Annual Report
Medical Property Investment Fd Ltd
21 March 2005
The Medical Property Investment Fund Limited
Annual Report and Financial Statements
For the period from 7 October 2003 to 31 December 2004
Highlights
The Medical Property Investment Fund Limited is a support services company
listed on the London Stock Exchange. The Company was launched in November 2003
and will have financial resources of circa £400m to invest in primary care.
This inaugural set of results is in respect of the period ending 31 December
2004.
• Good first year results with 46 sites acquired (a further 14 sites in
solicitors' hands)1
• Over £175m of capital committed1
• Average net initial yield on capital committed circa 7%
• Growing pipeline of acquisitions and developments
• BHE acquisition fully integrated, more opportunities in LIFT3 arising
• Gross income of £7.6m with retained profit of £0.3m net of all launch and
property acquisition expenses
• Final dividend 2.67p2 making 4p in total
1 As at 15 March 2005
2 Ex -dividend date 30 March 2005, Record date 1 April 2005, Payment date 11
April 2005
3 Local Improvement Finance Trusts ('LIFT') are part of the Government's aim to
procure investment in primary care and community-based facilities and
services.
Chairman's Statement
For the period ended 31 December 2004
This Report is published in respect of the period from incorporation of the
business on 7 October 2003 to 31 December 2004. The Ordinary Shares were
admitted to the Official List of the London Stock Exchange on 21 November 2003.
I am pleased to report an extremely satisfactory start for the Company since its
flotation on the London Stock Exchange.
During the period, total income amounted to £7.6m producing a net profit after
investment result of £2.2m. A dividend of 1.33p per Ordinary Share was declared
at the interim stage. The Board has recommended a final dividend of 2.67p per
Ordinary Share making a total of 4p per share which is in line with budget.
As at 15 March 2005, the Company had acquired or exchanged contracts on 46 sites
and has a further 14 sites in solicitors' hands. On completion, the aggregate
capital value of these investments will be approximately £120m. In addition,
the Company has committed a further £55m to its own development projects
including its LIFT investments and pharmacy commitments. On all capital
committed to date, the average net initial yield on completion is estimated to
be circa 7%.
The Company has pursued the strategy outlined at the time of flotation. Whilst
the property investment market has continued to be very competitive we have been
able to acquire existing primary health care properties and undertake sale and
leaseback transactions at average yields consistent with our forecasts.
At the interim stage, we reported on the acquisition of 70% of British Health
Enterprise ('BHE'), a specialist developer with expertise in LIFT developments,
general primary care projects and the development of hospital main entrance
retail malls.
BHE's interests in three LIFT companies together with other development
initiatives being undertaken by the investment manager and third party
developers is enabling the business to build up its own stock of developments
where higher returns can be anticipated.
During the latter half of 2004, the Company set up its own pharmacy business,
Healthcare Pharmacies Limited. This is in direct response to the increasing role
of pharmacy as an integral part of the service provision within larger primary
health care developments. We believe that a direct involvement in the way that
pharmacies are operated within these establishments will facilitate innovation
and enhance their operational performance and earnings potential.
Outlook
The NHS Plan will continue to create opportunities in the sector generally and
we expect the commitment to improve the range of services and facilities within
primary health care premises to be a key focus before and after the election.
LIFT areas are likely to continue to attract a significant share of the
additional funding supporting new premises development and the Company will
continue to explore ways of increasing its exposure to this part of the market.
The Company is well placed to meet its forecast returns. The second year of
operation will see more management resources devoted to development activity
particularly on larger schemes. At the same time, the Company will continue to
invest in sale and leasebacks in order to increase its national foot-print and
continue to pursue the generation of additional income from sites which have
already been acquired.
Against this backdrop and on the assumption that NHS policy continues to be
directed towards increasing resources in primary health care, I am confident
that the progress made in the first year of operation will be sustained in the
medium term.
Stockbroker
The Company has recently appointed Cenkos Securities as joint broker.
Dr Mark Jackson
Chairman
18 March 2005
Investment Manager's Report
For the period ended 31 December 2004
The Company's investment objective is to achieve asset-backed earnings' growth
from rental and other income streams through the acquisition and development of
a modern portfolio of primary health care premises.
In the first period of operation the principal focus has been on establishing a
regional infrastructure, creating market awareness and sourcing suitable
acquisition opportunities. Deal sourcing to date has comprised investment
purchases of completed rent producing properties, sale and leaseback
transactions with GP practices and forward funding or purchase commitments on
various development projects. During the latter half of 2004, we have increased
our management resources focussed towards direct development activity and a
number of land acquisitions have taken place or are in solicitors' hands which
will enable us to build out our own development pipeline.
