13 November
2018
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 2018.
Growth in NAV and EPRA earnings
- Profit after tax of £18.9 million
- Total return of 3.9%
- Increase in EPRA earnings per share of 9.5% to 2.2p
- Increase in EPRA NAV per share of 2.0%, to 92 pence per share
- Dividends paid of £9.4 million or 1.75
pence per share
- Dividend cover of 125%
Corporate Highlights
- Converted to a UK REIT on 1 October
- Successfully changed listing status to commercial company, from
investment company
- Repaid £33.7 million of fixed debt using cash reserves and
lower cost revolving credit facility
- Gearing reduced to 25.5% and weighted average interest rate
reduced from 4.1% to 4.0%
- Net saving of £1.1 million in annual finance costs
- Created greater operational flexibility by restructuring one of
the principal debt facilities
Portfolio outperformance
- Total property return of 4.4%, outperforming the MSCI IPD
Quarterly Benchmark of 3.2%
- Total property return and income return outperformance ahead of
MSCI IPD over 1, 3, 5 and 10 years
- Like-for-like valuation increase of 1.5%, driven by industrial
and office sectors
- Two disposals for £11.8 million, 8.4% ahead of March 2018 valuation
- Occupancy at 94%, ahead of the MSCI IPD Quarterly Digest of
92%
Balance
Sheet |
30
Sept 2018 |
31
March 2018 |
Property
valuation |
£683.0m |
£683.8m |
Net assets |
£497.1m |
£487.4m |
EPRA NAV per
Share |
92p |
90p |
Income
Statement |
Six
months to
30 Sept 2018 |
Six
months to
30 Sept 2017 |
Profit after tax |
£18.9m |
£30.7m |
EPRA earnings |
£11.8m |
£10.8m |
Earnings per
share |
3.5p |
5.7p |
EPRA earnings per
share |
2.2p |
2.0p |
Total return |
3.9% |
7.1% |
Total shareholder
return |
6.4% |
3.9% |
Total dividend per
share |
1.75p |
1.70p |
Dividend cover |
125% |
118% |
Picton Chairman, Nicholas
Thompson, commented:
“Picton aims to be one of the best performing diversified
UK-listed property companies and is therefore delighted to have
delivered yet another solid set of results during the first half of
the year, generating a 4% total return and an increase in EPRA
earnings. With the resounding support of our shareholders, we also
successfully completed the transition to become a UK REIT and other
associated changes, realigning the Board in the process.”
Michael Morris, Chief Executive
of Picton, commented:
“We continue to manage the portfolio and our occupiers, with a
view to enhancing our income and capital position through the
investment cycle. Our current performance can be directly
attributed to the work we’ve put into reshaping the property
portfolio, and separately having considerably strengthened the
Company’s balance sheet over the past few years.”
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 is a UK REIT established in 2005. It owns and actively
manages a £683 million diversified UK commercial property
portfolio, invested across 49 assets and with around 350 occupiers
(as at 30 September 2018). 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.
www.picton.co.uk
CHAIRMAN’S REPORT
I am pleased to report another set of solid interim results from
Picton for the six months to September
2018, with a 4% total return over the period.
This has been an important time for the Company, during which we
received overwhelming shareholder support to become a UK REIT and
also change our listing status to that of a commercial company,
from an investment company.
In spite of the economic and political uncertainty surrounding
the Brexit negotiations, the strength of our business model and the
work we have put into reshaping the property portfolio over the
past few years have contributed to our continued robust
performance.
Results and Dividends
Picton delivered a 2% increase in net assets of £9.7 million
over the period to £497.1 million or 92
pence per share. Our earnings per share was 3.5 pence.
At a property level, so excluding the impact of debt and
corporate level costs, the portfolio, as measured by MSCI IPD,
delivered a total return of 4.4%, 1.2% ahead of the MSCI IPD
Quarterly Benchmark. The Company has now outperformed the Benchmark
on a total return and income return basis over 1, 3, 5 and 10
years.
