Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2013 Earnings Presentation
37 slides from Primary Health Properties's earnings presentation, May 2013
Slide 1: 2013 interim results presentation
13 Specialist primary healthcare infrastructure fund 2013 interim results presentation 1
Slide 2: Presentation agenda
MedicX Fund Presentation agenda 1. Introduction 2. Portfolio review 3. Key financials 4. Investment opportunity 2
Slide 3: 1. Introduction
1. Introduction Introduction Hirwaun 3 Medical Centre, Wales
Slide 4: Objectives and overview
MedicX Fund Objectives and overview Leading investor in modern purpose-built primary healthcare properties leased to doctors and the NHS generating government-funded long term secure cash flow FTSE All Share £206 million1 market capitalisation Fund not a developer or operator External invest
Slide 5: Underlying value drivers
MedicX Fund Underlying value drivers Investment quality Market leading modern primary care portfolio created through value-adding property acquisitions Financing capability Sector leading financing structure Asset management Proactive approach to asset enhancement Cost control Culture of reducing co
Slide 6: Shareholder returns
Shareholder returns1 Continuing to deliver consistent returns Revised Investment Adviser performance fee hurdle 10% compound total shareholder return from 1 October 2012 Total shareholder returns May 20131 9.7% Sept 2012 9.0% Sept 2011 9.4% Sept 2010 8.6% Sept 2009 11.4% 1As at 24 May 2013 and inc
Slide 7: Timeline of events
MedicX Fund Timeline of events 7 7
Slide 8: Accelerating growth
Accelerating growth Locking into positive spread between property yields and borrowing costs £444 million committed investment at 5.87% cash yield and £280.2 million debt secured at 4.45%, average lease life 17.2 years, average debt life 16.2 years Committed investment and debt Property yield vs b
Slide 9: Investment adviser and property management fee structure
Investment adviser and property management fee structure Further reductions Lower investment adviser and property management fees ‒ Fees on healthcare property assets only rather than gross assets (excluding cash) ‒ Reduced investment adviser fee of 0.33% above £1 billion gross assets ‒ Property m
Slide 10: Dividends: progressive dividend policy and cover
Dividends Progressive dividend policy and cover *2013 data based on six months 1Percentage of dividends paid covered by adjusted earnings excluding valuation gains 2Underlying dividend cover assume all projects are complete with associated debt requirement 3Total expected dividends divided by share
Slide 11: Key financials: Adjusted NAV plus debt benefit
Key financials Adjusted NAV plus debt benefit 11 11
Slide 12: 2. Portfolio review
2. Portfolio review Raynes 12 Park Health Centre, London
Slide 13: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 121 assets Contractual certainty of income Portfolio geographical spread 109 projects 100% 90% 12 projects 10% 0% Demand risk Under construction Security of tenure Availability risk Operational 100% 100% Freehold/long leasehold 1As at 24 May
Slide 14: Portfolio review
MedicX Fund Portfolio review1 Security of income by tenant type Security of income by lease expiry Modernity of assets Value per property Average unexpired lease term 16.9 years Average age 6.5 years Average value £3.7 million 1As at 31 March 2013; includes completed value of properties under
Slide 15: Rental growth
MedicX Fund Rental growth1 Total rent roll £27.9 million ‒ £24.9 million completed Increasing RPI link ‒ £3.0 million under construction £8.7 million passing rents currently under negotiation £2.1 million rent reviews agreed during the period Equivalent to 2.3% per annum increase achieved2 ‒
Slide 16: 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 Period to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 March 13 Number 20 12 34 21 24 18 12 Passing rent £1,814,809 £969,757 £2,917,782 £1,872,284 £2,601,846 £1,883,001 £868,459 Annualised i
Slide 17: Property valuation yields stable
MedicX Fund Property valuation yields stable1 1MedicX Fund property valuation as at 31 March 2013, IPD data as at 30 April 2013 and Gilt rate data as at 24 May 2013 17 17
Slide 18: Corporate transaction: GPI portfolio acquisition
Corporate transaction GPI portfolio acquisition Earnings enhancing acquisition Impact on adjusted NAV + debt mark-to-market on acquisition expected to be neutral GPI portfolio acquisition lease type Seven properties completed / operational and seven properties under construction Development
Slide 19: Acquisitions since October 2012
Acquisitions since October 2012 Total investment of £50.1 million in 15 properties Investment Acquisition Developer Properties £m GPI portfolio GPI 44.7 14 Cambridge MedicX 5.4 1 Locking into positive spread to long term debt Cash yield (including Cambridge) 5.78% Average debt cost 4.47% Spread 1.31
