Interim Management Statement

RNS Number : 5786J

The MedicX Fund Limited

08 August 2012

 



For immediate release

8 August 2012

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 2012 to today's date.

Financial position

The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP as at 30 June 2012 stood at £286.1 million reflecting a net initial yield of 5.87%.  This is unchanged from March 2012, and compares favourably with the weighted average fixed cost of drawn long term debt held by the Company of 4.72%. 

Incorporating the June valuation, the unaudited adjusted net asset value at 30 June 2012 is estimated to be £166.3 million, equivalent to 64.7p per share compared with 65.5p per share at 31 March 2012.  Long-term interest rates have decreased since 31 March and, including the cost of the Company's fixed rate debt facilities, the unaudited adjusted net asset value plus the mark to market cost of fixed rate debt is estimated now to be £165.3 million, equivalent to 64.3p per share, compared with 68.6p per share at 31 March 2012.  The spread between property yields and borrowing costs is currently the widest the Company has seen since incorporation.

The shares of the Company have continued to perform well, with the closing mid-market share price at 29 June 2012 standing at 77.375p (source: Official Daily List).  This represents a total shareholder return for the nine months to 30 June 2012 as measured by dividends paid and share price growth of 9.6% or 6.6p per share.  The unaudited adjusted net asset value includes a provision equating to 0.4p 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 2012.  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.  The Company has recently agreed with the Investment Adviser that the 8% hurdle will be increased to 10% from the financial years commencing on or after 1 October 2012.

Aside from the significant investment in new acquisitions 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 28 May 2012.

Corporate acquisition

On 20 July 2012 the Company acquired 31 completed properties by way of a corporate acquisition for an initial cash consideration of £16.1 million and the assumption of existing debt facilities of £63.8 million.  The details of this transaction may be found in the announcement released on 23 July 2012.

If the acquisition had been completed by 30 June 2012, it is estimated that it would decrease the unaudited adjusted net asset value to £159.4 million or 62.1 pence per share, and would increase the discounted cash flow ("DCF") valuation to £233.7 million or 91.0 pence per share.  The value of the properties acquired would increase the property portfolio value to £371.0 million at a combined net initial yield of 5.94%, while the weighted average fixed cost of debt would be 4.31% assuming the acquired debt facilities were reset to market rates as at the time of the acquisition.

Discounted cash flow valuation of assets and debt

On the Fund's behalf the Investment Adviser has carried out a DCF valuation of the Group assets and associated debt at each period end.  At 30 June 2012, the DCF valuation was £228.5 million or 88.9p per share, compared with £222.4 million or 90.1 pence per share at 31 March 2012.

The discount rates used are 7% for completed and occupied properties and 8% for properties under construction.  The weighted average discount rate is 7.19% which represents a 4.21% risk premium relative to the 20 year gilt rate as at 30 June 2012.

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 the calculation also assumes the current level of borrowing facilities.

Rent reviews

Since 1 April 2012 seven leases and rents of £0.9 million were reviewed and the equivalent of a 2.5% per annum increase was achieved.  This brings the result of reviews completed for the financial year to date to 3.1% increase per annum, covering 19 leases and rents of £3.1 million.  Reviews of £7.4 million of passing rent are currently under negotiation.

Investment activity

The portfolio, which consists of 106 properties, continues to perform in line with long-term objectives.  In the period since 1 April 2012, the Company acquired a further five development properties in addition to the 31 completed properties acquired in the corporate acquisition on 20 July. 

Since 1 April 2012 three properties under construction have been completed at Rochdale, East Cowes and Hirwaun, and the Clapham forward purchase was also completed in the period.  Ten properties are now under construction at Raynes Park, Grangetown, Caerphilly, Monkseaton, Methil, plus the five new projects at Uckfield, Tooting, Kingston, Middlewich and Arnold which started construction during the period.  The property at Grangetown is expected to complete before the end of September 2012, and the remainder are all due to complete in the next financial year.

The Churchside Medical Practice investment property at Mansfield, Nottinghamshire was sold during the period at a price of £1.24 million, slightly below its 31 March 2012 valuation.  The property was acquired as part of the initial portfolio in November 2006 and was one of the smallest properties in the portfolio.

The Investment Adviser has access to a pipeline of £48.4 million, 13 properties, of which the acquisition of two properties at a cost of £8.0 million, has already been approved by the Board.

Share issues

Several tap issues have been made since 1 April 2012 to satisfy the demand for shares in the Company.  Overall a total of 9.7 million ordinary shares of no par value have been sold out of treasury for cash at an average issue price of 77.76 pence per share.  The individual transactions are listed in a table below, and all of the shares were issued at a premium to the net asset value of the Company at the time of the transaction.  The proceeds will be used to pursue further the investment objectives of the Company.

Date of issue	Number of shares	Price per share
27 April 2012	1,000,000	77.0 pence
3 May 2012	2,000,000	79.0 pence
31 May 2012	6,100,000	77.5 pence
13 June 2012	600,000	77.5 pence
Total issued	9,700,000

In addition, on 29 June 2012 the Company sold 238,099 shares from treasury to satisfy demand pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 78.45 pence per share.

As at today's date the total number of ordinary shares of the Company in issue is 263,645,780 of which 6,779,564 shares are held in treasury, compared with 263,645,780 ordinary shares in issue at 31 March 2012 of which 16,717,663 shares were held in treasury.  Consequently the total voting rights in issue at today's date are 256,866,216, compared with 246,928,117 at 31 March 2012.

Debt facilities

At 30 June 2012 the Company had access to debt facilities with a weighted average fixed cost of 4.46% including undrawn amounts, with an average remaining term of 18.3 years. 

New debt facilities of £63.8 million were acquired as part of the corporate acquisition (the "acquired facilities") which have a remaining term of 15.3 years.  The Company has negotiated with its lenders for the acquired facilities to be reset to current market rates.

Including the acquired facilities at the all-in fixable rate of 4.15% indicated by the lenders at the time of the acquisition, the Company currently has debt facilities with a weighted average fixed cost of debt of 4.31% with an average remaining term of 17.5 years.

A further £3.7 million was drawn against the £37.1 million Deutsche Postbank facility in July 2012, so that £11.2 million is currently drawn in total, and the intention is to draw the remainder of the facility by 31 August 2012, which is the final date for drawdown of that facility.

Dividends

On 29 June 2012 a quarterly dividend of 1.4p per ordinary share in respect of the period 1 January 2012 to 31 March 2012 was paid to ordinary shareholders on the register as at close of business on 18 May 2012.

The Directors have approved a quarterly dividend of 1.4p per ordinary share in respect of the period 1 April 2012 to 30 June 2012.  The dividend will be paid on 28 September 2012 to ordinary shareholders on the register as at close of business on 17 August 2012.  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 5.6p per Ordinary share in respect of the financial year 30 September 2012, an increase of 1.8% on the total dividend declared for the previous financial year. Based upon the current share price of 77.0p, this represents a dividend yield of 7.3%. 

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
Buchanan:	[phone]
Charles Ryland/Gabriella Clinkard

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 Main Market of the London Stock Exchange, with a portfolio comprising 106 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 29 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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