Primary Health Properties Plc · LSE:PHP
Primary Health Properties — H1 2012 Earnings Presentation
27 slides from Primary Health Properties's earnings presentation, August 2012
Slide 1: Primary Health Properties PLC – Interim Results
PRIMARY HEALTH PROPERTIES PLC “A Dedicated Healthcare REIT” “The objective of the Group is to generate rental income and capital growth through investment in primary health property in the United Kingdom leased principally to GPs, NHS organisations and other associated health users.” Harry A Hyman P
Slide 2: Operating Highlights
Operating Highlights Rental income increased by 6.3% to £16.21 million (30 June 2011: £15.25 million), fuelled by acquisitions and rent reviews completed in the period Total annualised rent roll including commitments up 3% to £33.2 million (December 2011: £32.3 million) Operating profit before
Slide 3: Debt Funding Highlights
Debt Funding Highlights Refinancing of Group bi-lateral loans completed 16 March 2012 Core debt facilities renewed as £175 million, four year, interest only Club facility Weighted average term of Group debt facilities now 5.4 years Refinance achieved without requirement to impact swap portfo
Slide 4: Portfolio Highlights
Portfolio Highlights Acquisition of four properties in period for a total consideration of £11.5 million Further asset acquired post balance sheet date for £3.9 million 165 healthcare centres – 160 completed and owned, 5 committed to acquire Portfolio (incl. commitments) valued at £552.3 mil
Slide 5: Results in Brief
Results in Brief Six months ended Six months ended 30 June 2012 30 June 2011 £m £m Rental and related income 16.2 15.3 Expenses (2.8) (2.7) Operating Profit 13.4 12.6 Net financing costs (9.0) (7.2) Profit on sale of AHMP shares - 0.3 Profit before revaluation result and fair 4.4 5.7 value gain/loss
Slide 6: Balance Sheet Highlights
Balance Sheet Highlights 30/06/12 31/12/11 Net Assets £185.7m £168.1m Net asset value per share 248.9p 246.3p EPRA net asset value per share 314.9p 318.7p Investment portfolio including finance lease1 £542.2m £528.7m Debt £297.6m £303.0m LTV 56.4% 57.8% Future minimum lease payments receivable £530m
Slide 7: Relative Performance
Relative Performance PHP real estate portfolio out performs 2011 IPD Healthcare and All Property Indices 1 1 year 3 years 5 years Primary Health Properties 10.1% 10.1% 6.6% IPD Healthcare Property Index 9.4% 7.5% 5.7% IPD All Property Index 7.8% 8.7% -0.9% Data for periods ended 31 December 2011 S
Slide 8: Investment Acquisition – Conan Doyle, Edinburgh
Investment Acquisition Conan Doyle, Edinburgh Tenants: 7 GPs Date acquired: March 2012 NIA: 1,144 sqm Cost: £3.6 million Patient numbers: 10,300 2012 Interim Results - August 2012 8
Slide 9: Investment Acquisition – Watton, Norfolk
Investment Acquisition Watton, Norfolk Tenants: 6 GPs Constructed: July 2006 NIA: 925 sqm Cost: £2.7 million Patient numbers: 12,750 2012 Interim Results - August 2012 9
Slide 10: Investment Acquisition – Caerphilly, South Wales
Investment Acquisition Caerphilly, South Wales Tenants: 3 GPs, Local PCT, pharmacy Completed: May 2012 NIA: 1,250 sqm Cost: £3.8 million Patient numbers: 9,500 2012 Interim Results - August 2012 10
Slide 11: Investment Acquisition – Luton, Bedfordshire
Investment Acquisition Luton, Bedfordshire Tenant: PCT (operated by 4 GPs) Constructed: February 2008 NIA: 1,281 sqm Cost: £3.9 million Patient numbers: 7,700 2012 Interim Results - August 2012 11
Slide 12: Asset Management Projects
Asset Management Projects Blenhiem Crescent, Luton – Completed April 2012 Construction of a pharmacy unit adjoining a modern medical centre. Pharmacy let on a 17 year lease, co-terminus with medical practice. 9.5% cash yield on cost of works, return on capital of 49%. Cost £213,000 Frithwood Surgery
Slide 13: Portfolio Strength
Portfolio Strength Key characteristics Weighted average unexpired lease term of 16 years (31 Dec 2011: 16.3 years) Strong tenant covenant – 90% of rent roll paid for directly/indirectly by the Government All leases effectively upward only rent reviews 95% of leases subject to triennial ren
Slide 14: Portfolio Rental Levels at 30 June 2012
