Primary Health Properties Plc · LSE:PHP
Primary Health Properties — FY2019 Earnings Presentation
36 slides from Primary Health Properties's earnings presentation, February 2020
Slide 1: A transformational year of growth
Primary Health Properties PLC Annual Results Presentation FY 2019 Primary Health Properties PLC A transformational year of growth Annual Results Presentation 2018 Modernising Primary Care infrastructure in a sustainable way for the 21st Century
Slide 2: Agenda
Our growing portfolio Agenda FY 2019 at a glance Investment highlights Financial results Property Portfolio Financing Outlook Appendices
Slide 3: FY 2019 at a glance
FY 2019 at a glance • Leading investor in flexible, modern primary healthcare accommodation across UK and Ireland • Leading portfolio of 488 properties valued at £2.4 billion • FTSE 250 UK Real Estate Investment Trust (“REIT”) with £1.9 billion market capitalisation • 90% of income funded by governm
Slide 4: MedicX merger
Our growing portfolio MedicX merger Compelling strategic, operational and financial rationale
Slide 5: Investment highlights
Investment highlights • Created the UK’s largest listed primary health property investors with over 488 properties valued at £2.4 billion • FTSE 250 UK REIT with market capitalisation of £1.9 billion and improved share liquidity Successful all-share • Highly complementary portfolios of flexible, mod
Slide 6: Strong track record of relative performance
Strong track record of relative performance • IRR over period since inception of 13.5%1 (Average annual inflation (RPI) over period: 2.8%) CAGR total shareholder returns PHP TSR (absolute change) – 1yr / 3yr/ 5yr PHP Assura EPRA UK 1 year 43.4% 40.9% 16.4% 3 years 22.6% 18.4% 8.8% 5 years 16.5% 13.4
Slide 7: Strong track record of dividend growth
Strong track record of dividend growth Historic dividend progression CAGR 9.1%1 7.0 Implied PHP 2020 dividend yield2 6.0 Share Price Yield 5.90p 5.60p 5.40p 160p 3.7% 5.125p 5.25p 4.75p 4.88p 5.00p 5.0 4.63p 4.25p 4.38p 4.50p 4.13p Q2-Q4 4.0 3.75p 3.38p 3.00p 3.0 2.75p 2.50p 2.25p 2.00p 2.0 1.75p 1.
Slide 8: Financial results
Our growing portfolio Financial results Strong performance delivering earnings, net asset value and dividend growth
Slide 9: Key financial highlights
Key financial highlights Performance 31 December 2019 31 December 2018 Change Net rental income (£m) 115.7 76.4 +51.4% Adjusted EPRA earnings (£m) 59.7 36.8 +62.2% Dividends paid (£m) 59.4 36.6 +62.3% Dividend cover 101% 101% - Dividend per share (pence) 5.6p 5.4p +3.7% Position 31 December 2019 31
Slide 10: Income Statement
Income Statement PHP MedicX 31 Dec 2019 31 Dec 2018 Change 12 months 9.5 months £m £m % Net rental income 81.1 34.6 115.7 76.4 +51.4% Administrative expenses (9.2) (1.3) (10.5) (8.6) Performance incentive fee (1.8) - (1.8) (1.3) Operating profit before financing costs 70.1 33.3 103.4 66.5 +55.5% Net
Slide 11: EPRA cost ratio
EPRA cost ratio • EPRA cost ratio reduced to 12.0%, lowest in sector (PHP: FY18 14.3%; MedicX FY18: 18.4%) • Reflects 9.5 months of synergy savings - £4.0m per annum • Total administrative expense ratio (TER) reduced to 0.4% (FY18: 0.6%) 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Source: Peel Hun
Slide 12: Balance Sheet strengthened
Balance Sheet strengthened Adjusted EPRA NAV per share (pence) 115.0 5.5 (5.5) 110.0 4.1 (1.4) 0.8 (0.7) 107.9 105.1 105.0 100.0 95.0 90.0 85.0 Opening Adjusted Dividends Portfolio Net impact of Interest Shares Closing NAV per EPRA paid revaluation MedicX derivatives issued NAV per share earnings me
Slide 13: Property Portfolio
Our growing portfolio Property Portfolio Modernising Primary Care infrastructure in a sustainable way for the 21st Century
Slide 14: Property portfolio overview
Property portfolio overview Key Figures1 PHP MedicX Combined Total number of properties 320 168 488 Including properties in Ireland 11 5 16 Investment portfolio value (£bn) 1.57 0.84 2.41 Floor area (000’s sqm) 458 231 689 Capital value (£ per sqm) 3,429 3,631 3,497 Contracted rent roll (£m) 82.6 45
Slide 15: Property portfolio overview
Property portfolio overview Geographical spread by valuation South West 5% Midlands and London East Anglia 7% Ireland 22% 7% Wales 8% Scotland North East 8% 16% North West 13% South East 14% Covenant exposure by rent roll Pharmacy Other 8% 2% Government backed income (UK GPs/NHS/HSE) 90% Primary Hea
Slide 16: High quality recurring income
High quality recurring income Key characteristics of the portfolio Strong tenant 31% 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 69% OMV revi
Slide 17: Long leases with rental growth potential
Long leases with rental growth potential • Effectively upward only rent roll Rental growth history • Total weighted average rental growth 1.9% p.a. 5.0% 3.9% 4.0% • 7% on fixed uplift (ave. 3.1% p.a.) 4.0% 3.4% 3.4% 3.1% 3.2% 3.0% • 24% index linked (ave. 3.0% p.a.) 3.0% 2.4% 2.2% 1.8% 1.9% • 69% re
