Proposed Placing and Offer
The MedicX Fund Limited
02 May 2007
MedicX Fund Limited
2 May 2007
NOT FOR DISTRIBUTION, PUBLICATION OR RELEASE IN OR INTO THE UNITED STATES,
CANADA, AUSTRALIA, JAPAN, NEW ZEALAND, IRELAND OR SOUTH AFRICA
ADVERTISEMENT
This document does not constitute or form part of any offer or invitation to
sell or issue, or any solicitation of any offer to subscribe for, any C Shares
or any other securities, nor shall it (or any part of it), or the fact of its
distribution, form the basis of, or be relied on in connection with, any
contract relating thereto. This document is an advertisement and not a
prospectus, and investors should not subscribe for any C Shares referred to in
this document except on the basis of the information in the Prospectus. Copies
of the Prospectus will, following publication, be available from the Company's
registered office.
MedicX Fund Limited
('MXF' or the 'Company')
Proposed Placing and Offer for Subscription of up to 40 million C Shares at 100p
per share and Notice of Extraordinary General Meeting and financial results
MedicX Fund Limited (MXF), the Official Listed specialist investor in modern
purpose built primary healthcare properties, today announces that it has agreed,
subject to shareholder approval, to raise up to £40m million (before expenses)
by way of a Placing and Offer for Subscription of C Shares at 100p per share.
The Offer for Subscription period, during which C Shares may be subscribed for
begins today. An EGM will be held on Tuesday 29 May 2007 at which resolutions
will be put to Shareholders permitting MXF to issue the C Shares to raise
capital for further growth.
The Placing and Offer for Subscription
HIGHLIGHTS
• Placing and Offer for Subscription to raise up to £40 million
(before expenses).
• Panmure Gordon (UK) Limited has procured commitments from institutional
and other investors for a minimum of 15 million C Shares under the
Placing and Offer for Subscription.
• Issue price of 100p per C Share.
• Proceeds to be used to finance MXF's further growth with the Company's
new target to have invested £200 million in total within 12 months of
Admission of the C Shares.
• The Placing and Offer for Subscription are subject to the approval
of Shareholders which is to be sought at an EGM to be held on 29 May 2007.
• The Prospectus describing the terms of the Placing and Offer for
Subscription is expected to be posted to shareholders later today.
• The ticker symbol for the C Shares is expected to be MXFC.
Financial results
HIGHLIGHTS
• MXF has also today announced its results for the period since IPO; 2
November 2006 to 31 December 2006. Highlights include:
o £56.2 million (net of expenses) of equity raised at IPO
o 35 properties acquired with a valuation when fully completed
of £124 million
o Profit after taxation* - £3.4 million
o Earnings per share* - 6.1 pence
o Net Asset Value* - 103.7 pence per Ordinary Share
o Net Debt £43.2 million representing 41% loan to value gearing
o £100 million of borrowing secured at 5% cost (including margin) fixed
for a 30 year term
o Additional 4 properties and £12 million post balance sheet date
investments allocated to the C Shares
* Adjusted to exclude the impact of deferred tax which the Directors believe
will not impact the Company.
Commenting on the proposed Placing and Offer for Subscription and financial
results, John Hearle, Non-Executive Director of MedicX Fund, said:
'We are delighted to have secured new capital from both new and existing
investors and look forward to the continued expansion of our property portfolio.
Our financial results are strong and we look forward to building further value
for shareholders.'
-ends-
For further information please contact
MedicX Fund
Alison Simpson Tel: 01481 723 450
MedicX Group
Keith Maddin Tel: 01483 869 500
Mike Adams
Buchanan Communications
Charles Ryland Tel: 020 7466 5000
Lisa Baderoon
Mary-Jane Johnson
Panmure Gordon (UK) Limited
Edward Farmer Tel: 020 7459 3600
Stuart Gledhill
Callum Stewart
THE PLACING AND OFFER FOR SUBSCRIPTION
The Board today announces that it is proposing to raise up to £40 million
(before expenses) by way of the Placing and Offer for Subscription at 100p per C
Share in order to provide MXF with capital for further growth. The Company's new
target is to have invested £200 million in total within 12 months of Admission
of the C Shares.
The Placing and Offer for Subscription is conditional upon the approval of
Shareholders at the forthcoming Extraordinary General Meeting. The principal
purpose of the Prospectus expected to be published later today is to explain the
reasons for, and terms of, the Issue and to recommend that Shareholders vote in
favour of the Resolution to be proposed at the Extraordinary General Meeting to
enable the Issue to proceed, notice of which is set out at the end of the
Prospectus.
The Extraordinary General Meeting is to be held on 29 May 2007, at 11.00 am at
the registered office of MXF; Regency Court, Glategny Esplanade, St Peter Port,
Guernsey, Channel Islands, GY1 3RH.
PLACING AND OFFER FOR SUBSCRIPTION STATISTICS
Placing Price per C Share under the Placing 100p
Issue Price per C Share under the Offer for Subscription 100p
Number of existing Ordinary Shares in issue at the date of the 57,460,715
Prospectus
NAV per Ordinary Share on 31 December 2006* 103.7p
(adjusted to exclude the impact of deferred tax which the
Directors believe will not impact the Company)
Number of C Shares in issue* 40,000,000
Gross proceeds of the Issue approximately* £40,000,000
Net proceeds of the Issue receivable by Company* £38,800,000
Approximate market capitalisation of the Company following £100,900,000
Admission*
(assuming a share price of 106p per Ordinary Share and 100p per C
Share)
Initial NAV per C Share on Admission* 97p
* assuming the maximum number of C Shares are issued pursuant to the Placing and
the Offer for Subscription
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record date for Qualifying Shareholders under the Offer for 5:00 p.m. on 1 May 2007
Subscription
Latest time and date for receipt of Application Forms and 1:00 p.m. on 22 May 2007
Priority Application Forms and payment
Latest time and date for receipt of completed Forms of Proxy 11:00 a.m. on 27 May 2007
Extraordinary General Meeting 11:00 a.m. on 29 May 2007
C Shares issued; Admission of C Shares and dealings in C 8:00 a.m. on 4 June 2007
Shares commence; CREST accounts credited in respect of C
Shares issued in uncertificated form;
Certificates for C Shares issued in certificated form to be by no later than 12 June 2007
despatched
Application will be made for admission of the Ordinary Shares arising on
Conversion to the Official List (and to dealings on the London Stock Exchange's
market for listed securities) to occur at the Conversion Time.
