MedicX Fund (MXF) has announced its final results for the year ended 30 September 2018. The company describes it as, “Another year of strong performance, reflecting progress and achieving notable milestones”.
Financial highlights
The announcement highlights the following from the financial results:
- 11.4% increase in EPRA earnings per Ordinary Share, from 3.5p per share to 3.9p per share;
- 14.8% total return on EPRA NAV2 for the financial year (2017: 12.7%);
- 6.9% increase in EPRA NAV per share, from 76.5p per share to 81.8 pence per share;
- Continued increase in rent receivable, up 8.6% to £40.3 million (2017: £37.1 million);
- Profit before tax was £49.1 million for the year; 47.4% higher than 2017 (£33.3 million);
- 10.0% increase in annualised rent roll1,14 from £40.0 million to £44.0 million;
- 89.4% (2017: 89.7%) of rent roll was directly from or reimbursed by the NHS11, Irish GPs or HSE12;
- EPRA cost ratios reduced year on year to 18.4% from 19.8% with the investment adviser fee reduction due to reduce this further; and
- Independent expert determination of March 2015 rent review at Clapham increase of 35% (equating to a compounded 10.54% per annum increase over the applicable 3 year rent review period).
Portfolio highlights
The announcement highlights the following developments with its investments:
- 18.6% increase in the value of the property portfolio to £806.7 million1,4. This is as a result of £99.2 million of capital investment to acquire standing let properties and fund developments through forward funding schemes, less £5.3 million of disposals and a £32.3 million net valuation gain;
- Net Initial Yield of UK assets 4.85% at 30 September 2018 (2017: 5.08%);
- £80.3 million of new committed investments in UK and Republic of Ireland, since 1 October 2017, with a weighted average cash yield of 4.63% together with the acquisition of three sites for £5.3 million in anticipation of new schemes;
- Competed £63.8 million corporate portfolio acquisition of 12 fully let primary care centres with 10 of the properties having an average age of 5.5 years, WAULT of 14.2 years and an average lot size of £5.3m; and
- Strong pipeline of approximately £144 million (2017: £175 million) of further acquisition opportunities including projects with a value of £69 million in solicitors’ hands1 (2017: £100 million).
Reduction of investment advisers fee
MXF reports that its investment adviser has agreed a reduction in its fees to reflect the change in the Company’s dividend policy (see below) and to reduce its costs. With effect from 1 October 2018, MXF’s performance fee was abolished, and the fund says that the investment adviser’s fee will be £0.5 million per annum lower until the portfolio reaches £1 billion with tapering savings between £1 billion and £1.25 billion. MXF says that this immediately increases next year’s earnings by 0.113 pence per share.
Fully covered dividend from 2019 onwards
MXF announced in May 2018 that it intends to declare a fully covered dividend for the 2019 financial year onwards. It says that this new policy is intended to free up additional funds for the Group to invest in attractive opportunities, and enable it to deliver superior capital growth over time from a sector which continues to demonstrate attractive growth prospects.
Going forward, the Company intends to continue to pay shareholders the dividend on a quarterly basis, in March, June, September and December of each financial year and on a growing covered basis. Subject to unforeseen circumstances and based on the current performance, the Directors are targeting dividends of 3.80p per share for the financial year ended 30 September 2019.
Capital management
MXF highlights the following:
- Quarterly dividend of 1.51p per share announced on 1 November 20185; total dividends of 6.04p per Ordinary Share for the year or 7.4% dividend yield on a share price of 82.0 pence per share at 30 September 20186 (2017: total dividends of 6.0p per Ordinary Share; 6.6% dividend yield);
- Total drawn debt facilities of £446.1 million1 with a weighted average fixed rate cost of debt of 4.26% and an average unexpired term of 12.3 years, compared with 4.29% and 12.7 years for the prior year; and
- Net debt of £430.0 million equating to 52.6% adjusted gearing at 30 September 2018 (30 September 2017: £340.7 million; 49.5%).
About MedicX Fund
MedicX Fund is a specialist primary care infrastructure investor in modern purpose-built primary healthcare properties, principally let to GPs and primary care trusts in the United Kingdom. It is a self managed closed-ended investment company, incorporated in 2006 and domiciled in Guernsey. The Fund receives investment advice from MedicX Adviser, a member of the MedicX Group, which is a specialist investor in, developer of and manager of healthcare properties.
The Fund’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 properties in this growing asset class form part of the core UK healthcare infrastructure and provide strong covenants with a long term secure and rising cash flow.
The key objective of MedicX Fund is to increase net income over time to support a rising dividend and provide capital growth. The key areas for this growth will come from rent reviews, expanding or re-configuring space, re-gearing leases and operating cost reductions. The Investment Adviser regularly reviews the entire property portfolio and has regular meetings with tenants to ensure that buildings are meeting the local healthcare needs and to identify opportunities for value enhancement.