Interim Results
The MedicX Fund Limited
15 June 2007
For Immediate Release 15 June 2007
MedicX Fund Limited
('MedicX Fund', 'the Fund' or 'the Company')
MedicX Fund Limited (LSE: MXF), an investment company which invests in modern,
purpose built primary healthcare properties in the United Kingdom, today
announces its interim results for the six month period ended 31 March 2007.
Interim Highlights
• Out performance against November 2006 initial public offering assumptions
• £133m of committed investment in 39 primary healthcare properties and on
track to invest £200m by mid 20081
• Annualised rent roll of £7.3m
• Adjusted earnings of £4.0m equivalent to 7.0p per ordinary share2
• Interim dividend of 2.5p per ordinary share3
• Adjusted net asset value of £60.0m equivalent to 104.5p per ordinary
share2
• Net debt £60.3m (45.7% gearing)
• £100m debt facility secured at a fixed rate of 5.0%
• £21.5m new equity raised in June 2007 in the form of 'C' Shares
• Market capitalisation increased to £82 m1
• Substantial pipeline of new opportunities
Commenting on these interim results, Christopher Bennett, Director, said: 'This
has been an exciting time for the MedicX Fund. We have made several successful
acquisitions and our portfolio of medical properties has expanded dramatically
since last November's IPO to 39 sites. With our secured debt facility and the
most recent fundraising together with industry trends working in our favour we
believe we are well positioned for future growth and look forward to building
further value for our shareholders.'
1 As at 14 June 2007
2 Adjusted to exclude the impact of deferred tax not expected to crystallise
3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August
2007
For further information please contact:
MedicX Fund
Alison Simpson Tel: 01481 723 450
MedicX Group
Keith Maddin Tel: 01483 869 500
Mike Adams
Buchanan Communications
Charles Ryland Tel: 020 7466 5000
Lisa Baderoon
Mary-Jane Johnson
Panmure Gordon (UK) Limited
Edward Farmer Tel: 020 7459 3600
Stuart Gledhill
Callum Stewart
Director's Statement
I am delighted to report a very successful first period of operation for the
MedicX Fund following the admission of the ordinary shares of MedicX Fund
Limited to the Official List of the UK Listing Authority on 2 November 2006.
For the period to 31 March 2007, the group reports adjusted earnings of £4.0
million, equivalent to 7.0p per share2. The group's adjusted net asset value at
31 March was £60.0 million, equivalent to 104.5p per ordinary share2.
The Property Adviser, MedicX Adviser Ltd part of the MedicX Group, has been able
to source a greater number of suitable investment opportunities than had
originally been anticipated at the time of the initial public offering. Of the
£54.4 million of funds net of expenses raised in the initial public offering,
£46.2 million was invested in an initial portfolio of 13 primary healthcare
properties. To supplement the funds raised through the listing, in December the
group secured a £100 million debt facility from Norwich Union at a rate of 5%
fixed for 30 years and in the period to 31 March 2007 the group has acquired a
total of 39 primary healthcare properties. Of these 35 are now fully
constructed and occupied with four further properties under construction1. The
total acquisition cost of the properties when all are completed will be
approximately £133.1 million and the group is over a year ahead of its
anticipated investment schedule.
The Property Adviser is continuing to identify attractive investment
opportunities and in order to fund ongoing investment and take advantage of
future pipeline opportunities, on 4 June 2007, MedicX Fund Limited raised £21.5
million of new equity net of expenses through the issue of 22,160,500 million C
shares.
Following the issue of the C shares and until their conversion into ordinary
shares, the group's portfolio will be divided between ordinary share properties
and C share properties. The C share properties comprise the completed
properties at Swaffham, Beauly and Strathpeffer and the property under
construction at Alsager, all owned at 31 March 2007 and all further properties
acquired by the group up to conversion. As at 31 March 2007 £12.5 million was
committed to assets attributable to the C shares and if the current rate of
investment continues it is likely that the conversion of the C shares to
ordinary shares will be triggered at the earliest possible date which coincides
with the year end of 30 September 2007.
The Board has approved an interim dividend of 2.5p per ordinary share.