Each of the times and dates in the above timetable is subject to change, in
which event details of the new times and/or dates will be notified to the UK
Listing Authority and the London Stock Exchange and, where appropriate,
Shareholders. References to times in this announcement are to London time.
BACKGROUND TO AND REASONS FOR THE PLACING AND OFFER FOR SUBSCRIPTION AND USE OF
PROCEEDS
The £55.96 million of funds raised in the Company's IPO have been used to invest
in primary healthcare properties. To supplement the initial proceeds raised at
the time of its IPO, on 4 December 2006 the Company announced that it had
secured a £100 million debt facility from Norwich Union (via its affiliate
General Practice Finance Corporation). The Company has achieved its initial
objective to invest £80 million in primary healthcare properties within six
months of its IPO. Following its successful acquisition programme to date and
the Forward Funding Agreements that the Company has already entered into, the
Company has become capital constrained.
At the current rate of investment, the Company will shortly become unable to
invest in the pipeline of opportunities that it continues to see.
The Property Adviser has, to date, been able to source a greater number of
investment opportunities fitting the Company's investment criteria (many of them
directly from third party vendors), than had originally been anticipated at the
time of its IPO. The level of potential acquisitions that are brought to the
Company's attention has remained significant and the Directors believe that it
would be in the interests of the Company to continue to acquire such properties
by raising additional funds.
Therefore, in order to fund the ongoing investment and to take advantage of
future pipeline opportunities, the Company is seeking to raise up to an
additional £40 million (before expenses) through the issue of up to 40 million C
Shares in the Company. The Company's objective is now to commit investment of
£40 million in primary healthcare property within six months of Admission of the
C Shares and to have fully invested £200 million in total within 12 months of
Admission. The Directors intend to secure and utilise long term borrowing
facilities of, in aggregate, approximately 50 per cent., but not exceeding 65
per cent., of the gross assets attributable to the Ordinary Shares and the C
Shares.
ISSUE OF C SHARES
The Board is proposing to effect the capital raising by way of an issue of C
Shares pursuant to the Placing and the Offer for Subscription. Current
Shareholders of the Company (being Qualifying Shareholders) may participate in
the Offer for Subscription by way of the Priority Application Form enclosed with
the Prospectus. New investors may also participate in the Offer for
Subscription, subject to clawback in favour of Qualifying Shareholders as
mentioned in paragraph 6 of Part I of the Prospectus. Please refer to 'Action to
be Taken' in paragraph 16 of Part I of the Prospectus.
An issue of C Shares is designed to overcome the potential disadvantages for
both existing and new investors which could arise out of a conventional fixed
price issue of further Ordinary Shares for cash, in particular:
• the assets representing the net proceeds attributable to the C Shares
(including the C Share Properties) will be valued as a distinct pool of assets
until the relevant calculations for purposes of Conversion are made. By
accounting for the net proceeds separately, holders of Ordinary Shares will not
be exposed to a portfolio potentially containing a substantial amount of
uninvested cash before Conversion;
• the Net Asset Value of Ordinary Shares will not be diluted by the expenses
associated with the issue of the C Shares, which will be borne by the
subscribers for C Shares and not by holders of Ordinary Shares; and
• the basis upon which the C Shares will convert into Ordinary Shares is such
that the number of
Ordinary Shares to which holders of C Shares will become entitled will reflect
the relative investment performance and value of the pool of new capital
attributable to the C Shares issued up to Conversion, as compared to the assets
attributable to the Ordinary Shares at that time. As a result, neither the Net
Asset Value per Ordinary Share nor the Net Asset Value per C Share will be
adversely affected by Conversion.
Conversion
At the Conversion Time, the C Shares will convert in accordance with the New
Articles into Ordinary Shares on the basis of the Conversion Ratio, which will
reflect the proportion which the net asset value attributable to the C Shares
bears to the net asset value attributable to the Ordinary Shares at the
Calculation Time. It is anticipated that the proceeds of the Issue will have
been substantially committed by 30 September 2007.
Pending Conversion, the assets and liabilities attributable to the C Shares
(including the net proceeds of issue of the C Shares and the C Share
Properties), and those attributable to the Ordinary Shares (including the
Ordinary Share Properties) will be managed and accounted for separately.
Pending investments being made in primary healthcare properties in accordance
with the Company's investment objective, the Net Proceeds of the Issue may be
held in cash, deposits, government securities or money market instruments.
Further details of the C Shares, the Calculation Time and the Conversion Ratio
are set out in Parts 4 and 9 of the Prospectus.
Certain amendments to the Property Advisory Agreement have been agreed, subject
to Admission, between the Property Adviser and the Company in order to ensure
that the Property Advisory Agreement reflects the issue of the C Shares pursuant
to the Placing and the Offer for Subscription. These amendments are reflected in
the summary of the Property Advisory Agreement set out in paragraphs 13.1 and
13.2 of Part 9 of the Prospectus.
SUMMARY OF THE PLACING AND OFFER FOR SUBSCRIPTION
Panmure Gordon (UK) Limited has agreed to use its reasonable endeavours to
procure subscribers by way of the Placing and the Offer for Subscription for 15
million C Shares at 100p per share. The Placing and the Offer for Subscription,
if fully subscribed, will raise approximately £38.8 million for the Company, net
of expenses.
