Primary Health Properties PLC · LSE:PHP
Primary Health Properties — MedicX Fund — H1 2015 Earnings Presentation
36 slides from Primary Health Properties's earnings presentation, May 2015
Slide 1: 2015 interim results presentation
2015 interim results presentation May 2015 1
Slide 2: Agenda
Agenda 1. Introduction 2. Portfolio review 3. Key financials 4. NHS and primary care update 5. Investment opportunity 2
Slide 3: Introduction
Introduction Specialist primary healthcare infrastructure fund 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 £302 million1 market capitalisation Fund not a developer or operator External investment adv
Slide 5: Highlights in the period
MedicX Fund Highlights in the period Total shareholder return of 5.4% for the six month period1 24.8% increase in EBITDA to £13.8 million2 (31 March 2014: £11.0 million) Dividend cover of 67% for the six month period3 (31 March 2014: 48%) Capital appreciation of the portfolio of £13.6 million less £
Slide 6: Robust financial position
MedicX Fund Robust financial position Property yield vs borrowing cost Committed investment £535.5m1 Property valuation yield 5.57%2 Adjusted NAV 68.8p2 Adjusted NAV plus debt 61.5p2 Average lease term 15.4 years1 Total drawn debt facilities £291.5m2 Average cost of debt 4.42%1 Average debt term 14.
Slide 7: Value drivers
MedicX Fund Value drivers Investment quality £17.2 million of new property invested with 19.2 year average unexpired lease term Financing capability Sector leading financing structure 14 active initiatives Asset management £1.4 million rent reviews agreed in the period with the equivalent of an aver
Slide 8: Shareholding returns
Shareholding returns Continuing to deliver consistent returns Dividends and share pricegrowth Dividend growth Mar 2015 5.4%1 Sept 2014 12.0%2 Sept 2013 13.1% Sept 2012 9.0% Sept 2011 9.4% Sept 2010 8.6% Sept 2009 10.8% 10.5% per annum average total shareholder return over last five years 1Share pric
Slide 9: Dividends
Dividends Progressive dividend policy Dividend cover of 67% for the first half of the year On full investment at 5.5% and 60% gearing, underlying dividend cover3 would be c.73% Yield (%) Dividend1 5.9p Shareprice2 85.0p Yield on share price 6.9% Sept 2011 Mar 2012 Sept 2012 Mar 2013 Sept 2013 Mar 20
Slide 10: Portfolio review
Portfolio review Specialist primary healthcare infrastructure fund 10
Slide 11: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 141 assets Contractual certainty of income Portfolio geographical spread 134 projects 100% 95% 7 projects 5% 0% Demand risk Availability risk Under construction Operational Security of tenure 100% 100% Freehold/long leasehold Ownership 1As a
Slide 12: Portfolio of modern purpose built assets
Portfolio of modern purpose built assets Portfolio review1 Security of income by tenant type Security of income by lease expiry Modernity of assets Value per property Average unexpired lease term 15.4 years2 Average age 7.2 years2 Average value £3.9 million2 1As at 31 March 2015; includes comp
Slide 13: Portfolio of modern purpose built assets: rental growth
Portfolio of modern purpose built assets Rental growth1 Total rent roll £33.9 million Rent review profile £32.2 million completed £1.7 million under construction £14.4 million passing rents under negotiation2 £1.4 million rent reviews agreed during the period3 Equivalent to 1.7% per annum increase a
Slide 14: 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 Year to Year to Period to Sept 07 Sept 08 Sept 09 Sept 10 Sept 11 Sept 12 Sept 13 Sept 14 Mar 15 Passing rents agreed £1,814,809 £1,134,357 £3,198,193 £2,785,382 £3,237,636 £4,122,166 £2,347,99
Slide 15: Acquisitions since October 2014
Acquisitions since October 2014 Total investment of £17.2 million in 4 properties Investment Acquisition Developer Properties £m Kingsbury GPI 4.8 1 Maidstone GPI 7.0 1 Streatham IntraUrban 2.9 1 Northampton MPA 2.5 1 15
Slide 16: Property valuation yields stable
MedicX Fund Property valuation yields stable1 1MedicX Fund property valuation as at 31 March 2015, IPD data as at 30 April 2015 and Gilt rate data as at 19 May 2015 16
Slide 17: Key financials
Key financials Specialist primary healthcare infrastructure fund 17
Slide 18: Key financials: income statement
Key financials Income statement 6 months to 31 Mar 2015 6 months to 31 Mar 2014 Change £000 £000 Rent receivable 16,652 13,415 24% Other income1 382 436 (12)% Total income 17,034 13,851 23% Direct property costs2 892 718 24% Investment advisory fee 1,845 1,593 16% Overheads 514 497 3% Total expenses
