3 Aug 2015 14:55
For immediate release
3 August 2015
MedicX Fund Limited
("MedicX Fund", "the Fund" or "the Company")
Quarterly Net Asset Value ("NAV") announcement
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 30 June 2015.
Financial position
The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP as at 30 June 2015 stood at £556.0 million, on the basis that all properties were complete. This reflects a net initial yield of 5.50% and has resulted in a valuation gain of £6.7 million during the quarter to 30 June 2015 on a like for like basis. The portfolio net initial yield of 5.50% compares favourably with a benchmark 20-year gilt rate of 2.75% and a weighted average fixed cost of debt of 4.42%.
Incorporating the June valuation, the unaudited adjusted net asset value at 30 June 2015 is estimated to be £255.9 million, equivalent to 70.1p per share, compared with 68.8p per share as at 31 March 2015. On the same basis, following increasing gilt rates over the quarter, the unaudited adjusted net asset value less the mark to market liability of fixed rate debt is estimated to be £244.0 million equivalent to 66.8p per share at 30 June 2015, compared with 61.5p per share as at 31 March 2015.
Aside from the investment in new acquisitions which have a completed value of £10.1 million and the other matters disclosed below, there have been no significant changes to the financial position of the Company since the interim results were announced on 22 May 2015.
Discounted cash flow valuation of assets and debt
On the Fund's behalf 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 30 June 2015, the DCF valuation was £344.9 million or 94.5p per share, compared with £340.6 million or 93.5p per share as at 31 March 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 7.08% which represents a 4.33% risk premium relative to the 20 year gilt rate of 2.75% as at 30 June 2015. The 20 year gilt rate as at 31 March 2015 was 2.29%.
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 2014, 14 leases and rents of £1.7 million have been reviewed and the equivalent of a 1.73% per annum increase was achieved. Of these reviews, an uplift of 1.21% per annum was achieved through open market reviews, fixed uplifts achieved 2.5% and an uplift of 2.87% per annum was agreed for RPI reviews. Reviews of £16.1 million of passing rent are currently under negotiation.
Investment activity
During the period between 1 April 2015 and 30 June 2015 the Company has committed £10.1 million on two further properties, both of which are currently under construction.
One of the properties acquired represents the Company's first acquisition in Ireland, and has followed a significant due diligence exercise into the opportunities available in the Irish healthcare property market. It is the belief of Octopus Healthcare Adviser and the Board that Ireland offers good yields for quality properties. The Irish properties targeted are let on long leases and generate principally government backed income, making Irish property opportunities an attractive fit with MedicX Fund's investment objectives.
In the period since 1 April 2015 construction of the property at Poringland was completed within budget. At 30 June 2015 nine properties were under construction at Peterborough, Stevenage, Devonport, Briton Ferry, Kinsbury, Maidstone, Streatham, Benllech and Mullingar. All of these properties are due to complete in the next twelve months.
The portfolio, at 30 June 2015 consisted of 143 properties which continue to perform in line with the long-term objectives of the Fund.
The Investment Adviser has access to a strong pipeline of approximately £100 million in value when fully developed.
Financing activity
On 1 May 2015, the Fund completed a £50 million private placement of loan notes bought by Standard Life Investments Limited. The loan notes have a duration of thirteen years and five months maturing on 30 September 2028, with no amortisation and the principle value repayable on maturity. The all-in interest rate on the notes is fixed for their term at 3.838%.
The first tranche of £25 million was drawn on 1 May 2015 with the remaining £25 million due to be drawn in September 2015.
Since 30 June 2015 a previous loan note facility of £50 million has been renegotiated to extend the term, with effect from 1 August 2015, from five years (unexpired term of four years and one month) to 13 years and five months, with the all-in interest rate increased from 3.80% to 3.99%. Across all facilities excluding the group's revolving credit facility the weighted unexpired term is 15 years and the weighted average fixed cost of debt is 4.45%.
Share issues
On 30 June 2015 the Company sold in lieu of cash dividend 656,479 shares out of treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 82.65p per share.
The total number of Ordinary Shares of the Company in issue at 30 June 2015 was 394,252,182, of which 29,240,351 are held in treasury, compared with 394,252,182 Ordinary Shares with 29,896,830 held in treasury at 31 March 2015.
Dividends
On 30 June 2015 a quarterly dividend of 1.475p per Ordinary Share in respect of the period 1 January 2015 to 31 March 2015 was paid to Ordinary Shareholders on the register as at close of business on 15 May 2015.
On 27 July 2015 the Directors approved a quarterly dividend of 1.475p per Ordinary Share in respect of the period 1 April 2015 to 30 June 2015. The dividend will be paid on 30 September 2015 to Ordinary Shareholders on the register as at close of business on 14 August 2015. 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 previously put in place by the Company on 5 May 2010.
The Company expects, subject to unforeseen circumstances, to pay dividends totalling 5.9p per Ordinary Share in respect of the financial year ending 30 September 2015, an increase of 0.1p 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 Group +44 (0) 1483 869 500
Mike Adams, Chief Executive Officer
Mark Osmond, Chief Financial Officer
Canaccord Genuity Limited +44 (0) 20 7523 8000
Andrew Zychowski / Helen Goldsmith
Buchanan +44 (0) 20 7466 5000
Charles Ryland / Vicky Watkins
Information on MedicX Fund Limited
MedicX Fund Limited (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 143 properties.
The Investment Adviser to the Company is Octopus Healthcare Adviser Ltd, which is authorised and regulated by the Financial Conduct Authority and is a subsidiary of the Octopus Healthcare Group. The Octopus Healthcare Group is a specialist investor, developer and manager of healthcare properties with 38 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), nor the contents of any website accessible from hyperlinks within this announcement, are incorporated into, or form part of, this announcement.