The Placing and the Offer for Subscription are not underwritten and are
conditional, inter alia, upon the passing of the Resolution at the EGM and
Admission occurring on or before 8:00 a.m. on 30 June 2007 (or such later time
and date as the Company and Panmure Gordon (UK) Limited may agree).
The Placing will close at noon on 25 May 2007.
The latest time and date for receipt of Application Forms and Priority
Application Forms under the Offer for Subscription will be 1:00 p.m. on 22 May
2007.
Applications by new investors under the Offer for Subscription will be subject
to clawback in favour of Qualifying Shareholders. The basis of clawback and the
overall allocation of the C Shares pursuant to the Issue will be determined by
the Company in its absolute discretion in consultation with Panmure Gordon (UK)
Limited.
The Minimum Net Proceeds to be raised under the Placing and the Offer for
Subscription will be £14,550,000.
Details of the Placing Agreement are set out in paragraph 11 of Part 9 of the
Prospectus.
Capital structure
The Company is registered in Guernsey, and was incorporated with share capital
consisting of an unlimited number of Ordinary Shares of no par value. It is
anticipated that the C Shares will be admitted to the Official List and traded
on the London Stock Exchange's market for listed securities.
No C Shares have previously been issued by the Company. On the assumption that
the Placing and the Offer for Subscription are fully subscribed, the Company's
issued share capital will on Admission comprise 57,460,715 Ordinary Shares and
40 million C Shares.
The Directors intend to secure and utilise long term borrowing facilities of, in
aggregate, approximately 50 per cent., but not exceeding 65 per cent., of the
Company's gross assets attributable to the Ordinary Shares and the C Shares.
DIVIDENDS AND DIVIDEND POLICY
For the period 2 November 2006 to 31 March 2007 the Directors expect, subject,
inter alia, to the Company's performance and to availability of distributable
reserves, to pay an interim dividend on Ordinary Shares at a rate of 2.5 pence
per Ordinary Share.
For the period 1 April 2007 to 30 September 2007 the Directors expect, subject,
inter alia, to the Company's performance and to availability of distributable
reserves, to pay a final dividend on Ordinary Shares (including those arising
from any Conversion of the C Shares) at a rate of at least 2.5 pence per
Ordinary Share.
For the period from Admission to 30 September 2007 the Directors expect,
subject, inter alia, to the Company's performance and to availability of
distributable reserves, to pay a dividend on the C Shares (to the extent not
Converted) at a rate of 2.5 pence per C Share.
The Directors intend, subject to the Company's performance and to available
distributable reserves, to maintain the dividend in real terms, although no
assurance can be given that this will be achieved.
Prior to Conversion, the C Shares will have no right to participate in the
distributable profits of the Company that relate to the Ordinary Shares and,
consequently, any dividend declared in respect of those shares.
Pursuant to the New Articles the Company will not be able to pay any dividend or
declare any record date for any class of share between the Calculation Time and
the Conversion Time.
KEY RISK FACTORS
• There is no guarantee that the market price of the C Shares and the Ordinary
Shares will fully reflect their underlying net asset value and the Ordinary
Share or C Shares may trade at a discount or there may be limited liquidity in
them.
• Any future property market recession could materially adversely affect the
value of the properties held by the MedicX Fund Group.
• Property and property related assets are inherently difficult to value and
valuations are subject to uncertainty. There can be no assurance that the
estimates resulting from the valuation process will reflect actual sale prices
that could be realised by the MedicX Fund Group in the future.
• Refurbishment, maintenance or extension expenditure may be necessary in the
future to preserve the rental income generated from and/or the capital value of
a property and such expenditure may depress the dividend payable on the C Shares
and the Ordinary Shares in the short term.
• If property values rise significantly between the publication of the
Prospectus and the time when the funds available to the Company are invested,
the potential returns available for Shareholders may be less than those set out
in the Prospectus.
• Rental income and the market value for properties are generally affected by
overall conditions in the local economy, demographic trends, inflation and
changes in interest rates, which in turn may impact upon the demand for
properties. Furthermore, movements in interest rates may also affect the cost of
financing.
• There is no assurance that the MedicX Fund Group has acquired or will acquire
properties free of contamination by hazardous waste, asbestos or other toxic
substances or environmental problems. If at any time the Company has acquired or
acquires contaminated properties, the Company may have an obligation, alone or
jointly with other parties, to dispose of or otherwise resolve any such
environmental hazards to the satisfaction of relevant governmental authorities.
There is no basis for estimating the costs and liabilities of such an
obligation, but such costs and liabilities could adversely affect returns to
Shareholders.
• In relation to properties acquired by the MedicX Fund Group, the Company is
relying on the warranties given to the relevant MedicX Fund Group company by the
vendors under the relevant acquisition agreements and on the reports of its
professional advisers prepared in relation to these acquisitions. In relation to
the assets, liabilities and affairs of MPII, the Company is also relying on an
indemnity provided by the MedicX Group details of which are set out in paragraph
13.21 of Part 9 of the Prospectus. There can be no guarantee that the relevant
MedicX Fund Group company will in any given case be able to recover the amount
of all or any of its losses under the terms of any of the foregoing
arrangements. The relevant warranties (and the indemnity) are also subject to
certain limitations and caps on liability as set out in the relevant agreements.
The ability to recover will also depend, among other factors, on the vendors'
and the MedicX Group's ability to pay as there is no escrow retention or similar
arrangement to secure any claims under those agreements.
• Investments in property are relatively illiquid and usually more difficult to
realise than listed equities or bonds.
• The Company may face competition that may drive up prices of prospective
properties thereby limiting suitable investment opportunities for the Company,
which may also have an impact on the dividend yield of the Company.
