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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Picton Property Income Ld | LSE:PCTN | London | Ordinary Share | GB00B0LCW208 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.40 | 0.59% | 67.90 | 67.70 | 68.00 | 68.00 | 67.60 | 67.60 | 438,836 | 11:59:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 51.82M | -89.53M | -0.1642 | -4.14 | 370.75M |
Hot Features
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TIDMPCTN
9 November 2022
PICTON PROPERTY INCOME LIMITED
("Picton", the "Company" or the "Group")
LEI: 213800RYE59K9CKR4497
Half Year Results
Picton announces its half year results for the period to 30 September 2022.
Financial results
* Net assets of £636 million, or 117p per share, a decrease of 3.2%
* Stable EPRA earnings of £10.7 million, or 2.0p per share
* Loss for the period of £10.4 million
* Dividends paid of £9.5 million with dividend cover of 112%
Defensive capital structure
* Loan to value ratio of 24%
* Total borrowings of £225.2 million, with 95% at fixed rates of interest
* Weighted average interest rate of 3.7% with a weighted average debt
maturity of 8.9 years
* Undrawn revolving credit facility of £38.1 million available
Valuation impacts mitigated by rental growth and asset management
* Total property return of -0.2%, outperforming the MSCI UK Quarterly
Property Index of -1.3%
* Like-for-like portfolio valuation decrease of 1.9%
* Like-for-like increase in estimated rental value (ERV) of 5%
* £2.1 million invested into asset upgrading and repositioning projects
* Completed the acquisition of two freehold mixed-use properties for £19.0
million, before costs
* Occupancy of 90%, with vacancy in recent acquisitions contributing to the
decline relative to March 22 (93%)
Encouraging occupational activity
* Like-for-like increase in passing rent of 3%
* 12 lettings / agreements to lease completed, securing £0.5 million per
annum, in line with the March 2022 ERV
* Five lease renewals / regears completed, retaining £0.3 million per annum,
25% above the March 2022 ERV
* Eight rent reviews completed, securing an uplift of £0.1 million per annum,
1% above the March 2022 ERV
* Current pipeline of 12 new lettings totalling £1 million per annum, agreed
subject to contract
Balance sheet 30 Sept 2022 31 March 2022
Property valuation £852m £849m
Net assets £636m £657m
EPRA NTA per share 117p 120p
EPRA NDV per share 123p 119p
Income statement Six months to Six months to
30 Sept 2022 30 Sept 2021
(Loss)/profit after tax £(10.4)m £54.4m
EPRA earnings £10.7m £10.9m
Earnings per share (1.9)p 10.0p
EPRA earnings per share 2.0p 2.0p
Total return (1.7)% 10.2%
Total shareholder return (11.4)% 12.7%
Total dividend per share 1.75p 1.65p
Dividend cover 112% 121%
Picton Chair, Lena Wilson CBE, commented:
"Picton has always taken a prudent approach to the management of its assets and
balance sheet. Against a backdrop of multiple economic challenges impacting
real estate pricing, we are in a relatively robust position with low leverage
and stable EPRA earnings. Moreover, we have the flexibility and headroom to
selectively take advantage of good quality earnings accretive opportunities
that may arise out of the current market volatility."
Michael Morris, Chief Executive of Picton, commented:
"We have seen positive occupational market activity within the portfolio with
lettings, lease renewals and rent reviews on average 5% ahead of March
estimated rental values, which has limited the impact of outward yield movement
and valuation declines. Our net income is insulated from the impact of rising
interest rates with 95% of our drawn debt being fixed and with an average debt
maturity profile of nearly nine years. Whilst navigating current conditions the
team has started to implement our net zero pathway, which is increasingly
relevant at a time of rising energy costs and will make our assets more
attractive to occupiers."
This announcement contains inside information.
For further information:
Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150,
james.verstringhe@tavistock.co.uk
Picton
Michael Morris, 020 7011 9980, michael.morris@picton.co.uk
Note to Editors
Picton, established in 2005, is a UK REIT. It owns and actively manages a £852
million diversified UK commercial property portfolio, invested across 49 assets
and with around 400 occupiers (as at 30 September 2022). Through an occupier
focused, opportunity led approach to asset management, Picton aims to be one of
the consistently best performing diversified UK focused property companies
listed on the main market of the London Stock Exchange.
For more information please visit: www.picton.co.uk
CHAIR'S STATEMENT
Introduction
Our results for this period reflect the volatility in financial markets. There
have been increasing concerns over rising energy prices and inflationary
pressures, alongside political and fiscal uncertainty. There is an elevated
risk of recession in the UK and in response to rapidly rising interest rates
and gilt yields, the property sector has also started to see rising yields
which have adversely impacted pricing.
Some of the strong valuation gains seen last year have been reversed, but
despite these challenges we have delivered stable EPRA earnings and a
well-covered dividend. We have a conservative balance sheet with attractive
long-term fixed rate financing arrangements in place, which should insulate us
from some of the worst impacts of this period of instability.
Performance
This has undoubtedly been a difficult period for the whole real estate sector.
Our total return was -1.7%, with capital valuation movements driving a loss
over the period of £10.4 million.
Our total shareholder return over the period was -11.4% reflecting a weakening
share price and in common with the sector, a widening discount to net asset
value as instability in the financial markets increased.
At a portfolio level we again outperformed the MSCI UK Quarterly Property Index
over the six-month period. This continues our long-term track record of
outperformance over one, three, five and ten years and since inception.
Property portfolio
Whilst occupational activity within the portfolio was broadly positive, the
impact of rising yields was the main driver of performance. Our lettings, rent
reviews and lease renewals were on average 5% ahead of March 2022 estimated
rental values, which underlines the continuing strength in the occupational
markets.
The portfolio valuation, which increased over the first three months of the
period, saw a decline in the second quarter to September. Whilst movements have
affected all sectors, very low yielding assets or assets with limited rental
growth potential have seen a more pronounced write down. Liquidity in the
direct property market has reduced, particularly from mid-September, leading to
greater volatility in pricing.
Occupancy reduced slightly over the period but was driven in part by the
acquisition of assets with vacancy and positive rental value growth on void
space as this was upgraded.
We acquired two mixed-use assets over the period, where we believe there is
medium-term upside potential through income growth and repositioning. Further
detail is provided in the Business Review below.
Capital structure
We have continued to maintain a conservative level of gearing on our balance
sheet; our loan to value ratio currently stands at 24%.
Importantly in the current environment, 95% of our drawn borrowings are at
fixed rates of interest and therefore are not subject to the increases we are
seeing in financing costs. By refinancing and extending a tranche of our debt
earlier in the year we now have a weighted average maturity profile of nearly
nine years, providing further stability at this time.
Our revolving credit facility was extended until 2025 during the period and we
utilised £6 million to part fund two acquisitions. The cost of this facility
moves in line with SONIA rates, however this is a very small component of our
overall financing cost.
We currently have access to £38 million of undrawn facilities, which we intend
to use on a highly selective basis. There are an increasing number of
acquisition opportunities available in the market, and the use of funds will
have to be balanced between the quality of any opportunities and the impact on
our overall risk profile.