Christopher Bennett
Director
14 June 2007
1 As at 14 June 2007
2 Adjusted to exclude the impact of deferred tax not expected to crystallise
3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August
2007
Report of the Property Adviser, MedicX Adviser Ltd
The Market
The NHS continues its drive to reposition a higher proportion of healthcare
provision through primary care, and initiatives such as practice based
commissioning are expected to result in an increasing number of larger primary
care facilities. Demand for new primary healthcare properties outweighs the
available funding, and some easing of funding blockages is anticipated following
the recent reorganisation of the Primary Care Trusts.
Inflationary concerns and the recent rise in the interest base rate have put
pressure on the commercial property market generally, and the increase in long
term interest rates may have an impact on the acquisition yields in the market,
though currently the market remains firm for well let assets.
Over delivery against Initial Public Offering assumptions
As at 31 March 2007, the value of the MedicX Fund's committed investment was
£137 million - over a year ahead of the assumptions made at the time of the
initial public offering.
The properties acquired have been consistent with MedicX Fund's objective to
acquire mainly modern, purpose-built, primary healthcare properties. At 31
March 2007 the average age of the properties was 3 years and the average
remaining term of the leases was 20.1 years. The annualised net rent roll is
already £7.3 million with 92% of the rents payable by doctors and Primary Care
Trusts/Local Health Boards and 6% by pharmacies.
MedicX Adviser Ltd, Property Adviser to the MedicX Fund and a division of the
MedicX Group has been successful in identifying and securing acquisition
opportunities. Exclusive forward funding agreements have been put in place with
primary care developers Oakapple and Medcentres providing the MedicX Fund with a
continuing pipeline of properties. In addition the MedicX Fund group has a
forward funding agreement with Primary Asset Ltd, the development arm of the
MedicX Group.
As stated in the director's statement a debt facility of £100 million has been
obtained from Norwich Union at a rate of 5% fixed for 30 years, and this
represents a saving of 0.5% or £0.5 million per annum against the initial public
offering assumptions.
1 As at 14 June 2007
2 Adjusted to exclude the impact of deferred tax not expected to crystallise
3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August
2007
Pipeline and Investment opportunity
The Property Adviser has a pipeline subject to contract which is estimated to be
worth approximately £128 million in value when fully developed, including MedicX
Group's own pipeline of 20 projects of value of approximately £78 million and
agreed non-binding heads of terms with other developers of projects of value £50
million1.
During the period six rent reviews were completed and there are a number of
reviews outstanding that we expect to see resolved during the year. The results
of reviews completed during the period added £42,270 to the rent roll and the
reviews outstanding relate to £1,501,940 of passing rent. A further £283,291 of
passing rent is up for review before the end of the financial year 30 September
2007. The average increase in rent agreed during the period as a percentage of
passing rent over the three year review process has been 16% equating to 5% per
annum. Asset management opportunities have also been identified in respect of a
number of the properties in the portfolio.
MedicX Group has continued its expansion and has increased its staff numbers to
25 employees. Already well placed geographically with offices in Godalming,
Nottingham, and Warrington, MedicX Group is looking to expand its office base
and expects to increase its staff numbers further by the end of the year.
The Property Adviser is excited by the opportunities available in the primary
healthcare property market and continues to seek and identify new opportunities
for the MedicX Fund to enable it to meet its objective of £200 million invested
by mid 2008.
Keith Maddin Chairman
Mike Adams Managing Director
MedicX Adviser Ltd
14 June 2007
1 As at 14 June 2007
2 Adjusted to exclude the impact of deferred tax not expected to crystallise
3 Ex dividend date 4 July 2007, Record date 6 July 2007, Payment Date 3 August
2007
Consolidated Income Statement
For the period from 25 August 2006 to 31 March 2007
Notes £'000
Income
Rent receivable 2 1,846
Finance income 2 979
Net valuation gains on investment properties 9 4,079
Total income 6,904
Expenses
Property advisory fee 20 728
Property management fee 20 24
Administrative fees 20 57
Audit fees 4 10
Professional fees 54
Directors' fees 3 100
Other expenses 130
Finance costs 5 1,641
Provision for impairment of properties under construction 9 172
Total expenses 2,916
Profit before tax 3,988
Taxation 6 (636)
Profit after taxation 3,352
Earnings per ordinary share
Normal and diluted 7 8.6p
1. Included in Note 7 is an adjusted earnings per share calculation that adjusts
for the impact of deferred tax which, based on the expected manner of
realisation of the carrying amount of investment properties, is unlikely to
crystallise.
