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MedicX Fund sees its premium expand

MedicX Fund has announced its interim results for the six-months ended 31 March 2016. During the period, the company’s EPRA NAV has grown by 0.6% to 71.2p per share (30 September 2015: 70.8 pence per share) whilst its EPRA earnings were £6.8m, equivalent to 1.8p per share (31 March 2015: £7.0 million; equivalent to 2.0p per share). The company announced a quarterly dividend of 1.4875p per share in April 2016 and expects to pay a total dividend for the year ending 30 September 2016 of 5.95p per share (or 6.8% dividend yield), which is an increase of 0.8% year-on-year (2015: total dividends of 5.9p per share; 7.0% dividend yield). In the period to 31 March 2016, the total shareholder return, as measured by dividends and share price growth, was 16.9%, reflecting an expansion of its premium. Of this return, 3.5% was attributable to dividends with the remainder from growth in the share price.

In terms of portfolio activity, the company committed to £27.4m of new investments during the period and now has £573.0m of committed investment in 151 primary healthcare properties (an increase of 2.4% over the period). The company says that it now has an annualised rent roll of £36.7m with 87% of rents reimbursed by the NHS (an increase of £0.9 million, or 2.5%, since 4 December 2015). In terms of further portfolio development, the company says that it has a pipeline of approximately £144.0m of further acquisition opportunities.

With regards to funding, the company had total drawn debt facilities, at 31 March 2016, of £337.4m with an average all-in fixed rate of debt of 4.45% and an average unexpired term of 14.5 years. The company comments that this is close to the average unexpired lease term of the investment properties of 15.7 years (this compares against 4.45% and 15.0 years at 30 September 2015). The company had net debt of £311.6m equating to 52.3% adjusted gearing at 31 March 2016 (30 September 2015: £281.4 million; 50.2%)

In terms of outlook, the company’s board says that demand for primary care continues to grow, with political support to provide wider local community patient choice, as consultations and the range of services offered continue to increase. To respond to the challenge, GP practices are merging, forming federations or provider groups to create super practices with patient lists in excess of 50,000 individuals. The formation of larger practices is driving the need for large, modern purpose built facilities to replace older existing premises, many of which are judged inadequate by the British Medical Association.

However, the board say that the UK market has become increasingly competitive with relatively high values being paid for assets of variable quality and so it is important to be selective and maintain price discipline. The fund is also looking further afield and is seeking new investment opportunities in the Republic of Ireland.

The board say that the Irish primary healthcare market has a well-defined strategy and is seeking to procure space in new dominant properties offering a wide range of primary healthcare and complimentary services which fully meet the Fund’s investment criteria. The Board say that they continue to believe that the Republic of Ireland offers good yields for quality properties, let on long leases, generating principally government backed income, making Irish healthcare property opportunities an attractive fit with the Fund’s investment objective and that the yields available in the Republic of Ireland currently remain significantly higher than those available for similar quality properties in the UK.

MedicX Fund sees its premium expand : MXF

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