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For immediate release
31 July 2014
MedicX Fund Limited
("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 2014 to 31 July 2014.
The quarterly valuation of the portfolio undertaken by Jones Lang LaSalle LLP as at 30 June 2014 stood at £494.5 million, on the basis that all properties were complete. This reflects a net initial yield of 5.73% which has resulted in a valuation gain of £0.8 million during the quarter, comprising a £0.9 million appreciation in capital value offset by £0.1 million of purchaser costs written-off during the period. The portfolio net initial yield of 5.73% compares favourably with a benchmark 20-year gilt rate of 3.45% and a weighted average fixed cost of debt of 4.45%.
Incorporating the June valuation, the unaudited adjusted net asset value at 30 June 2014 is estimated to be £229.1 million equivalent to 64.8p per share, compared with 64.7p per share as at 31 March 2014. On the same basis, the unaudited adjusted net asset value plus the mark to market benefit of fixed rate debt is estimated to be £239.9 million equivalent to 67.8p per share at 30 June 2014, compared with 68.6p per share as at 31 March 2014.
Aside from the 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 30 May 2014.
Discounted cash flow valuation of assets and debt
On the Fund's behalf the Investment Adviser has undertaken a discounted cash flow ("DCF") valuation of the assets of the Fund and its subsidiary undertakings (together the "Group") 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 each 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 are then aggregated with the surplus cash position of the Group.
At 30 June 2014, the DCF valuation was £324.9 million or 91.9p per share, compared with £319.0 million or 93.1p per share as at 31 March 2014. The decrease per share is as a direct result of the 10 million shares sold from treasury by way of tap issues during the period, and the DCF valuation is expected to improve following the full deployment of the funds raised from the tap issues.
The discount rates used are 7% for completed and occupied properties and 8% for properties under construction. The weighted average discount rate is 7.05% which represents a 3.60% risk premium relative to the 20 year gilt rate of 3.45% as at 30 June 2014. The 20 year gilt rate as at 31 March 2014 was 3.55%.
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.
Since 1 April 2014, 18 leases and rents of £1.0 million have been reviewed and the equivalent of a 1.81% per annum increase was achieved. Of these reviews, an uplift of 1.74% was achieved through open market reviews with RPI reviews achieving 3.27%. Reviews of £9.9 million of passing rent are currently under negotiation.
During the period from 1 April 2014 the Company has committed £16.9 million to four further properties, three of which are currently under construction.
Construction on the property at Potters Bar completed in the period since 1 April 2014. Six properties are now under construction at Wigston, Prenton, Buckley, Peterborough, Stevenage and Devonport. All of these properties are due to complete in the next twelve months.
In June 2014 the Group disposed of three non-core smaller properties for a combined price of £4.3 million. These properties were acquired as part of the portfolio acquisition announced in March 2014, and were subject to options to sell to a party connected to the vendor of the portfolio.
The portfolio, which consists of 134 properties, continues to perform in line with long-term objectives.
The Investment Adviser has access to a strong pipeline of approximately £100 million in value when fully developed.
Seven tap issues were completed during the period for a total of 10.0 million shares, at an average price of 83.60 pence per share. The Fund is seeking to fully deploy the proceeds quickly into appropriate primary healthcare property investments whilst maintaining the quality of its portfolio and targeting investments that will generate long term income and good returns for shareholders.
Additionally, on 30 June 2014 the Company sold 1,025,290 shares out of treasury pursuant to the Scrip Dividend Scheme, based on a scrip calculation price of 82.80 pence per share.
The total number of Ordinary Shares of the Company in issue is 361,445,780, of which 7,784,654 are held in treasury, compared with 361,445,780 Ordinary Shares with 18,809,944 held in treasury at 31 March 2014. Accordingly, as at today's date, the total voting rights in the Company amount to 353,661,126 Ordinary Shares.
On 30 June 2014 a quarterly dividend of 1.45p per Ordinary Share in respect of the period 1 January 2014 to 31 March 2014 was paid to Ordinary Shareholders on the register as at close of business on 16 May 2014.
On 28 July 2014 the Directors approved a quarterly dividend of 1.45p per Ordinary Share in respect of the period 1 April 2014 to 30 June 2014. The dividend will be paid on 30 September 2014 to Ordinary Shareholders on the register as at close of business on 15 August 2014. 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 previously put in place by the Company on 5 May 2010.
The Company expects, subject to unforeseen circumstances, to pay dividends totalling 5.8p per Ordinary Share in respect of the financial year ending 30 September 2014, an increase of 0.1p per Ordinary Share from the 5.7p per Ordinary Share for the financial year ended 30 September 2013.
The Company is categorised as a Non-EU Alternative Investment Fund ("AIF") for the purposes of the AIFM Directive. It has elected to be its own AIF manager for this purpose. The Company has registered under the Directive's private placement regime in the UK with effect from 22 July 2014 which allows the Company to market its shares in the UK after 21 July 2014 as an internally-managed, non-EU AIF, provided certain disclosure and compliance requirements are met.
The Company complies with such requirements by virtue of its adherence with legal and regulatory requirements of Guernsey law, the UK Listing Rules, International Financial Reporting Standards, the UK Corporate Governance Code and the principles and recommendations of the Association of Investment Companies Code of Corporate Governance. The relevant disclosures to investors are made annually and periodically via company reports, results presentations, regulatory announcements and through the Company's website.
Acquisition of MedicX Adviser Ltd
During the period, the Company announced that Octopus Capital Limited ("Octopus") had agreed to acquire MedicX Group, including the Investment Adviser, from funds managed by Cabot Square Capital LLP. The acquisition is subject only to Financial Conduct Authority approval and is expected to close by the end of September 2014.
Octopus is committed, as a long term owner of MedicX Group, to supporting the Company's continued growth and recognises the importance of the excellent working relationship and clear focused strategy shared by the Board and the Investment Adviser. Mike Adams, CEO of MedicX Group, will continue to work with his existing team in the same role, and the Company will remain a core focus.
For further information please contact:
MedicX Fund +44 (0) 1481 723 450
David Staples, Chairman
MedicX Group +44 (0) 1483 869 500
Keith Maddin, Chairman
Mike Adams, Chief Executive Officer
Mark Osmond, Chief Financial Officer
Canaccord Genuity +44 (0) 20 7523 8000
Andrew Zychowski / Helen Goldsmith
Buchanan +44 (0) 20 7466 5000
Charles Ryland / Sophie McNulty
Information on MedicX Fund Limited
MedicX Fund Limited (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 134 properties.
The Investment Adviser to the Company is MedicX Adviser Ltd, which is authorised and regulated by the Financial Conduct 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.
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