2. There were no material transactions between the date of incorporation, 25
August 2006, and 1 November 2006, the date on which the Company's ordinary
shares were listed on the London Stock Exchange.
Consolidated Balance Sheet
as at 31 March 2007
Notes £'000
Non-current assets
Goodwill 8 6,175
Investment properties 9 103,435
Properties under construction 9 18,703
Total non-current assets 128,313
Current assets
Trade and other receivables 10 3,721
Cash and cash equivalents 40,980
Total current assets 44,701
Total assets 173,014
Current liabilities
Trade and other payables 11 6,936
Non-current liabilities
Long-term loan 12 99,866
Deferred tax provision 6 6,624
Total non-current liabilities 106,490
Total liabilities 113,426
Net assets 59,588
Equity
Share capital 13 -
Share premium 14 1,585
Distributable reserves 15 54,651
Retained earnings 3,352
Total equity 59,588
Net asset value per ordinary share
Normal and diluted 7 103.7p
1. Included in Note 7 is an adjusted net asset value per share calculation that
adjusts for the impact of deferred tax which based on the expected manner of
realisation of the carrying amount of investment properties, is unlikely to
crystallise.
Consolidated Statement of Changes in Equity
for the period from 25 August 2006 to 31 March 2007
Share Distributable Retained Total
Premium Reserve Earnings £'000
£'000 £'000 £'000
Proceeds on issue of shares 57,550 - - 57,550
Share issue costs (1,314) - - (1,314)
Transfer from share premium (54,651) 54,651 - -
Profit attributable to equity holders - - 3,352 3,352
Balance at 31 March 2007 1,585 54,651 3,352 59,588
Consolidated Cash Flow Statement
for the period from 25 August 2006 to 31 March 2007
Notes £'000
Operating activities
Profit before taxation 3,988
Adjustments for:
Net valuation gains on investment property (3,907)
Financial income received (979)
Finance costs paid and similar charges 1,641
743
Increase in trade and other receivables (2,499)
Increase in trade and other payables 3,029
Interest paid (584)
Interest received 979
Net cash inflow from operating activities 1,668
Investing activities
Acquisitions net of cash acquired 17 (11,279)
Purchase of investment properties (27,510)
Net cash outflow from investing activities (38,789)
Financing activities
Net proceeds from issue of share capital 54,647
(36,439)
Bank loans repaid on acquisition (41,359)
Other loan repaid on acquisition
Net proceeds of long term borrowings 101,252
Net cash inflow from financing activities 78,101
Increase in cash and cash equivalents 40,980
Cash and cash equivalents at 31 March 2007 17 40,980
MedicX Fund Limited
Notes to the financial statements for the period from 25 August 2006 to 31 March
2007
1. Business and objective
MedicX Fund Limited was incorporated in Guernsey on 25 August 2006 and commenced
trading on 2 November 2006 on listing on the London Stock Exchange. No
transactions took place between the date of incorporation and the date of
listing.
MedicX Fund Limited ('the Company') and its subsidiaries (together 'the Group')
have been established for the purpose of investing in primary healthcare
properties in the United Kingdom. The Group's investment objective is to achieve
rising rental income and capital growth from the ownership of a portfolio of
mainly modern, purpose built, primary healthcare properties. The Group is self-
managed with property advice and management services from MedicX Adviser
Limited, a member of the MedicX Group, an independent group of companies which
is a specialist developer of, investor in, and manager of primary healthcare
properties.
The Company's investment policy is to acquire primary healthcare properties in
the United Kingdom, some of which may have potential for enhancement, which will
be sourced in the market by MedicX Adviser Limited, including properties forming
part of the MedicX Group's own pipeline of development and investment
opportunities.
2. Principal accounting policies
Basis of preparation and statement of compliance
The financial statements of the Group have been prepared in conformity with
International Financial Reporting Standards ('IFRS') issued by the International
Accounting Standards Board, interpretations issued by the International
Financial Reporting Interpretations Committee and applicable legal and
regulatory requirements of Guernsey Law. The principal accounting policies are
set out below.
Impact of revision to International Financial Reporting Standards
In preparing these financial statements, the Board have chosen not to early
adopt any revisions to the International Financial Reporting Standards.