• Any change in the tax status or tax residence of the Company or in tax
legislation or practice may have an adverse effect on the returns available on
an investment in the Company. Similarly any changes under Guernsey law to the
basis on which Guernsey companies may pay dividends could have an adverse effect
on the Company's ability to pay dividends.
• In the event that a PCT or other tenant found itself unable to meet its
liabilities the Company may not receive rental income when due and/or the total
income received may be less than that due under the relevant contract. In
addition budgetary restrictions generally might restrict or delay the number of
opportunities available to the Company.
• The Directors' objective is to have fully invested £200 million in total
within 12 months of Admission. This may not be possible if the Company cannot
source properties at acceptable prices or on acceptable terms.
• The rental costs of premises used for the provision of primary healthcare are
reimbursed to GPs (subject to the fulfillment of certain standard conditions) by
the PCTs. There is no guarantee that this will always be the case which could
therefore increase the risk of default on the leases as a result of changes in
Government policy.
• Prospective investors should be aware that the Company intends to use
borrowings which may have an adverse impact on NAV, NAV per Ordinary Share, NAV
per C Share or any dividend in respect of Ordinary Shares or C Shares, for
example as a result of any increase in UK Sterling interest rates.
• If the Company breaches any financial covenants, the Company may be required
to repay such borrowings and to sell assets at less than their market value.
• The Company is dependent upon its Directors and the Property Adviser and may
be adversely affected if the services of the Directors and/or the Property
Adviser cease to be available to the Company.
• If the Company were for whatever reason unable to meet the continuing
obligations of the UKLA and the London Stock Exchange, it is possible that the
listing of the C Shares and/or the Ordinary Shares may be suspended or the
Company's shares could be removed from the Official List.
DEFINITIONS
Capitalised terms used shall have the meanings given to them in the Prospectus
to be sent to Shareholders today.
Extraordinary General Meeting
A notice convening the Extraordinary General Meeting to be held on 29 May 2007
at 11:00 a.m. at Regency Court, Glategny Esplanade, St. Peter Port, Guernsey GY1
3RH is set out at the end of the Prospectus. The purpose of the meeting is to
seek Shareholders' approval to the Resolution set out in the notice of EGM,
inter alia, to:
• approve and adopt the New Articles (including provisions relating to the C
Shares) and the principles for Conversion;
• approve the terms of the Issue and allot the C Shares;
• amend the authority granted to the Company to make market purchases of
Ordinary Shares so that the minimum price which may be paid for an Ordinary
Share is one penny;
• grant authority, subject to Admission and the approval of the Guernsey Court,
to cancel the amount standing to the credit of the share premium account of the
Company attributable to the C Shares following Admission, and credit the amount
so cancelled as a distributable reserve to enhance the Company's ability to pay
dividends attributable to the C Shares; and
• amend the Company's memorandum of association to grant power to issue on
unlimited number of C Shares in a similar manner to the existing power in
relation to Ordinary Shares.
The Directors recommend that Shareholders vote in favour of the Resolution. To
be passed, the Resolution will require a 2/3 majority of those Shareholders
voting in person or (on a poll) by proxy in favour of the Resolution.
Recommendation
The Board considers that the Placing and the Offer for Subscription are in the
best interests of Shareholders as a whole. The Board therefore recommends that
Shareholders vote in favour of the Resolution.
The Board has received financial advice from Panmure Gordon (UK) Limited in
relation to the Placing and the Offer for Subscription. In giving their
financial advice, Panmure Gordon (UK) Limited has relied upon the Directors'
commercial assessment of the Placing and the Offer for Subscription.
These audited financial results are in respect of the period 2 November 2006 to
31 December
Consolidated Income Statement
for the period 2 November 2006 to 31 December 2006(2)
Notes £'000
Income
Rent receivable 2 427
Finance income 2 370
Net valuation gains on investment properties 9 3,459
Total income 4,256
Expenses
Property advisory fee 21 256
Property management fee 21 12
Administrative fees 20
Audit fees 4 25
Professional fees 15
Directors' fees 3 60
Other expenses 33
Finance costs 5 396
Total expenses 817
Profit before tax 3,439
Taxation 6 413
Profit after taxation 3,026
Earnings per ordinary share(1)
Normal and diluted (p) 7 5.4
1. Included in Note 7 is an adjusted earnings per share calculation that adjusts
for the impact of deferred tax which based on the expected manner of realisation
of the carrying amount of investment properties, is unlikely to crystallise.
2. There were no material transactions between the date of incorporation, 25
August 2006, and 1 November 2006.
Consolidated Balance Sheet
as at 31 December 2006
Notes £'000
Non-current assets
Goodwill 8 5,983
Investment properties 9 92,825
Properties under construction 9 12,325
Total non-current assets 111,133
Current assets
Trade and other receivables 10 3,768
Cash and cash equivalents 56,599
Total current assets 60,367
Total assets 171,500
Current liabilities
Trade and other payables 11 6,040
6,040
Non-current liabilities
Long-term loan 12 99,865
Deferred tax provision 6 6,402
Total non-current liabilities 106,267
Total liabilities 112,307
Net assets 59,193
Equity
Share capital 13 -
Share premium 15 -
Share reserve 14 1,510
Distributable reserves 16 54,657
Retained earnings 3,026
Total equity 59,193
Net asset value per ordinary share(1)
Normal and diluted 7 103.0p
1. Included in Note 7 is an adjusted net asset value per share calculation that
adjusts for the impact of deferred tax which based on the expected manner of
realisation of the carrying amount of investment properties, is unlikely to
crystallise.