Financial Performance
The Company has been profitable in its inaugural year. It has fulfilled the
dividend forecast made at the time of flotation and has fully absorbed all
property acquisition costs incurred at the time of purchase. During this
period, 50% of total income comprised bank and other interest income. In 2005,
interest income will be replaced by increased revenue from rental receipts and
forward funding arrangements arising from recent capital expenditure on new
projects.
The Company intends to draw down a first tranche of debt during the third
quarter of 2005. The terms of this facility are still being finalised through a
competitive tender process involving four banks. The initial bank facility will
be of the order of £100m and will be arranged on a short term basis with
flexibility to allow for a full refinancing once the property portfolio
increases towards £400m.
Rent reviews in primary health care property are generally on a three yearly
cycle. Given the Company's national focus towards investment and its spread of
activities among sale and leasebacks, development projects and LIFT, the Company
is building up an extensive database of rental evidence which will become
increasingly useful in rent review negotiations. The Company has settled rent
reviews on six properties during 2004 resulting in an overall uplift of 14.1% on
the passing rent relating to those properties.
On all properties acquired as at 31 December 2004, the Company had a weighted
income un-expired term of 19.7 years.
Strategic Initiatives
The acquisition of a 70% interest in the share capital of BHE was completed in
August 2004 and we have been pleased with its performance to date. It has
brought to the Group financial and operational involvement in three LIFT areas
as well as development expertise in other primary health care projects and the
niche area of developing hospital main entrance retail malls.
A large portfolio of medical properties, owned by the General Practice Finance
Corporation (GPFC), the principal lender in the sector, came to the market
during the second half of 2004. This attracted considerable interest from a
variety of prospective purchasers including ourselves. The eventual sale price
was somewhat higher than our proposal which was pitched at a level which
balanced the advantages of scale with the ability to achieve a satisfactory
return on investment. The winning bid did however reinforce market evidence of
the premiums that purchasers are prepared to pay for portfolios. We will
continue to monitor the market for such opportunities whilst focussing the
majority of our management resources on individual property purchases.
The Company has established a pharmacy subsidiary to take advantage of changes
in the provision of primary health care. The delivery of a wider range of
medical services has been facilitated by the new GP contract and improved
premises infrastructure. In order to leverage operational efficiency within this
new generation of medical buildings it is becoming increasingly important to
promote the interaction between GPs, practice nursing staff and the provision of
pharmacy and pharmacists' services. The recent relaxation of conditions
controlling the grant of new pharmacy contracts is facilitating this change. As
at 15 March 2005, Healthcare Pharmacies Limited had applied for a total of eight
licences and more licence applications are expected as the Company's property
portfolio expands.
The pharmacy initiative is the first example of how we intend to generate other
earnings streams as our portfolio of primary health care developments gains
critical mass. There are a large number of providers of medical services from
both the private and public sector keen to co-locate in these developments. The
shortage of available space within the current generation of modern medical
facilities is currently their biggest constraint. As our development pipeline
gathers momentum, we intend to pursue innovative and sustainable ways to
accommodate other service providers.
Industry Trends
In April 2004, GPs signed up to their new contract known as nGMS. This was a
further milestone in the evolution of the NHS Plan towards improved service
delivery being undertaken within the primary health care market. During this
period GP practices have been adjusting to the new regime. We believe that many
practices are only now becoming fully conversant with the implications and
opportunities posed by the new contracts. One of the most striking features of
the new contract is that GPs are now financially incentivised to offer an
increasing range of services. To do this they need modern, larger premises so
that they can offer a wider range of services to patients.
At the same time GPs' appetite for owning premises is declining. Working
practices are becoming more diverse, graduates are more reluctant to be saddled
with property assets, older property-owning GPs want to retire and the
profession generally is focussing more on service delivery. The inevitable
consolidation of smaller GP practices into larger, more capital intensive new
developments and the arrival of practice based commissioning are likely to
accelerate these dynamics and increase the demand for new facilities.
Growth money funding continues to be a hot topic within the sector with Primary
Care Trusts being restricted in the amount of funding available to support new
premises' development. Whilst there have been a number of increases announced
by Government during the period under review this continues to be patchy and in
many cases can adversely affect the smooth delivery of new facilities. We
believe the Company is well placed to tackle these issues as it has the
financial resources to take a long term view and is not reliant on project
specific bank debt funding.