Those standards which have been revised that are relevant to the activities of
the Group are IAS 1 Presentation of financial statements and IFRS 7 Financial
Instrument: Disclosures, which replaces IAS 30 and IAS 32. Both of these
revisions deal with disclosures and presentation of financial statements and
will not have an impact on the Group's equity.
Convention
The financial statements have been prepared on a going concern basis under the
Historical Cost Convention except for the measurement at fair value of
investment properties and financial instruments.
Basis of consolidation
The Group financial statements consolidate the financial statements of MedicX
Fund Limited and its subsidiary undertakings. The results of subsidiaries
acquired during the period are included in the consolidated income statement
from the effective date of acquisition. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values at the
date of exchange of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquired company,
plus any costs directly attributable to the business combination. The acquired
companies' assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date. The details of the companies acquired and how they have
been treated are dealt with in Note 16.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being primary care investment in primary healthcare properties in
the United Kingdom.
Income
Rental income exclusive of any value added taxes is included in the financial
statements on an accruals basis and is shown gross of any UK income tax.
Finance income and fees receivable are included in financial statements on an
accruals basis.
Expenses
All expenses are accounted for on an accruals basis.
Employees
The Company has no employees.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the period.
Deferred tax is the tax which may become payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent it is probable that taxable
profits will be available against which deductible temporary differences can be
utilised.
Goodwill
Goodwill arising on acquisition is accounted for being the difference between
the fair value of the consideration given and the fair value of the Group share
of identifiable net assets of the subsidiary acquired. It is subject to annual
review for any impairment.
Investment properties
The Group's completed properties are held for long-term investment. Freehold
properties are initially recognised at cost, being fair value of consideration
given including transaction costs associated with the property. After initial
recognition, freehold properties are measured at fair value, with unrealised
gains and losses recognised in the consolidated income statement. Fair value is
based upon the open market valuations of the properties as provided by DTZ
Debenham Tie Leung, a firm of independent chartered surveyors, as at the balance
sheet date.
Long leasehold properties are accounted for as freehold properties and, after
initial recognition at cost, are measured at fair value (on the same basis as
freehold properties above).
Properties under construction
Freehold properties under construction are valued at cost until such time as a
certificate of practical completion has been issued from which date they are
treated as Investment Properties as set out above. At each balance sheet date
an assessment is made of whether provision is required to reflect any impairment
in the value of development work in progress. This assessment is based on
whether the costs to date plus estimated future costs to completion exceed an
independent valuer's estimate of the value of the property following completion.
Costs of financing development are capitalised and included in the cost of
development. During the period there were no material borrowing costs on
development work in progress and none were capitalised.
Derivative financial instruments and hedging activities
The Group has no derivative financial instruments.
Cash and cash equivalents
Cash on hand and deposits in banks are carried at cost. Cash and cash
equivalents are defined as cash in hand, demand deposits, and highly liquid
investments readily convertible to known amounts of cash and subject to
insignificant risk of changes in value. For the purposes of the Consolidated
Cash Flow Statement, cash and cash equivalents consist of cash in hand and
deposits in banks.
Trade and other receivables
Trade and other receivables are measured at initial recognition at their
invoiced value inclusive of any value added taxes that may be applicable.
Trade and other payables
Trade and other payables are recognised and carried at their invoiced value
inclusive of any value added taxes that may be applicable.
Bank loans and borrowings
All bank loans and borrowings are initially recognised at cost, being fair value
of the consideration received, less issue costs where applicable. After initial
recognition, all interest-bearing loans and borrowings are subsequently measured
at amortised cost. Amortised cost is calculated by taking into account any
discount or premium on settlement.
Borrowing costs
Borrowing costs are taken to the consolidated income statement in the period to
which they relate on an accruals basis.
Estimates
In the process of applying the Company's accounting policies described above,
management is required to make certain judgements and estimates to arrive at
fair carrying value for its assets and liabilities. Significant areas requiring
management's judgement include the fair value of the assets and liabilities of
subsidiaries acquired and the assessment of the fair value of development work
in progress described above.
3. Directors' fees
£'000
During the period each of the Directors received the following fees:
J M S Tavares 29
S Mason 20
C Bennett 17
A Simpson 17
J Hearle 17
100
4. Audit fees
The amount disclosed in the consolidated income statement relates to an accrual
for audit fees for the period ending on 30 September 2007, payable to PKF
(Guernsey) Limited.