Dividends
During the period, we paid dividends of £9.5 million, some 6% higher than the
corresponding period last year. Dividend cover for the period was a comfortable
112%.
Our distribution is back to pre-pandemic levels and whilst we continue to keep
the dividend level under review depending on further leasing progress and
improved occupancy levels, we believe it is right to be prudent at this stage
given the current economic backdrop.
Governance
Our Annual General Meeting was brought forward to 1 September this year, and
I'm pleased to confirm that all resolutions were duly passed with 96% support
or higher. We subsequently held an online webinar for shareholders using the
Investor Meet Company platform and would like to thank all shareholders who
attended and for their feedback and support.
For the eighth and fourth years in a row we have received Gold awards from EPRA
for our 2022 Annual Report and 2022 Sustainability Report respectively, further
demonstrating our open and transparent approach with our stakeholders.
Sustainability
During the period we published our net zero carbon pathway and we are now
taking steps to deliver against that plan. Rising energy costs further support
the case for renewable, low carbon alternatives and the record temperatures
this summer further reinforce the need to mitigate and adapt to a changing
climate.
Our team has recently been strengthened by the appointment of an in-house
building surveyor, who will work with our asset managers on all capital
projects and will specifically support the upgrading of our assets and their
transition to net zero.
Outlook
We are in an unusual position of record-low unemployment, whilst at the same
time households are struggling with a cost-of-living crisis. The outlook is
dependent on stability returning to the financial markets and the severity of
any recession.
The marked change in gilt yields and financing costs recently means a repricing
in the commercial property market has commenced. Despite this, the fundamental
supply/demand balance has not altered, and we are still continuing to see
occupational demand and rising rental values in many of the areas where we
operate.
Whilst there are many events currently outside of our control, we will continue
to do what we do well: proactively manage our portfolio, work with our
occupiers and enhance income and value. Although the leasing markets are likely
to be more challenging in the short-term, we believe that we can further
enhance our income profile from our high-quality portfolio.
During the past few years, we have witnessed periods of instability and the
property sector has been more resilient than many had anticipated. We believe
that opportunities are likely to arise from these conditions and Picton is well
positioned to capitalise on these.
Lena Wilson CBE
Chair
8 November 2022
MARKET OVERVIEW
Economic backdrop
During the period we have been operating against a backdrop of marked
geopolitical and economic instability. The Covid-19 pandemic created supply
chain challenges and labour shortages, which set inflation on an upward
trajectory. This has been exacerbated by the escalating war in Ukraine, which
has driven energy, gas, oil, food, and other commodity prices to record highs.
Annual CPI inflation in September was at a 40-year high of 10.1%. There has
been a marked change in investor confidence in recent months driven by rising
yields and risk appetite.
Events at Westminster caused further market volatility, despite attempts to
soften the impact of rising energy costs. As a result, in late September
long-term bond yields soared, and the value of the pound fell to a record low
against the dollar. The ten-year gilt yield rose to levels last seen during the
Global Financial Crisis in 2007/08. The Bank of England subsequently
intervened, reversing the planned quantitative tightening.
With the third new Prime Minister in office within the space of two months,
there are early signs that the market turmoil is stabilising. The ten-year gilt
yield recovered to levels seen before the September 'mini-budget' and the value
of the pound rose against the dollar.
At the time of writing, the Bank of England base rate stands at 3.0% and has
risen markedly from the ultra-low level of 0.1% during the pandemic. The impact
of impending rising mortgage costs has already slowed the housing market, and
Nationwide reported falling house prices in October. Further interest rate
rises are expected.
Growth in average total pay (including bonuses) was 6.0% and growth in regular
pay (excluding bonuses) was 5.4% among employees from June to August 2022.
However due to the current high level of inflation, in real terms these are
amongst the largest recorded falls in pay growth since comparable records
began. On a more positive note, at 3.5%, the level of unemployment is currently
the lowest it has been since 1974 and despite three consecutive quarterly
falls, the number of vacancies remain at historically high levels.
Monthly gross domestic product (GDP) is estimated to have fallen by 0.3% in
August 2022, which is back to the pre-pandemic level in February 2020. With the
UK composite PMI declining to 48.2 in October, it is expected that the UK will
enter a period of economic recession in the coming quarters.
UK property market
Since April 2022 there has been an outward yield movement across all property
sectors, reflecting the increased risk-free rate and rising cost of debt.
The MSCI Monthly UK Property Index shows a total return for All Property for
the six months to September 2022 of -0.6%, with an income return of 2.2% and
capital growth of -2.7%. Rental growth was 2.0% for the six months to September
2022, compared to 2.8% for the six months to March 2022. Initial yields have
moved from 4.1% in March 2022 to 4.3% in September 2022.
The market performance for the six months to September 2022 for the three main
sectors was as follows:
In the industrial sector, the six-month total return was -2.8%, comprising 1.7%
income return and -4.4% capital growth. In terms of capital growth by segment,
this ranged from -1.8% in the North & Scotland to -7.1% in London. All
Industrial rental growth was 5.0%. Rental growth by segment ranged from 6.6% in
London to 2.4% in the South West.
In the office sector, the six-month total return was 0.1%, comprising 2.1%
income return and -2.0% capital growth. The range in capital growth by segment
ranged from 4.1% in Eastern to -6.4% in Inner South East. All Office rental
growth was 0.4%. Rental growth by segment ranged from 1.8% in the South West to
-0.3% in Scotland.
The retail total return was 1.7%, comprising 3.0% income return and -1.3%
capital growth. Capital growth by segment ranged from 1.3% for Retail Warehouse
- North & Scotland to -12.5% for Standard Retail - Eastern. All Retail rental
growth was 0.2%. Rental growth by segment ranged from 2.5% for Standard Retail
- Central London to -10.5% for Standard Retail - Eastern.
According to Property Data, total investment in UK commercial property for the
six months to September 2022 was £24.2 billion, down 19.4% on the £30.0 billion
for the six months to September 2021. Of the total investment in the period,
45.1% was from overseas.
Occupancy at an All Property level stayed flat over the six months, with the
MSCI Monthly UK Property Index recording an occupancy rate of 90.5% for
September 2022.
BUSINESS REVIEW
Valuation
The independent portfolio valuation on 30 September 2022, as provided by CBRE
Limited, was £851.9 million, reflecting a net initial yield of 4.2% and a
reversionary yield of 5.8%. There was a decrease in the value of the portfolio
of 1.9% over the six months on a like-for-like basis, principally reflecting
the volatility in the financial markets and rising interest rates affecting
yields.
Sector Portfolio Sept 22 Like-for-like
weightings valuation change
Industrial 58.0% £494.5m -3.0%
South East 42.1% -3.2%
Rest of UK 15.9% -2.5%
Office 31.6% £269.0m -0.5%
London City and West 7.1% -0.5%
End
Inner and Outer 5.4% -1.5%
London
South East 8.8% -2.1%
Rest of UK 10.3% 1.5%
Retail and Leisure 10.4% £88.4m -0.1%
Retail warehouse 6.8% 0.6%
High Street - Rest 2.1% -3.6%
of UK
Leisure 1.5% 2.1%
Total 100% £851.9m -1.9%
Performance
For the six months to September, the portfolio returned -0.2%, outperforming
the MSCI UK Quarterly Property Index which delivered -1.3%. The income return
was 2.1%, 0.2% ahead of the Index.