During the period we paid dividends of 1.75 pence per share, an increase of 3% compared
to a year ago. Our last dividend to be paid as an investment
company will be later this month. From February next year we will
continue to pay dividends on the usual quarterly basis but
primarily in the form of Property Income Distributions (PIDs). We
will review our dividend policy in light of the minimum REIT
distribution requirements and prevailing market conditions ahead of
this time.
Volatility in the listed real estate equity market has
contributed significantly to the fact that the share price does not
currently fully reflect the underlying net asset value of the
Company, but this is not uncommon.
Strategic Priorities
During the period, we remained focused on our strategic
priorities to ensure we continue to deliver long-term value for
shareholders. As we have stated over the past few years, Picton
aims to be one of the consistently best performing diversified UK
focused property companies listed on the London Stock Exchange.
By repaying some debt in July, we have reduced financing costs
and secured additional changes to our loan arrangements which will
translate into future operational flexibility. We have de-risked
the capital structure, undertaken a small number of disposals,
which have been accretive to net asset value, and continue to
improve the effectiveness and efficiency of our business model
through our REIT conversion and associated changes.
We expect to see the savings from becoming a REIT start to flow
through in the next six months. We have also created additional
operational efficiencies by migrating management and control to the
UK and by streamlining our reporting process, removing the
duplication of net asset value statements overlapping with annual
and half yearly results.
Property Strategy
We have a good quality portfolio of assets that continues to
outperform the MSCI IPD Quarterly Benchmark.
We have been overweight in the outperforming industrial,
warehouse and logistics sector, whilst at the same time being
underweight in the far more challenging and underperforming retail
sector. This is more fully detailed below. Despite a small
reduction over the period, occupancy remains high and the Board is
encouraged by initiatives both ongoing and planned for assets
within the portfolio.
We continue to work with our occupiers to provide space that
meets their needs and, through a process of upgrading space, help
mitigate any risks to our cashflow. We hope to be able to
report on several specific asset management initiatives before the
year end.
Corporate Structure and Board Changes
The corporate changes referred to above took place following the
period end and came into effect on 1 October, when the UKLA
confirmed the listing change and we applied to HMRC to enter the UK
REIT regime. In advance of this, we have focused on succession
planning and repositioning the Board recognising our new onshore
arrangements. During the period, Mark
Batten became Chair of the Audit and Risk Committee and,
following a selection process, Maria
Bentley was appointed to the Board and has become Chair of
the Remuneration Committee.
The Company no longer has an investment management subsidiary.
Michael Morris has now become Chief
Executive of the Group and Andrew
Dewhirst has joined the Board as the Group’s Finance
Director. I wish to welcome my new colleagues to the Board and
equally thank both Vic Holmes and
Robert Sinclair for all they have
done, not only during their many years of service, but especially
in the last six months, to make this a successful and effective
transition.
As well as reflecting the new corporate structure, the Board
believes that these changes will bring different perspectives to
its deliberations. We are mindful of the need to continuously
evaluate the composition of the Board whilst also ensuring that the
knowledge and experience of the present incumbents can be properly
transferred to new Directors over a reasonable timeframe. The
changes made will help ensure that the Company is well placed for
the changes in the UK Corporate Governance code which are effective
in 2019 as well as continuing to demonstrate best practice in this
area.
I would also like to thank shareholders for their support in
passing all the resolutions at the most recent AGM, the last to be
held in Guernsey.
Outlook
Clearly the coming months are important in terms of the Brexit
negotiations and our future relationship with the EU and more
widely in terms of global trade. Despite the recent uncertainty,
the UK economy has been reasonably resilient, as have the fortunes
of the property market and we remain cautiously optimistic;
however, we believe it is right to be prudent in the short term
until we have greater clarity. For many of our occupiers it appears
that it is business as usual and, as such, we will continue working
towards meeting our strategic aims and deliver value for our
shareholders.