Non-audit fees paid to PKF (UK) LLP, a fellow member of PKF International,
include the following amounts:
£'000
Completing financial due diligence on the acquisition of subsidiaries and included in the cost 95
of purchase
For acting as reporting accountants in respect of the initial listing and set off against share 50
premium
For acting as reporting accountants in respect of the 'C' Share issue and included in other 55
debtors and prepayments
For acting as auditors for the non-statutory audit in respect of the 'C' Share issue and 26
included in other debtors and prepayments
Other professional services including tax advice 22
248
5. Finance costs
£'000
Interest payable on long term loan 1,641
6. Taxation
£'000
Current Tax
Corporate tax charge for the period -
Deferred Tax
On fair value gain for the period 636
Total income tax charge in the income statement 636
The Board have estimated that for the period under review the Group does not
have any profits chargeable to tax in jurisdictions outside Guernsey.
The Company and its Guernsey registered subsidiaries, MedicX Properties I
Limited and MedicX Properties V Limited, have obtained exempt company status in
Guernsey under the terms of Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989
so that they are exempt from Guernsey taxation on income arising outside
Guernsey and on bank interest receivable. Each Guernsey company is, therefore,
only liable to a fixed fee of £600 per annum. The Directors intend to conduct
the Group's affairs such that it continues to remain eligible for exemption.
Guernsey companies are taxable on UK net rental income. During the period no
tax arose in respect of the income of any of the Guernsey companies. The
Company's UK subsidiaries, MedicX Properties II Ltd, MedicX Properties III Ltd
and MedicX Properties IV Ltd, are subject to United Kingdom corporation tax on
their profits less losses.
The calculation of the Group's tax charge necessarily involves a degree of
estimation in respect of certain items whose tax treatment cannot be finally
determined until a formal resolution has been reached with the relevant tax
authorities.
Deferred taxation provision
£'000
Deferred tax is provided as follows:
Balance on acquisition 192
On fair value gain arising on acquisition 5,796
On fair value gain in period 636
Total deferred tax provision per the balance sheet 6,624
All deferred tax relates to the fair value gains on the Group's investment
property portfolio.
As required by IAS 12, full provision has been made for the temporary timing
differences arising on the fair value gain of investment properties held by UK
resident companies that have passed through the Group's consolidated income
statement. In the opinion of the Directors, this provision is only required to
ensure compliance with IAS 12. It is the Directors' view that the liability
represented by the deferred tax provision is unlikely to crystallise as, in
common with practice in the sector, the Group would sell the company that holds
the property portfolio rather than sell an individual property. Had the
provision not been made, the Group's earnings for the period would be £636,000
higher.
7. Earnings and net asset value per ordinary share
The basic and diluted earnings per ordinary share are based on the profit for
the period of £3,352,000 and on 38,745,443 ordinary shares being the weighted
average aggregate of ordinary shares in issue at the balance sheet date. The
weighted average number is calculated over the period from incorporation on 25
August 2006 to the balance sheet date. This gives rise to a basic and diluted
earnings per share of 8.6 pence per share.
The basic and diluted net asset value per ordinary share are based on the net
asset position at the balance sheet date of £59,588,000 and on 57,460,715
ordinary shares being the aggregate of ordinary shares in issue at the balance
sheet date. This gives rise to a basic and diluted net asset value per share of
103.7 pence per share.
Adjusted earnings per share and net asset value per share
The Directors believe that the following adjusted earnings per share and net
asset value per share are more meaningful key performance indicators for the
Group.
Adjusted basic and diluted earnings per share 7.0p
Adjusted net asset value per basic and diluted share 104.5p
The adjusted earnings per ordinary share is based on the profit for the period
of £3,352,000, adjusted for the impact of deferred tax charged for the period of
£636,000, giving an adjusted earnings figure of £3,988,000 and on 56,292,930
ordinary shares being the weighted average number of ordinary shares in issue in
the period from commencement of operations on 2 November 2006 to the balance
sheet date.
The adjusted net asset value per ordinary share is based on the net asset
position at the balance sheet date of £59,588,000 as adjusted for deferred tax
of £6,624,000 and goodwill of £6,175,000, giving an adjusted net assets figure
of £60,037,000 and on 57,460,715 ordinary shares being the aggregate of ordinary
shares in issue at the balance sheet date.
