Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2017 Earnings Presentation
38 slides from Primary Health Properties's earnings presentation, 2017
Slide 1: Building a brighter future for healthcare investment
Building a brighter future for healthcare investment Annual results presentation 2017
Slide 2: Highlights and achievements; Key financials; Acquisitions and disposals
01 MedicX Fund Limited Highlights and Key financials Acquisitions achievements and disposals Slide 02 Slide 05 Slide 13 Portfolio review NHS and Outlook primary care update Slide 17 Slide 25 Slide 30
Slide 3: At a Glance
02 AT A GLANCE • Leading UK and Republic of Ireland primary healthcare REIT AVERAGE LOT VALUE • 11 year successful track record £8.0m OF ACQUISITIONS • 156 modern primary healthcare properties1 IN THE YEAR • Disciplined investment approach • 89% of rent government backed AVERAGE LOT VALUE • FTSE All
Slide 4: A strong year with good progress achieved
03 MedicX Fund Limited A STRONG YEAR WITH GOOD PROGRESS ACHIEVED EPRA NAV PER PROPERTY RENT ROLL LOWER AVERAGE ORDINARY SHARE VALUATION COST OF DEBT 76.5p £680.4m £40.0m 4.29% 2016: 73.2p 2016: £612.3m 2016: £37.2m 2016: 4.45% +4.5% +11.1% +7.5% -16bps
Slide 5: Strong portfolio fundamentals
04 MedicX Fund Limited STRONG PORTFOLIO FUNDAMENTALS GOVERNMENT AVERAGE LOT AVERAGE AGE OF 7 DISPOSALS BACKED RENT VALUE1 PROPERTIES SINCE 01 OCT 2016 89.7% £4.4m 8.7yrs £7.7m 2016: 89.2% 2016: £4.1m 2016: 8.0 years 2016: £0.2m AVERAGE AVERAGE ROI UK UNEXPIRED DEBT UNEXPIRED LEASE PIPELINE PIPELINE
Slide 6: Key Financials
KEY FINANCIALS Annual results presentation 2017
Slide 7: Income Statement
06 MedicX Fund Limited INCOME STATEMENT Ongoing charges including direct property costs v EPRA NAV 3.00% 2.60% 2.20% 1.80% 2.49% 2.24% 1.40% 1.00% 2016 2017 Valuation movements include profit / loss on disposal of properties
Slide 8: Financial Position
07 MedicX Fund Limited FINANCIAL POSITION 1 Adjusted gearing is the ratio of net debt to total assets less cash
Slide 9: Property yield vs borrowing cost
08 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% 2006 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 1 As at 30 September 2017
Slide 10: Fund raising in the year
09 MedicX Fund Limited FUND RAISING IN THE YEAR • Continued high demand for new shares during the year met through tap issuance • 39.751 million new shares issued between 1 October 2016 and 30 June 2017 at an average price of 87.9 pence per share • Average premium to EPRA NAV of 18% • Temporary fall
Slide 11: Continuing to deliver consistent returns
010 MedicX Fund Limited CONTINUING TO DELIVER CONSISTENT RETURNS 6.00p DIVIDEND FOR THE YEAR 6.6% 2017 YIELD ON SHARE PRICE 2018 - Dividend target of 6.04 pence per share 6.00 91.00p 5.95 PROGRESSIVE DIVIDEND POLICY 5.90 5.80 2018 DIVIDEND 5.70 TARGET OF 30 SEPTEMBER 2017 SHARE PRICE 5.60 5.40 5.50
Slide 12: Debt portfolio