Portfolio Rental Levels at 30 June 2012 Area Rent Tenant Area (sqm) (sq ft) Rent (£psm) (£ psf) NHS 164,686 1,772,020 174 16.17 Pharmacy 9,959 107,162 286 26.57 Other 3,257 35,040 127 11.81 Total – June 2012 177,902 1,914,222 179 16.67 Total – Dec 2011 174,438 1,867,292 178 16.54 Note: 1. Conversion
Slide 15: Rental Increases Achieved
Rental Increases Achieved 2012 to date average increase on review 2.7% per annum (2011: 3.0%) % of rent roll on fixed uplift – 2% % of rent roll index linked – 12% Balance open market effectively upwards only Historically rental increases have broadly tracked RPI increases – see below PHP
Slide 16: Conventional Independent Valuation
Conventional Independent Valuation Portfolio valued every 6 months using Lambert Smith Hampton valuations Basis is aggregation of INDIVIDUAL values No “lotting premium” (“portfolio effect”) taken account of Length of leases 16 years + covenant defensive characteristics Rental increases d
Slide 17: Portfolio analysis
Portfolio analysis • 67% of assets are greater than £3 million in value • Average lot size in portfolio - £3.35 million (2011: £3.34 million) No. of Value Cumulative Capital value assets %’age (£’m) %’age £9 million + 4 46.51 8.4% 8.4% £3 - £9 million 73 325.16 58.9% 67.3% £1 - £3 million 83 176.87
Slide 18: DCF Valuation – as at June 2012
DCF Valuation – as at 30 June 2012 The length of leases produces robust DCF valuations to underpin valuation of PHP Additional valuation based on discounted cash flow1 £595million vs £545million £50million increase Equates to 63 pence per share of additional NAV Discounted using 7% per a
Slide 19: Wide Geographical Spread
Wide Geographical Spread Wales London South West Scotland 10% 4% 3% 8% South East North 27% 4% Yorkshire & Humberside 8% North West 10% East Anglia 2% West Midlands East Midlands 12% 12% 2012 Interim Results - August 2012 19
Slide 20: Long Leases
Long Leases Average lease length 16 years Analysis of rent unexpired New leases typically 20 - 25 years Maintenance of lease length 15-20 years 52% through active asset management More than 20 years and lease renewals 13% Less than 5 95% of leases subject to triennial years rent reviews 2%
Slide 21: PHP portfolio analysis by tenant type
PHP portfolio analysis by tenant type PHP owns and leases freehold Tenancy split by contracted rent or long leasehold modern purpose-built primary Pharmacy Other healthcare facilities 9% 1% NHS 15% 165 primary care facilities, 160 completed and 5 committed Primary tenants GP surgeries GPs
Slide 22: Security of Income by Lease Expiry
Security of Income by Lease Expiry 100% Percentage total income as at 30 June 2012 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 10 Years from 30 June 2012 Receiving over 90% of current passing rent in 10 years time assuming no re
Slide 23: Stable Borrowing Facilities
Stable Borrowing Facilities Average maturity of bank debt - 5.4 years Provider Maturity Amount Headroom £175m, 4 year, interest only Club facility commenced March 2012 RBS Mar 2013 5.0 5.0 Maximum LTV covenant 65% AIB Jan 2013 27.0 - Clydesdale Bank July 2014 50.0 28.6 Minimum ICR covenant 1.4
Slide 24: Continued dividend growth
Continued dividend growth REIT status drives pay out of substantially all available profits as dividends 16 year track record of progressive dividend growth First 2012 dividend of 9.25p paid on 5 April 2012 Second dividend for 2012 declared 9.25 pence to be paid on 26 October 2012, to shar
Slide 25: Progressive Annual Dividend
Progressive Annual Dividend Pence 20 18.0 18.5 17.0 17.5 18 16.5 16 15.0 13.5 14 12.0 12 11.0 10.0 10 9.0 8.0 8 7.0 5.6 6.0 6 3.2 4 2 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total dividend paid – 178.55p to April 2012 + 9.25p October 2012 = 187.8p 2012 Inter
Slide 26: Conclusion
Conclusion Low risk business model with 90% of rental income underpinned by Government funding Proven business model – 100% occupancy Demographic and political drivers – ageing population, cross party commitment to NHS Long term non-cyclical market Well positioned to lead next phase of Pri
Slide 27: Disclaimer
Disclaimer IMPORTANT NOTICE This document has been prepared by Primary Health Properties PLC (the “Company”) and is the sole responsibility of the Company. The information in this document is accurate as at the date of this document and its contents are therefore subject to updating and revision. Th
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