Slide 20: Completed investments
Completed investments Total investment of £25.2 million in seven forward funding properties Investment Property Developer £m Uckfield MedicX 2.9 Raynes Park MedicX 9.4 Grangetown MedicX 3.3 Methil MedicX 1.9 Monkseaton MedicX 2.9 Kingston CMS 2.9 Middlewich Oakapple 1.9 20 20
Slide 21: Asset management: strategic portfolio management
Asset management Strategic portfolio management Property Overview Timing Riverside Pharmacy extension and GP refurbishment 2013 Hoveton & Wroxham GP extension 2013 Eastbourne GP and pharmacy extension 2013/2014 Wood Green Pharmacy extension and GP refurbishment 2013/2014 Sutton GP extension 2013/201
Slide 22: 3. Key financials
3. Key financials Lytham 22 Primary Care Centre, Lytham-St-Anne’s
Slide 23: Investment and financing highlights
MedicX Fund Investment and financing highlights1 Total shareholder return of 9.7% for the period New committed and approved investments since 1 October 2012 of £50.1 million acquired at a cash yield of 5.78% £443.7 million committed investment in 121 primary healthcare properties at a valuatio
Slide 24: Key financials: Income statement
Key financials Income statement 6 months to 31 Mar 2013 6 months to 31 Mar 2012 Change £000 £000 Rent receivable 11,603 6,917 68% Other income1 589 455 29% Total income 12,192 7,372 65% Direct property costs2 449 326 38% Investment advisory fee 1,412 1,125 26% Overheads 458 341 34% Total expenses 2,
Slide 25: Key financials: Balance sheet
Key financials Balance sheet Funding required to complete committed investment £10 million at 31 March 2013 As at 31 Mar 2013 As at 31 Mar 2013 £000 Pence per share Gross assets excluding cash 398,619 152.6 Debt 244,855 93.7 Cash 36,387 13.9 Net debt 208,468 79.8 Adjusted NAV1 164,731 63.0 Adjuste
Slide 26: Key financials: Debt funding
Key financials Debt funding Average weighted fixed rate cost of debt of 4.45% with an average unexpired term of 16.2 years vs 17.2 years average unexpired lease term In discussions to secure a revolving credit facility that can be repaid following an equity raise Deutsche Postbank Acquired Aviva
Slide 27: 4. Investment opportunity
4. Investment opportunity Sawston 27 Health Centre, Cambridgeshire
Slide 28: NHS and primary care update
NHS and primary care update Political focus on integration and cost reduction by efficiency savings Primary Care Trusts replaced by Clinical Commissioning Groups on 31 March 2013 Transfer of properties and lease liabilities to NHS Property Services now completed Clear message from the Departme
Slide 29: Pipeline of new opportunities
Pipeline Pipeline of new opportunities Investment Adviser with proprietary market access and deal flow Strong pipeline of £105 million Circa £7 million rent roll 31 properties including 7 from Investment Adviser development arm Further completed property acquisition opportunities under rev
Slide 30: Investment opportunity: Conclusion
Investment opportunity Conclusion Able to buy assets at attractive yield Plus lock into long-term low fixed rate debt Earnings and dividend cover enhanced as MedicX Fund grows Management well placed to take advantage of opportunities Attractive total return proposition ‒ 7.2% dividend yiel
Slide 31: Appendices
Appendices xMedicX
Slide 32: MedicX Fund performance: sector comparison
MedicX Fund performance Sector comparision1 Dividend yield Share price total return 1As at 24 May 2013 – Canaccord Genuity / DataStream 32 32
Slide 33: Premium to Adjusted NAV + Debt Mark to Market
Key financials Premium to Adjusted Net Asset Value + Debt Mark to Market1 Primary Health MedicX Assura Properties Premium 22% 37% 34% Share price pps 79.0p 323.0p 37.75p Adjusted NAV + Debt MtM pps 64.7p 235.5p 28.1p 1Share price as at 24 May 2013. MedicX Interim Results 31 March 2013, Debt MtM +ve
Slide 34: DCF NAV sensitivity
Key financials DCF NAV sensitivity1 DCF Share price Pence per share 92.9p 79.0p Weighted discount rate 7.1% 8.9% Risk premium to 20 year gilt rate 4.0% 3.9% Rental growth per annum 2.5% 0.2% Capital appreciation per annum 1.0% (0.8)% DCF reconciliation Adjusted NAV plus debt benefit 63.6p Purchasers
Slide 35: DCF NAV sensitivities
Key financials DCF NAV sensitivities1 Discount rate Rental and capital value increases per annum NAV pence NAV pence Completed per share Rental per share % 0.5 1.5 2.5 3.5 4.5 % 6.0 6.5 7.0 7.5 8.0 Under construction 6.0 103 99 95 91 87 -1.0 65 71 78 85 93 Capital 7.0 102 98 94 90 86 0.0 72 78 85 92
Slide 36: 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 Christo
Slide 37: Important notice
MedicX Fund presentation 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 Financi