011 MedicX Fund Limited DEBT PORTFOLIO 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 €29.1 million £2
Slide 13: Fixed long term protection
012 MedicX Fund Limited FIXED LONG TERM PROTECTION September 2017 September 2016 September 2015 Debt £373.5 million £336.3 million £338.3 million Weighted average maturity 12.7 years 14.0 years 15.0 years Weighted average cost of debt 4.29% 4.45% 4.45% 120 100 Aviva Private placements BoI 80 £ milli
Slide 14: Acquisitions and Disposals
ACQUISITIONS AND DISPOSALS Annual results presentation 2017
Slide 15: Accelerating UK investment
014 MedicX Fund Limited ACCELERATING UK INVESTMENT LEAVESDEN HANDSWORTH Acquisition Value Scheme Developer Forward GPI Brynmawr £5.7m funded Framework Income Bellway Leavesden £4.0m producing Homes Income Walsall £10.3m Private vendor producing Income Handsworth £12.0m Private vendor producing Forwa
Slide 16: Further progress in Ireland
015 MedicX Fund Limited FURTHER PROGRESS IN IRELAND TALLAGHT MULLINGAR Acquisition Value Scheme Developer 61,000 sq ft Feasible Tallaght £13.7m Forward funded Developments conversion Framework 12,000 sq ft Feasible Mullingar1 £2.5m Forward funded Developments extension Framework Guardian 35,000 sq f
Slide 17: Disposals – constantly improving portfolio
016 MedicX Fund Limited DISPOSALS – CONSTANTLY IMPROVING PORTFOLIO HARLESTON WOOLSTON Property Sale value Harleston £0.8m Verwood £1.3m Disposals post year end Property Sale value Wolverhampton £1.1m Woolston £1.5m Shorne £0.8m Sub scale No further Disposals assets sold Leicester £1.1m disposals sol
Slide 18: Portfolio Review
PORTFOLIO REVIEW Annual results presentation 2017
Slide 19: Key metrics of the portfolio
018 MedicX Fund Limited KEY METRICS OF THE PORTFOLIO1 NUMBER OF NUMBER OF GP NUMBER OF OPERATIONAL LEASES INTEGRATED ASSETS PHARMACIES 151 158 88 2016: 147 2016: 153 2016: 84 NUMBER OF NUMBER OF NUMBER OF CCGS PATIENTS LEASES 1.6m 375 79 2016: 1.2m 2016: 361 2016: 75 1 As at 30 September 2017 / 30 S
Slide 20: Portfolio of modern purpose-built assets
019 MedicX Fund Limited PORTFOLIO OF MODERN PURPOSE-BUILT ASSETS1 SECURITY OF INCOME BY LEASE EXPIRY PORTFOLIO VALUATION PROFILE 4% 12% 20% 13% 52% 32% 31% 36% Less than 10 years More than £5m 10 - 15 years £3m - £5m 15 - 20 years £2m - £3m Over 20 years Less than £2m 1 As at 30 September 2017
Slide 21: Rent reviews profile
020 MedicX Fund Limited RENT REVIEWS PROFILE1 • Total rent roll £40.0 million2 ─ £37.9 million completed 4% ─ £2.1 million under construction 27% • £22.2 million passing rents under negotiation • £9.0 million rent reviews agreed during the year • Equivalent to 1.0% per annum increase achieved ─ 0.5%
Slide 22: Rent review by period
021 MedicX Fund Limited RENT REVIEW BY PERIOD Open market reviews 5.0% Average of all rent reviews Passing rents Passing rents Year to agreed under review to 4.5% Blended RPI and fixed uplifts be agreed Sept 2010 £2.9m - 4.0% Sept 2011 £3.6m - 3.5% 3.0% Sept 2012 £5.6m £0.2m 2.5% Sept 2013 £4.8m £0.
