Interim Management Statement

RNS Number : 4808X

The MedicX Fund Limited

08 February 2013

 



For immediate release                                                                           

8 February 2013

MedicX Fund Limited

("MedicX Fund", "the Fund" or "the Company")

Interim Management Statement

MedicX Fund Limited (LSE: MXF), the specialist primary care infrastructure investor in modern purpose-built primary healthcare properties in the United Kingdom, today announces its Interim Management Statement for the period from 1 October 2012 to today's date.

Financial position

The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP as at 31 December 2012 stood at £386.8 million, on the basis all properties were complete, reflecting a net initial yield of 5.81% which has resulted in a valuation gain of £1.3 million during the quarter, comprising a £1.6 million appreciation in capital value offset by £0.3 million of purchaser costs written-off in the period.  The portfolio net initial yield of 5.81% compares with a benchmark 20-year gilt rate of 3.02%.

On 23 July 2012, the Company announced the acquisition of a portfolio of 31 completed and fully let primary care medical centres, including the assumption of a £63.8 million debt facility provided by Aviva Public Private Finance Limited ("the Aviva PMPI loan facility").  On 3 December 2012 the Company entered an agreement to reset the interest rates on the Aviva PMPI loan facility to current market levels.  The all-in fixed interest rate for the Aviva PMPI loan facility has been reset to 4.45% from the weighted all-in fixed interest rate of 6.26% at a cost of £10.3 million.  This has been offset by the release of an amount of £11.9 million being the fair value adjustment for the facility recognised at the time of the acquisition net of its subsequent amortisation. 

The Company entered into an interest rate swap agreement on 4 October 2012 to fix the interest rate on the £23.7 million drawn against the Deutsche Postbank facility in the last quarter of the year ended 30 September 2012.  The interest rate was fixed for the life of the facility at an all-in rate of 2.62%, and results in a weighted average fixed interest rate of 2.75% for the total facility of £31.2 million which is interest only and expires in April 2015.

The all-in weighted average cost of debt for the Company is now 4.45%, down from 4.91% as at 30 September 2012, with a weighted average unexpired term of 16.7 years.

Incorporating the December valuation, the unaudited adjusted net asset value at 31 December 2012 is estimated to be £167.5 million equivalent to 64.2p per share, compared with 64.4p per share as at 30 September 2012, which allowed for the benefit of the post year-end impact of resetting the interest rate on the Aviva PMP loan facility. On the same basis, the unaudited adjusted net asset value plus the mark to market benefit of fixed rate debt is estimated now to be £168.3 million equivalent to 64.5p per share, compared with 64.3p per share at 30 September 2012.

Since 31 December 2012, long term interest rates have increased by 30 basis points.  Taking the property valuation as at 31 December 2012 and applying the 30 basis points increase in long term interest rates to the calculation of the mark to market benefit of MedicX Fund's debt results in an uplift of £8.1m and an estimated increase in the unaudited net asset value plus mark to market benefit of fixed rate debt to £175.6m (or 67.3p per share), representing a 2.8p increase from 31 December 2012.

Discounted cash flow valuation of assets and debt

On the Fund's behalf the Investment Adviser has carried out a discounted cash flow ("DCF") valuation of the Group's assets and associated debt at each period end. The basis of preparation is similar to that calculated by infrastructure funds.  The values of each investment are derived from the present value of each property's expected future cash flows, after allowing for debt and taxation, using reasonable assumptions and forecasts based on the predominant lease at each property.  The total of the present values of each property and associated debt cash flows so calculated are then aggregated with the surplus cash position of the Group.

At 31 December 2012, the DCF valuation was £240.4 million or 92.2p per share, compared with 91.9p per share as at 30 September 2012.

The discount rates used are 7% for completed and occupied properties and 8% for properties under construction.  The weighted average discount rate is 7.11% which represents a 4.09% risk premium relative to the 20 year gilt rate of 3.02% as at 31 December 2012.  The 20 year gilt rate as at 30 September was 2.95%.

The discounted cash flows assume an average 2.5% per annum increase in individual property rents at their respective review dates.  Residual values continue to be based upon capital growth at 1% per annum from the current valuation until the expiry of leases, (when the properties are notionally sold), and also assuming the current level of borrowing facilities.