Economic and political uncertainty has led to a marked slowdown in the
investment market, particularly since the end of the summer. Rising bond yields
are resulting in an upwards yield movement in the property market which has
affected lower yielding properties in particular and those with limited rental
growth. All sectors have shown negative like-for-like valuation movements over
the half year, with the industrial portfolio decreasing by 3% and the office
and retail / leisure portfolios decreasing by a nominal amount.
Whilst values rose 1.9% between March and June 2022, we saw a decline of 3.7%
between June and September 2022. Industrial values were up 2.3% in the three
months to June, but down 5.2% in the three months to September. Similarly,
office values were up 0.7% for the three months to June and declined 1.1% in
the three months to September. Retail and leisure values were up 2.8% in the
first quarter and then subsequently declined 2.8% in the second quarter.
Occupational demand remains robust in the industrial sector with associated
rental growth offsetting in part the effect of sharper outward yield movements.
Good quality offices are still attracting occupiers and the retail warehouse
and prime high street occupational markets remain stable.
Passing rent increased to £40.7 million per annum, a like-for-like increase of
3%. The increase reflects the expiry of rent-free periods following prior
letting activity, combined with higher rents being secured overall on lease
events and various other asset management transactions.
We completed 12 lettings securing income of £0.5 million per annum, in line
with ERV. There were also five lease renewals or regears retaining income of £
0.3 million per annum, an increase on the previous passing rent of 49%, and 25%
above ERV. Eight rent reviews were concluded, securing a £0.1 million per annum
uplift in income, 1% above ERV.
The portfolio's ERV is £53.8 million per annum, a like-for-like increase of 5%,
mainly due to continuing rental growth in the industrial portfolio.
£2.1 million was invested into the portfolio over the period, with the majority
of this on upgrading and repositioning vacant buildings. This was principally
at three properties: an industrial unit at Lyon Business Park, Barking, an
office suite at Metro, Salford Quays, and an industrial unit at Colchester
Business Park. All three refurbishments have recently been completed and we are
marketing the space.
Investment activity
In May, we completed the freehold acquisition of Charlotte Terrace, Hammersmith
Road, London W14 for £13.7 million.
The property comprises four adjoining buildings, with 28,500 sq ft of office
space and 4,400 sq ft of retail space arranged over five floors. The property
was redeveloped behind the façade in 1990 and is Grade II listed, meaning there
are no business rates payable on void units.
The property is located close to Olympia, which is currently undergoing a £1
billion redevelopment delivering a new creative district with a new theatre,
entertainment venue, hotel, office, retail and leisure space, enhancing the
surrounding area. The annual rental income on purchase was £0.5 million,
equating to £34 per sq ft. This is expected to rise to over £1.1 million once
the remaining units are leased and we have already secured our first letting.
To improve office occupancy, we are upgrading the space and rolling out
SwiftSpace, our flexible lease offering.
The purchase price reflected a net initial yield of 3.3%, rising to over 8.0%
once fully let, and a low capital value of £417 per sq ft, which is below its
estimated replacement cost.
In August, we completed the freehold acquisition of 109-117 High Street,
Cheltenham for £5.3 million. The mixed-use property comprises 7,700 sq ft of
ground floor retail space with 11,450 sq ft of office space over two upper
floors, and is in Cheltenham's pedestrianised town centre, adjacent to John
Lewis. Comprehensively refurbished in 2020, the property has good environmental
credentials. It is leased to four occupiers with an average lease length of 12
years to expiry and eight years to break. The current annual rental income is £
0.4 million, equating to £21 per sq ft, with most leases containing fixed
rental uplifts that will increase income to £0.5 million per annum by 2026. The
purchase price reflects a net initial yield of 7.2%, rising to 9.0% by 2026.
The low capital value of £277 per sq ft is below its estimated replacement
cost.
Industrial portfolio
The industrial sector, which accounts for 58% of the portfolio, saw a decrease
in value over the half year, as yields have softened and investment demand
slowed considerably. On a like-for-like basis, capital values decreased by 3%,
or £15.2 million. The passing rent increased by 4% and the ERV grew by 9%, or £
2.1 million.
The valuation decrease was driven by yield movement, especially in respect of
our London multi-let estates. Whilst we expect continuing outward yield
movement to erode some of the significant valuation gains of the past two
years, occupier demand remains robust, and we are seeing and capturing rental
growth. The current uncertainty will create acquisition opportunities and we
remain committed to the sector over the medium-term, primarily due to the
strength of demand, lack of supply and low capital expenditure requirements.
Our UK-wide distribution warehouse assets total 1.2 million sq ft in five
units, which are fully leased with a weighted average unexpired lease term of
4.9 years. Two of the units have rent reviews in early 2023 and we expect to
secure significant uplifts in rent. We acquired the freehold of our Rushden
asset in the period for nil consideration, having previously owned a long
leasehold interest.
The multi-let estates, of which 89% by value are in the South East, total 2.0
million sq ft and we only have six vacant units out of 165. Four units were let
during the period, securing £0.3 million per annum, 16% ahead of ERV. This
included pre-letting a warehouse in Radlett where an occupier was vacating on
lease expiry, with the new occupier moving in four days later. The new rent has
been agreed at £0.1 million per annum, 34% ahead of the previous passing rent
and 5% ahead of the March ERV. The estate, which is our largest asset, has been
fully leased since November 2019 and there remains strong occupational demand.
We have secured £0.1 million per annum of additional income from six rent
reviews settled over the period, 5% below the March ERV, which reflects the
timing of the reviews, all of which except one predated the period. As part of
the negotiation in Radlett, we removed an occupier's break clause in both of
their leases in 2024, securing £0.2 million per annum, subject to review, until
lease expiry in 2027.
Five occupiers have been retained at renewal, increasing their passing rent by
£0.1 million, 25% ahead of ERV. Two of the renewals were at Mill Place,
Gloucester, which was acquired in February. The combined passing rent was
increased by 72%, 22% ahead of ERV.
The industrial portfolio currently has £7.3 million of reversionary income
potential, with £1.2 million relating to the void units.
Office portfolio
Offices account for 32% of the portfolio and their value has decreased
nominally over the half year. Capital values declined by 0.5%, or £1.2 million,
and the passing rent increased by 1% with the ERV growing by 1%, or £0.3
million, all on a like-for-like basis.
Generally, most office occupiers are adapting to a hybrid model of working and
employers increasingly recognise the need for quality workplaces for their
staff. There are two main areas where office demand remains strong, for the
very best space (including good environmental credentials) and where there is
short-term flexibility. The continued investment into our assets and our
SwiftSpace proposition aim to capitalise on this.