In common with practice in the sector, the Group would sell the UK company or UK
companies that hold the properties rather than sell an individual property.
Consequently, it is the Directors' view that the liability represented by the
deferred tax provision is unlikely to crystallise.
8. Goodwill
£'000
Carrying amount at 31 March 2007 6,175
The goodwill arose on the acquisition of MedicX Properties III Ltd and MedicX
Properties IV Ltd. The Board have reviewed the carrying value of goodwill and
they do not consider that there has been an impairment in its carrying value.
9. Investment properties
Investment properties are initially recognised at cost, being fair value of
consideration given including transaction costs associated with the property.
After initial recognition, freehold properties are measured at fair value, which
has been determined based on valuations performed by DTZ Debenham Tie Leung as
at 31 March 2007, on the basis of open market value, supported by market
evidence, in accordance with International Valuation Standards. In accordance
with industry standards, the valuation does not take account of purchaser costs
which are approximately 5.75% of purchase price.
Completed Properties Total
Investment Under £'000
Properties Construction
£'000 £'000
Acquisitions at cost/fair value 92,429 25,802 118,231
Transfer to completed properties 6,927 (6,927) -
Fair value revaluation 4,079 - 4,079
Provision for impairment - (172) (172)
103,435 18,703 122,138
10. Trade and other receivables
£'000
Rent receivable 1,049
Other debtors and prepayments 1,725
VAT recoverable 947
3,721
11. Trade and other payables
£'000
Bank loans 1,387
Trade creditors 919
Deferred rental income 1,449
Interest payable and similar charges 1,057
Accruals 1,717
Other creditors 399
VAT payable 8
6,936
The loan is secured on one investment property and has a remaining term of 11
years. It is expected that the loan will be repaid within one year from the
balance sheet date.
12. Long-term loan
£'000
Amount drawn down in period 100,000
Loan issue costs (135)
Amortisation of loan issue costs 1
GPFC Loan 99,866
The Company's subsidiary, MedicX Properties I Limited, has a loan facility
agreement for £100,000,000 with The General Practice Finance Corporation Limited
('GPFC') at a fixed rate of 5.008% on an interest only basis which was fully
drawn down on 1 December 2006, with the cash held on deposit to meet future
investment requirements. This loan is due for repayment in its entirety on 1
December 2036.
Under the terms of the loan, further charges will be incurred when amounts are
taken off deposit and utilised for investment purposes. The charges for these
withdrawals depends on the quantum of the withdrawal and will be recognised as
and when withdrawals are made.
The value of the loan on an amortised cost basis at 31 March 2007 was
£99,866,000.
During the year, the Group's bank borrowings were subject to the following
financial covenants:
(i) monies released from deposit must not exceed 65% of the property value
charged;
(ii) the net loan amount must not exceed 75% of the market value of mortgaged
property; and
(iii) long term rental income from the properties charged must cover 140% of
projected finance costs.
The Group has been in compliance with the financial covenants throughout the
period since issue.
The loan is secured on the Group's investment properties.
As at 31 March 2007 the Group had £36.0 million on deposit secured against the
loan.
13. Share capital
Number of shares Share Capital
£'000
Authorised
Ordinary shares of no par value. Unlimited -
Issued and fully paid
Ordinary shares of no par value 57,460,715 -
The Company issued 2 ordinary shares for £1 each on incorporation on 25 August
2006 and a further 55,960,713 ordinary shares for £1 each on 2 November 2006
pursuant to an offering and listing on the London Stock Exchange. A further
1,500,000 shares were issued on 26 February 2007 for a fair value of £1,588,750
in connection with the purchase of subsidiaries.
14. Share premium
£'000
At 25 August 2006 -
Proceeds arising on issue of Ordinary Shares on 2 November 2006 55,961
Proceeds arising on issue of Ordinary Shares on 26 February 2007 1,589
Allocation of issue costs (1,314)
Transfer to distributable reserve (note 15) (54,651)
Share premium at 31 March 2007 1,585
15. Distributable reserve
The Company applied to the Royal Court in Guernsey on 8 November 2006 to
transfer its entire share premium account on that date to a distributable
reserve and this was approved on 10 November 2006. The reserves are freely
distributable with no restrictions having been applied by the Court.
