Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — FY2012 Earnings Presentation
39 slides from Primary Health Properties's earnings presentation, December 2012
Slide 1: Specialist primary healthcare infrastructure fund: 2012 annual results presentation
Specialist primary healthcare infrastructure ast uctu e fund u d 2012 annual results presentation 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. Investment opportunity 2
Slide 3: Introduction
Introduction 3
Slide 4: MedicX Fund 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 £192 million1 market capitalisation • Fund not a developer p or operator p • External in
Slide 5: Dividend growth year-on-year
Dividend growth year-on-year year on year 5
Slide 6: Continuing to deliver returns
Continuing to deliver returns Sept Sept Sept Sept 2009 2010 2011 2012 Total shareholder return based on share p price 11 4% 11.4% 8 6% 8.6% 9 4% 9.4% 9 0% 9.0% growth and dividends received in the year Renewed R d Investment I t t Ad Adviser i agreementt increased i d performance f hurdle from 8% to
Slide 7: Accelerating growth
Accelerating growth Committed investment Rental income 1MedicX Fund property valuation yield less cost of long term debt (2028 gilt rate plus margin) 7
Slide 8: Highlights of the year
Highlights of the year 1 • New committed investments since 1 October 2011 of £146.5 million acquired at a cash yield of 6.03% • £394.8 million committed investment in 107 p primaryy healthcare properties p p at a valuation net initial yield y of 5.84% compared to 20 year gilt rate of 3.00% • Adjuste
Slide 9: Portfolio review
Portfolio review 9
Slide 10: Portfolio review
Portfolio review 1 Portfolio g geographical g p spread p 107 assets Contractual certainty 98 projects of income 92% 100% 9 projects 8% 0% Demand risk Under d construction A il bilit risk Availability i k Operational Security of tenure 100% 100% Freehold/long Ownership leasehold 1As at 4 December 201
Slide 11: Portfolio review
Portfolio review 1 Security of income Security of income by tenant type by lease expiry Modernity of assets Value per property Average unexpired lease term 17.2 years y Average age 6.1 years Average g value £3.6 million 1As at 30 September 2012; includes completed value of properties under construct
Slide 12: Rental reviews
Rental reviews 1 • Total rent roll £24.8 million − p £22.2 million completed − £2.6 million under construction • £8.9 million passing rents currently under negotiation • £3.9 million rent reviews agreed during the period2 • Equivalent to 2.9% per annum increase achieved Increasing inflation link − 2
Slide 13: Rent reviews by period
Rent reviews by period 1 Year to Year to Year to Year to Year to Year to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Number 20 12 34 20 22 16 Passing rent £1,814,809 £969,757 £2,917,782 £1,803,714 £2,309,946 £1,804,170 Annualised increase 3.1% 2.8% 1.8% 3.0% 2.5% 3.3% - Open market reviews 3.0%
Slide 14: Property valuation yields
Property valuation yields 1 1MedicX Fund property valuation as at 30 September 2012, IPD data as at 31 October 2012 and Gilt rate data as at 4 December 2012 14
Slide 15: Acquisitions
Acquisitions Birkwood Putnoe Frodsham Cobham Fleet Thames Ditton Halstead Eastbourne Wood Green Total investment of £112.7 million in 36 completed properties 15
Slide 16: Forward funding investments
Forward funding investments Methil Monkseaton Caerphilly Tooting Kingston Uckfield Middlewich Scholar Green Arnold Total investment of £33.8 million in 9 forward funding properties 16
Slide 17: Completed investments
Completed investments Hounslow Woolwich West Wirral Corby Glen Hirwaun East Cowes Grangetown Clapham Rochdale Total investment of £38.2 million in 10 forward funding properties 17
Slide 18: Key financials
Key financials 18
Slide 19: Key financials – income statement
Key financials – income statement 12 months to 30 Sept 12 months to 30 Sept 2012 2011 Change £000 £000 Rent receivable 15,642 11,768 33% Other income1 860 694 24% Total income 16,502 12,462 32% Direct property costs2 719 551 31% Investment advisory fee 2,383 2,250 6% Overheads 838 662 27% Total expe
Slide 20: Key financials – balance sheet
Key financials – balance sheet As at 30 Sept 2012 As at 30 Sept 2012 £000 Pence per share Gross assets excluding cash 381,115 146.3 Debt 256,249 98.4 Cash 66,247 25.4 Net debt 190,002 73.0 Adjusted NAV1 167,718 64.4 Adjusted NAV plus debt MtM1 167,507 64.3 DCF 239,326 91.9 As at 30 Sept 2012 Restric
Slide 21: Debt funding
Debt funding Deutsche Postbank Acquired Aviva Aviva facility New Aviva facility facility facilities Facility size £100 million £31 2 million £31.2 £50 million £63 6 million £63.6 Committed December 2006 December 2009 February 2012 July 2012 Drawn £100 million £31.2 million £50 million £63.6 million
Slide 22: Historic dividend cover
Historic dividend cover 12 months 12 months 12 months 12 months p to 30 Sept to 30 Sept p to 30 Sept p to 30 Sept p 2012 2011 2010 2009 £000 £000 £000 £000 Dividends paid 12,496 9,131 6,593 6,146 j Adjusted earnings g excluding g revaluation gain g 5,225 , 4,042 , 2,674 , 1,383 , Dividend cover 42%
Slide 23: Investment opportunity
Investment opportunity 23
Slide 24: NHS and primary care update
NHS and primary care update • NHS Bill in place from April 2012 • Clinical Commissioning Groups now involve wider community and only impact on 60% of the NHS budget (originally 80%) • The new NHS includes clustered PCTs across the country (as commissioning support) • Key political focus on integrati
Slide 25: What does this mean for the future?
