Interim Management Statement

RNS Number : 8251L

The MedicX Fund Limited

05 August 2011

 



For immediate release                                                                                    

05 August 2011

MedicX Fund Limited

("MedicX Fund", "the Fund" or "the Company")

Interim Management Statement

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 Interim Management Statement for the period from 1 April 2011 to today's date.

Financial position

Since 31 March 2011, the Company has continued to invest successfully in new acquisitions and properties currently under construction, with two new properties secured and an additional three projects approved for acquisition.  The company has also disposed of its smallest investment property during the period. 

The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP (formerly King Sturge LLP) as at 30 June 2011 stood at £227.8 million reflecting a net initial yield of 5.87%.  This is broadly unchanged from the net initial yield of 5.86% in March 2011.  Primary care properties have yet to see the full benefit of the increase in valuations seen in other prime property sectors.  In the Company's first interim results in March 2007 the portfolio valuation reflected a net initial yield of 5.10%.   The valuation net initial yield only moved out as far as 6.09% in March 2009 at the depth of the property recession recognising the security of the income underpinning the portfolio.  The current valuation at 5.87% reflects an improvement of only 4% since then.  There is limited transactional evidence in the sector and we continue to believe that at the current valuation levels the properties represents good value when compared with other prime properties.

Incorporating the June valuation, the unaudited adjusted net asset value at 30 June 2011 is estimated to be £125.5 million equivalent to 65.7p per share compared with 66.5p per share at 31 March 2011.  Long-term interest rates have decreased since 31 March and, including the benefit of the £100 million fixed rate debt, the unaudited adjusted net asset value plus the mark to market benefit of fixed rate debt is estimated now to be £138.6 million equivalent to 72.6p per share, compared with 74.1p per share at 31 March 2011.

It is pleasing to report that the shares have continued to perform well, and the Company is delivering shareholder returns above the expected level.  With the share price at 30 June 2011 standing at 77.38p, this represents a total shareholder return for the nine months to 30 June 2011 as measured by dividends paid and share price growth of 10.5% or 7.73p per share.  The unaudited adjusted net asset value includes a provision equating to 0.5p per share for the potential performance fee that may be earned by MedicX Adviser Ltd (the "Investment Adviser") for the financial year ended 30 September 2011.  The performance fee equates to 15% of any excess return above a total shareholder return of 8% compounded annually from the high watermark set when a performance fee was last earned.

There have been no other significant changes to the financial position of the Company since the interim results were announced on 26 May 2011.

Discounted cash flow valuation of assets and debt

On the Fund's behalf the Investment Adviser has carried out a discounted cash flow ("DCF") valuation of the Group 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 the 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 is then aggregated with the surplus cash position of the Group. 

The discount rates used are 7% for completed and occupied properties and 8% for properties under construction.  The weighted average discount rate is 7.21% which represents a 2.71% risk premium relative to the 20 year gilt rate as at 30 June 2011.

The discounted cash flows assume an average 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.

At 30 June 2011, the DCF valuation was £165.0 million or 86.4p per share, compared with £164.8 million or 86.6p per share at 31 March 2011.

Rent reviews

Since 1 April 2011 14 leases and rents of £1.6 million were reviewed and the equivalent of a 2.6% per annum increase was achieved.  This brings the result of reviews completed for the financial year to date to 2.5% increase per annum, covering 27 leases and rents of £2.7 million.  Following these reviews the cash yield of the portfolio is 6.04%, which compares with a benchmark 20-year gilt rate of 4.51%.  Reviews of £4.1 million of passing rent are currently under negotiation.

Investment activity

The portfolio, which consists of 60 properties, continues to perform in line with long-term objectives.  Eight properties are now under construction at Halifax, Hounslow, Apsley, Bermondsey, Clapham, West Wirral, Woolwich Royal Arsenal and including the project at Rochdale which started construction during the period.  The properties at Halifax, Apsley and Bermondsey are expected to complete before the end of September 2011, and the remainder are all due to complete in the next financial year.  The existing project at Raynes Park and the newly contracted project at Hirwaun are expected to commence construction in the coming months.

The Pen-y-bryn Surgery investment property at Gorseinon, West Glamorgan was sold during the quarter at its valuation of £0.6 million.  The property was acquired as part of the initial portfolio in November 2006 and was the lowest value property in the portfolio.

The Investment Adviser has access to a pipeline of £83.1 million, 22 properties, of which the acquisition of 9 properties at a cost of £38.4 million, have already been approved by the Board.

Share issues

On 17 June 2011, the Company issued 500,000 new ordinary shares of no par value for cash at an issue price of 78.25 pence per share.  A further 1,500,000 new ordinary shares were issued on 8 July 2011 at an issue price of 78.25 pence per share.  The proceeds will be used to pursue further the investment objectives of the Company.

In addition, on 30 June 2011 the Company issued 156,928 shares pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 76.63 pence per share.

As at today's date the total number of ordinary shares of the Company in issue is 192,470,029 with each share holding one voting right, compared with 190,313,101 ordinary shares at 31 March 2011.  No shares are held in treasury.

Increased bank facilities

Due to the good opportunities that continue to be available to the Company for investment and the benefit to the Company of growing the portfolio, the Group agreed on 1 August 2011 to extend its loan facility with Deutsche Postbank from £25.5 million to £37.1 million on substantially the same terms as the existing facility. Interest is payable at 2% plus LIBOR. The intention is to fix the interest rate applicable to the loan at the time of each drawdown.  Based on the five-year swap rate at 29 July 2011 of 1.84% the loan would be fixed at 3.84%.

Dividends

On 30 June 2011 a quarterly dividend of 1.375p per ordinary share in respect of the period 1 January 2011 to 31 March 2011 was paid to ordinary shareholders on the register as at close of business on 20 May 2011.

The Directors have approved a quarterly dividend of 1.375p per ordinary share in respect of the period 1 April 2011 to 30 June 2011.  The dividend will be paid on 30 September 2011 to ordinary shareholders on the register as at close of business on 19 August 2011.  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 (the "Scheme") previously put in place by the Company on 5 May 2010.

In line with the Company's progressive dividend policy of growing the dividends throughout the life of the Company, the Directors expect, subject to unforeseen circumstances and the Company's financial position, to pay dividends totalling 5.5p per Ordinary share in respect of the financial year 30 September 2011, an increase of 1.9% on the total dividend declared for the previous financial year. Based upon the current share price of 78.38p, this represents a dividend yield of 7.0%. 

David Staples

Chairman

End

For further information please contact:

MedicX Group:                                                               [phone]

Keith Maddin, Chairman

Mike Adams, Chief Executive Officer

Mark Osmond, Chief Financial Officer

MedicX Fund:                                                                [phone]

David Staples, Chairman

Collins Stewart Europe Limited:                                       [phone]

Andrew Zychowski

Helen Goldsmith

Buchanan Communications:                                             [phone]

Charles Ryland/Suzanne Brocks

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, listed on the London Stock Exchange, with a portfolio comprising 60 properties.

The Investment Adviser to the Company is MedicX Adviser Ltd, which is authorised and regulated by the Financial Services Authority and is a subsidiary of the MedicX Group. The MedicX Group is a specialist investor, developer and manager of healthcare properties with 31 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.

 

END

 

 

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