Strategy and Outlook
The main focus over the next twelve months will be on allocating investment into
five key areas: sale and leaseback transactions; investment purchases; forward
funding development commitments; own developments and investment in LIFT
companies. The relative mix between the categories is not fixed however it is
our intention to allocate at least 50% of our gross assets towards developments
and LIFT.
Our aim is to build on the position we have established in the market as the
natural partner for GPs and PCTs alike as a long term owner and active asset
manager of primary care premises. We anticipate an increased level of sale and
leaseback activity during this year as more GP practices recognise the merits of
forming a relationship with a partner committed to ongoing capital investment
and development.
The Company is uniquely positioned to take an active role in the development of
bigger projects or 'one stop shops' where there is an opportunity to attract
complementary medical providers and services alongside the GP practice. We will
develop additional space on a 'risk' basis as we believe there is a substantial
and unsatisfied group of users keen to gain representation in these
establishments. We will also explore ways to accelerate the procurement of new
premises. Looking ahead, we believe that the Company's active involvement in the
development process will be a key driver of shareholder value and, as a result,
more resources are being allocated to this part of the business.
The prime objective of delivering asset-backed income growth by building up the
Company's portfolio of properties and development projects is on course. We
continue to explore opportunities to grow other income streams from our
expanding portfolio of medical premises and we are pleased with the progress of
the Company so far.
Richard Burrell
Berrington Fund Management Limited
18 March 2005
The Medical Property Investment Fund Limited
Report of the Directors
The Directors of The Medical Property Investment Fund Limited ('the Company')
and its subsidiaries (together 'the Group') are pleased to submit the Audited
Consolidated Financial Statements of the Group for the period from 7 October
2003 to 31 December 2004.
Investment Policy
The primary investment objective of the Group is to achieve income and capital
growth primarily from a portfolio of medical centres situated in the United
Kingdom and related primary care services.
Listing
The Ordinary Shares of the Company were admitted to the Official List of the
London Stock Exchange on 21 November 2003.
Results
The results for the period are shown in the Consolidated Statement of
Operations.
Dividend
During the period the Company has declared and paid the following interim
dividend and declared the following final dividend to its Ordinary Shareholders:
Dividend Date Declared Rate
Interim 13 September 2004 1.33p
Final 18 March 2005 2.67p
Directors' and Other Interests
None of the Directors or persons connected with them held any shares at 31
December 2004.
None of the Directors had a service contract with the Company during the period.
As at 31 December 2004, Berrington Fund Management Limited was interested in
147,000 Ordinary Shares.
Corporate Governance
As a Guernsey incorporated company, the Company is not required to comply with
the Code of Best Practice published by the Committee on the Financial Aspects of
Corporate Governance (the 'Combined Code'). However, the Directors place a high
degree of importance on ensuring that high standards of Corporate Governance are
maintained.
Going Concern
The Directors believe it is appropriate to adopt the going concern basis in
preparing the financial statements as, after due consideration, the Directors
consider that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Substantial Shareholdings
At 1 March 2005, Directors were aware that the following shareholders owned 3%
or more of the issued Ordinary Shares of the Company.
Number of Ordinary Shares % of Ordinary Shares
The Bank of New York (Nominees) Limited 4,645,970 3.26
BNY (OCS) Nominees Limited 6,776,810 4.76
HSBC Global Custody Nominee (UK) Limited 4,300,000 3.02
Morstan Nominees Limited 13,930,000 9.78
Nortrust Nominees Limited 9,350,000 6.57
Nutraco Nominees Limited 4,355,000 3.06
State Street Nominees Limited 14,118,649 9.91
Vidacos Nominees Limited 32,596,674 22.89
Directors' Responsibilities
The Directors are responsible for preparing financial statements for each
financial period which give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that period and are in
accordance with applicable laws. In preparing those financial statements the
Directors are required to:-
• select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and to enable them to ensure that the financial statements comply with the
Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the
assets of the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Report of the Directors and
other information included in the Annual Report is prepared in accordance with
applicable company law. They are also responsible for ensuring that the Annual
Report includes information required by the Listing Rules of the Financial
Services Authority.
Status for Taxation
The Income Tax Authority in Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989 and the income of the Company may be distributed or accumulated without
deduction of Guernsey income tax. Exemption under the above mentioned Ordinance
entails payment by the Company of an Annual Fee of £600.
The property subsidiary is subject to United Kingdom tax on income arising on
investment properties, after deduction of their debt financing costs and
allowable expenses. The UK trading subsidiaries are subject to UK corporation
tax on their profits.