Slide 18: Growing development pipeline
Growing development pipeline • Six schemes on site with a net development cost of £57m Eastbourne, East Sussex, UK Bray Primary Care Centre, Ireland Tenants Tenants • GP Practices x 2 • Health Service Executive (HSE) • Pharmacy • GP Practices Purchase date: December 2019 • Pharmacy PC date: Q1 2021
Slide 19: Ongoing investment
Ongoing investment • Nine assets acquired for £57.1m (average lot size £6.3m) • Strong active pipeline in UK and Ireland totalling £160m including £44m in legal due diligence Oakwood Lane Medical Centre, Leeds The Meath Primary Care Centre, Dublin, Ireland Tenants Tenants • GP Practice • Health Serv
Slide 20: Asset Management – enhancing existing portfolio
Asset Management – enhancing existing portfolio • 36 projects completed, on-site or approved and due to commence shortly • £13.4m invested, £0.64m additional rent and WAULT extended back to 19 years • Strong pipeline of over 100 potential projects Central Milton Keynes Medical Practice, Milton Keyne
Slide 21: Environmental, social and governance
Environmental, social and governance • 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 EPC ratings • 80% of the portfolio has an EPC rating of C or better E A • Future asset and property managem
Slide 22: Financing
Our growing portfolio Financing Delivering financial management
Slide 23: Delivering financial management
Delivering financial management • £100m equity raise via accelerated book build Placing • £150m/2.875% unsecured convertible bond issued for 6 years • €70m/1.509% euro denominated senior secured loan notes issued for 12 years • £100m secured, multi-currency RCF with HSBC for 3 year term with options
Slide 24: Debt summary
Debt summary • Broad and diverse range of lending partners Euro private placements £102m/€121m (7%) • Long weighted average debt maturity of 7.2 years Convertible bond £150m (10%) • 98% of debt fixed or hedged for a weighted average maturity of 8.2 years Aviva £522m • Total debt facilities in excess
Slide 25: Outlook
Outlook • 1.475p first quarterly dividend for 2020 payable on 21 February, equivalent to 5.9p on an annualised basis, which represents a 5.4% increase and 24th year of dividend growth representing a CAGR of 9.1% • 13.5% IRR over period since inception in 1996 to date – 25p invested at IPO today wort
Slide 26: Appendices
Our growing portfolio Appendices
Slide 27: Positive yield gap
Positive yield gap Illustrative yield gap on property investment UK Acquisitions Ireland 6.0% 6.0% 5.0% 4.8% 5.2% 5.0% 0.275% 0.275% +0.1% 4.0% 0.7% 4.0% 3.4% 3.0% 3.0% 1.6% 2.1% 2.0% 1.7% 2.0% 1.0% 1.0% 0.0% Valuation Incremental 10 year Libor Average debt Income return 0.0% yield* mgt Fee Swap Rat
Slide 28: Spread of funding sources
Spread of funding sources Secured facilities 3 Barclays/ Secured Provider Santander Lloyds RBS HSBC Aviva Aviva – One Medical AIB bond Tenor Bullet Bullet Bullet Bullet Bullet Bullet Bullet Amortising Expiry Jan-2021 Jul-2021 Dec-2021 Mar-2022 Dec-2022 Dec-2022 Dec-2025 Aug-2026 Facility £115m £31m
Slide 29: Spread of funding sources (continued)
Spread of funding sources (continued) Unsecured Unfettered Total Secured facilities (continued) 3 facilities 1 assets Secured Standard Euro Euro Convertible Provider Aviva Ignis Aviva Aviva Aviva bond bond Life PP (€) PP (€) Tenor Bullet Bullet Bullet Bullet Bullet Bullet Bullet Amort’n Amortising B
Slide 30: Balance sheet
Balance sheet £m 31 Dec.19 31 Dec.18 Investment properties 2,413.1 1,502.9 Cash 143.1 5.9 Debt (1,210.4) (679.1) Net debt (1,067.3) (673.2) Other net current liabilities (33.0) (21.1) Adjusted EPRA net assets 1,312.8 808.6 Convertible bond fair value adjustment (22.7) (3.4) Fixed rate debt and swap
Slide 31: Rent review results
Rent review results • £1.6m (1.9% p.a) increase from 312 rent reviews completed OMV Number of outstanding 12 months to 31 December 2019 Rent reviews reviews (current rent) • 1.1% p.a. achieved on 165 open market value reviews completed • 3.0% p.a. achieved on 132 indexed linked reviews No % No £m •
Slide 32: EPRA cost ratio
EPRA cost ratio Year ended Year ended 31 December 2019 31 December 2018 £m £m Gross rent less ground rent and service charge income 118.3 77.6 Direct property expense 5.6 3.2 Administrative expenses 10.5 8.6 Performance incentive fee (“PIF”) 1.8 1.3 Less: service charge costs (2.8) (1.7) Less: groun
Slide 33: Nexus’s revised fee base
Nexus’s revised fee base • MedicX portfolio at acquisition (£804m) 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 ch
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 Annual Results Presentation 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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