Primary Health Properties Plc · LSE:PHP
Primary Health Properties — FY2018 Earnings Presentation
38 slides from Primary Health Properties's earnings presentation, Jan 31, 2019
Slide 1: Annual Results Presentation 2018
Slide 2: Agenda
Slide 3: Primary Health Properties PLC at a glance
Primary Health Properties PLC at a glance Er ar nr GS < FTSE 250, UK Real Estate Investment Trust (“REIT”) Leading investor in flexible, modern primary healthcare accommodation across UK and Ireland Leading portfolio of 313 properties valued at £1.5 billion 91% of income funded by government bodies
Slide 4: Proposed merger with MedicX
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Slide 5: Compelling strategic, operational and financial rationale
Compelling strategic, operational and financial rationale v Enlarged Group portfolio: more than 470 properties, combined value of £2.3bn, annual rental income of over £120m Stronger platform with v Strengthened investment case from greater scale and improved rental growth prospects from asset manage
Slide 6: Benefits to PHP shareholders
Benefits to PHP shareholders The Board of PHP believes that a combination with Medicx represents a compelling opportunity to create a business capable of achieving significant strategic, operational and financial benefits v Strengthened investment case from greater scale and improved rental growth p
Slide 7: Financial results
Slide 8: Key financial highlights
Key financial highlights Performance 31 December 2018 31 December 2017 Change Net rental income (£m) 76.4 71.3 +7.2% EPRA earnings (£m) 36.8 31.0 +18.7% Dividends paid (£m) 36.6 31.4 +16.6% Dividend cover 101% 99% +2.0% Dividend per share (pence) 5.40p 5.25 +2.9% Position 31 December 2018 31 Decembe
Slide 9: Income Statement
Income Statement 31 December 2018 31 December 2017 Change £m £m % Net rental income 76.4 71.3 +7.2% Administrative expenses (8.6) (8.2) Performance incentive fee (1.3) (0.5) Operating profit before financing costs 66.5 62.6 +6.2% Net financing costs (29.7) (31.6) IEPRA earnings 36.8 31.0 +18.7% Reva
Slide 10: EPRA NAV per share (pence)
EPRA NAV per share (pence) 110.0 5.2 (5.2) 4.7 (0.7) 0.4 105.1 105.0 100.7 100.0 95.0 90.0 85.0 Opening NAV EPRA Dividends Portfolio Interest Shares Closing NAV per share earnings paid revaluation derivatives issued per share cancelled
Slide 11: Dividend per share history
CAGR: 9.25%1 6.0 5.40p 5.25p 4.88p 5.00p 5.125p 5.0 4.63p 4.75p 4.38p 4.50p 4.13p 4.25p 4.0 3.75p 3.38p 3.00p 3.0 2.75p 2.50p 2.25p 2.00p 2.0 1.75p 1.40p 1.50p 1.0 0.80p 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividend cover r
Slide 12: Total return versus indices
PHP 80% FTSE All Share Index 67.8% 200 70% FTSE All Share REIT Index (all rebased to 100) 60% 160 50% 40% 30.1% 120 30% 23.5% 24.6% 25.2% 20% 6.4% 2.9% 80 10% 0% -10% 40 -7.7% -5.3% -20% 1 year 3 year 5 year 0 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 PHP FTSE All Share Index FTSE All Share REIT
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Slide 14: Investing the proceeds from the equity raise
Investing the proceeds from the equity raise Proceeds from £115m equity raise selectively deployed by acquiring eight properties and completing 16 asset management projects UK ° Two assets acquired for £28m generating £1.2m p.a. of rental income * — Strong pipeline including £10m in legals and a fur
Slide 15: Property portfolio
Property portfolio Portfolio of 313 healthcare centres - valued at £1.5bn - Average net initial yield 4.85% (2017: 4.91%) - Average lot size increased to £4.8m (2017: £4.5m) + 82% of portfolio valued at more than £3m - Irish portfolio of 8 primary care centres - valued at €110m (including developmen
Slide 16: Investment Acquisition
Investment Acquisition Celbridge Primary Care Centre, Co. Kildare Ireland Tenants Health Service Executive (HSE) Centric Health Primary Care (5 GP’s) The Child & Family Agency (Irish Government) Mangan Pharmacies Limited Size WAULT 3,500 sqm 23.9 years Date purchased Number of GPs September 2018 5 A
Slide 17: Investment Acquisition
Investment Acquisition Moredon Medical Centre, Swindon Tenants GP practice (5 GPs) Lloyds Pharmacy Size 1,446 sqm Date purchased June 2018 Acquisition cost £6.1m WAULT 27.5 years Number of GPs 5 Rent review OMV AND RPI Primary Health Properties Primary Health Properties PLC Annual Results Presentati
Slide 18: Development delivery
Development delivery Bray Primary Care Centre, Ireland Tenants Size Health Service Executive (HSE) GP practice (5 doctors) GYsoeSeyi Pharmacy Coffee shop ‘Completion date Development Cost Autumn 2019 £20.0m (€22.5m) WAULT Rent Reviews 24.8 years Irish CPI Primar Health” Properties Primary Health Pro
Slide 19: Asset management activities adding value