Auditors
Ernst & Young LLP have indicated their willingness to continue in office.
Dr Mark Jackson, Chairman
Graham Chase, Director
18 March 2005
Independent Auditors' Report to the Members of
The Medical Property Investment Fund Limited
We have audited the Group's financial statements for the period ended 31
December 2004 which comprise the Consolidated Statement of Operations,
Consolidated Balance Sheet, Company Balance Sheet, Consolidated Statement of
Changes in Equity, Consolidated Cash Flow Statement and the related notes 1 to
25. These financial statements have been prepared on the basis of the
accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
The Directors are responsible for preparing the financial statements in
accordance with Guernsey law as described in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements, United Kingdom Auditing Standards
and the Listing Rules of the Financial Services Authority.
We report to you our opinion as to whether the financial statements, which have
been prepared in accordance with International Financial Reporting Standards,
give a true and fair view and are properly prepared in accordance with the
Companies (Guernsey) Law, 1994. We also report to you if, in our opinion, the
Directors' Report is not consistent with the financial statements, if the
Company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit or if information
specified by the Listing Rules regarding Directors' transactions with the Group
is not disclosed.
We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. This other
information comprises the Highlights, Chairman's Statement, Investment Manager's
Report, Directors' Profiles, Management and Administration and Report of the
Directors. We consider the implications for our Report if we become aware of
any apparent misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other information.
Basis of Audit Opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. An audit includes examination, on a
test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgments made by the Directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Group as at 31 December 2004 and of its profit for the period
then ended and have been properly prepared in accordance with the Companies
(Guernsey) Law, 1994.
Ernst & Young LLP
Guernsey, Channel Islands
18 March 2005
Consolidated Statement of Operations
For the period from 7 October 2003 to 31 December 2004
7/10/2003
to
31/12/2004
Notes £
Income
Rent receivable 3,399,736
Fees receivable 358,488
Bank and other interest 3,829,875
Total Income 7,588,099
Expenses
Interest payable and similar charges 5 43,448
Investment Manager's fees 3(i) 2,958,265
Salaries 2 409,520
Legal and professional fees 189,893
Property management expenses 186,546
Audit fees 35,000
Tax and accountancy fees 22,560
Administration fee 3 (ii) 113,453
Directors' fees 4 243,287
Insurance 37,686
Advertising, PR & marketing 260,420
Other expenses 409,168
Depreciation 350
Bank charges 9,503
Total Expenses 4,919,099
Net Profit before Investment Result 2,669,000
Unrealised loss on revaluation of properties (508,027)
Minority interests 69,703
Net Profit before Taxation 2,230,676
Taxation 7 -
Net Profit for the Period 2,230,676
Dividend 6 (1,893,971)
Retained Profit 336,705
Basic and Diluted Profit per Ordinary Share 8 1.58p
All items in the above statement are derived from continuing operations. The
accompanying notes form an integral part of the financial statements.
Consolidated Balance Sheet
as at 31 December 2004
31/12/2004
Notes £
Non-current Assets
Property 10 51,739,136
Investments 11 4,232
Goodwill 12 5,867,768
Tangible fixed assets 13 20,078
57,631,214
Current Assets
Cash and cash equivalents 15 66,650,944
Debtors 16 4,615,396
Development work in progress 10,071,702
81,338,042
Total Assets 138,969,256
Current Liabilities
Creditors 17 2,222,416
Total Liabilities 2,222,416
Net Assets 136,746,840
Represented by:
Capital and Reserves
Share capital 18 14,240,385
Share premium 19 122,239,453
Reserves 20 336,705
136,816,543
Minority interests (69,703)
Total Equity 136,746,840
Net Asset Value per Ordinary Share 21 96.03p
The financial statements were approved at a meeting of the Board of Directors
held on 18 March 2005 and signed on its behalf by:
Dr Mark Jackson, Chairman
Graham Chase, Director
The accompanying notes form an integral part of the financial statements.
Company Balance Sheet
as at 31 December 2004
31/12/2004
Notes £
Non-current Assets
Property 10 -
Investments in subsidiary companies 9 & 11 15,696,868
Loans 14 53,299,452
68,996,320
Current Assets
Cash and cash equivalents 15 66,340,103
Debtors 16 1,515,910
67,856,013
Total Assets 136,852,333
Current Liabilities
Creditors 17 105,493
Total Liabilities 105,493
Net Assets 136,746,840
Represented by:
Capital and Reserves
Share capital 18 14,240,385
Share premium 19 122,239,453
Reserves 20 267,002
Total Equity 136,746,840
The financial statements were approved at a meeting of the Board of Directors
held on 18 March 2005 and signed on its behalf by:
Dr Mark Jackson, Chairman
Graham Chase, Director
The accompanying notes form an integral part of the financial statements.