What does this mean for the future? • Strong role for GPs in fit for purpose premises • Increasing co-location of additional services • Commissioning g will bring g more services to a local level in primary p y care buildings g • Location and flexibility are increasingly important in new primary car
Slide 26: Pipeline
Pipeline • Investment adviser with p proprietary p y market access and deal flow • Strong pipeline of £134 million • Circa £8 million rent roll • 32 properties including 10 from investment adviser development arm • Further completed property acquisition opportunities under review 26
Slide 27: Conclusion
Conclusion • Able to buy assets at attractive prices • 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 7.6% 6% dividend d de d yield y e d at 7
Slide 28: Appendix
Appendix 28
Slide 29: Adjusted NAV plus debt benefit
Adjusted NAV plus debt benefit 29
Slide 30: DCF NAV sensitivity
DCF NAV sensitivity 1 DCF C Sh Share price i Pence per share 91.9p 76.0p Weighted discount rate 7.1% 9.3% Risk premium to 20 year gilt rate 4 2% 4.2% n/a Rental growth per annum 2.5% (0.3)% Capital appreciation per annum 1.0% (1.2)% DCF reconciliation Adjusted NAV plus debt benefit 64.3p Purchasers
Slide 31: DCF NAV sensitivities
DCF NAV sensitivities 1 Discount rate Rental and capital value increases per annum NAV NAV pence per Completed pence per Rental share h share h % 6.0 6.5 7.0 7.5 8.0 % 0.5 1.5 2.5 3.5 4.5 Under constructtion 6.0 103 98 95 91 88 -1.0 65 71 77 84 92 Capital 7.0 101 97 93 89 86 0.0 72 78 84 91 98 8.0 1
Slide 32: Investment adviser fee structure
Investment adviser fee structure Gross assets Investment Adviser fee First £300 million (min £2.25 million) 0.75% Between £300 million and £500 million 0 65% 0.65% Between £500 million and £750 million 0.50% Greater than £750 million 0.40% Earnings enhanced as MedicX Fund grows 32
Slide 33: Disposals in the period
Disposals in the period Churchside Medical Centre April 2012 £1.2 million Ch h id Medical Churchside M di l Centre C t 33
Slide 34: Pressure on primary care estate
Pressure on primary care estate The current UK estate Service transfer to 75% of GPs unhappy with their premises1 primary care _ £8.1 billion of primary care estate3 + NHS budget Ageing and constraints growing population 60% of GPs work from unsuitable premises2 72% GP owned3 1NHS The Information Ce
Slide 35: General medical statistics in England
General medical statistics in England 1 2011 1995 Change • Number of practices 8,316 9,188 -9% • Single-handed g practices p 1,147 2,919 -61% • Number of GPs 35,415 27,465 +29% • Number of part-time GPs 31%2 14% +17% • GPs aged 60 and over 10% 6% +4% • Contracted GPs (GMS) 51% 98% -47% • Salaried GP
Slide 36: Infrastructure comparison
Share price total return Infrastructure comparison i 1 Dividend yield 1As at 4 December 2012 – Canaccord Genuity / DataStream 36
Slide 37: Sector comparison
Share price total return Sector comparison i 1 Dividend yield 1As at 4 December 2012 – Canaccord Genuity / DataStream 37
Slide 38: MedicX Fund Board of Directors
MedicX Fund Board of Directors • David Staples, p , 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 • Chr
Slide 39: Important notice
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 Financial Services and Markets A