Consolidated Statement of Changes in Equity
for the period from 2 November 2006 to 31 December 2006(1)
Share Share Distributable Retained Total
reserve Premium Reserve Earnings £'000
£'000 £'000 £'000 £'000
Proceeds on issue of shares - 55,961 - - 55,961
Share issue Costs - (1,304) - - (1,304)
Transfer from share premium - (54,657) 54,657 - -
Profit attributable to equity - - - 3,026 3,026
holders
Shares provisionally allotted but 1,510 - - - 1,510
not issued
Balance at 31 December 2006 1,510 - 54,657 3,026 59,193
1. There were no material transactions between the date of incorporation, 25
August 2006 and 1 November 2006.
Consolidated Cash Flow Statement
for the period from 2 November 2006 to 31 December 2006(1)
Notes £'000
Operating activities
Profit before taxation 3,439
Adjustments for:
Net valuation gains on investment property (3,459)
Financial income received (370)
Finance costs paid and similar charges 396
6
Increase in trade and other receivables (1,804)
Increase in trade and other payables 774
Interest paid (2)
Interest received 359
Net cash outflow from operating activities (667)
Investing activities
Acquisitions net of cash acquired 18 (10,290)
Purchase of investment properties (10,757)
Net cash outflow from investing activities (21,047)
Financing activities
Net proceeds from issue of share capital 54,828
Bank loans repaid on acquisition (36,439)
Other loan repaid on acquisition (41,359)
Net proceeds of long term borrowings 101,283
Net cash inflow from financing activities 78,313
Increase in cash and cash equivalents 56,599
Cash and cash equivalents at 31 December 18 56,599
1. There were no material transactions between the date of incorporation, 25
August 2006 and 1 November 2006.
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD FROM 2 NOVEMBER 2006 TO 31
DECEMBER 2006
1. Business and objective
MedicX Fund Limited was incorporated in Guernsey on 25 August 2006 but commenced
trading on 2 November 2006 on listing on the London Stock Exchange. No
transactions took place between the date of incorporation and the date of entry.
MedicX Fund Limited ('the Company') and its subsidiaries (together 'the Group')
have been established for the purpose of investing in primary healthcare
properties in the United Kingdom. The Group's investment objective is to achieve
rising rental income and capital growth from the ownership of a portfolio of
mainly modern, purpose built, primary healthcare properties. The Group is self-
managed with property advice and management services from MedicX Adviser
Limited, a member of the MedicX Group, an independent group of companies which
is a specialist developer of, investor in, and manager of primary healthcare
properties.
The Company's investment policy is to acquire primary healthcare properties in
the United Kingdom, some of which may have potential for enhancement, which will
be sourced in the market by MedicX Adviser Limited, including properties forming
part of the MedicX Group's own pipeline of development and investment
opportunities.
2. Principal accounting policies
Basis of preparation and statement of compliance
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. The principal accounting policies are
set out below.
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 and financial instruments.
Basis of consolidation
The Group financial statements consolidate the financial statements of MedicX
Fund Limited and its subsidiary undertakings. The results of subsidiaries
acquired during the period are included in the consolidated income statement
from the effective date of acquisition. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values at the
date of exchange of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquired company,
plus any costs directly attributable to the business combination. The acquired
companies' assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognised at their fair value at
the acquisition date. The details of the companies acquired and how they have
been treated are dealt with in Note 17.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being primary care investment in primary healthcare properties in
the United Kingdom.
Impact of revision to International Financial Reporting Standards
In preparing these financial statements, the Board have not chosen to early
adopt any revisions to the International Financial Reporting Standards.
Those standards which have been revised that are relevant to the activities of
the Group are IAS 1 Presentation of financial statements and IFRS 7 Financial
Instrument: Disclosures, which replaces IAS 30 and IAS 32. Both of these
revisions deal with disclosures and presentation of financial statements and
will not have an impact on the Group's equity.
Income
Rental income exclusive of any value added taxes is included in the financial
statements on an accruals basis and is shown gross of any UK income tax.
Finance income and fees receivable are included in financial statements on an
accruals basis.
Expenses
All expenses are accounted for on an accruals basis.
Employees
The Company has no employees.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the period.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent it is probable that taxable
profits will be available against which deductible temporary differences can be
utilised.
Goodwill
Goodwill arising on acquisition is accounted for being the difference between
the fair value of the consideration given and the fair value of the Group share
of identifiable net assets of the subsidiary acquired. It is subject to annual
review for any impairment.
Investment properties
The Group's completed properties are held for long-term investment. Freehold
properties are initially recognised at cost, being 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 income statement. Fair value is
based upon the open market valuations of the properties as provided by DTZ
Debenham Tie Leung, a firm of independent chartered surveyors, as at the balance
sheet date.
Long leasehold properties are accounted for as freehold properties and, after
initial recognition at cost, are measured at fair value (on the same basis as
freehold properties above).
Properties under construction
Freehold properties under construction are valued at cost until such time as a
certificate of practical completion has been issued from which date they are
treated as Investment Properties as set out above. At each balance sheet date
an assessment is made of whether provision is required to reflect any impairment
in the value of development work in progress. This assessment is based on
whether the costs to date plus estimated future costs to completion exceed an
independent valuer's estimate of the value of the property following completion.
Costs of financing development are capitalised and included in the cost of
development. During the period there were no material borrowing costs on
development work in progress and none were capitalised.
Derivative financial instruments and hedging activities
The Group has no derivative financial instruments.
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.
Trade and other payables
Trade and other payables are recognised and carried at their invoiced value
inclusive of any value added taxes that may be applicable.
Trade receivables
Trade and other receivables are measured at initial recognition at their
invoiced value inclusive of any value added taxes that may be applicable.
Bank loans and borrowings
All bank loans and borrowings are initially recognised at cost, being fair value
of the consideration received, less issue costs where applicable. After initial
recognition, all interest-bearing loans and borrowings are subsequently measured
at amortised cost. Amortised cost is calculated by taking into account any
discount or premium on settlement.