Consolidated Statement of Changes in Equity
For the period from 7 October 2003 to 31 December 2004
7/10/2003
to
31/12/2004
£
Retained profit 336,705
Minority interest (69,703)
Issue of Ordinary Shares, net of issue costs 136,479,838
Equity at 31 December 136,746,840
The accompanying notes form an integral part of the financial statements.
Consolidated Cash Flow Statement
For the period from 7 October 2003 to 31 December 2004
7/10/2003
to
31/12/2004
Note £
Operating Activities
Rent received 3,285,877
Fees received 358,488
Bank and other interest received 3,829,875
Expenses paid (5,240,581)
Interest paid and similar charges (43,448)
Net cash inflow from operating activities 22 2,190,211
Investing Activities
Purchase of property (53,228,913)
Purchase of investments (4,232)
Purchase of fixed assets (20,428)
Acquisition of subsidiary, net of cash acquired (5,867,768)
Cost of development work in progress (10,071,702)
Short term loan to associated company (932,091)
Net cash outflow from investing activities (70,125,134)
Financing Activities
Issue of Ordinary Shares 142,500,000
Issue costs paid on issuance of Ordinary Shares (6,020,162)
Dividend paid (1,893,971)
Net cash inflow from financing activities 134,585,867
Increase in cash and cash equivalents 66,650,944
Cash and cash equivalents at 7 October 2003 -
Cash and cash equivalents at 31 December 2004 66,650,944
The accompanying notes form an integral part of the financial statements.
Notes to the Financial Statements
For the period from 7 October 2003 to 31 December 2004
1. Operations
The Medical Property Investment Fund Limited is a closed-ended investment
company incorporated in Guernsey whose investment objective is to achieve
capital growth and rising rental income from the ownership and development of a
diversified portfolio of primary health care properties and the provision of
related services.
2. Principal Accounting Policies
Basis of Preparation
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, and reflect the following policies:
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.
Basis of Consolidation
The Group financial statements consolidate the financial statements of The
Medical Property Investment Fund Limited and its subsidiary undertakings drawn
up to 31 December 2004.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being primary care investment and development business and related
services. The Group invests in primary health care properties and developments
situated in the United Kingdom.
Income
Interest and fees receivable are included in the financial statements on an
accruals basis. Rental income is included in the financial statements on an
accruals basis and is shown gross of any UK income tax.
Expenses
All expenses are accounted for on an accruals basis.
Salaries
The Company has no employees. Salary costs relate to the Group's subsidiary, BHE
Management Services Limited, which has nine employees. The latter company does
not have a pension scheme.
Issue Costs
The share issue costs incurred amounted to £6,020,162 and have been written off
in full against the share premium account.
Investments in Subsidiary Companies
The investments in subsidiary companies are included in the Company Balance
Sheet at cost less any provisions for diminution in value.
Goodwill
Goodwill arising on acquisition is accounted for being the difference between
the cost of acquisition and the fair value of the assets acquired. It is then
subject to annual review for any impairment.
Property - Freehold
Freehold properties are initially recognised at cost, being the 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 Statement of
Operations. Fair value is based upon the open market valuations of the
properties as provided by FPD Savills Commercial Limited, a firm of independent
chartered surveyors, as at the balance sheet date.
Property - Long Leasehold
IAS 40 (2003 - revised) has been adopted early. As a result, long leasehold
properties have been accounted for as freehold properties and, after initial
recognition at cost, are measured at fair value (on the same basis as freehold
properties above).
Tangible Fixed Assets
Tangible fixed assets are depreciated over their expected useful lives which
are:
Fixtures & Fittings - four years.
Investments
Investments are initially recognised at cost, being the fair value of the
consideration paid, including transaction costs associated with the investment.
After initial recognition, investments are carried at the Group's share in the
net asset value of the investment.
Loans to Subsidiary Companies
The unsecured subordinated loan that has been granted to MPIF Holdings Limited
at various times during the accounting period, has been accounted for as an
originated loan under IFRS. This loan, and other loans to subsidiary companies,
have been accounted for on an amortised cost basis with intercompany interest
being recognised under the effective interest rate method. The loans are
reviewed regularly for impairment.
