Quarterly NAV and business update

RNS Number : 4363O

The MedicX Fund Limited

08 February 2016

 

For immediate release                                                                           

8 February 2016

MedicX Fund Limited

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

Quarterly Net Asset Value ("NAV") announcement and business update

MedicX Fund Limited (LSE: MXF), the specialist primary care infrastructure investor in modern purpose-built primary healthcare properties in the United Kingdom and Ireland, today announces its quarterly NAV as at 31 December 2015.

The quarter ended 31 December 2015 has been another solid period of performance for MedicX Fund, as it continues to make selective acquisitions in delivering on its objective of achieving rising rental income and capital growth.

The unaudited EPRA NAV at 31 December 2015 is £263.6 million, an increase of 2% over the EPRA NAV of £258.4 million at 30 September 2015. This equates to growth of 0.6% in EPRA NAV per share to 71.2 pence. The Company also paid a quarterly dividend of 1.475 pence per share on 31 December 2015.

Market update

The demand for new modern primary care infrastructure remains strong in both the UK and Republic of Ireland as their populations age and a wider range of clinical services are delivered in their communities by GPs.

In spite of positive political will, investment in primary healthcare premises has remained slow. Initial strategic estates planning has been undertaken by each clinical commissioning group in England which is currently being finalised. This planning, coupled with the next phase of submissions under the £1 billion Primary Care Transformation Fund, is expected to provide capital contributions resulting in an increase to the rate of approvals for new primary care developments in the medium term.      

As well as rising clinical demand, it has been well publicised that pressures on GPs from increased regulation and a need for more GP numbers to deliver longer hours of service are having an effect. The pace of change is accelerating with GPs working more collaboratively with more Provider Groups and Super Practices emerging which is another driver for new premises, fit to deliver services for larger patient numbers. MedicX Fund is well positioned to deliver the new schemes needed by working closely with its preferred developers.

In the Republic of Ireland, although the market is less mature, similar demographic pressure and political will are enabling the Health Service Executive to drive forward its programme of putting in place a modern purpose-built estate to deliver provision of world class healthcare. MedicX Fund, with schemes underway in both Mullingar and Crumlin, is well positioned and has connected with various developers to lead this growth.

Financial position

Between 1 October 2015 and 31 December 2015, MedicX Fund has invested in five standing, let UK properties and committed to forward funding its second property in the Republic of Ireland. These acquisitions will have a combined value of £20.4 million when completed. During the same quarter, the Fund sold five million shares from treasury at a premium to NAV to meet market demand and paid a dividend of 1.475 pence per share at the end of the quarter.

The quarterly valuation of the UK portfolio undertaken by Jones Lang LaSalle LLP as at 31 December 2015 stood at £582.8 million on the basis that all properties were complete. This reflects a Net Initial Yield of 5.40% and has resulted in a net valuation gain of £2.5 million during the quarter ended 31 December 2015, after allowing for purchasers costs. In addition, as at 31 December 2015, Jones Lang LaSalle LLP valued the two assets in the Republic of Ireland at €18 million when completed. The UK portfolio Net Initial Yield of 5.40% compares favourably with a benchmark 20-year gilt rate of 2.71% and current weighted average fixed cost of debt of 4.45%.

Incorporating the December 2015 valuation, the unaudited net asset value at 31 December 2015 is £259.3 million, equivalent to 70.0p per share, compared with 69.6p per share as at 30 September 2015. The unaudited EPRA NAV at 31 December 2015 is £263.6 million, equivalent to 71.2p per share at 31 December 2015, compared with 70.8p per share at 30 September 2015. Following an increase in gilt rates over the quarter, the unaudited EPRA NNNAV is estimated to be £242.3 million, equivalent to 65.4p per share at 31 December 2015, comparing with 62.7p per share at 30 September 2015.

Discounted cash flow valuation of assets and debt

The Investment Adviser has undertaken a discounted cash flow ("DCF") valuation of the assets of the Fund and its subsidiary undertakings (together the "Group") 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 2015, the DCF valuation was £352.9 million or 95.3p per share, compared with £346.3 million or 94.9p per share as at September 2015.

There has been no change to the assumptions adopted in the DCF valuation. The discount rates used are 7% for completed and occupied properties and 8% for properties under construction.  The weighted average discount rate is 7.05% which represents a 4.34% risk premium relative to the 20 year gilt rate of 2.71% at 31 December 2015.  The 20 year gilt rate as at 31 September 2015 was 2.51%.