Rent reviews

Since 1 October 2012, seven leases and rents of £0.5 million were reviewed and the equivalent of a 2.2% per annum increase was achieved.  Reviews of £10.1 million of passing rent are currently under negotiation.

The Investment Adviser has seen a slowdown in rental growth as a result of the rental levels agreed for new developments not keeping pace with inflation.  This is due to low growth in construction costs, a tougher procurement regime as well as limited evidence due to a slowdown in the number of new schemes reaching financial close.  

There are signs that procurement will increase as the current NHS restructuring beds down and that, coupled with inflationary pressure on construction costs, should lead to greater rental growth in the medium term.

Investment activity

The portfolio, which consists of 107 properties, continues to perform in line with long-term objectives.  The four properties at Grangetown, Kingston upon Thames, Methil and Monkseaton were completed on time with the first two reaching completion in October, Methil completing in December, and Monkseaton achieving completion in early January.  Seven properties are now under construction at Raynes Park, Caerphilly, Uckfield, Tooting, Middlewich, Arnold and Scholar Green.  All of these properties are due to complete in the next twelve months.

Share issues

On 31 December 2012 the Company sold 396,751 shares out of treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 73.9 pence per share.

The total number of Ordinary Shares of the Company in issue is 263,645,780, of which 2,829,310 are held in treasury, compared with 263,645,780 Ordinary Shares with 3,226,061 held in treasury at 30 September 2012.  Accordingly, as at today's date, the total voting rights in the Company amount to 260,816,470 Ordinary Shares.

Dividends

On 31 December 2012 a quarterly dividend of 1.4p per Ordinary Share in respect of the period 1 July 2012 to 30 September 2012 was paid to Ordinary Shareholders on the register as at close of business on 16 November 2012.

On 1 February the Directors approved a quarterly dividend of 1.425p per Ordinary Share in respect of the period 1 October 2012 to 31 December 2012.  The dividend will be paid on 28 March 2013 to Ordinary Shareholders on the register as at close of business on 15 February 2013.  Shareholders will be offered the opportunity to take new ordinary shares in the Company in lieu of receiving a cash payment under the Scrip Dividend Scheme (the "Scheme") previously put in place by the Company on 5 May 2010.

The Company expects, subject to unforeseen circumstances, to pay dividends totalling 5.7p per Ordinary Share in respect of the financial year ending 30 September 2013, an increase of 0.1p per Ordinary Share from the 5.6p per Ordinary Share for the financial year ended 30 September 2012.

Fundraising

In the announcement of the Company's full year results on 6 December 2012, the Chairman stated that following the successful deployment of funds from the March 2012 equity raising, and in view of the committed investment and attractive investment pipeline, the Company was considering raising new equity capital in 2013.

The Investment Adviser, together with the Board, is considering the timing of any fundraise in light of the pace at which the Investment Adviser believes the pipeline will come to fruition.  The Company wishes to minimise the time it holds cash pending investment as a result of the low returns achievable on cash.

The Company will make a further announcement in due course.

End

For further information please contact:

MedicX Group:                                                            [phone]

Keith Maddin, Chairman

Mike Adams, Chief Executive Officer

Mark Osmond, Chief Financial Officer

MedicX Fund:                                                              [phone]

David Staples, Chairman

Canaccord Genuity Limited:                                           [phone]

Andrew Zychowski/Helen Goldsmith

Buchanan:                                                                   [phone]

Charles Ryland/Sophie McNulty/Gabriella Clinkard

Information on MedicX Fund Limited

MedicX Fund Limited ("MXF", the "Fund" or the "Company", or together with its subsidiaries, the "Group") is the specialist primary care infrastructure investor in modern, purpose-built primary healthcare properties in the United Kingdom, listed on the London Stock Exchange, with a portfolio comprising 107 properties.

The Investment Adviser to the Company is MedicX Adviser Ltd, which is authorised and regulated by the Financial Services Authority and is a subsidiary of the MedicX Group. The MedicX Group is a specialist investor, developer and manager of healthcare properties with 31 people operating across the UK.  

The Company's website address is www.medicxfund.com.  Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement. 

 

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