Development Work in Progress
Development work in progress, including capitalised interest where applicable,
is carried at cost or, if lower, market value. No interest was capitalised in
the period.
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.
3. Material Agreements
(i) Under the terms of an appointment made by the Board on 18 November 2003,
Berrington Fund Management Limited ('BFML') was appointed as Investment Manager
to the Company. With effect from 21 November 2003 the Investment Manager is paid
an aggregate annual management fee of 2.0% of the net asset value of the Company
payable monthly in arrears. In addition, BFML is entitled to receive a
performance fee in respect of the period from Admission to 31 December 2008 of
18% of the amount by which the market value per share exceeds on 31 December
2008 the Placing Price (compounded annually at 12% per annum) and, thereafter,
18% of the amount by which the market value per share exceeds the higher of (1)
the Placing Price (compounded annually at 12% per annum) or (2) the highest
previous market value per share as stated in the Prospectus.
The Investment Management Agreement is terminable by the Company on 12 months'
notice, such notice to be given on or after the fourth anniversary of the
Investment Manager's Agreement.
The Investment Manager has delegated the management of the investment properties
to Barlows Asset Management Limited.
(ii) Under the terms of an Administration Agreement dated 18 November 2003,
the Company appointed Guernsey International Fund Managers Limited ('GIFM') as
Administrator, Secretary and Registrar of the Company. This agreement was
terminated with effect from 27 April 2004.
The Company entered into an Administration Agreement dated 26 April 2004 with
Mourant Guernsey Limited ('Mourant') under which Mourant agreed to provide
services to the Company as Administrator and Secretary to the Company. Mourant
is entitled to an annual fee of £85,000 per annum, such fees being invoiced
monthly in arrears.
4. Directors' Fees 7/10/2003
to
31/12/2004
During the period each of the Directors was entitled to the following fees: £
M. Jackson (Chairman) 121,643
J. Curran (Deputy Chairman) 48,657
G. Chase 24,329
F. Porter 24,329
C. Vibert 24,329
243,287
5. Interest Payable and Similar Charges 7/10/2003
to
31/12/2004
Bank & other interest payable 43,448
43,448
6. Dividends Paid and Payable on Ordinary Shares
7/10/2003
No. of to
Ordinary Rate 31/12/2004
Shares pence £
Interim dividend paid 15 October 2004 142,403,847 1.33 1,893,971
Dividends paid 1.33 1,893,971
A final dividend of 2.67 pence per Ordinary Share was declared on 18 March 2005.
7. Taxation
The Company and its Guernsey registered subsidiary, MPIF Holdings Limited, have
obtained exempt company status in Guernsey under the terms of the 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 in
Guernsey. Each 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.
MPIF Holdings Limited is subject to United Kingdom income tax on income arising
on the investment properties, after deduction of its debt financing costs,
allowable expenses and capital allowances.
The Company's UK subsidiaries are subject to United Kingdom corporation tax on
their profits less losses.
8. Basic and Diluted Profit per Ordinary Share
The basic and diluted profit per Ordinary Share is based on the net profit for
the period of £2,230,676 and on 140,909,564 Ordinary Shares, being the weighted
average number of Ordinary Shares in issue throughout the period since 21
November 2003, when the shares were admitted to the Official List of the London
Stock Exchange.
9. Investments in Subsidiary Companies
The Company owns the whole of the issued Ordinary Share capital of MPIF Holdings
Limited, specially formed to act as the property investment holding company for
the Group, which is incorporated and registered in Guernsey. MPIF Holdings
Limited owns the whole of the issued Ordinary Share capital of BHE (Heartlands)
Limited (property investment company - registered in England), and BHE
(Bonnyrigg) Limited and BHE (Wand) Limited, both of which are dormant and
registered in England.
MPIF Holdings Limited also owns the whole of the issued Ordinary Share capital
of MPF Pharmacies Limited, specially formed to act as the pharmacy investment
holding company for the Group, which is incorporated and registered in Guernsey.
MPF Pharmacies Limited owns the whole of the issued Ordinary Share capital of
Healthcare Pharmacies Limited which is registered in England and will, in due
course, carry on its pharmacy trade in the United Kingdom.
The Company also owns 70% of the issued Ordinary Share capital of BHE Holdings
Limited and its subsidiaries, Development Support Partnership Limited and BHE
(York) Limited, both of which are dormant, and BHE Management Services Limited.
BHE Holdings Limited and BHE Management Services Limited, all of which are
registered in England, both undertake property development, health planning and
related consultancy services.