16. Acquisition of subsidiaries
MedicX Properties II MedicX Properties MedicX Properties Total
Ltd III Ltd IV Ltd
Book value Fair Book Fair Book Fair Book value Fair
value value value value value value
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net assets acquired
Investment properties 32,936 32,936 9,412 12,405 16,760 26,937 59,108 72,278
Properties under construction 7,653 7,653 - - 4,989 10,790 12,642 18,443
Trade and other receivables 20 20 245 245 867 754 1,132 1,019
Cash and cash equivalents 1,196 1,196 87 87 1,797 1,797 3,080 3,080
Trade and other payables (814) (814) (209) (209) (398) (398) (1,421) (1,421)
Current tax liabilities 368 368 (59) (59) 203 203 512 512
Bank loans and other loans (41,359) (41,359) (7,559) (7,559) (28,880) (28,880) (77,798) (77,798)
Deferred tax liabilities - - (32) (930) (160) (5,058) (192) (5,988)
- - 1,885 3,980 (4,822) 6,145 (2,937) 10,125
Goodwill - 943 5,232 6,175
Total consideration - 4,923 11,377 16,300
Satisfied by:
Cash - 3,515 9,833 13,348
Directly attributable costs - 363 1,000 1,363
Issue of shares - 1,045 544 1,589
- 4,923 11,377 16,300
Number of shares issued - 1,000 500 1,500
Net cash outflow arising on
acquisition
Cash consideration - (3,515) (9,833) (13,348)
Cash and cash equivalents 1,196 87 1,797 3,080
acquired
1,196 (3,428) (8,036) (10,268)
Date of acquisition 2/11/06 4/12/06 22/12/06
Rental income for period 883 220 418
Profit before tax attributable 805 171 398
to acquired company excluding
intra group charges
MedicX Properties II Ltd was acquired for £2.
It is not practicable to determine the revenue and profit or loss which would
have arisen from MedicX Properties III Ltd and MedicX Properties IV Ltd if they
had been purchased on the commencement of operations on 2 November 2006.
In addition to the above, the Company has two further wholly owned subsidiaries,
MedicX Properties I Limited and MedicX Properties V Limited which are also
property investment companies.
17. Cashflow notes
Acquisition of subsidiaries £'000
Cash 3,080
Trade and other receivables 1,019
Goodwill 6,175
Investment properties 72,278
Properties in the course of construction 18,443
Trade and other payables (6,897)
Long term debt (77,798)
Total purchase price 16,300
Less
Shares issued as part of consideration (1,589)
Cash acquired (3,080)
Acquisition costs accrued not yet paid (352)
Net cost of acquisition 11,279
Cash and cash equivalents
Cash in hand and balances with banks 40,980
Major non cash transactions
Shares were issued as part of the consideration for the acquisition of MedicX
Properties III Ltd and MedicX Properties IV Ltd, details of which are in note
13.
18. Financial instruments and properties
The Group holds cash and liquid resources as well as having debtors and
creditors that arise directly from its operations.
The main risks arising from the Group's financial instruments and properties are
market price risk, credit risk, liquidity risk and interest risk. The Board
regularly reviews and agrees policies for managing each of these risks and these
are summarised below.
Market price risk
The Group's exposure to market price risk is comprised mainly of movements in
the value of the Group's investment in property. Property and property related
assets are inherently difficult to value due to the individual nature of each
property. As a result, valuations are subject to uncertainty. There is no
assurance that the estimates resulting from the valuation process would reflect
the actual sales price even where sale occurs shortly after the valuation date
however there is no intention to sell any of the properties at the date of the
report.
Rental income and the market value for properties are generally affected by
overall conditions in the local economy, such as growth in gross domestic
product, employment trends, inflation and changes in interest rates. Changes in
gross domestic product may also impact employment levels, which in turn may
impact the demand for premises. Furthermore, movements in interest rates may
also affect the cost of financing for real estate companies.
Both rental income and property values may also be affected by other factors
specific to the real estate market, such as competition from other property
owners, the perceptions of prospective tenants of the attractiveness,
convenience and safety of properties, the inability to collect rents because of
the bankruptcy or the insolvency of tenants or otherwise, the periodic need to
renovate, repair and release space and the cost thereof, the costs of
maintenance and insurance, and increased operating costs.
