Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2009 Earnings Presentation
46 slides from Primary Health Properties's earnings presentation, December 2009
Slide 1: Specialist primary healthcare infrastructure fund
Specialist primary healthcare infrastructure fund 2009 annual results presentation
Slide 2: Agenda
Agenda • Strategy S • Financial review • Portfolio update p • Valuation analysis Keith Maddin Chairman MedicX Adviser Mike Adams CEO MedicX Adviser 2
Slide 3: Strategy
Strategy gy 3
Slide 4: Investment policy and objectives
Investment p policy y and objectives j Primary care infrastructure Investment adviser MedicX Shareholder returns • Modern purpose-built • Specialist investor, • Total dividend for the properties developer and manager year 5.33 pence per share • Long term secure cash of primary care • Targeting progr
Slide 5: Strategy implementation
Strategy gy implementation p £97 million net equity raised since IPO November 2006 Includes £17 £17.1 1 million since April 2009 at an average 70 70.4p 4p per share £125 million 5% fixed rate debt secured* £100 million illi A Aviva i expiry i DDecember b 2036 £25 million Deutsche Postbank expiry Dec
Slide 6: Attractive yield differential
Attractive yield differential Source: MXF property valuations and Bank of England as at 30 September 2009 6
Slide 7: Lower property valuation volatility
Lower property valuation volatility Source: MXF property valuations as at 30 September 2009 and IPD net initial yield as at 30 November 2009 7
Slide 8: Development in primary care
Development p in primary p y care The current UK estate Service transfer to primary care NHS budget 40% purpose built constraints Ageing and growing + 80% too small - Election impact population on decision 5% co-located making Drive for quality pharmacy 8
Slide 9: Dividends paid since inception
Dividends p paid since inception p • Total dividends since listing 15.53 pence per share • Increases above RPI Sept 07 Sept 08 Sept 09 To date Dividend per share 5.00p 5.20p 5.33p 15.53p Increase 4 0% 4.0% 2 5% 2.5% 6 6% 6.6% RPI annual increase* 3.8% (0.4%) 3.4% • Quarterly dividends paid from Sept
Slide 10: Index comparison
Index comparison Source: Collins Stewart / DataStream as at 07 December 2009 10
Slide 11: Financial review
Financial review 11
Slide 12: Key financials – income statement
Key y financials – income statement 12 months to 30 Sept 09 12 months to 30 Sept 08 Change £000 £000 % R t receivable Rent i bl 8 804 8,804 7 467 7,467 17 9 17.9 Other income 633 769 (17.7) Total income* 9,437 8,236 14.6 Investment advisory fee 2,226 2,269 (1.9) Other fees & expenses 1,080 1,661 (35
Slide 13: Key financials – balance sheet
Key y financials – balance sheet At 30 Sept 09 £000 Pence per share Gross assets excl cash* 172,371 164.9 Debt 100,901 96.5 Cash 7,172 6.9 Net debt 93,729 89.7 Adjusted NAV* 64,839 62.0 Adjusted NAV plus debt benefit* 75,829 72.6 Restrictions/ At 30 Sept 09 covenants Adjusted gearing* 56.9% 65% Debt
Slide 14: 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 based on 104,521,215 shares 14
Slide 15: 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 104,521,215 shares 15
Slide 16: Updated debt financing
Updated debt financing Deutsche Postbank Aviva facility facility Amount £100 million £25.5 million Expiry December 2036 December 2014 Margin 0.9% 2.0% Interest rate 5.0% 5.0%* Hedging activities N\A Swap Loan to value drawdown 65% 65% Repayment terms I t Interest t only l A Amortises ti 1% per annum
Slide 17: Fund overheads
Fund overheads* Achieved target to reduce overheads to £650,000 43% reduction in overheads even after costs of new initiatives e.g. Edison research, IPD Healthcare Index and Internal Audit Costs will continue to be managed prudently *Other fees and expenses, excluding direct property costs, property
Slide 18: Investment Adviser fees
Investment Adviser fees • October 2007 • April 2008 No fees charged on cash Fund accounting taken over at no cost £0.2 million saving per annum • April 2009 Advisory base fee cut significantly Base fee as percentage of gross assets excluding cash Up to £150 million 1.5% From £150 million to £300 mil
Slide 19: Portfolio update
Portfolio update 19
Slide 20: Portfolio geographically spread
Portfolio g geographically g p y spread* p Completed projects Under construction / committed projects p j *£196.3 million committed investment in 50 primary healthcare premises 20
Slide 21: Portfolio review
Portfolio review* Contractual certainty Asset status Security of tenure of income 46 Projects 4 Projects *As at 07 December 2009; based on rents on completed properties under-construction and committed investment 21
Slide 22: Portfolio review
Portfolio review* Security of income by Security of income lease expiry by tenant type Average unexpired lease term 19.0 years* *As at 07 December 2009; based on rents on completed properties under-construction and committed investment 22
Slide 23: Portfolio review
Portfolio review* Modernity of Value per assets property Average property age 3.4 years* Average property value £3.5 million* *As at 07 December 2009; based on rents on completed properties under-construction and committed investment 23