Nicholas Thompson
Chairman
12 November 2018
BUSINESS OVERVIEW
Economic Backdrop
As the UK government attempts to secure an exit agreement from
the European Union in March, the economy has proven somewhat
resilient in the face of this uncertainty. The Office of National
Statistics estimated GDP growth for the six months to September at
1.0%. By comparison, GDP for the six months to September 2017 was estimated at 0.7%. The IHS
Markit/CIPS UK PMI figures saw Construction, Manufacturing and
Services all showing marginal signs of improvement for the third
quarter of 2018.
The Bank of England increased
the base rate for the second time this year by 0.25% to 0.75% in
August. It is not expected that there will be any further increase
until after the Brexit date in March
2019.
Inflation ticked up higher than expected in August but fell back
in September, with CPI and RPI now standing at 2.4% and 3.3%
respectively. The CPI inflation target from the Monetary
Policy Committee remains at 2.0%.
Between June 2018 and August 2018, the unemployment rate stood at 4.0%,
the lowest level recorded since 1975. In nominal terms, average
weekly earnings increased by 3.1% excluding bonuses and 2.7%
including bonuses compared with a year earlier. Despite
unemployment continuing to trend at record low levels and an
increase in average earnings, consumer confidence remains fragile,
as increasing inflation is squeezing any real wage growth. Retail
sales, which includes online purchases, continued an upward trend
in September, albeit from a low base at the start of the year, and
September saw the slowest month for retail sales growth since
April. The increasingly challenging operating environment for
retailers has seen some large high street names undertake store
closures and Company Voluntary Arrangements (CVAs) during 2018.
Looking ahead, the high level of political uncertainty, higher
than expected inflation, weak sterling and generally subdued levels
of production are reflected in the ONS forecast of 1.3% GDP for the
year ending December 2018 - the
lowest in the ten years since the global financial crisis -
recovering only marginally to 1.6% for 2019.
UK Property Market
The UK commercial property market remains broadly robust,
delivering a positive total return overall for the six months to
September. Notwithstanding this, there were widening variations in
performance at sector level, with the challenging trading
environment and impact of retail failures continuing to negatively
impact the retail sector.
According to Property Data, total investment for the six months
to September 2018 was £28.4 billion,
a decrease of 8.6% compared to £31.1 billion in the six months to
March 2018. Almost half of total
investment in the period was from overseas investors.
The MSCI IPD Monthly Index shows a total return for All Property
for the six months to September 2018
of 3.9%, with an income return of 2.6%. Capital growth for the six
months to September 2018 was lower at
1.3% compared to 3.0% for the six months to March 2018. Rental growth was positive at 0.4%
for the six months to September 2018,
lower than the 1.0% for the six months to March 2018. Initial yields have moved from 5.0%
in March 2018 to 4.9% in September 2018.
Industrial remained the best performing sector for the six
months to September with total returns of 8.8%, 4.9% above the All
Property average. For the same period, office and retail returns
were 3.5% and 0.6%, respectively.
The MSCI IPD Quarterly Digest recorded an occupancy rate of
92.4% in September 2018 (March 2018: 92.2%).
In the industrial sector, returns comprised 2.4% income and 6.3%
capital growth. Rental growth was 2.0%, lower than the 2.2% for the
six months to March 2018. In terms of
capital growth by segment, growth ranged from 3.1% in North &
Scotland to 8.7% in Inner South
East. Similarly, rental growth ranged from 0.9% in South West to
2.8% for Outer South East.
In the office sector, returns comprised 2.3% income and 1.1%
capital growth. Rental growth was 0.7%. In terms of capital growth
by segment, growth ranged from 0.3% in London Mid Town & West
End to 4.0% in South West. Similarly, rental growth ranged from
-0.1% for Scotland to 2.0% for
South West.