Asset management activities adding value
Slide 20: High quality recurring income
High quality recurring income.... y characteristics of the portfolio Strong tenant covenant - 31% of portfolio on fixed or 91% of rent roll paid ine mae) ai leases nove indexed uplifts. 69% OMV directly/indirectly by the enective’ nerd only ren} review, typically every three Government years v o v v
Slide 21: Long leases with growth potential
Long leases with growth potential Effectively upward only rent roll Total weighted average rental growth 1.4% * 8% on fixed uplift (ave. 2.6% p.a.) * 23% index linked (ave. 2.7% p.a.) * 69% reviewed to open market (ave. 0.4%) Drivers of rental growth * Increased development activity * Building cost
Slide 22: Asset Management Project
Asset Management Project Fell Tower Medical Centre, Gateshead Refurbishment of the large multi-purpose room on the lower ground floor to create 5 consulting rooms and new patient waiting area. Total capex. £0.2m. New 25 year lease on the whole property. 5 week programme completed in August 2018. Fel
Slide 23: Funding, diversity and longevity
Funding, diversity and longevity
Slide 24: Delivering financial management
Delivering financial management * Low marginal cost of debt 2.6% * 98% of debt fixed or hedged - 2.5% €51m private placement loan note issued with a weighted average maturity of 10.4 years * £40m (£46m incl. PPE) convertible bonds converted saving £2.0m p.a. * Repayment of £75m retail bond (July 201
Slide 25: Debt maturity profile
• • • • £'m Debt maturity profile 200.0 180.0 175.6 160.0 140.0 125.4 120.0 112.8 104.3 98.2 100.0 80.0 70.0 63.0 60.0 50.0 51.2 40.0 20.0 13.0 7.0 0.0 1.5 1.7 0.0 2.0 0.0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Slide 26: Positive Outlook
Slide 27: Stronger platform with increased scale and resources
Stronger platform with increased scale and resources Compelling strategic, operational and financial rationale for the merger Y Highly complementary portfolios, the combined business will present a stronger platform with greater scale and financial resources Y Combination expected to create signific
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Slide 29: MedicX transaction structure & timetable
MedicxX transaction structure & timetable (Transaction structure * MedicX shareholders to receive 0.77 PHP shares for every MedicX share held + All share merger to be effected by means of a Scheme of Arrangement by MedicX * Based on PHP’s closing share price on 23 January 2019 of 115.2p the merger v
Slide 30: Complementary property portfolios with attractive characteristics
Complementary property portfolios with attractive characteristics PHP() Medicx) Pro-forma Total number of properties 313 166 479 Including properties in Ireland 8 5 13 Investment portfolio value (£bn) 15 0.8 2.3 Contracted rent roll (£m) 79 44 123 Net initial yield (NIY) 4.85% 4.85% 4.85% Average lo
Slide 31: Debt maturity profile
Debt maturity profile PHP MedicX £'m 300 278 250 198 200 179 165 150 129 121 4 108 23 100 85 198 73 69 53 34 50 21 5 12 7 5 98 50 176 125 3 51 70 104 113 63 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Slide 32: Management and revised fee structure
Management and revised fee structure Board of directors and management “ Helen Mahy and Laure Duhot of the Medicx Board are expected to join the board of the enlarged group at completion, with Nick Wiles and Geraldine Kennel stepping down. Helen Mahy is expected to be the Senior Independent Director
Slide 33: Nexus's revised fee base
Nexus’s revised fee base * Medicx portfolio at acquisition (£808m')) 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 * Noc
Slide 34: Positive Yield Gap
Positive Yield Gap 1. Net margin over funding cost - UK Acquisitions 6.00% 5.00% 4.00% 3.00% 2.00% 1,00% 0.00% 5.8% 15% 2.0% ncome return after costs Valuation yield 4.85% [| 0.275% 1.7% Valuation ncremental lyr Libor Average debt yield” metFee"* Swap Rate*** —margin**** pamary * PHP portfolio valua
Slide 35: Spread of Funding Sources
Spread of Funding Sources Secured Unsecured facilities! Facilities Provider HSBC Lloyds _—_ Barclay RBS Aviva’ Secured Secured Aviva = Aviva Santander Euro Aviva Convert. Retail /AIB bond bond PP bond bond Tenor Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Bullet Amort’n Bul
Slide 36: Contact Details
Contact Details Harry Hyman Richard Howell Managing Director Finance Director harry. hyman@nexusgroup.co.uk richard.howell@nexusgroup.co.uk Primary Health Properties Primary Health Properties PLC Annual Results Presentation 2018
Slide 37: 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 38: 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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