We let five offices during the period, securing £0.2 million per annum. Three
of these were leased in line or ahead of ERV, however two were leased below
ERV, both on a short-term inclusive basis and prior to the units being
refurbished. The two largest lettings were at our new acquisition at Charlotte
Terrace, London, and Longcross, Cardiff, which has recently been upgraded, with
the refurbishment and co-working space shortlisted for an Industry award.
The office portfolio currently has £6.3 million of reversionary income
potential, with £3.7 million relating to the void units.
Retail and Leisure portfolio
Retail and leisure accounts for 10% of the portfolio and values were beginning
to stabilise after a prolonged period of repricing. The sector generally has
high yields and therefore has been less affected by rising interest rates. With
the current cost-of-living challenges, consumers are expected to rein in their
discretionary spending which will have a further impact on the sector.
On a like-for-like basis, there was a nominal decline in capital values over
the period. The passing rent increased by 5% and the ERV declined by 1%.
Our portfolio remains very well leased and we are seeing occupational demand,
hence we are considering opportunities such as our recent purchases in
Cheltenham and Hammersmith, both of which contain an element of ground floor
retail. With high street yields being at an all-time high, we remain of the
view that there are opportunities in the sector for prime assets off rebased
rents.
The retail warehouse assets total 0.4 million sq ft in 19 units across four
parks and are fully leased, with a weighted average unexpired lease term of 5.7
years.
The high street portfolio remains well let, with only two vacant units, with an
ERV of £0.1 million per annum, both of which are under offer.
The retail and leisure portfolio has £0.4 million per annum of over-renting,
primarily relating to the high street retail assets which have seen a reduction
in ERV over the last few years.
Occupancy
As at 30 September 2022 we had a total void ERV of £5.4 million and occupancy
had decreased from 93% to 90%. A third of the decrease is as a result of the
purchase of the partly let Charlotte Terrace asset, whilst growth in ERV on
some of our vacant space has also contributed to this.
The majority of the void in the portfolio is relatively recent and reflects in
part some of the units becoming available during the pandemic, which have
subsequently been refurbished to enhance letting prospects. 50% of our vacancy
arose in this calendar year, with a further 30% in 2021. We have now introduced
SwiftSpace flexible leasing on the majority of the remaining vacancy.
Our industrial portfolio is 95% leased with demand remaining robust across the
country. We have only six vacant industrial units, four of which became vacant
during the period. All the units are either recently refurbished or works are
on site.
The office portfolio occupancy is 83%, and there is less depth of demand
relative to the industrial sector. Our recently introduced SwiftSpace
proposition has helped to grow occupancy on smaller units with seven lettings
across five assets. Our largest voids are at:
* Angel Gate Office Village, London - accounting for 19% of the total
portfolio void. Demand for smaller suites is returning following our
investment into the property, including an occupier lounge, occupier app
and other amenities.
* Charlotte Terrace, London - this recently acquired property accounts for
13% of our total portfolio void and was bought with the strategy of
repositioning it. We are in the process of upgrading units to meet current
occupational needs.
* Colchester Business Park, Colchester - accounting for 11% of our total
portfolio void. Nearly 50% of the void relates to an industrial unit that
is being refurbished and we already have occupational interest.
In terms of retail and leisure, occupancy is 94%. The retail warehouse
portfolio is fully leased, and we have two vacant high street shops, both of
which are under offer. At Regency Wharf, despite the predominant leisure use,
we have an office element which is now refurbished, and we have interest which
we are progressing.
Across all sectors, we currently have a pipeline of 12 new lettings totalling £
1 million per annum, agreed subject to contract.
Looking ahead
The economic backdrop is causing yields to rise in the short-term, eroding some
of the significant valuation gains seen in the last few years.
The occupational market has been resilient, and our focus remains working with
our occupiers, improving the quality of the portfolio and capturing its
reversionary income potential, principally through leasing vacant space, and
creating further value through active asset management.
The difference between the ERV at 30 September and the passing rent is £13.1
million and comprises £5.4 million per annum of additional potential income
from letting vacant space, £2.6 million per annum of income where ERVs are
higher than passing rent, and £5.1 million per annum from the expiry of rent
free periods and stepped rents.
The portfolio is well placed in terms of its geography, sectors, asset quality
and diversified income, with numerous asset management opportunities in the
short and medium-term.
In terms of potential acquisitions, the current market uncertainty will lead to
opportunities. We continue to look selectively across sectors and are focused
on properties that will deliver attractive returns commensurate with the asset
specific risk.
Top ten assets
The largest assets in the portfolio as at 30 September 2022, ranked by capital
value, represent 54% of the total portfolio valuation and are detailed below:
Sector Approximate Appraised
area (sq ft) value
Parkbury Industrial Estate, Radlett, Industrial 343,800 >£100m
Herts.
River Way Industrial Estate, Harlow, Industrial 454,800 £50m-£80m
Essex
Datapoint, Cody Road, London E16 Industrial 55,100 £30m-£40m
Lyon Business Park, Barking, Essex Industrial 99,400 £30m-£40m
Stanford Building, Long Acre, London Office 19,600 £30m-£40m
WC2
Shipton Way, Rushden, Northants. Industrial 312,900 £30m-£40m
Angel Gate, City Road, London EC1 Office 64,600 £30m-£40m
Tower Wharf, Cheese Lane, Bristol Office 70,600 £20m-£30m
Sundon Business Park, Dencora Way, Industrial 127,800 £20m-£30m
Luton
50 Farringdon Road, London EC1 Office 31,300 £20m-£30m
A full portfolio listing is available on the Company's website:
www.picton.co.uk
Top ten occupiers
The top ten occupiers, based as a percentage of annualised contracted rental
income, after lease incentives, as at 30 September 2022, are summarised below:
Occupier %
1 Public Sector 5.0
2 Whistl UK Limited 3.6
3 B&Q Plc 2.7
4 The Random House Group Limited 2.6
5 Snorkel Europe Limited 2.6
6 XMA Limited 2.1
7 Portal Chatham LLP 2.0
8 DHL Supply Chain Limited 1.7
9 Hi-Speed Services Limited 1.5
10 Canterbury Christ Church University 1.5
25.3
Financial review
Income statement
For the six months to 30 September 2022, we recorded an overall loss of £10.4
million. This was driven by negative valuation movements on the portfolio of £
21.1 million, a reduction of 1.9% on a like-for-like basis over the period. Our
EPRA earnings, being recurring income less costs of running the business, were
£10.7 million for the period, or 2.0 pence per share. This is in line with the
same period last year. Rental income has increased by 6% compared to a year ago
to £20.9 million, reflecting the new acquisitions made over the last year.
Property expenses are also higher, impacted by inflationary pressures and
increasing void costs.
Administrative expenses for the period were £2.9 million, higher than the
previous period by £0.2 million, and again impacted by rising inflation.
Finance costs were £4.5 million for the half year. Following the re-financing
and extension of our Canada Life facility earlier this year, our average
interest rate has reduced to 3.7% on drawn borrowings.
Dividend cover for the six months was 112%. During the period we have paid two
interim dividends, both at 0.875 pence per share, giving a total payment of £
9.5 million. This is 6% higher than the equivalent period last year.