In the retail sector, returns comprised 2.9% income and -2.3%
capital growth. Rental growth was -1.0%. In terms of capital growth
by segment, growth ranged from -9.1% for Standard Retail Yorkshire
& Humberside to 0.8% for Standard Retail Central London.
Similarly, rental growth ranged from -4.2% for Standard Retail East
Midlands to 0.6% for Standard Retail Central London.
Valuation
The portfolio valuation increased on a like-for-like basis by
1.5% over the period to September
2018. The industrial portfolio increased by 6.0% and the
office portfolio by 0.3%, while the retail and leisure portfolio
declined by 4.9%, primarily reflecting the negative impact of
retail failures in the wider market.
For the six months to September, the portfolio returned 4.4%,
outperforming the MSCI IPD Quarterly Benchmark which delivered
3.2%. The income return was 2.9%, 0.4% ahead of the Benchmark.
Sector |
Portfolio
Weightings |
Sept 18
Valuation |
Like for
like
change |
Industrial |
43.7% |
£298.8m |
6.0% |
South East |
30.6% |
|
6.9% |
Rest of UK |
13.1% |
|
4.0% |
Offices |
34.5% |
£235.4m |
0.3% |
London City and West End |
4.1% |
|
1.2% |
Inner and Outer London |
8.3% |
|
-2.5% |
South East |
11.0% |
|
0.2% |
Rest of UK |
11.1% |
|
2.4% |
Retail and Leisure |
21.8% |
£148.8m |
-4.9% |
Retail warehouse |
8.6% |
|
-9.2% |
High Street – Rest of UK |
5.6% |
|
-9.2% |
High Street – South East |
5.7% |
|
6.3% |
Leisure |
1.9% |
|
-1.6% |
Total |
100% |
£683.0m |
1.5% |
Our overweight position to the better performing sectors
combined with active management and leasing activity contributed to
the portfolio’s outperformance. Passing rent declined marginally on
a like-for-like basis by 0.4%, with the positive letting activity
being offset by active management initiatives and the New Look and
Poundworld insolvencies. Overall, like-for-like ERV declined by
0.6%, with the positive growth in the industrial portfolio being
offset by the negative story in the retail portfolio where we are
seeing considerable oversupply depressing rental values.
Top Ten Assets
The largest assets in the portfolio as at 30
September 2018, ranked by capital value, represent 50% of
the total portfolio valuation and are detailed below:
|
Sector |
Tenure |
Approximate
Area (sq ft) |
Appraised Value |
Parkbury Industrial
Estate, Radlett, Herts. |
Industrial |
Freehold |
336,700 |
>£45m |
River Way Industrial
Estate, Harlow, Essex |
Industrial |
Freehold |
454,800 |
>£45m |
Stanford House, Long
Acre, London WC2 |
Retail |
Freehold |
19,600 |
£35m-£45m |
Angel Gate, City Road,
London EC1 |
Office |
Freehold |
64,500 |
£35m-£45m |
50 Farringdon Road,
London EC1 |
Office |
Leasehold |
31,000 |
£25m-£35m |
Tower Wharf, Cheese
Lane, Bristol |
Office |
Freehold |
70,800 |
£25m-£35m |
Belkin Unit, Shipton
Way, Rushden, Northants. |
Industrial |
Leasehold |
312,900 |
£15m-£25m |
30 & 50 Pembroke
Court, Chatham, Kent |
Office |
Leasehold |
86,300 |
£15m-£25m |
Colchester Business
Park, Colchester, Essex |
Office |
Leasehold |
150,700 |
£15m-£25m |
Lyon Business Park,
Barking |
Industrial |
Freehold |
99,400 |
£15m-£25m |
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 2018, are summarised
below:
Occupier |
% |
1 Belkin
Limited |
4.0 |
2 Public
Sector |
3.9 |
3 DHL
Supply Chain Limited |
3.5 |
4 B&Q
PLC |
2.9 |
5 The
Random House Group Limited |
2.8 |
6 Snorkel
Europe Limited |
2.6 |
7 Portal
Chatham LLP |
2.1 |
8 Edward
Stanford Limited |
1.8 |
9 TK
Maxx |
1.7 |
10 XMA Limited |
1.6 |
|
26.9 |
Portfolio and Asset Management
Investment Activity
We have further rebalanced the office portfolio with the sales of
Merchants House, Chester and 800 Pavilion Drive, Northampton for a combined £11.8 million, 8.4%
ahead of the March valuation. The Merchants House sale was due to
concern of a potential Compulsory Purchase Order being put in place
and at 800 Pavilion Drive the occupier had not actioned their break
giving us the opportunity to sell the building for a premium to
valuation and de-risk a future potential void in a weak
occupational market.
