MedicX dividend cover has some way to go

MedicX dividend cover has some way to go – MedicX reports a 12.7% total return on EPRA NAV for the year ended 30 September 2017 as the EPRA NAV rose to 76.5p from 73.2p and EPRA earnings per share rose by 2.9% to 3.5p. The dividend of 6p, up from 5.95p was paid in four equal instalments of 1.5p. For the new year the target is 6.04p. Underlying dividend cover edged up to 69.5% (2016: 68.5%) but, on an EPRA basis, it fell to 59.2% for the full year to 30 September 2017 (30 September 2016: 64%), the reduction resulting from share issues in the year. part of the problem is the amount of money that MedicX has committed to properties under construction which do not generate an income. However, when they are finished, dividend cover should improve.

Over the year, the fund committed the equivalent of £49.4 million in six properties at an average cash yield of 5.22%. The existing portfolio was revalued upwards by £18.6m and the total portfolio was worth £680.4m at the end of the period. This is spread across 156 properties, of which five were under construction at 30 September. The rent roll increased 7.5% to £40 million which led to a 5.7% increase in rent receivable from £35.1 million to £37.1 million. A total of 92 rent reviews have been concluded during the year, with a combined rental value of £9.0 million. Of these reviews, 0.52% per annum was achieved on open market reviews, 1.7% per annum was achieved on RPI based reviews and 2.38% per annum on fixed uplift reviews.

Outstanding rent reviews of £20.9 million of passing rent are currently under negotiation as at 30 September 2017.

At 30 September 2017, the property portfolio had an average age of 8.7 years, remaining average unexpired lease length of 14.1 years and an average property value of £4.4 million (30 September 2016: 8.5 years; 14.3 years; and £4.3 million). At 30 September 2017 the rents profile was as follows: 84.2% were from UK government-funded doctors and the NHS, 6.4% from the HSE and Irish GPs, 7.9% from pharmacies and 1.5% from other tenants.

Despite only two small disposals during the year, the Fund will continue to look to sell properties which no longer meet its long term investment criteria or have been identified within the CCG’s estates strategy as less likely to be used for delivery of primary care beyond their existing lease term. Following the year end, in November, five such properties located in Wolverhampton, Southampton, Gravesend, Leicester and Grimsby were sold for consideration of £5,575,000, representing a gain of approximately £250,000 over the most recent external valuation.

The net initial valuation yield on UK investments was 5.08% compared with the Group’s weighted average fixed rate debt of 4.29% and a benchmark 20-year gilt rate of 2.00% at 30 September 2017. Assuming the revolving credit facility is utilised and the new Bank of Ireland facility is drawn down, the Group’s average cost of debt would fall further towards 4.17% which will enhance future returns. The spreads being achieved for Irish assets are significantly wider than those seen in the UK market.

MXF : MedicX dividend cover has some way to go

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