Balance sheet
The net asset value of the Group declined over the period by £20.8 million to £
636.4 million, or 3.2%. The external valuation of the property portfolio stood
at £851.9 million at 30 September 2022, reversing some of the valuation gains
of last year. During the period we acquired two new mixed-use assets, for a
total consideration of £20.2 million, including costs. We have continued to
invest in our portfolio, with £2.1 million of capital expenditure incurred in
the period.
Following our re-financing in March, total borrowings now stand at £225.2
million, representing an overall loan to value ratio of 24%. The weighted
average maturity of our borrowings is now 8.9 years, and 95% of the drawn debt
is at fixed rates of interest, largely insulating us from rising interest
rates. Other than our largely undrawn revolving credit facility, which has been
extended to May 2025, our earliest re-financing event is in July 2031. We
continue to meet all of our loan covenants and have significant headroom, with
a further £80 million of uncharged assets providing additional flexibility.
Our EPRA net tangible assets at 30 September were £1.17 pence per share, in
line with the IFRS net asset value. However, the EPRA net disposal value, which
includes a fair value adjustment to our borrowings, rose to £1.23 pence per
share. With the recent rise in interest rates our borrowings are now below the
market rate, although this fair value adjustment is not included under IFRS.
DIRECTORS' RESPONSIBILITIES
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets comprise direct investments in UK commercial property. Its
principal risks are therefore related to the commercial property market in
general and its investment properties. Other risks faced by the Company include
economic, investment and strategic, regulatory, management and control,
operational and financial risks.
These risks, and the way in which they are managed, are described in more
detail under the heading 'Managing Risk' within the Strategic Report in the
Company's Annual Report for the year ended 31 March 2022.
Since the publication of the Group's Annual Report in May 2022 there has been
heightened volatility in the financial markets, with increasing interest rates
and rising inflation. As a result, the risks and uncertainties that could have
a material impact on the Group have changed, with a number trending higher.
Emerging risks
The Board continues to consider where emerging risks or disrupting events may
impact the business. These may arise from for example changes in economic
conditions, political or regulatory changes, advances in technology or
demographic changes. All emerging risks are reviewed as part of the ongoing
risk management process.
During the period the risk of a recession in the UK has heightened, due to
rising interest rates, higher inflation and energy costs, increasing the risk
of occupier default. The Group maintains a diversified portfolio with a wide
range of occupiers, with no significant exposure to any particular sector.
Principal risks
The Group's principal risks that have changed materially during the period are
set out below. The remaining principal risks are the same as reported in the
2022 Annual Report.
Political and economic
Risk: Uncertainty in the UK economy, whether arising from political events or
otherwise, brings risks to the property market and to occupiers' businesses.
This can result in lower shareholder returns, lower asset liquidity
and increased occupier failure.
Change since 2022 Annual Report: Political changes and inflationary pressures
are causing economic uncertainty and volatility in financial markets, with an
increased risk of recession in the UK. The risk trend is therefore increased.
The Group has a strong cash flow arising from a wide range of businesses. The
Group's borrowings are mainly long-term and are at fixed rates of interest.
Market cycle
Risk: The property market is cyclical and returns can be volatile. There is an
ongoing risk that the Company fails to react appropriately to changing market
conditions, resulting in an adverse impact on shareholder returns.
Change since 2022 Annual Report: Economic uncertainty and rising financing
costs have caused property yields to increase, adversely impacting valuations.
This risk trend is also increased. The Group has a diversified portfolio and
low gearing. Additionally the Board considers current market trends when
setting strategy.
Portfolio strategy
Risk: The Group has an inappropriate portfolio strategy, as a result of poor
sector or geographical allocations, or holding obsolete assets, leading to
lower shareholder returns.
Change since 2022 Annual Report: Rising interest rates are impacting all
sectors of the property market but industrial values, which have seen the
highest gains historically, are expected to see a more marked correction. The
impact of cost-of-living increases is more likely to impact the retail and
leisure sectors. The risk trend is increased. The Group maintains a
high-quality diversified portfolio to mitigate against this risk.
Investment
Risk: Investment decisions may be flawed as a result of incorrect assumptions,
poor research or incomplete due diligence, leading to financial loss.
Change since 2022 Annual Report: The risk trend is higher as increased
volatility in the investment market could lead to incorrect assumptions in
decision-making. The Group is highly selective in considering investment
opportunities.
Asset management
Risk: Failure to properly execute asset business plans or poor asset management
could lead to longer void periods, higher occupier defaults, higher arrears and
low occupier retention, all having an adverse impact on earnings and cash flow.
Change since 2022 Annual Report: A recession in the UK could lead to higher
occupier defaults and lower earnings which will increase this risk. The Group
has a strong cash flow from a diversified range of occupiers, mitigating the
risk.
Valuation
Risk: A fall in the valuation of the Group's property assets could lead to
lower investment returns and a breach of loan covenants.
Change since 2022 Annual Report: Rising yields across all sectors of the
commercial property market are adversely impacting valuations, increasing this
risk. The Group has significant headroom against all its loan covenants and
holds uncharged assets in the portfolio.
Capital structure
Risk: The Group operates a geared capital structure, which magnifies returns
from the portfolio, both positive and negative. An inappropriate level of
gearing relative to the property cycle could lead to lower investment returns.
Change since 2022 Annual Report: Declines in the valuation of the Group's
investment properties will be magnified by gearing, increasing this risk. The
Group has a modest level of gearing with a loan to value ratio of 24%, and
interest rates are mainly fixed.
STATEMENT OF GOING CONCERN
The Directors have assessed whether the going concern basis remains appropriate
for the preparation of the financial statements for the period ended 30
September 2022. In making their assessment the Directors have considered the
principal and emerging risks relating to the Group, its loan covenants, access
to funding and liquidity position. They have also considered different adverse
scenarios impacting the portfolio and the potential consequences on financial
performance, asset values, dividend policy, capital projects and loan
covenants. More details regarding the Group's business activities, together
with the factors affecting performance, investment activities and future
development are set out in the Business Review.
Further information on the financial position of the Group, including its
liquidity position, borrowing facilities and debt maturity profile, is set out
in the Financial Review section of the Business Review and in the condensed
consolidated financial statements.
Under all of these scenarios the Group has sufficient cash resources to
continue its operations, and remain within its loan covenants, for a period of
at least 12 months from the date of these financial statements.
