Medicx Fund Regulatory News (MXF)

For immediate release

9 February 2017

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 2016.

The fundamental market drivers for primary healthcare remain strong despite wider market uncertainty following the result of the EU referendum. Underpinned by a high quality portfolio with secure, long term income and funding, the Company, continues to demonstrate resilience and is well positioned for the future.

Summary of Net Asset Values

1 unaudited

Market update

The demand for new modern primary care infrastructure continues in both the UK and Republic of Ireland as populations age and a wider range of clinical services is sought to be delivered over longer hours by GPs in their local communities.

Politically, cross-party support remains in place for primary care and its front line pivotal role in providing care. Transforming the NHS through improved access to services, better working efficiency and implementing new ways of working are expected to remain as government priorities, which will require investment in new more efficient and sustainable premises.

Reform is also being led by the NHS and local councils in England, through the preparation of 44 Sustainability & Transformation Plans (STPs) and the Strategic Estates Plans supporting the STPs which provide clarity on premises requirements. There is a growing acceptance across stakeholders within the STPs that the process has to succeed and estate and premises solutions will reflect the joined up needs across all health infrastructure. It is anticipated there will be an evolution of premises design which will enable providers to deliver new models of care with a mixture of reimbursed and non-reimbursed tenants.

The Fund continues to work with its strategic development partners, engaging with provider groups and working with its tenants to deliver new schemes and premises improvements. As announced on 26 January 2017, MedicX Fund entered into a joint venture agreement with General Practice Investment Corporation Limited ("GPIC"). The jointly controlled company will be an investor in UK primary healthcare properties, let to GPs or directly to the NHS, which have asset management needs or will lead to new development delivery opportunities. In addition to this, the framework agreement with GPIC, who have delivered c.£77 million of assets to the Fund since 2012, has been extended for a further five years.

The Republic of Ireland demonstrates similar demographic pressures and political will which has enabled the Health Service Executive to drive forward its programme of putting in place a modern purpose-built estate to deliver new world class healthcare. MedicX Fund is now supporting three schemes underway in Mullingar, Crumlin and Rialto, and a significant pipeline currently in solicitors' hands.

Quarterly Valuation

The quarterly valuation of the UK portfolio as at 31 December 2016 undertaken by Jones Lang LaSalle LLP stood at £612.1 million (30 September 2016: £603.4 million) on the basis that all properties were complete. This reflected a Net Initial Yield of 5.22% (30 September 2016: 5.25%). Excluding the effects of property acquisitions and disposals the uplift on a like for like basis was 0.67%. 

In addition, as at 31 December 2016, Jones Lang LaSalle LLP continued to value the three assets under construction in the Republic of Ireland at €34.6 million on a completed basis. 

During the quarter to 31 December 2016, the net book value of the portfolio increased by 1.6% to £622.2 million (30 September 2016: £612.3 million). This was as a result of a £3.4 million valuation gain and £7.3 million of capital investment, being offset by the sale of one asset at a net book value of £0.8 million.

Discounted cash flow valuation of assets and debt

The Investment Adviser has undertaken 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 2016, the DCF valuation was £382.8 million or 96.1 pence per share, compared with £374.9 million or 96.6 pence per share as at 30 September 2016.

The assumptions applied remain unchanged to those used in previous periods. 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 5.11% risk premium relative to the 20 year gilt rate of 1.94% at 31 December 2016.

The discounted cash flows assume an average 2.5% per annum increase in individual property rents at their respective review dates and also assume the level of gearing and cost of debt are maintained at current levels. 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). 

Rent reviews

Since 1 October 2016, 23 leases and rents of £2.2 million have been reviewed and the equivalent of a 1.42% per annum increase was achieved (year to 30 September 2016: 1.20%). Of these reviews, an uplift of 1.29% per annum was achieved through open market reviews and an uplift of 1.56% per annum was agreed for RPI reviews. Reviews of £18.4 million (30 September 2016: £16.1 million) of passing rent currently remain under negotiation.

Investment activity

In the quarter ended 31 December 2016, construction of the property at Benllech reached practical completion and the property was brought into use. In addition to this, in October, the Fund committed to a forward funding of a new primary healthcare medical centre in Brynmawr, South Wales. The completed property will consist of 1,587m2 adding an initial passing rent of approximately £300,000 per annum to the rent roll.

At 31 December 2016 six properties were under construction at Streatham, Brynhyfryd, Brynmawr, Mullingar, Crumlin and Rialto. Five of these properties are due to complete within the next twelve months, with Rialto due to complete in 2018.

The Company regularly assesses the assets it owns in its portfolio, to ensure they perform in line with the long-term objectives set by the Fund. In light of this, one primary healthcare centre at Harleston was sold during December at its book value of £0.8m.

The Investment Adviser has access to a strong pipeline in both the UK and Ireland with approximately £80 million of assets either in solicitors' hands or under negotiation.

Share issues

During the quarter ended 31 December 2016 the Company issued 9,900,000 Ordinary Shares of no par value at an average price of 87.82 pence per share.

On 30 December 2016 the Company sold in lieu of cash dividends, 402,011 Ordinary Shares from treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 89.30 pence per share.

Following the scrip dividend, the total number of Ordinary Shares of the Company in issue at 31 December 2016 was 406,152,182, of which 7,783,327 were held in treasury. The Company also had 12,081,109 Ordinary Shares of no par value remaining under its block listing facility at 31 December 2016. The total voting rights at 31 December 2016 were 398,368,855, with each Ordinary Share carrying one vote.

Since the quarter end, the Company has issued 4,350,000 Ordinary Share of no par value at an average price of 88.00 pence per share.

All shares were issued at a premium (net of costs) to NAV and so were accretive to existing shareholders.

Dividends

On 30 December 2016 a quarterly dividend of 1.4875p per Ordinary Share in respect of the period 1 July 2016 to 30 September 2016 was paid to shareholders on the register as at close of business on 18 November 2016.

On 1 February 2017 the Directors announced a quarterly dividend of 1.5p per Ordinary Share in respect of the period 1 October 2016 to 31 December 2016. The dividend will be paid on 31 March 2017 to shareholders on the register as at close of business on 17 February 2017. 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 6.00p per Ordinary Share in respect of the financial year ending 30 September 2017, an increase of 0.05p per Ordinary Share over the previous year.

End

For further information please contact:

MedicX Fund +44 (0) 1481 723 450

David Staples, Chairman

Octopus Healthcare +44 (0) 20 3142 4820

Mike Adams, Chief Executive Officer

Canaccord Genuity Limited +44 (0) 20 7523 8000

Andrew Zychowski / Helen Goldsmith

Buchanan +44 (0) 20 7466 5000

Charles Ryland / Vicky Hayns

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 152 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 five core areas: GP surgeries, care homes, special education schools, 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 £6 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.

The Company's Legal Entity Identifier is 2138008POF35FTNFCB25.