The discounted cash flows assume an average long term 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 2015, 24 leases and rents of £2.4 million have been reviewed and the equivalent of a 1.1% per annum increase was achieved. Of these reviews, an uplift of 0.90% per annum was achieved through open market reviews and an uplift of 1.88% per annum was agreed for RPI reviews. There were no fixed uplift reviews agreed during the period. Reviews of £15.7 million of passing rent are currently under negotiation.

Investment activity

During the period between 1 October 2015 and 31 December 2015 the Company has committed £20.4 million to a total of six acquisitions.

Five operational and fully let primary healthcare properties located in the United Kingdom were acquired including a property at Fakenham which was purchased by way of a corporate acquisition. The other four properties located in Brighton, Salisbury, Wymondham and Abergele were property purchases.

The final property purchased during this quarter is located in Crumlin, a suburb of Dublin. This property is currently under construction and due to complete in January 2017. The property in Crumlin will be let on long leases with approximately 60% of rental income due directly from the Health Service Executive with the remainder from two GP practices, a dentist, an optician and a pharmacist.

In the quarter ended 31 December 2015, construction of the property at Briton Ferry reached practical completion and the property was brought into use.

At 31 December 2015 six properties were under construction at Stevenage, Kingsbury, Streatham, Benllech, Mullingar and Crumlin. All of these properties are due to complete within the next twelve months.

The portfolio, at 31 December 2015 consisted of 149 properties which continue to perform in line with the long-term objectives of the Fund.

The Investment Adviser has access to a strong pipeline in both the UK and Ireland with approximately £90 million of assets either in solicitors' hands or under negotiation.

Share issues

On 9 December 2015 the Company sold for cash 3,000,000 Ordinary Shares of no par value in the Company at a price of 84.00 pence per share and on 16 December 2015 the Company sold for cash, a further 2,000,000 Ordinary Shares at a price of 86.25 pence per share. The Ordinary Shares were sold from treasury by the Company to meet market demand.

On 31 December 2015 the Company sold in lieu of cash dividend 185,789 Ordinary Shares from treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 84.65p per share.

The total number of Ordinary Shares of the Company in issue at 31 December 2015 was 394,252,182, of which 23,941,087 were held in treasury, compared with 394,252,182 Ordinary Shares with 29,126,876 held in treasury at 30 September 2015. The total voting rights at 31 December 2015 were 370,311,095, with each Ordinary Share carrying one vote.

Since the quarter end, the Company has sold for cash from treasury 1,000,000 Ordinary Shares at a price of 84.75 pence per share on 8 January 2016 and 1,000,000 Ordinary Shares at a price of 85.00 pence per share on 28 January 2016. As of today's date, the total voting rights are 372,311,095, and the Company holds 21,941,087 Ordinary Shares in treasury.

Dividends

On 31 December 2015 a quarterly dividend of 1.475p per Ordinary Share in respect of the period 1 July 2015 to 30 September 2015 was paid to Ordinary Shareholders on the register as at close of business on 20 November 2015.

On 2 February 2016 the Directors announced a quarterly dividend of 1.4875p per Ordinary Share in respect of the period 1 October 2015 to 31 December 2015.  The dividend will be paid on 31 March 2016 to Ordinary Shareholders on the register as at close of business on 19 February 2016.  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 put in place on 5 May 2010.

The Company expects, subject to unforeseen circumstances, to pay dividends totalling 5.95p per Ordinary Share in respect of the financial year ending 30 September 2016, an increase of 0.05p per Ordinary Share over the previous year.

End

For further information please contact:

MedicX Fund                                                                  [phone]

David Staples, Chairman

Octopus Healthcare Group                                               [phone]

Mike Adams, Chief Executive Officer

Canaccord Genuity Limited                                              [phone]

Andrew Zychowski / Helen Goldsmith

Buchanan                                                                      [phone]

Charles Ryland / Vicky Watkins

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 and Ireland, listed on the London Stock Exchange, with a portfolio comprising 149 properties.

The Investment Adviser to the Company is Octopus Healthcare Adviser Ltd, which is part of the Octopus Healthcare group. Octopus Healthcare invests in and develops properties as well as creating partnerships to deliver innovative healthcare buildings to improve the health, wealth and wellbeing of the UK. It currently manages over £1 billion of healthcare investments across a number of platforms, with a focus on four core areas: GP surgeries, care homes, retirement housing and private hospitals. Octopus Healthcare is part of the Octopus group, a fast-growing UK fund management business with leading positions in several specialist sectors including healthcare property, energy, property finance and smaller company investing. Octopus manages £5.5 billion of funds for more than 50,000 retail and institutional investors.

Octopus Healthcare Adviser Ltd is authorised and regulated by the Financial Conduct Authority.

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), nor the contents of any website accessible from hyperlinks within this announcement, are incorporated into, or forms part of, this announcement.

 

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