Slide 24: Lease expiry
Lease expiry* p y *As at 07 December 2009; based on rents on completed properties under-construction and committed investment 24
Slide 25: Rental uplifts
Rental uplifts p £1.1 million rent reviews agreed during year Equivalent to 2.4% % per annum increase achieved 3.1% open market reviews 2.5% fixed uplifts 1 8% RPI b 1.8% based d £3 million passing rents currently l under negotiation 25
Slide 26: Rent review profile
Rent review profile p £11.7m annualised current rent falling due for review by year* *As at 07 December 2009; based on rents 26
Slide 27: Completed properties
Completed properties Castlecroft Lytham Ossett Completed Completed Completed November 2008 May 2009 November 2009 27
Slide 28: New acquisitions
New acquisitions Combined investment £30 3 million at a 6 £30.3 6.29% 29% cash yield 3-yearly reviews and over 20 years average lease length Abergele Bury Middlewich Scholar Green Ruabon *As at 07 December 2009; includes committed investment 28
Slide 29: Portfolio management
Portfolio management g • Two pharmacies and podiatry suite to be added to existing properties • Will add £0.5 million value to completed portfolio • MedicX Manage tenant portal and website 29
Slide 30: Valuation analysis
Valuation analysis 30
Slide 31: NAV analysis
NAV analysis y NAV Pence per share Market capitalisation* £81.4m 77.5p Adjusted NAV** £64.8m 62.0p Adjusted NAV plus debt** £75.8m 72.5p DCF NAV £93.5m 89.5p Weighted discount rate 7.09% Risk premium to 10 year gilt 3.38% *As at 07 December 2009 **Adjusted to exclude goodwill and deferred tax not ex
Slide 32: DCF NAV sensitivities – discount rate
DCF NAV sensitivities – discount rate NAV p per share Completed 6 0% 6.0% 6 5% 6.5% 7 0% 7.0% 7 5% 7.5% 8 0% 8.0% 6.0% 101p 96p 92p 87p 83p 7.0% 100p 95p 90p 86p 82p Under construction 8.0% 99p 94p 89p 85p 81p 9.0% 99p 93p 89p 84p 80p 10 0% 10.0% 98p 93p 88p 84p 79p DCF reduced from 3.0% to 2.5% per
Slide 33: DCF sensitivities – rental and capital value increases
DCF sensitivities – rental and capital value increases p.a. NAV p per share Rental* 0 5% 0.5% 1 5% 1.5% 2 5% 2.5% 3 5% 3.5% 4 5% 4.5% -1.0% 59p 66p 74p 82p 92p 0.0% 67p 73p 81p 89p 99p Capital 1.0% 75p 82p 89p 98p 108p 2.0% 85p 91p 99p 108p 117p 3 0% 3.0% 96p 102p 110p 119p 128p *DCF reduced from 3.
Slide 34: DCF NAV sensitivity
DCF NAV sensitivity y 30 September 2009 DCF Share price Pence per share 89.5p 77.5p* Weighted discount rate 7.09% 8.41% Rental growth per annum** 2.50% 0.87% Capital appreciation per annum 1.00% (0.45)% *MedicX Fund share price as at 07 December 2009 **DCF reduced from 3.0% to 2.5% per annum rent in
Slide 35: Adjusted NAV plus debt sensitivity
Adjusted NAV plus debt sensitivity Adjusted NAV plus Share price debt Pence per share 72.5p 77.5p Net initial yield 6.06% 5.88% *MedicX Fund share price at 07 December 2009 35
Slide 36: Entry value
Entry value Pence per share Adjusted NAV* 62.0p Purchasers costs at 5.75% 9.9p Debt benefit 10.5p Total entry cost assuming property acquisitions at 82.4p current valuation of 6 6.06% 06% *Adjusted to exclude goodwill and deferred tax not expected to crystallise 36
Slide 37: Conclusion
Conclusion • Strategy implementation and performance on track • Prime assets with secure long term income • Raised capital at attractive prices • Continuing to grow dividends • Strong pipeline and considering raising equity in the New Year 37
Slide 38: Appendix
Appendix 38
Slide 39: General medical services in England statistics
General medical services in E l d statistics England t ti ti 2008 1995 Ch Change • Number of practices 8,230 9,188 -10.4% • Single handed practices 2,003 Single-handed 2 003 2 919 2,919 -31.4% 31 4% • Number of GPs 34,010 27,645 +23.0% • Part-time 26%* 14% +12.0% • Aged 60 and over 10.0% 6.3% +3.7%
Slide 40: UK ageing population
UK ageing g g population p p Source: Population projections by the Office of National Statistics (2006-based, principal projection) 40
Slide 41: UK health budget
UK health budget g Source: www.healthcarerepublic.com 20 May 2008 41
Slide 42: UK population with chronic disease
UK p population p with chronic disease Source: Department of Health Chronic Disease Management Discussion Document 2004/7 42
Slide 43: Sector comparison
Share price total return Sector comparison i Dividend yield Source: Collins Stewart / DataStream as at 07 December 2009 43
Slide 44: Infrastructure comparison
Share price total return Infrastructure comparison i Dividend yield Source: Collins Stewart / DataStream as at 07 December 2009 44
Slide 45: MedicX Fund Board of Directors
MedicX Fund Board of Directors • David Staples, p , Chairman ((52)) Guernsey based quoted Fund Director (FCA, CTA) • John Hearle, Director (57) Chairman and Head of Healthcare Division of Aitchison Raffety Group (FRICS) • Shelagh Mason, Director (50) Guernsey based Commercial Property Lawyer and quo
Slide 46: Important notice
Important 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 A