Primary Health Properties Plc · LSE:PHP
Primary Health Properties — H1 2019 Earnings Presentation
36 slides from Primary Health Properties's earnings presentation, Jul 25, 2019
Slide 1: Interim Results Six Months Ended 30 June 2019
Interim Results Six Months Ended 30 June 2019 Primary Health Properties PLC Leading the way in modern primary health properties 25 July 2019
Slide 2: Agenda
Agenda PHP at a glance Investment highlights Financial results Property Portfolio Funding Dividend track record Appendices
Slide 3: Primary Health Properties PLC at a glance
Primary Health Properties PLC at a glance ✓ Leading investor in flexible, modern primary healthcare accommodation across UK and Ireland ✓ Leading portfolio of 484 properties valued at £2.35 billion ✓ FTSE 250 UK Real Estate Investment Trust (“REIT”) with £1.5 billion market capitalisation ✓ 90% of i
Slide 4: MedicX merger
MedicX merger Compelling strategic, operational and financial rationale
Slide 5: Investment highlights
Investment highlights ✓ Created one of the UK’s largest listed primary health property investors with over 484 properties valued at £2.35 billion ✓ FTSE 250 REIT with market capitalisation of £1.5 billion and improved share liquidity Successful all-share ✓ Highly complementary portfolios of flexible
Slide 6: Strong track record of relative performance
Strong track record of relative performance ✓ IRR over period since inception of 13.2%1 (Average annual inflation (RPI) over period: 2.8%) PHP 5 year relative TSR performance PHP TSR (absolute change) – 1yr / 3yr/ 5yr 250 PHP PHP FTSE All Share Index FTSE All Share REIT Index FTSE All Share Index 12
Slide 7: Financial results
Financial results Strong performance delivering earnings, net asset value and dividend growth
Slide 8: Key financial highlights
Key financial highlights Performance 30 June 2019 30 June 2018 Change Net rental income (£m) 53.8 37.4 +43.9% Adjusted EPRA earnings (£m) 27.9 17.1 +63.2% Dividends paid (£m) 26.7 16.8 +58.9% Dividend cover 104% 102% - Dividend per share (pence) 2.8p 2.7p +3.7% Position 30 June 2019 31 December 2018
Slide 9: Income statement
Income statement PHP MedicX 30 June 2019 30 June 2018 Change 6 months 3.5 months £m £m % Net rental income 40.3 13.5 53.8 37.4 +43.9% Administrative expenses (4.5) (0.5) (5.0) (4.2) Performance incentive fee (0.9) - (0.9) (0.6) Operating profit before financing costs 34.9 13.0 47.9 32.6 +46.9% Net f
Slide 10: EPRA cost ratio
EPRA cost ratio • EPRA cost ratio reduced to 12.2% lowest in sector (PHP: FY18 14.3%; MedicX FY18: 18.4%) • Reflects only 3.5 months of synergy savings - £4.0m per annum • Total expense ratio (TER) reduced to 0.5% (FY18: 0.6%) 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: Peel Hunt /company
Slide 11: Balance Sheet Strengthened
Balance Sheet Strengthened Adjusted EPRA NAV per share (pence) 110.0 2.8 (2.8) 1.6 (1.4) 105.1 (0.1) 105.2 105.0 100.0 95.0 90.0 85.0 Opening NAV Adjusted Dividends Portfolio Net impact of Shares Closing NAV per share EPRA paid revaluation MedicX issued per share earnings merger 30 June 2019 31 Dec
Slide 12: Property Portfolio
Property Portfolio
Slide 13: Property portfolio overview
Property portfolio overview Key Figures PHP MedicX Combined Total number of properties 317 167 484 Including properties in Ireland 10 5 15 Investment portfolio value (£bn) 1.54 0.81 2.35 Floor area (000’s sqm) 419 225 644 Capital value (£ per sqm) 3,665 3,615 3,650 Contracted rent roll (£m) 81.1 44.