Occupancy
Over the period, we secured £0.6 million per annum of additional
income though new lettings, including securing an occupier for the
final suite at 50 Farringdon Road in London as detailed below. At the period end we
have space under offer with a combined rent of £0.8 million per
annum.
As anticipated, there was a reduction in occupancy over the
period from 96% to 94%. The decrease, which we expect to be short
term, reflected active management at Stanford House in Covent
Garden where we have started the process of securing vacant
possession of the whole building by 2019. This unlocks options for
either the re-letting of the whole of this flagship Grade II listed
20,000 sq ft building, post a refurbishment, or potentially a sale
to an owner occupier or a developer looking to take advantage of
the office/residential planning consent on the upper floors.
Industrial Portfolio
The industrial portfolio has performed well over the half-year.
Tight supply, limited development and continued demand has resulted
in further rental growth, especially in the South East, which we
are capturing through asset management activity. Capital values
increased by 6.0% on a like-for-like basis, the rent roll increased
by 3.8% to £16.2 million per annum and the ERV grew by 2.3% to
£18.4 million on a like-for-like basis. The portfolio has a
weighted average lease length of 4.5 years to the first lease
event.
The UK wide distribution warehouse assets total 1.3 million sq
ft in six fully income producing units, 74% of which are located in
the Midlands, let to occupiers
including Belkin, DHL and The Random House Group. The multi-let
estates, of which 95% by value are located in the South East, total
1.4 million sq ft and are 99% let. Two units are vacant, one of
which is under offer at an increased rent.
Five multi-let units were let during the period securing £0.22
million per annum, 6% ahead of ERV. The most notable transaction
was where we surrendered a lease of a unit at our largest estate
securing a full dilapidations payment. We then re-let the unit in
less than two months in its existing condition securing a minimum
five-year term at an initial rent of £0.1 million per annum which
is 34% ahead of the previous passing rent and 13% ahead of ERV. The
letting sets new rental evidence on the estate and has had a
positive impact on income and valuation.
We have secured £0.2 million of additional income from two rent
reviews settled over the period, 8% ahead of ERV. Six occupiers
have been retained at renewal securing £0.36 million per annum, 1%
above ERV.
The industrial portfolio currently has £2.2 million of
reversionary income potential and with high occupancy we can look
to capture this through active management and lease events as
demonstrated above. Looking to the end of 2019, we have 29 lease
events with an ERV of £2.9 million per annum, £0.4 million above
the current passing rent.
Office Portfolio
On a like-for-like basis capital values increased by 0.3% and the
rent roll increased by 1.9% to £14.4 million per annum. The
portfolio has a weighted average lease length of 3.7 years to the
first lease event. The office portfolio ERV was flat over the
period on a like-for-like basis with the regional assets seeing
growth, which was offset by London. We have over the past two years
rebalanced the office portfolio by selling out of central
London and investing into the
regions. 64% of the office portfolio is now outside Greater London, where we are seeing stronger
occupational demand.