Based on their assessment and knowledge of the portfolio and market, the
Directors have therefore continued to adopt the going concern basis in
preparing the financial statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE INTERIM REPORT
We confirm that to the best of our knowledge:
a. the condensed set of consolidated financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
b. the Chair's Statement and Business Review (together constituting the
Interim Management Report) together with the Statement of Principal Risks and
Uncertainties above include a fair review of the information required by the
Disclosure Guidance and Transparency Rules ('DTR') 4.2.7R, being an indication
of important events that have occurred during the first six months of the
financial year, a description of principal risks and uncertainties for the
remaining six months of the year, and their impact on the condensed set of
consolidated financial statements; and
c. the Chair's Statement together with the condensed set of consolidated
financial statements include a fair review of the information required by DTR
4.2.8R, being related party transactions that have taken place in the first six
months of the current financial year and that have materially affected the
financial position or performance of the Company during that period, and any
changes in the related party transactions described in the last Annual Report
that could do so.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, and for
the preparation and dissemination of financial statements. Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By Order of the Board
Andrew Dewhirst
Director
8 November 2022
INDEPENT REVIEW REPORT TO PICTON PROPERTY INCOME LIMITED
CONCLUSION
We have been engaged by Picton Property Income Limited (the "Company") to
review the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 September 2022 of the
Company and its subsidiaries (together, the "Group"), which comprises the
condensed consolidated balance sheet, the condensed consolidated statements of
comprehensive income, changes in equity and cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of consolidated financial statements in the
half-yearly financial report for the six months ended 30 September 2022 is not
prepared, in all material respects, in accordance with IAS 34 Interim Financial
Reporting and the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial
Reporting Council for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the half-yearly financial report and
consider whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of consolidated
financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
CONCLUSIONS RELATING TO GOING CONCERN
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Scope of review section of this report, nothing
has come to our attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors have
identified material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
interim financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual condensed set of consolidated financial
statements of the Group are prepared in accordance with International Financial
Reporting Standards. The directors are responsible for preparing the condensed
set of consolidated financial statements included in the half-yearly financial
report in accordance with IAS 34 Interim Financial Reporting.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless they either intend to liquidate the Group or the
Company or to cease operations, or have no realistic alternative but to do so.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed
set of consolidated financial statements in the half-yearly financial report
based on our review. Our conclusion, including our conclusions relating to
going concern, are based on procedures that are less extensive than audit
procedures, as described in the scope of review paragraph of this report.
THE PURPOSE OF OUR REVIEW WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Steven Stormonth
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
8 November 2022
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF YEARED 30 SEPTEMBER 2022
Note 6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 audited
unaudited unaudited Total
Total Total £000
£000 £000
Income
Revenue from properties 3 25,068 22,623 46,543
Property expenses 4 (6,999) (5,014) (11,098)
Net property income 18,069 17,609 35,445
Expenses
Administrative expenses (2,948) (2,744) (5,755)
Total operating expenses (2,948) (2,744) (5,755)
Operating profit before movement on 15,121 14,865 29,690
investments
Investments
Profit on disposal of investment 9 - 47 42
properties
Investment property valuation movements 9 (21,073) 42,951 129,801
Total (loss)/profit on investments (21,073) 42,998 129,843
Operating (loss)/profit (5,952) 57,863 159,533
Financing
Interest received 1 - -
Interest paid (4,471) (3,945) (8,502)
Debt prepayment fee - - (4,045)
Total finance costs (4,470) (3,945) (12,547)
(Loss)/profit before tax (10,422) 53,918 146,986
Tax - - -
(Loss)/profit after tax (10,422) 53,918 146,986
Other comprehensive income
Revaluation on owner occupied property 33 443 434
Total other comprehensive income for the 33 443 434
period/year
Total comprehensive (loss)/income for the (10,389) 54,361 147,420
period/year
Earnings per share
Basic 7 (1.9)p 10.0p 27.0p
Diluted 7 (1.9)p 10.0p 26.9p
All of the profit and total comprehensive income for the period is attributable
to the equity holders of the Company. There are no minority interests. Notes 1
to 15 form part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEARED 30 SEPTEMBER 2022
Note Share Other Retained Revaluation Total
capital reserves earnings reserve £000
£000 £000 £000 £000
Balance as at 31 March 2021 164,400 (669) 364,466 - 528,197
Profit for the period - - 53,918 - 53,918
Dividends paid 6 - - (9,008) - (9,008)
Share-based awards - 303 - - 303
Purchase of shares held in - (237) - - (237)
trust
Other comprehensive income for - - - 443 443
the period
Balance as at 30 September 2021 164,400 (603) 409,376 443 573,616
Profit for the period - - 93,068 - 93,068
Dividends paid 6 - - (9,417) - (9,417)
Share-based awards - 365 - - 365
Purchase of shares held in - (493) - - (493)
trust
Other comprehensive income for - - - (9) (9)
the period
Balance as at 31 March 2022 164,400 (731) 493,027 434 657,130
Loss for the period - - (10,422) - (10,422)
Dividends paid 6 - - (9,549) - (9,549)
Share-based awards - 290 - - 290
Purchase of shares held in - (1,126) - - (1,126)
trust
Other comprehensive income for - - - 33 33
the period
Balance as at 30 September 2022 164,400 (1,567) 473,056 467 636,356
Notes 1 to 15 form part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2022
Note 30 30 31 March
September September 2022
2022 2021 audited
unaudited unaudited £000
£000 £000
Non-current assets
Investment properties 9 831,278 726,020 830,027
Property, plant and equipment 4,334 4,473 4,383
Total non-current assets 835,612 730,493 834,410
Current assets
Accounts receivable 26,235 24,390 22,850
Cash and cash equivalents 19,718 16,681 38,547
Total current assets 45,953 41,071 61,397
Total assets 881,565 771,564 895,807
Current liabilities
Accounts payable and accruals (19,201) (18,945) (19,138)
Loans and borrowings 10 (1,099) (973) (1,068)
Obligations under leases (114) (107) (114)
Total current liabilities (20,414) (20,025) (20,320)
Non-current liabilities
Loans and borrowings 10 (222,207) (176,218) (215,764)
Obligations under leases (2,588) (1,705) (2,593)
Total non-current liabilities (224,795) (177,923) (218,357)
Total liabilities (245,209) (197,948) (238,677)
Net assets 636,356 573,616 657,130
Equity
Share capital 11 164,400 164,400 164,400
Retained earnings 473,056 409,376 493,027
Other reserves (1,567) (603) (731)
Revaluation reserve 467 443 434
Total equity 636,356 573,616 657,130
Net asset value per share 13 117p 105p 120p
These condensed consolidated financial statements were approved by the Board of
Directors on 8 November 2022 and signed on its behalf by:
Andrew Dewhirst
Director
Notes 1 to 15 form part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEARED 30 SEPTEMBER 2022
Note 6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 audited
unaudited unaudited £000
£000 £000
Operating activities
Operating (loss)/profit (5,952) 57,863 159,533
Adjustments for non-cash items 12 21,445 (42,615) (129,010)
Interest received 1 - -
Interest paid (3,516) (3,722) (8,102)
Increase in accounts receivables (3,385) (4,845) (3,305)
(Decrease)/increase in payables and accruals (565) 191 897
Cash inflows from operating activities 8,028 6,872 20,013
Investing activities
Purchase of investment properties 9 (20,194) (13,933) (25,005)
Capital expenditure on investment properties 9 (2,130) (4,363) (9,551)
Disposal of investment properties - 731 726
Purchase of tangible assets - 1 (3)
Cash outflows from investing activities (22,324) (17,564) (33,833)
Financing activities
Borrowings repaid (5,675) (650) (26,917)
Borrowings drawn 12,000 14,000 79,545
Debt prepayment fees - - (4,045)
Financing costs (183) (90) (419)
Purchase of shares held in trust (1,126) (237) (730)
Dividends paid 6 (9,549) (9,008) (18,425)
Cash (outflows)/inflows from financing activities (4,533) 4,015 29,009
Net (decrease)/increase in cash and cash equivalents (18,829) (6,677) 15,189
Cash and cash equivalents at beginning of period/ 38,547 23,358 23,358
year
Cash and cash equivalents at end of period/year 19,718 16,681 38,547
Notes 1 to 15 form part of these condensed consolidated financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEARED 30 SEPTEMBER 2022
1. GENERAL INFORMATION
Picton Property Income Limited (the "Company" and together with its
subsidiaries the "Group") was established in Guernsey on 15 September 2005 and
entered the UK REIT regime on 1 October 2018.
