12 Feb 2015 10:52
For immediate release
12 February 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, today announces its quarterly NAV as at 31 December 2014.
Financial position
The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP as at 31 December 2014 stood at £542.0 million, on the basis that all properties were complete. This reflects a net initial yield of 5.59% and has resulted in a valuation gain of £9.1 million during the quarter to 31 December 2014 on a like for like basis. The portfolio net initial yield of 5.59% compares favourably with a benchmark 20-year gilt rate of 2.48% and a weighted average fixed cost of debt of 4.52%.
Incorporating the December valuation, the unaudited adjusted net asset value at 31 December 2014 is estimated to be £243.6 million equivalent to 68.0p per share, compared with 65.8p per share as at 30 September 2014. On the same basis, following the recent sharp decrease in 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 £221.3 million equivalent to 61.8p per share at 31 December 2014, compared with 65.3p per share as at 30 September 2014.
The decrease in gilt rates provides an opportunity for the Fund to take out new low cost debt facilities and the Fund is in discussions with lenders in this regard.
Aside from the investment in new acquisitions with a completed value of £11.8 million and the other matters disclosed below, there have been no significant changes to the financial position of the Company since the full year results were announced on 10 December 2014.
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 31 December 2014, the DCF valuation was £334.3 million or 93.4p per share, compared with £331.1 million or 93.4p per share as at 30 September 2014.
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 7.07% which represents a 4.59% risk premium relative to the 20 year gilt rate of 2.48% as at 31 December 2014. The 20 year gilt rate as at 30 September 2014 was 3.06%.
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, 13 leases and rents of £1.6 million have been reviewed and the equivalent of a 2.08% per annum increase was achieved. Of these reviews, an uplift of 1.79% per annum was achieved through open market reviews and an uplift of 2.82% per annum was agreed for RPI reviews. Reviews of £11.9 million of passing rent are currently under negotiation.
Investment activity
During the period between 1 October 2014 and 31 December 2014 the Company has committed £11.8 million on two further properties, both of which are currently under construction.
In the period since 1 October 2014 construction on the property at Prenton was completed within budget. At 31 December 2014 eight properties were under construction at Buckley, Peterborough, Stevenage, Devonport, Poringland, Briton Ferry, Kinsbury and Maidstone. All of these properties are due to complete in the next twelve months.
The portfolio, at 31 December 2014 consisted of 139 properties, which continue to perform in line with the long-term objectives of the Fund. Since 31 December 2014, two more properties with a combined completed value of £5.3 million have been added to the portfolio.
The Investment Adviser has access to a strong pipeline of approximately £90 million in value when fully developed.
Share issues
One tap issue was completed during the period for 3.0 million shares, at a price of 82.5 pence per share. The Fund is seeking to fully deploy the proceeds quickly into appropriate primary healthcare property investments whilst maintaining the quality of its portfolio and targeting investments that will generate stable long term income and strong returns for shareholders.
Additionally, on 31 December 2014 the Company sold in lieu of cash dividend 718,517 shares out of treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 83.3 pence per share.
The total number of Ordinary Shares of the Company in issue at 31 December 2014 was 361,445,780, of which 3,338,175 are held in treasury, compared with 361,445,780 Ordinary Shares with 7,056,692 held in treasury at 30 September 2014.
Since 31 December 2014, three further tap issues of the remaining 3,338,175 shares at a weighted average price of 82.96 pence per share were completed. Accordingly, at today's date the total shares in issue amount to 361,445,780 with no shares held in treasury.
Financing activity
On 28 November 2014, the Fund repaid its GE Capital real estate loan of £31.2 million that was due in April 2015, by drawing down £25 million from its revolving loan facility and utilising existing cash reserves.
On 15 December 2014, the Fund completed the second drawdown of £35 million under the £50 million private placement agreed in August 2014.
The loan notes have a duration of five years maturing in August 2019, with no amortisation and the principal value repayable at maturity. The funds are secured against certain properties and the all-in interest rate on the notes is fixed at 3.80%.
Following completion of the second closing of the loan note facility, the £25 million revolving loan facility was fully repaid and remains in place, providing headroom for future investment.
Dividends
On 31 December 2014 a quarterly dividend of 1.45p per Ordinary Share in respect of the period 1 July 2014 to 30 September 2014 was paid to Ordinary Shareholders on the register as at close of business on 14 November 2014.
On 26 January 2015 the Directors approved a quarterly dividend of 1.475p per Ordinary Share in respect of the period 1 October 2014 to 31 December 2014. The dividend will be paid on 31 March 2015 to Ordinary Shareholders on the register as at close of business on 13 February 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.
Board and Audit Committee composition
In the quarter to 31 December 2014 Christopher Bennett retired as a director of the Board and as Chairman of the Audit Committee. Steve Le Page joined the Board in November 2014 and was appointed as Chairman of the Audit Committee upon the retirement of Christopher Bennett.
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 +44 (0) 20 7523 8000
Andrew Zychowski / Helen Goldsmith
Buchanan +44 (0) 20 7466 5000
Charles Ryland / Sophie McNulty
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 141 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 36 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.