Borrowing costs
Borrowing costs are taken to the consolidated income statement in the period to
which they relate on an accruals basis.
Share reserve
The Share reserve has been created for the purposes of recording the value of
shares which the Company has allotted but not yet issued at the balance sheet
date as part of the costs of acquisition of subsidiary companies.
Estimates
In the process of applying the Company's accounting policies described above,
management is required to make certain judgements and estimates to arrive at
fair carrying value for its assets and liabilities. Significant areas requiring
management's judgement include the fair value of the assets and liabilities of
subsidiaries acquired and the assessment of the fair value of development work
in progress described above.
3. Directors' fees
£'000
During the period each of the Directors received the following fees:
J M S Tavares 20
S Mason 10
C Bennett 10
A Simpson 10
J Hearle 10
60
4. Audit fees
The amount disclosed in the consolidated income statement relates to an accrual
for audit fees for the period ending on 30 September 2007.
Non-audit fees paid to the auditors and set against the share premium account
premium during the period amounted to £45,000 for acting as reporting
accountants in respect of the listing of the Company's shares on 2 November
2006, and £95,000 in relation to financial due diligence on acquisitions which
has been included in the cost of purchase of properties held by the subsidiaries
acquired.
5. Finance costs
£'000
Interest payable on long term loan 396
6. Taxation
£'000
Current Tax
Corporate tax charge for the period -
Deferred Tax
On fair value gain for the period 413
Total income tax charge in the income statement 413
The Board have estimated that for the period under review the Group does not have any profits chargeable to tax
in jurisdictions outside of Guernsey.
The Company and its Guernsey registered subsidiaries, MedicX Properties I Limited and MedicX Properties V
Limited, have obtained exempt company status in Guernsey under the terms of 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. Each Guernsey 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.
Guernsey companies are taxable on UK net rental income. During the period no tax arose in respect of the income
of any of the Guernsey companies. The Company's UK subsidiaries, MedicX Properties II Limited, MedicX Properties
III Limited and MedicX Properties IV Limited, are subject to United Kingdom corporation tax on their profits less
losses.
The calculation of the Group's tax charge necessarily involves a degree of estimation in respect of certain items
whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax
authorities.
Deferred taxation provision
£'000
Deferred tax is provided as follows:
Balance on acquisition 193
Fair value gain arising on acquisition 5,796
Fair value gain in period 413
Total deferred tax provision per the balance sheet 6,402
All deferred tax relates to the fair value gains on the Group's investment
property portfolio.
As required by IAS 12, full provision has been made for the temporary timing
differences arising on the fair value gain of investment properties held by UK
resident companies that have passed through the Group's consolidated income
statement. In the opinion of the Directors, this provision is only required to
ensure compliance with IAS 12. It is the Directors' view that the liability
represented by the deferred tax provision is unlikely to crystallise as, in
common with the sector, the Group would sell the company that holds the property
portfolio rather than sell an individual property. Had the provision not been
made, the Group's earnings for the period would be £413,000 higher.
7. Earnings and net asset value per ordinary share
The basic and diluted earnings per ordinary share are based on the profit for
the period of £3,026,000 and on 56,494,613 ordinary shares being the weighted
average aggregate of ordinary shares in issue and ordinary shares that were
issueable at the balance sheet date. The weighted average number is calculated
over the period from commencement of operations on 2 November 2006 to the
balance sheet date. This gives rise to a basic and diluted earnings per share of
5.4 pence per share.
The basic and diluted net asset value per ordinary share are based on the net
asset position at the balance sheet date of £59,193,000 and on 57,460,715
ordinary shares being the aggregate of ordinary shares in issue and ordinary
shares that were issueable at the balance sheet date. This gives rise to a basic
and diluted net asset value per share of 103.0 pence per share.
Adjusted earnings per share and net asset value per share
The Directors believe that the following adjusted earnings per share and net
asset value per share are more meaningful key performance indicators for the
Group.
Adjusted earnings per share 6.1p
Adjusted net asset value per share 103.7p
The adjusted earnings per ordinary share is based on the profit for the period
of £3,026,000, adjusted for the impact of deferred tax charged for the period of
£413,000, giving an adjusted earnings figure of £3,439,000 and on 56,494,613
ordinary shares being the weighted average number of ordinary shares in issue in
the period from commencement of operations on 2 November 2006 to the balance
sheet date.
The adjusted net asset value per ordinary share is based on the net asset
position at the balance sheet date of £59,193,000 as adjusted for deferred tax
of £6,402,000 and goodwill of £5,983,000, giving an adjusted net assets figure
of £59,612,000 and on 57,460,715 ordinary shares being the aggregate of ordinary
shares in issue and ordinary shares that were issueable at the balance sheet
date.
In common with the sector, the Group would sell the UK company or UK companies
that hold the properties rather than sell an individual property. Consequently,
it is the Directors' view that the liability represented by the deferred tax
provision is unlikely to crystallise.
8. Goodwill
£'000
Carrying amount at 31 December 2006 5,983
The goodwill arose on the acquisition of MedicX Properties III Ltd and MedicX
Properties IV Ltd. The Board have reviewed the carrying value of goodwill and
they do not consider that there has been an impairment in its carrying value.
9. Investment properties
Investment properties are initially recognised at cost, being fair value of
consideration given including transaction costs associated with the property.
After initial recognition, freehold properties are measured at fair value, which
has been determined based on valuations performed by DTZ Debenham Tie Leung as
at 31 December 2006, on the basis of open market value, supported by market
evidence, in accordance with International Valuation Standards. In accordance
with industry standards, the valuation is after deduction of purchaser costs of
5.75%, which amount to approximately £5.3 million.