The financial statements are prepared for the period from 1 April to 30
September 2022, with unaudited comparatives for the period from 1 April to 30
September 2021. Comparatives are also provided from the audited financial
statements for the year ended 31 March 2022.
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with IAS 34
'Interim Financial Reporting'. They do not include all of the information
required for full annual financial statements and should be read in conjunction
with the financial statements of the Group as at and for the year ended 31
March 2022.
The accounting policies applied by the Group in these financial statements are
the same as those applied by the Group in its financial statements as at and
for the year ended 31 March 2022.
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards ('IFRS') as issued by the IASB. The
Group's annual financial statements for the year ended 31 March 2022 refer to
new Standards and Interpretations none of which has a material impact on these
financial statements. There have been no significant changes to management
judgements and estimates as disclosed in the last annual report and financial
statements for the year ended 31 March 2022.
The Directors have assessed whether the going concern basis remains appropriate
for the preparation of the financial statements. They have reviewed the Group's
principal and emerging risks, existing loan facilities, access to funding and
liquidity position and then considered different adverse scenarios impacting
the portfolio and the potential consequences on financial performance, asset
values, dividend policy, capital projects and loan covenants. Under all these
scenarios the Group has sufficient resources to continue its operations, and
remain within its loan covenants, for a period of at least 12 months from the
date of these financial statements. Based on their assessment and knowledge of
the portfolio and market, the Directors have therefore continued to adopt the
going concern basis in preparing the financial statements.
3. REVENUE FROM PROPERTIES
6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Rents receivable (adjusted for lease incentives) 20,856 19,672 40,133
Surrender premiums 113 59 59
Dilapidation receipts 3 - 21
Other income 107 91 118
Service charge income 3,989 2,801 6,212
25,068 22,623 46,543
Rents receivable includes lease incentives recognised of £1.1 million (30
September 2021: £1.9 million, 31 March 2022: £2.8 million).
4. PROPERTY EXPENSES
6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Property operating costs 1,495 1,269 2,477
Property void costs 1,515 944 2,409
Recoverable service charge costs 3,989 2,801 6,212
6,999 5,014 11,098
5. OPERATING SEGMENTS
The Board is charged with setting the Group's business model and strategy. The
key measure of performance used by the Board to assess the Group's performance
is the total return on the Group's net asset value. As the total return on the
Group's net asset value is calculated based on the net asset value per share
calculated under IFRS as shown at the foot of the Balance Sheet, assuming
dividends are reinvested, the key performance measure is that prepared under
IFRS. Therefore, no reconciliation is required between the measure of profit or
loss used by the Board and that contained in the financial statements.
The Board has considered the requirements of IFRS 8 'Operating Segments'. The
Board is of the opinion that the Group, through its subsidiary undertakings,
operates in one reportable industry segment, namely real estate investment, and
across one primary geographical area, namely the United Kingdom, and therefore
no segmental reporting is required. The portfolio consists of 49 commercial
properties, which are in the industrial, office, retail and leisure sectors.
6. DIVIDS
Declared and paid: 6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Interim dividend for the period ended 31 March 2021: 0.8 - 4,364 4,364
pence
Interim dividend for the period ended 30 June 2021: 0.85 - 4,644 4,644
pence
Interim dividend for the period ended 30 September 2021: 0.85 - - 4,640
pence
Interim dividend for the period ended 31 December 2021: 0.875 - - 4,777
pence
Interim dividend for the period ended 31 March 2022: 0.875 4,774 - -
pence
Interim dividend for the period ended 30 June 2022: 0.875 4,775 - -
pence
9,549 9,008 18,425
The interim dividend of 0.875 pence per ordinary share in respect of the period
ended 30 September 2022 has not been recognised as a liability as it was
declared after the period end. A dividend of £4,771,000 will be paid on 30
November 2022.
7. EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing the net (loss)/
profit for the period attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares in issue during the period,
excluding the average number of shares held by the Employee Benefit Trust. The
diluted number of shares also reflects the contingent shares to be issued under
the Long-term Incentive Plan.
The following reflects the (loss)/profit and share data used in the basic and
diluted earnings per share calculation:
6 months 6 months Year ended
ended ended 31 March
30 30 2022
September September
2022 2021
Net (loss)/profit attributable to ordinary shareholders of (10,389) 54,361 147,420
the Company from continuing operations (£000)
Weighted average number of ordinary shares for basic earnings 545,538,789 545,987,095 545,904,197
per share
Weighted average number of ordinary shares for diluted 547,192,032 547,095,699 547,295,589
earnings per share
8. FAIR VALUE MEASUREMENTS
The fair value measurement for the financial assets and financial liabilities
are categorised into different levels in the fair value hierarchy based on the
inputs to valuation techniques used. The different levels have been defined as
follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Group can access at the measurement date.
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. The fair
value of the Group's secured loan facilities, as disclosed in note 10, are
included in Level 2.
Level 3: unobservable inputs for the asset or liability. The fair value of the
Group's investment properties is included in Level 3.
The Group recognises transfers between levels of the fair value hierarchy as of
the end of the reporting period during which the transfer has occurred. There
were no transfers between levels for the period ended 30 September 2022.
The fair value of all other financial assets and liabilities is not materially
different from their carrying value in the financial statements.
The Group's financial risk management objectives and policies are consistent
with those disclosed in the consolidated financial statements for the year
ended 31 March 2022.
9. INVESTMENT PROPERTIES
6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Fair value at start of period/year 830,027 665,418 665,418
Capital expenditure on investment properties 2,130 4,363 9,551
Acquisitions 20,194 13,933 25,005
Disposals - (692) (687)
Acquisition of right of use asset - - 897
Realised gains on disposal - 47 42
Unrealised movement on investment properties (21,073) 42,951 129,801
Fair value at the end of the period/year 831,278 726,020 830,027
Historic cost at the end of the period/year 676,694 638,110 654,370
The fair value of investment properties reconciles to the appraised value as
follows:
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Appraised value 851,890 745,195 849,325
Valuation of assets held under head leases 2,245 1,329 2,237
Lease incentives held as debtors (18,708) (16,279) (17,367)
Owner-occupied property (4,149) (4,225) (4,168)
Fair value at the end of the period/year 831,278 726,020 830,027
As at 30 September 2022, all of the Group's properties are Level 3 in the fair
value hierarchy as it involves the use of significant inputs and there were no
transfers between levels during the period. Level 3 inputs used in valuing the
properties are those which are unobservable, as opposed to Level 1 (inputs from
quoted prices) and Level 2 (observable inputs either directly, i.e. as prices,
or indirectly, i.e. derived from prices).