10. Property
Properties are stated at fair value, which has been determined based on
valuations performed by FPD Savills Commercial Limited as at 31 December 2004,
on the basis of open market value, supported by market evidence, in accordance
with International Valuation Standards.
31/12/2004
Group £
At 7 October 2003 -
Additions at cost 52,247,163
Unrealised loss on revaluation (508,027)
At 31 December 2004 51,739,136
31/12/2004
Company £
At 7 October 2003 -
Additions at cost 32,040,262
Disposals (32,040,262)
At 31 December 2004 -
During the period the Group has complied with Sections 21.27 (f) to 21.27 (i) of
the FSA Listing Rules.
11. Investments
The Group has the following investments:
Shares held % held Place of Business
Name of Company by the Group Incorporation Activity
Infracare (Midlands) 5 Ordinary 5% (with an option to England Dormant (formed to
Limited Shares of £1 increase to 40% for invest in the Dudley
nominal South LIFT Company)
consideration)
GB Consortium (No. 1) 4,200 Ordinary 40% held by BHE England Holds 60% of the
Limited Shares of £1 (Holdings) Limited share capital in the
which is 70% owned by Barnet, Enfield and
the Company Haringey, and
Liverpool and Sefton
LIFT Companies
GB Consortium (No. 2) 27 Ordinary 45% held by BHE England Holds 60% of the
Limited Shares of £1 (Holdings) Limited share capital in the
which is 70% owned by Coventry LIFT
the Company Company
The Company has the following investments in subsidiaries:
31/12/2004
Company £
Investment in MPIF Holdings Limited 12,000,000
Investment in BHE Holdings Limited 6,670,771
Provision for diminution in value of subsidiaries (2,973,903)
15,696,868
12. Goodwill
On 30 July 2004 the Company acquired 70% of the share capital of BHE Holdings
Limited, and 100% of the share capital of BHE (Bonnyrigg) Limited and BHE
(Heartlands) Limited for a consideration of £4m in cash plus 2,403,847 Ordinary
Shares in the Company with a value of £2,500,000.
The net assets of the group acquired were £Nil.
The goodwill arising and at the period end is as follows:
31/12/2004
Group £
Purchase consideration 6,500,000
Stamp duty, legal fees and other costs of acquisition 170,771
Total cost 6,670,771
Net assets acquired -
Revaluation at date of acquisition 803,003
Goodwill arising and at 31 December 2004 5,867,768
13. Tangible Fixed Assets
31/12/2004
Group £
Fixtures &
Fittings
Cost
At date of acquisition and at 31 December 2004 37,896
Depreciation
At date of acquisition 17,468
Depreciation for the period 350
At 31 December 2004 17,818
Net book value at 31 December 2004 20,078
14. Loans
31/12/2004
Company £
MPIF Holdings Limited (i) 48,355,860
BHE Holdings Limited (ii) 250,000
BHE (Heartlands) Limited (iii) 3,424,675
BHE (Bonnyrigg) Limited (iii) 1,032,032
MPF Pharmacies Limited (iii) 216,560
GB Consortium (No. 1) Limited (iii) 20,325
53,299,452
(i) These comprise unsecured subordinated loans issued in support of property
acquisitions. The loans are repayable on 31 December 2013 and interest is
charged at the fixed rate for that period plus a margin of 3%.
(ii) The loan is unsecured, repayable upon demand and carries interest at 8% per
annum.
(iii) These loans are unsecured, non interest bearing and repayable upon demand.
15. Cash and Cash Equivalents
Cash balances include £635,000 held to the bank's order as security for letters
of credit issued by the bank to the debt funders for the three Local Improvement
Finance Trusts (LIFT Companies) to which the Group has pledged funding upon
practical completion of the medical centres under development.
16. Debtors
31/12/2004
Group £
VAT recoverable 873,584
Other debtors 934,796
Short term loan to Infracare (Midlands) Limited* 932,091
Rent receivable 893,175
Property purchase deposits 981,750
4,615,396
* The unsecured loan from MPIF Holdings Limited to Infracare (Midlands) Limited carries interest at
12% and is repayable upon financial close of the Dudley South LIFT.