Completed Properties Total
Investment under £'000
properties construction
£'000 £'000
Acquisitions at cost/fair value 82,439 18,555 100,994
Additions - 697 697
Transfer to completed properties 6,927 (6,927) -
Fair value revaluation 3,459 - 3,459
92,825 12,325 105,150
10. Trade and other receivables
£'000
Other debtors and prepayments 1,550
Rent receivable 1,647
VAT recoverable 571
3,768
11. Trade and other payables
£'000
Loans 1,418
Accruals 2,447
Deferred rental income 1,451
Interest payable and similar charges 394
Trade creditors 242
Other creditors 34
VAT payable 54
6,040
The loan is secured on one investment property and has a remaining term of 11
years. It is expected that the loan will be repaid within one year from the
balance sheet date.
12. Long-term loan
£'000
Amount drawn down in period 100,000
Loan issue costs (135)
Amortisation of loan issue costs -
GPFC Loan 99,865
The Company's subsidiary, MedicX Properties I Limited, has a loan facility
agreement for £100,000,000 with The General Practice Finance Corporation Limited
('GPFC') at a fixed rate of 5.008% on an interest only basis which was fully
drawn down on 1 December 2006, with the cash held on deposit to meet future
investment requirements. This loan is due for repayment in its entirety on 1
December 2036.
Under the terms of the loan, further charges will be incurred when amounts are
taken off deposit and utilised for investment purposes. The charges for these
withdrawals depends on the quantum of the withdrawal and will be recognised as
and when withdrawals are made.
The value of the loan on an amortised cost basis at 31 December 2006 was
£99,865,000.
During the year, the Group's bank borrowings were subject to the following
financial covenants:
(i) monies released from deposit must not exceed 65% of the property
value charged.
(ii) the net loan amount must not exceed 75% of the market value of
mortgaged property.
(iii) long term rental income from the properties charged must cover 140%
of projected finance costs.
The Group has been in compliance with the financial covenants throughout the
period since issue.
The loan is secured on the Group's investment properties.
As at 31 December 2006 the Group had £41.9 million on deposit in relation to the
loan amount.
13. Share capital
Number of shares Share Capital
£'000
Authorised
Ordinary shares of no par value. Unlimited -
Issued and fully paid
Ordinary shares of no par value. 55,960,715 -
The Company issued 2 ordinary shares for £1 each on incorporation on 25 August
2006 and a further 55,960,713 ordinary shares for £1 each on 2 November 2006
pursuant to an offering and listing on the London Stock Exchange.
14. Share reserve
The Company had allotted but not yet issued a further 1,500,000 shares at the
balance sheet date as part payment for the purchase of subsidiary companies.
The fair value of these shares at the contracted date for the purchase of the
subsidiaries, as measured by the closing price of the shares on the Official
List on the preceding day was £1,588,750 in total. As this amount is not
materially different from the contracted amount of share consideration of
£1,510,000, that amount has been transferred to the share reserve.
These 1,500,000 shares were issued on 26 February 2007.
15. Share premium
£'000
At 25 August 2006 -
Proceeds arising on issue of Ordinary Shares on 2 November 2006 55,961
Allocation of issue costs (1,304)
Transfer to distributable reserve (note 16) (54,657)
Share premium at 31 December 2006 -
16. Distributable reserve
The Company applied to the Royal Court in Guernsey on 8 November 2006 to
transfer its entire share premium account on that date to a distributable
reserve and this was approved on 10 November 2006. The reserves are freely
distributable with no restrictions having been applied by the Court.
17. Acquisition of subsidiaries
MedicX Properties MedicX Properties MedicX Properties Total
II Ltd III Ltd IV Ltd
Book Fair Book value Fair Book Fair Book Fair
value value value value value value value
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Net assets acquired
Investment properties 32,936 32,936 9,412 12,405 16,760 26,937 59,108 72,278
Properties under construction 7,653 7,653 - - 10,790 12,642 18,443
4,989
Trade and other receivables 20 20 245 245 867 867 1,132 1,132
Cash and cash equivalents 1,196 1,196 87 87 1,797 1,797 3,080 3,080
Trade and other payables (814) (814) (209) (209) (398) (398) (1,437) (1,437)
Current tax liabilities 368 368 (59) (59) 203 203 512 512
Bank loans and other loans (41,359) (41,359) (7,559) (7,559) (28,880) (28,880) (77,782) (77,782)
Deferred tax liabilities - - (32) (930) (160) (5,058) (192) (5,988)
- - 1,885 3,980 (4,822) 6,258 (2,937) 10,238
Goodwill - 898 5,085 5,983
Total consideration - 4,878 11,343 16,221
Satisfied by:
Cash - 3,515 9,833 13,348
Directly attributable costs - 363 1,000 1,363
Issue of shares - 1,000 510 1,510
- 4,878 11,343 16,221
Number of shares issued - 1,000 500 1,500
Net cash outflow arising on
acquisition
Cash consideration - (3,515) (9,833) (13,348)
Cash and cash equivalents
acquired
1,196 87 1,797 3,080
1,196 (3,428) (8,036) (10,268)
Date of acquisition 2/11/06 4/12/06 22/12/06
Rental income for period 304 41 44
Profit before tax attributable
to acquired company 289 42
42
MedicX Properties II Ltd was acquired for £2.
It is not practicable to determine the revenue and profit or loss which would
have arisen from MedicX Properties III Ltd and MedicX Properties IV Ltd if they
had been purchased on the commencement of operations on 2 November 2006.
In addition to the above, the Company has two further wholly owned subsidiaries,
MedicX Properties I Ltd and MedicX Properties V Ltd. MedicX Properties I Ltd
was established prior to listing and is also a property investment company.
MedicX Properties V Ltd was formed before the period end but had not traded by
that date.