The Directors monitor market value by having independent valuations carried out
quarterly by DTZ Debenham Tie Leung.
Credit risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Group. In the
event of a default by an occupational tenant, the Group will suffer a rental
income shortfall and incur additional costs, including legal expenses, in
maintaining, insuring and re-letting the property.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet financial commitments. Investments in property
are relatively illiquid however the Group has tried to mitigate this risk by
investing in desirable properties which are well let to General Practitioners
and Primary Care Trusts.
Interest rate risk
The interest rate profile of the Group at 31 March 2007 was as follows:
Total Fixed rate Variable rate Assets on which Weighted
no interest is average
£'000 £'000 received interest rate
per annum
£'000
%
Financial assets
Goodwill 6,175 - - 6,175 -
Properties 103,435 - - 103,435 -
Properties under construction 18,703 - - 18,703 -
Debtors 3,721 - - 3,721 -
Cash and cash equivalents 40,980 - 40,980 - 5.2%
Total assets as per 173,014 - 40,980 132,034 -
balance sheet
Total Fixed rate Variable rate Liabilities on Weighted
which no average
interest is interest rate
paid per annum
£'000 £'000 £'000 £'000 %
Financial liabilities
Bank loans 101,253 101,253 - - 5.0%
Creditors 5,549 - - 5,549 -
Deferred tax provision 6,624 - - 6,624 -
Total liabilities as per balance 113,426 101,253 - 12,173 -
sheet
19. Commitments
At 31 March 2007 the Group had commitments of £13.1 million to complete
properties under construction.
20. Material contracts
Property Adviser
MedicX Adviser Limited is appointed Property Adviser under the terms of an
agreement dated 17 October 2006. Fees payable under this agreement are (i) 1.5%
per annum on gross assets by way of property advisory fee; (ii) a property
management fee of 3% of gross rental income; (iii) a corporate transaction fee
of 1% of the gross asset value of any property owning subsidiary company
acquired; and (iv) a performance fee of 15% of the amount by which the return to
shareholders in terms of share price growth plus cumulative dividends paid
exceeds the initial offer price compounded annually by 10% in each accounting
period.
Administration agreements
International Administration (Guernsey) Limited, the Company's administrator and
company secretary, was entitled during the period to receive a fee of £55,000
per annum for carrying out administrative services for the Company under the
terms of an agreement dated 17 October 2006; a further £25,000 per annum under
an agreement of the same date for the provision of administrative services to
MedicX Properties I Limited, and £15,000 per annum under an agreement dated 12
March 2007 with MedicX Properties V Limited.
During the period, the agreements with International Administration (Guernsey)
Limited gave rise to the following fees:
£'000
Administrative fees 34
MedicX Adviser Limited was entitled during the period to receive fees of £65,000
for providing administrative services to MedicX Properties II Ltd, MedicX
Properties III Ltd and MedicX Properties IV Ltd.
From 1 April 2007, each Group company entered into a separate administration
agreement with International Administration (Guernsey) Limited for the provision
of administrative services for fees totalling £58,000 for the provision of
corporate secretarial services to all Group companies plus fees at time spent
rates for other administrative services.
During the period, the agreements with Medicx Adviser gave rise to £1,312,000 of
fees, of which £464,000 remained outstanding at the end of the period, as
follows:
£'000
Expensed to the consolidated income statement:
Property advisory fee 728
Property management fees 24
Administrative fees 24
Added to cost of acquisition of properties:
Corporate fees for purchase of subsidiaries 536
Total Fees 1,312
21. Post balance sheets events
At an extraordinary meeting held on 29 May 2007 the Company approved the
adoption of revised memorandum and articles of association and the issue of 'C'
Shares by way of placing and offer, such 'C' Shares to represent a class of
shares with assets segregated from the assets pertaining to the Ordinary Shares
until such time as the proceeds of the 'C' Share issue are substantially
invested, at which time they will be converted to Ordinary Shares on the terms
set out in the prospectus dated May 2007.
On 4 June 2007 the Company issued 22,160,500 'C' Shares of no par value at a
price of £1 per share for total proceeds net of issue expenses of £21,496,000.
22. Total return per share
As at 31 March 2007 the share price was 106p representing an increase of 6.0% in
the period since listing on 2 November 2006.
This information is provided by RNS
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