviva Acquired Aviva Private Private Private Bank of Ireland facility facility PMPI GPG placement placement placement Facility size £100 million £50 million £62.5 million £34.6 million £50.0 million £50.0 million €34.0 million £
Slide 29: Protection from fixed rate, long term debt
028 MedicX Fund Limited PROTECTION FROM FIXED RATE, LONG TERM DEBT March 2018 September 2017 September 2016 Debt £380.1 million £373.5 million £336.3 million Weighted average maturity 12.1 years 12.7 years 14.0 years Weighted average cost of debt 4.27% 4.29% 4.45% 120 100 Aviva Private placements Bo
Slide 30: Financing opportunities
029 MedicX Fund Limited FINANCING OPPORTUNITIES • In discussions with Aviva to restructure debt • To release surplus properties from charge (£70.1 million), reduce amortisation and blend down average cost of borrowing by way of a new tranche • In discussions with Bank of Ireland to put in place new
Slide 31: Conclusion
CONCLUSION Interim results presentation 2018
Slide 32: Conclusion
031 MedicX Fund Limited CONCLUSION • Transformation underway at MedicX to better position the business for the long term • Proposal for dividend to be re-set to a fully covered position for the 2019 financial year onwards1 • Ability to benefit from future growth and scale efficiencies • Greater bala
Slide 33: Appendices
APPENDICES Interim results presentation 2018
Slide 34: NHS and Primary Care Update
NHS AND PRIMARY CARE UPDATE Interim results presentation 2018
Slide 35: NHS and Primary Care Update
034 MedicX Fund Limited NHS AND PRIMARY CARE UPDATE NHS PRIMARY CARE FUNDING • Hospitals remain under pressure and need to see more services delivered in primary care £2.4bn • 44 Sustainability and Transformation Partnership areas working towards clinical and estates Extra per year by 2021 strategie
Slide 36: Demand drivers increasing
035 MedicX Fund Limited DEMAND DRIVERS INCREASING • Consistent direction of travel leading to GPs operating at scale as set out in the Five Year Forward View • Demand for services continues to rise as population ages with multiple long term conditions • GPs continue to suffer with workload, recruitm
Slide 37: Other Information
OTHER INFORMATION Interim results presentation 2018
Slide 38: Investment adviser and property management fee
037 MedicX Fund Limited INVESTMENT ADVISER AND PROPERTY MANAGEMENT FEE Further reductions with asset growth • Reducing relative 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 ─ Enables the
Slide 39: Key financials – DCF NAV sensitivity
038 MedicX Fund Limited KEY FINANCIALS DCF NAV sensitivity1 DCF Share price Pence per share 100.9p 78.6p Weighted discount rate 7.0% 9.8%2 Risk premium to 20 year gilt rate 5.3% n/a Rental growth per annum 2.0% (1.8)%2 Capital appreciation per annum 1.0% (1.9)%2 DCF reconciliation EPRA NAV 79.6p Pur
Slide 40: DCF NAV sensitivities
039 MedicX Fund Limited DCF NAV Sensitivities1 DISCOUNT RATE RENTAL AND CAPITAL VALUE INCREASES NAV pence NAV pence Completed Rental growth per share per share % 6.0 6.5 7.0 7.5 8.0 % pa 1.0 1.5 2.0 2.5 3.0 6.0 112 106 102 97 93 -1.0 78 81 85 88 92 Under construction Capital growth 7.0 111 106 101 9
Slide 41: Disclaimer
040 MedicX Fund Limited DISCLAIMER 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 ris
Slide 42: Disclaimer
041 MedicX Fund Limited DISCLAIMER Certain statements in this document are forward looking statements. All forward looking statements involve risks and uncertainties and are based on current expectations. Forward looking statements and forecasts contained herein are subject to risks, uncertainties a