Slide 19: Key financials: balance sheet
Key financials Balance sheet As at 31 Mar 2015 As at 31 Mar 2015 £000 Pence per share Investment properties 527,436 144.8 Debt 289,499 79.5 Cash 23,925 6.6 Net debt 265,574 72.9 Adjusted NAV1 250,596 68.8 Adjusted NAV plus debt MtM1 223,954 61.5 DCF 340,584 93.5 As at 31 Mar 2015 Restrictions / cove
Slide 20: Debt funding
Key financials Debt funding Average all-in fixed rate of debt of 4.42% and an average unexpired term of 14.01 years, close to unexpired lease term of the investment properties In addition, there is a £25 million revolving loan facility with the Royal Bank of Scotland Plc which at current rates is ex
Slide 21: Long term debt position
Key financials Long term debt position Sep 2014 Mar 2015 Debt £286.3m £289.5m Weighted average maturity 13.3 years 14.0 years1 Weighted average cost of debt 4.35% 4.42%1 1As at 19 May 2015 21
Slide 22: NHS and primary care update
NHS and primary care update Specialist primary healthcare infrastructure fund 22
Slide 23: Political and NHS perspectives
NHS and primary care update Political and NHS perspectives Jeremy Hunt David Cameron 13 May 2015 18 May 2015 Extra £8 billion per year by 2020 increased spending The government accepts that there will be a £30 on key development areas billion funding gap by 2020 5,000 more GPs in the next five years
Slide 24: Premises and GP earnings
NHS and primary care update Premises and GP earnings Premises GPs BMA review underpins the need for new infrastructure GP income down by 25% in real terms since the 70% of existing premises regarded as unfit by GPs to 2004 contract2 expand or sustain services1 1 : 3 GPs feel current workload unmanag
Slide 25: Investment opportunity
Investment opportunity Specialist primary healthcare infrastructure fund 25
Slide 26: Pipeline of new opportunities
Pipeline1 Pipeline of new opportunities Investment Adviser with proprietary market access and deal flow Forward funding framework with developers Octopus Healthcare Property and GPI Strong pipeline of c.£100 million potential acquisitions when fully developed including £20 million in legals Circa £6
Slide 27: Investment opportunity: Conclusion
Investment opportunity Conclusion Strong pipeline of c.£100 million potential acquisitions when fully developed Earnings enhanced as MedicX Fund grows Management well placed to take advantage of opportunities Attractive total return proposition and track record 7.1% dividend yield at 82.75 pence per
Slide 28: Appendices
Appendices Specialist primary healthcare infrastructure fund 28
Slide 29: Rental growth prospects: supply and demand in primary care
Rental growth prospects Supply and demand in primary care Rental growth driven by construction costs and new build rental evidence 300 BIS Output Price Index for New Construction Construction costs1 250 RPI Index Economic activity now increasing 200 The BIS Output Price Index for All Work (2010): al
Slide 30: 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 managemen
Slide 31: Adjusted NAV plus debt
Key financials Adjusted NAV plus debt1 1Adjusted to exclude goodwill, the impact of deferred tax not expected to crystallise, financial derivatives, and the post year-end impact of resetting debt interest costs 31
Slide 32: Adjusted NAV plus debt sensitivities
MedicX Fund Adjusted NAV plus debt sensitivities1 NAV penceper NAV pence per share Cost of20 year debt (bps) share ERV % --20 - +20 +50 +100 % -1% - +1% +2% +3% 6.25 43.4 45.3 47.1 49.6 53.7 6.25 43.8 45.1 46.4 47.8 49.1 6.00 48.9 50.8 52.6 55.2 59.2 6.00 49.3 50.6 52.0 53.4 54.8 Net initial yield N
Slide 33: DCF NAV sensitivities
Key financials DCF NAV sensitivities1 Discount rate Rental and capital value increases per annum NAV penceper NAV penceper Completed share Rental share % 0.5 1.5 2.5 3.5 4.5 % 6.0 6.5 7.0 7.5 8.0 Under construction 6.0 105 100 95 90 86 -1.0 67 72 78 84 91 Capital 7.0 104 99 94 90 86 0.0 74 80 85 92
Slide 34: MedicX Fund performance: sector comparison
MedicX Fund performance Sector comparison1 Dividend yield Share price total return 1As at 19 May 2015 – Canaccord Genuity / DataStream 34
Slide 35: 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 Steve Le Page,
Slide 36: Important notice
MedicX Fund Important notice This document has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000, as amended. Reliance on this document for the purpose of engaging in any investment activity may expose an individual to a significant risk of l