Slide 14: Property portfolio overview
Property portfolio overview Geographical spread by valuation Ireland South West 7% 5% Midlands and East Anglia London 23% 7% Wales 8% Scotland North East 8% 16% North West South East 13% 13% Covenant exposure by rent roll Other Pharmacy 1% 9% Government backed income (UK GPs/NHS/HSE) 90% Numbers in
Slide 15: High quality recurring income
High quality recurring income Key characteristics of the portfolio Strong tenant 32% of portfolio Weighted average covenant – 90% of The majority of on fixed or Occupancy unexpired lease rent roll paid leases have indexed uplifts. rate of length of directly/indirectly effectively upward 68% OMV revi
Slide 16: Growing Income
Growing Income Development pipeline, rent reviews and asset management delivering rental growth 140.0 125.6 131.2 3.8 1.8 44.4 0.8 1.0 120.0 100.0 79.4 Rent £m p.a. 80.0 60.0 40.0 20.0 0.0 31 Dec.18 MedicX merger Acquisitions Completed rent 30 Jun.19 Development Anticipated Pro-forma reviews and pip
Slide 17: Long leases with growth potential
Long leases with growth potential Effectively upward only rent roll Income expiry profile – WAULT of 13.0 years Rent review profile • 6.6% on fixed uplift <3 years 3-5 years 20+ years 1.6% 6.0% • 25.3% index linked 13.0% • 68.1% reviewed to open market 5-10 years 25.5% Drivers of rental growth 15-20
Slide 18: Growing Development Pipeline
Growing Development Pipeline • Eight schemes on site with a net development cost of £59.5m Emerald Gardens, Kew Medical Centre, UK Bray Primary Care Centre, Ireland Tenants Tenants • GP practice • Health Service Executive (HSE) • Social prescribing charity • GP Practices • Pharmacy Purchase date: Ma
Slide 19: Investment
Investment • Five assets acquired for £31.3m (average lot size £6.3m) • Strong active pipeline in UK and Ireland totalling £150m including £70m in legal due diligence Oakwood Lane Medical Centre, Leeds The Meath Primary Care Centre, Dublin, Ireland Tenants Tenants • GP practice • Health Service Exec
Slide 20: Asset Management – enhancing existing portfolio
Asset Management – enhancing existing portfolio • Eight projects completed, three on-site and eleven approved and due to commence shortly • £4.9m invested, £0.3m additional rent and WAULT extended back to 17 years • Strong pipeline of over 60 potential projects Robin Lane Medical Centre, Pudsey West
Slide 21: Environmental and social
Environmental and social • PHP is committed to supporting both the NHS and HSE in tackling the major underinvestment in primary care facilities in both the UK and Ireland Portfolio Split by EPC Rating • 82% of the portfolio has an EPC rating of C or better E A • Future asset management projects offe
Slide 22: Funding
Funding
Slide 23: Delivering financial management
Delivering financial management Cost of debt (%) Interest cover ratio H1 2019 1 3.75 H1 2019 2.7 2018 3.9 2018 2.6 2017 2.25 2017 4.1 2016 2.05 2016 4.7 Loan to value ratio (%) Debt maturity (years) H1 2019 1 7.6 H1 2019 47.9 2018 44.8 2018 5.4 2017 52.9 2017 6.3 2016 53.7 2016 5.1 2015 62.7 2015 5.
Slide 24: Debt summary
Debt summary ✓ Broad range of lending partners with 93% of debt fixed or hedged ✓ Total debt facilities in excess of £1.37bn(1) ✓ Drawn net debt £1.1bn(1) ✓ Group LTV 47.9% ✓ Average cost of debt 3.75%(1) ✓ Long weighted average debt maturity of 7.6 years(1) Debt maturity profile 300 281.2 £'m 250 2
Slide 25: Strong track record of dividend growth
Strong track record of dividend growth Historic dividend progression CAGR: 9.25%1 Implied PHP 2019 dividend yield2 6.0 Share Price Yield 5.40p 5.60p2 5.25p 134.4p 4.2% 4.88p 5.00p 5.125p 5.0 4.63p 4.75p Q4 4.38p 4.50p 4.13p 4.25p 4.0 3.75p 3.38p 3.00p 3.0 2.75p 2.50p Q1 – Q3 2.25p 2.00p 2.0 1.75p 1.