Company
Due from MPIF Holdings Limited 1,479,132
Prepayments 36,778
1,515,910
17. Creditors 31/12/2004
£
Group
Trade creditors 954,745
Other creditors 488,355
Rents received in advance 779,316
2,222,416
Company
Trade creditors 6,357
Other creditors 99,136
105,493
18. Share Capital
Authorised £
200,000,000 Ordinary Shares of 10p each 20,000,000
20,000,000 Preference Shares of 10p each 2,000,000
22,000,000
Number of Share
Shares Capital
Ordinary Shares issued and fully paid £
142,403,847 Ordinary Shares of 10p each 142,403,847 14,240,385
Total share capital 142,403,847 14,240,385
The Company has yet to issue any Preference Shares.
Voting Rights
Ordinary shareholders are entitled to vote at all general meetings. Preference
shareholders are entitled to receive notice of and speak at any general meeting
of the Company but they can only vote on any resolution relating to the
Preference Shares.
Dividends
The preference shareholders are entitled to, in priority to the holders of any
other class of share, a fixed cumulative preferential cash dividend at the rate
of 6p per Preference Share per annum.
The ordinary shareholders are entitled to the balance of revenue made available
for distribution by the Company.
Conversion
Each preference shareholder may convert part of his shareholding into fully paid
Ordinary Shares at the rate of one Ordinary Share for each Preference Share
held, in the manner and basis set out in the articles.
Capital
If not converted, the Preference Shares may be redeemed by the Company subject
to notice periods set out in the articles.
The ordinary and preference shareholders are entitled to all capital pari passu
once the preference shareholders have received their dividend entitlement.
19. Share Premium
31/12/2004
£
Proceeds arising on issue of Ordinary Shares 128,259,615
Allocation of issue costs (6,020,162)
Share premium at 31 December 2004 122,239,453
Profit and
Loss
20. Reserves Reserves
31/12/2004
£
Group
Retained profit 336,705
Reserves at 31 December 2004 336,705
Company
Retained profit 267,002
Reserves at 31 December 2004 267,002
21. Net Asset Value per Ordinary Share
The net asset value per Ordinary Share is based on the net assets attributable
to the ordinary shareholders of £136,746,840 and on 142,403,847 Ordinary Shares
in issue at the balance sheet date.
22. Note to the Consolidated Cash Flow Statement
7/10/2003
to
31/12/2004
£
Reconciliation of net profit before investment result to net cash outflow from operating activities:
Net profit before investment result 2,669,000
Adjustment for non-cash items:
Depreciation 350
(Increase) in debtors (2,701,555)
Increase in creditors 2,222,416
Net cash inflow from operating activities 2,190,211
23. 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 Group has not entered
into any derivative transactions during the period under review.
The main risks arising from the Group's financial instruments and properties are
market price risk, credit risk, liquidity risk and interest rate 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 will reflect
the actual sales price even where a sale occurs shortly after the valuation
date.
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 costs thereof, the costs of
maintenance and insurance, and increased operating costs.
The Directors monitor market value by having independent valuations carried out
quarterly by FPD Savills Commercial Limited.
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 Group's exposure to market risk for changes in interest rates relates
primarily to the Group's cash deposits and, once debt is being utilised,
long-term debt obligations. The Group's policy will be to manage its interest
cost using fixed rate debt in due course.
The interest rate profile of the Group at 31 December 2004 is as follows:
Total Variable Assets on Weighted
rate which no average
interest is interest
received rate
per annum
£ £ £ %
Assets
Properties 51,739,136 - 51,739,136 -
Fixed assets 20,078 - 20,078 -
Goodwill 5,867,768 - 5,867,768 -
Investments 4,232 - 4,232 -
Non-current assets 57,631,214 - 57,631,214 -
Cash and cash equivalents 66,650,944 66,650,944 - 4.6
Debtors 4,615,396 - 4,615,396 -
Development work in progress 10,071,702 - 10,071,702 -
Total assets as per Balance Sheet 138,969,256 66,650,944 72,318,312
Total Liabilities
on which
no interest
is paid
£ £
Liabilities
Creditors 2,222,416 2,222,416
Total liabilities as per Balance Sheet 2,222,416 2,222,416
24. Commitments
At the period end the Group had commitments to invest a further £15,616,000 in
its portfolio of investment property.
The Company has given guarantees in favour of the General Practice Finance
Corporation (GPFC) amounting to £635,000 to secure future LIFT investments by
the Group.
25. Related Parties
The Company was charged investment manager's fees totalling £2,958,265 by
Berrington Fund Management Limited, none of which was outstanding at the balance
sheet date. At the period end Berrington Fund Management Limited had an interest
in 147,000 Ordinary Shares in the Company.
This information is provided by RNS
The company news service from the London Stock Exchange MSCPKFKQABKDNND
Wednesday, 15th May 2024
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