The investment properties were valued by CBRE Limited, Chartered Surveyors, as
at 30 September 2022 on the basis of fair value in accordance with the RICS
Valuation - Global Standards (incorporating the International Valuation
Standards) and the UK national supplement (the Red Book) current as at the
valuation date.
The fair value of the Group's investment properties has been determined using
an income capitalisation technique, whereby contracted and market rental values
are capitalised with a market capitalisation rate. The resulting valuations are
cross-checked against the equivalent yields and the fair market values per
square foot derived from comparable market transactions on an arm's length
basis.
Information on the significant unobservable inputs per sector of investment
properties is disclosed as follows:
30 September 2022 31 March 2022
Office Industrial Retail and Office Industrial Retail and
Leisure Leisure
Appraised value (£000) 268,995 494,490 88,405 251,125 509,730 88,470
Area (sq ft, 000s) 875 3,251 695 828 3,240 692
Range of unobservable
inputs:
Gross ERV (sq ft per
annum)
- range £11.00 to £2.91 to £3.10 to £10.96 to £2.82 to £3.23 to
£80.52 £26.69 £20.53 £82.32 £26.77 £28.49
- weighted average £34.89 £12.20 £11.43 £35.10 £11.47 £11.83
Net initial yield
- range 0.46% to 1.01% to 1.65% to 0.92% to 0.00% to 3.07% to
9.00% 7.15% 27.97% 9.00% 6.75% 25.00%
- weighted average 4.69% 3.48% 7.59% 4.64% 3.25% 7.33%
Reversionary yield
- range 4.26% to 3.46% to 6.20% to 4.29% to 3.04% to 6.19% to
10.87% 8.05% 12.00% 9.63% 7.37% 12.89%
- weighted average 7.22% 4.77% 7.37% 7.00% 4.24% 7.42%
True equivalent yield
- range 4.11% to 3.40% to 6.25% to 4.09% to 3.00% to 6.25% to
9.50% 7.00% 12.17% 9.95% 7.00% 13.02%
- weighted average 6.66% 4.57% 7.52% 6.49% 4.11% 7.55%
An increase/decrease in ERV will increase/decrease valuations, while an
increase/decrease to yield will decrease/increase valuations.
The Group's borrowings (note 10) are secured by a first ranking fixed charge
over the majority of investment properties held.
10. LOANS AND BORROWINGS
Maturity 30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Current
Aviva facility - 1,402 1,343 1,372
Capitalised finance costs - (303) (370) (304)
1,099 973 1,068
Non-current
Canada Life facility 24 July 129,045 80,000 129,045
2031
Aviva facility 24 July 82,813 84,215 83,518
2032
Natwest revolving credit facility 26 May 11,900 14,000 4,900
2025
Capitalised finance costs - (1,551) (1,997) (1,699)
222,207 176,218 215,764
Total loans and borrowings 223,306 177,191 216,832
The Group has a loan with Canada Life Limited for £129.0 million which matures
in July 2031. Interest is fixed at 3.25% over the life of the loan.
Additionally, the Group has a loan facility agreement with Aviva Commercial
Finance Limited for £95.3 million, which was fully drawn on 24 July 2012. The
loan matures in 2032, with approximately one-third repayable over the life of
the loan in accordance with a scheduled amortisation profile. Interest on the
loan is fixed at 4.38% over the life of the loan.
The Group also has a £50 million revolving credit facility ("RCF") with
National Westminster Bank Plc which matures in May 2025. Currently £11.9
million has been drawn down under the facility. The RCF incurs interest at 150
basis points over SONIA on drawn balances and an undrawn commitment fee of 60
basis points.
The fair value of the secured loan facilities at 30 September 2022, estimated
as the present value of future cash flows discounted at the market rate of
interest at that date, was £191.3 million (30 September 2021: £200.0 million,
31 March 2022: £225.6 million). The fair value of the secured loan facilities
is classified as Level 2 under the hierarchy of fair value measurements.
The weighted average interest rate on the Group's borrowings as at 30 September
2022 was 3.7% (30 September 2021: 4.0%, 31 March 2022: 3.7%).
11. SHARE CAPITAL AND OTHER RESERVES
The Company has 547,605,596 ordinary shares in issue of no par value (30
September 2021: 547,605,596, 31 March 2022: 547,605,596).
The balance on the Company's share premium account as at 30 September 2022 was
£164,400,000 (30 September 2021: £164,400,000, 31 March 2022: £164,400,000).
30 30 31 March
September September 2022
2022 2021
Ordinary share capital 547,605,596 547,605,596 547,605,596
Number of shares held in Employee Benefit Trust (2,388,694) (1,474,253) (1,974,253)
Number of ordinary shares 545,216,902 546,131,343 545,631,343
The fair value of share awards made under the Long-term Incentive Plan and the
Deferred Bonus Plan is recognised in other reserves.
Subject to the solvency test contained in the Companies (Guernsey) Law, 2008
being satisfied, ordinary shareholders are entitled to all dividends declared
by the Company and to all of the Company's assets after repayment of its
borrowings and ordinary creditors. The Trustee of the Company's Employee
Benefit Trust has waived its right to receive dividends on the 2,388,694 shares
it holds but continues to hold the right to vote. Ordinary shareholders have
the right to vote at meetings of the Company. All ordinary shares carry equal
voting rights.
12. ADJUSTMENT FOR NON-CASH MOVEMENTS IN THE CASH FLOW STATEMENT
6 months 6 months Year
ended ended ended
30 30 31 March
September September 2022
2022 2021 £000
£000 £000
Profit on disposal of investment properties - (47) (42)
Movement in investment property valuation 21,073 (42,951) (129,801)
Share-based provisions 290 303 668
Depreciation of property, plant and equipment 82 80 165
21,445 (42,615) (129,010)
13. NET ASSET VALUE
The net asset value per share calculation uses the number of shares in issue at
the period end and excludes the actual number of shares held by the Employee
Benefit Trust at the period end; see note 11.
At 30 September 2022, the Company had a net asset value per ordinary share of £
1.17 (30 September 2021: £1.05, 31 March 2022: £1.20).
14. RELATED PARTY TRANSACTIONS
There have been no changes in the related party transactions described in the
last annual report that could have a material effect on the financial position
or performance of the Group in the first six months of the current financial
year.
The Company has no controlling parties.
15. EVENTS AFTER THE BALANCE SHEET DATE
A dividend of £4,771,000 (0.875 pence per share) was approved by the Board on
20 October 2022 and is payable on 30 November 2022.
The Group has completed on the acquisition of an industrial unit, adjacent to
an existing holding, for £0.4 million.
END
END
(END) Dow Jones Newswires
November 09, 2022 02:00 ET (07:00 GMT)
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