Slide 26: Appendices
Appendices
Slide 27: Spread of funding sources
Spread of funding sources Secured facilities 3, 4 Barclays/ Bank of Secured Aviva – One Provider HSBC Santander Lloyds RBS Aviva AIB Ireland € bond Medical Tenor Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Amortising Expiry Jul-2020 Jan-2021 Jul-2021 Dec-2021 Mar-2022 Dec-2022 Sep-2024 D
Slide 28: Spread of funding sources (continued)
Spread of funding sources (continued) Unsecured Unfettered Total Secured facilities (continued) 3, 4 facilities 1 assets Secured Standard Euro Convertible Provider Aviva Ignis Aviva Aviva Aviva bond bond Life PP (€) Tenor Bullet Bullet Bullet Bullet Bullet Bullet Amort’n Amortising Bullet - Aug-2024
Slide 29: Positive yield gap
Positive yield gap Illustrative yield gap on property investment UK Acquisitions Ireland 6.0% 6.0% 5.6% 5.0% 4.8% 0.275% 5.0% 0.1% 0.275% 4.0% 4.0% 3.6% 1.6% 1.0% 3.0% 3.0% 2.0% 1.8% 2.0% 1.7% 1.0% 1.0% 0.0% 0.0% Valuation Incremental 10 yr Libor Average debt Income return Valuation Incremental 10 y
Slide 30: Rent review results
Rent review results ✓ £0.9m (1.9% p.a) increase from 182 rent reviews completed OMV Number of outstanding 6 months to 30 June 2019 Rent reviews reviews (current rent) ✓ 0.9% achieved on 94 open market value reviews completed ✓ 3.0% achieved on 78 indexed linked reviews No % No £m ✓ 3.1% achieved on
Slide 31: Pharmacy rent
Pharmacy rent • £11.0m 9% of total rent roll across 280 stores. • WAULT 10.3 years Rent p.a Covenant analysis £m Independents 3.7 Lloyds 2.6 Boots 1.0 Well Pharmacy 0.8 Rowlands 0.7 Gorgemead 0.4 Day Lewis 0.2 Co-op 0.1 Super-drug 0.1 Ireland pharmacy 0.7 Other multiple chain operators 0.7 11.0 Prim
Slide 32: EPRA cost ratio
EPRA cost ratio Six months ended Six months ended Year ended 30 June 2019 30 June 2018 31 December 2018 £m £m £m Gross rent less ground rent and service charge income 55.0 38.0 77.6 Direct property expense 2.6 1.5 3.2 Administrative expenses 5.0 4.2 8.6 Performance incentive fee (“PIF”) 0.9 0.6 1.3
Slide 33: Nexus's revised fee base
Nexus’s revised fee base • MedicX portfolio at acquisition (£804m(1)) charged at a flat rate of 0.225% p.a. or £1.8m p.a. • This equates to a total management fee saving of £3.0m p.a. in the first full year of operation as compared to the current combined standalone fees payable by each company • No
Slide 34: Contact Details
Contact Details Harry Hyman Richard Howell Chris Santer Managing Director Finance Director Chief Investment Officer harry.hyman@ richard.howell@ chris.santer@ nexusgroup.co.uk nexusgroup.co.uk nexusgroup.co.uk Primary Health Properties PLC Interim Results 2019 34
Slide 35: Disclaimer
Disclaimer The information contained in this presentation in respect of Primary Health Properties PLC (the “Company”) and communicated during any delivery of the presentation, including the talks given by the presenters, any question and answer session and any document or material distributed at or
Slide 36: Disclaimer
Disclaimer to place undue reliance on these forward-looking statements. The Company is not under any obligation (except as required by the Listing Rules of the FCA, the Disclosure Guidance and Transparency Rules of the FCA, the Market Abuse Regulation and the rules of the London Stock Exchange) and
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