Slide 23: Asset management
022 MedicX Fund Limited ASSET MANAGEMENT • 375 leases in 151 completed UK and Ireland assets NUMBER OF LEASES • 15% of leases less than years 10 years remaining 375 ACROSS 151 UK • Strategy prepared for all 55 leases: AND ROI ASSETS ─ 12 property strategies at an advanced stage ─ Business case decis
Slide 24: Asset management project
023 MedicX Fund Limited ASSET MANAGEMENT PROJECT • Thakeham House Surgery, Shoreham-by-Sea • Extension to existing pharmacy of 39m2 • Increase in rental value of £14,200 to £45,800 per annum • Overall value increase of c.£180,000 • Improved pharmacy service and patient experience
Slide 25: Pudsey
024 MedicX Fund Limited LEASE REGEAR PROJECT VALUE 25 £1.0m YEARS ROBIN LANE HEALTH AND WELLBEING CENTRE, PUDSEY SMART ASSET Our vision has always been to MANAGEMENT offer the highest quality primary healthcare to our patients here in Pudsey, and to enable them to Over the last five years Robin EXTE
Slide 26: NHS and Primary Care Update
NHS AND PRIMARY CARE UPDATE Annual results presentation 2017
Slide 27: NHS and Primary Care Update
026 MedicX Fund Limited NHS AND PRIMARY CARE UPDATE NHS PRIMARY CARE FUNDING • Consistent direction of travel leading to GPs operating at scale as set out in the Five Year Forward View £2.4bn Extra per year • Demand for services continues to rise as population ages by 2025 • GPs continue to suffer w
Slide 28: NHS and Primary Care Update
027 MedicX Fund Limited NHS AND PRIMARY CARE UPDATE NAYLOR REPORT • Cross party support for primary care investment • Consolidation of NHS entities leading to strategic clinical and £5bn Potential proceeds from sale of surplus estates strategies NHS estates • Autumn budget an improvement, but capita
Slide 29: Pipeline and Strategy
PIPELINE AND STRATEGY Annual results presentation 2017
Slide 30: Pipeline and Strategy
029 MedicX Fund Limited PIPELINE AND STRATEGY • Selectively buying high quality dominant assets and forward funding new assets under framework agreements with a range of PIPELINE experienced developers in UK and Republic of Ireland • Irish opportunity accelerates growth improving economies of scale
Slide 31: Outlook
OUTLOOK Annual results presentation 2017
Slide 32: Outlook
031 MedicX Fund Limited OUTLOOK Primary Strong Framework care core to portfolio agreements NHS fundamentals delivering agenda Maintaining Reduced Cost ratios investment cost of debt reducing discipline with scale
Slide 33: Appendices
APPENDICES Annual results presentation 2017
Slide 34: Investment adviser and property management fee
033 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 35: DCF NAV sensitivities
034 MedicX Fund Limited DCF NAV Sensitivities1 DISCOUNT RATE RENTAL AND CAPITAL VALUE INCREASES NAV pence NAV pence Completed Rental per share per share % 6.0 6.5 7.0 7.5 8.0 % 0.5 1.5 2.5 3.5 4.5 6.0 110 105 100 96 91 -1.0 71 76 82 89 95 Under construction 7.0 109 104 99 95 91 0.0 78 84 90 96 103 C
Slide 36: EPRA NNNAV sensitivities
035 MedicX Fund Limited EPRA NNNAV Sensitivities1 EPRA EPRA NNNAV NNNAV Cost of 20 year debt (bps) Passing rent higher/lower pence per pence per share share % -20 - +20 +50 +100 % -1 - +1 +2 +3 5.75 51.0 53.1 55.0 57.8 62.2 5.75 47.2 48.6 49.9 51.3 52.6 5.50 55.6 57.7 59.6 62.4 66.8 5.50 53.3 54.7 5
Slide 37: Key Financials: DCF NAV sensitivity
036 MedicX Fund Limited KEY FINANCIALS DCF NAV sensitivity1 DCF Share price Pence per share 98.5p 91.0p Weighted discount rate 7.0% 7.9%2 Risk premium to 20 year gilt rate 5.0% n/a Rental growth per annum 2.5% 1.2%2 Capital appreciation per annum 1.0% 0.1%2 DCF reconciliation EPRA NAV 76.5p Purchase
Slide 38: Important Notice
037 MedicX Fund Limited 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 significa