18. Cashflow notes
Acquisition of subsidiaries £'000
Cash 3,080
Trade and other receivables 1,703
Goodwill 5,983
Investment properties 72,278
Properties in the course of construction 18,443
Trade and other payables (7,468)
Long term debt (77,798)
Total purchase price 16,221
Less
Shares to be issued as part of consideration (1,510)
Cash acquired (3,080)
Acquisition costs accrued not yet paid (1,341)
Net cost of acquisition 10,290
Cash and cash equivalents
Cash in hand and balances with banks 56,599
Major non cash transactions
As part of the consideration on the acquisition of MedicX Properties III Ltd and
MedicX Properties IV Ltd shares were issued, details are in note 17.
19. 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 main risks arising from the Group's financial instruments and properties are
market price risk, credit risk, liquidity risk and interest 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 would reflect
the actual sales price even where sale occurs shortly after the valuation date
however there is no intention to sell any of the properties at the date of the
report.
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 cost thereof, the costs of
maintenance and insurance, and increased operating costs.
The Directors monitor market value by having independent valuations carried out
quarterly by DTZ Debenham Tie Leung.
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 interest rate profile of the Group at 31 December 2006 was as follows:
Total Fixed rate Variable rate Assets on which Weighted average
no interest is interest rate per
£'000 £'000 received annum
£'000 %
Financial assets
Goodwill 5,983 - - 5,983 -
Properties 92,825 - - 92,825 -
Properties under
12,325 - - 12,325 -
construction
Debtors 3,768 - - 3,768 -
Cash and cash equivalents 56,599 - 56,599 - 5.0%
Total assets as per
171,500 - 56,599 114,901 -
balance sheet
Total Fixed rate Variable rate Liabilities on Weighted average
which no interest rate per
interest is annum
paid
£'000 £'000 £'000 £'000 %
Financial liabilities
Bank loans 101,284 101,284 - - 5.0%
Creditors 4,621 - - 4,621 -
Deferred tax provision 6,402 - - 6,402 -
Total liabilities as per
112,307 101,284 - 11,023 -
balance sheet
20. Commitments
At 31 December 2006 the Group has commitments of £9.2 million to complete
properties in development and has commitments of a further £6.3 million in
respect of new property.
21. Material contracts
Property Adviser
MedicX Adviser Limited is appointed Property Adviser under the terms of an
agreement dated 17 October 2006. Fees payable under this agreement are (i) 1.5%
per annum on gross assets by way of property advisory fee; (ii) a property
management fee of 3% of gross rental income; (iii) a corporate transaction fee
of 1% of the gross asset value of any property owning subsidiary company
acquired; and (iv) a performance fee of 15% of the amount by which the return to
shareholders in terms of share price growth plus cumulative dividends paid
exceeds the initial offer price compounded annually by 10% in each accounting
period.
Administration agreements
International Administration (Guernsey) Limited, the Company's administrator and
company secretary, is entitled to receive a fee of £55,000 per annum for
carrying out administrative services for the Company under the terms of an
agreement dated 17 October 2006, and a further £25,000 per annum under an
agreement of the same date for the provision of administrative services to
MedicX Properties I Limited.
During the period, the agreements with International Administration (Guernsey)
Limited gave rise to the following fees:
£'000
Administrative fees 14
MedicX Adviser Limited is entitled to receive fees of £65,000 for providing
administrative services to MedicX Properties II Limited, MedicX Properties III
Limited and MedicX Properties IV Limited.
During the period, the agreements with Medicx Adviser gave rise to £810,000 of
fees, which remained outstanding at the end of the period, as follows:
£'000
Expensed to the consolidated income statement:
Property advisory fee 256
Property management fees 12
Administrative fees 6
Added to cost of acquisition of properties:
Corporate fees for purchase of subsidiaries 536
Total Fees 810
22. Post balance sheets events
Since the balance sheet date, the Group has entered into forward funding
agreements in respect of two new properties at an aggregate cost of £12.0
million and completed the purchase of four new properties at an aggregate cost
of £9.7 million.
23. Total return per share
As at 31 December the share price was 108.75p representing an increase of 8.75%
in the period since 2 November 2006.
END
The contents of this announcement have been approved for the purposes of section
21 of the Financial Services and Markets Act 2000 as amended ('FSMA') by Panmure
Gordon (UK) Limited ('Panmure Gordon') of Moorgate Hall, 155 Moorgate, London,
EC2M 6XB. Panmure Gordon is authorised and regulated in the United Kingdom by
the Financial Services Authority in respect of regulated activities and is
acting as sponsor and broker in respect of the Placing and Offer for
Subscription. Panmure Gordon is acting solely for MedicX Fund Limited in
connection with the Placing and Offer for Subscription and will not be
responsible to anyone other than MedicX Fund Limited for providing the
protections afforded to clients of Panmure Gordon nor for providing advice in
relation to the Placing and Offer for Subscription.
This announcement is not for release, publication or distribution, in whole or
in part, in or into the United States, Australia, Canada, Japan, South Africa,
New Zealand, the Republic of Ireland or Australia (the 'Prohibited Territories
'). The Shares have not been and will not be registered under the US Securities
Act of 1933 (as amended), the United States Investment Company Act of 1940 (as
amended) or under the applicable securities laws of the other Prohibited
Territories and, unless an exemption under such laws is available, may not be
offered for sale or subscription or sold or subscribed directly or indirectly
within the USA or the other Prohibited Territories or for the account or benefit
of any national, resident or citizen of the USA or the other Prohibited
Territories.
Copies of the Prospectus will be available during normal business hours on any
weekday (Saturdays, Sundays and public holidays excepted) at the offices of
Panmure Gordon, Moorgate Hall, 155 Moorgate, London EC2M 6XB until Admission and
for the 14 days following Admission. The Prospectus is also available at the
document viewing facility of the UKLA at the UKLA Document Viewing Facility,
Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14
5HS.
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