The office portfolio is 91% let and the most notable transaction
was at 50 Farringdon Road. The final suite was let to an existing
occupier for £0.21 million per annum, 5% ahead of ERV and the
building is now fully let. We agreed with the same occupier to move
the break option in their existing lease, securing five years term
certain on both suites. The transaction is a good example of our
occupier focused approach, which enabled us to work with our
existing occupier and retain them in the building.
The short-term opportunities are the letting of 180 West George
Street, Glasgow, where we have one
suite under offer, and the refurbishment next year of Longcross
Court in Cardiff where we are creating best in class space in
central Cardiff. The combined ERV of voids at these two properties
is £1 million. These two properties account for 58% of the total
office void.
The regional office assets have performed well due to continued
demand for space and the potential for rents to increase from
relatively low levels which we have seen in, for example,
Colchester where there has been
15% rental growth in the last 12 months. In London, the occupational market is active but
remains more subdued and we have reduced our ERVs at Angel Gate in
Islington to take account of this. The portfolio has £3.7 million
of reversionary income potential and up to the end of 2019 the
office portfolio has 38 lease events with an ERV of £3.4 million
per annum, £0.3 million above the current passing rent.
Retail and Leisure Portfolio
It has undoubtedly been a challenging six months in the retail
property market and our portfolio has not been immune from the
impact of retailer failures. Capital values reduced by 4.9%
principally driven by the retail warehouse sector as detailed
below.
We have seen a decline of 9.5% in respect of the retail rent
roll. Of this 47% related to the active management initiatives of
the upper floors at Stanford House, our flagship store in Covent
Garden, where we are looking to secure vacant possession in early
2019, and 37% related to retail failures with the remainder being
lease events. The portfolio has been affected by the New Look CVA,
where we are getting a retail unit back in Peterborough, which is under offer, and the
Homebase CVA which will mean we will get a unit back in Swansea, in
which we already have strong interest. On the same park we will get
a unit back following the Poundworld administration.
The passing rent of the retail portfolio is £9.7 million per
annum. It has a weighted average lease length of 7.6 years, is 89%
let and has £0.5 million of reversionary income potential. At the
end of the period we had new lettings under offer with a combined
annual rent of
£0.4 million per annum.
The most significant void relates to a retail warehouse unit in
Bury, Greater Manchester, where we are working
through our active management strategy and have occupier
interest.
We consider our exposure to the sector to be robust with future
upside on the retail warehouse parks and at Stanford House in
Covent Garden in particular. Up to the end of 2019 the retail and
leisure portfolio has only 15 lease events with an ERV of £2.6
million per annum, £0.1 million above the current passing rent.
Looking Ahead
The portfolio has £6.4 million of reversionary income potential,
primarily in the industrial and office sectors. £2.9 million of the
reversion is from lettings, with the remainder from lease renewals,
rent reviews and contracted uplifts. The supply and demand
imbalance, combined with a lack of development, will continue to
drive rental growth in the industrial sector, while demand remains
strong in the regional office market with incentives moving out in
London. The retail sector is going
though a structural change, however this should provide
opportunities such as we are seeing in our portfolio.
Financial Overview
Income Statement
For the six months to 30 September, our total profit was £18.9
million, representing earnings per share of 3.5 pence. Within this, our income profit,
comprising the revenue from the property portfolio, less direct
property costs, management and other operating costs, and finance
costs, was £11.8 million. For the previous half year, to
30 September 2017, the comparative
figure was £10.8 million, so we have achieved a 9% increase in
income profit.
The capital profit, at £7.1 million for the half year, is lower
than in 2017 and this reflects the more muted conditions in the
commercial property market generally. However, with a portfolio
capital return of 1.5% for the period, we have continued to
outperform the MSCI IPD Quarterly Benchmark.
The capital result has also been impacted by the early loan
repayment of a tranche of the Canada Life facility. We repaid £33.7
million in July, which was originally scheduled for repayment in
July 2022. As a result, we incurred a
one-off prepayment fee of £3.2 million. Going forward there will be
a net saving of £1.1 million annually due to lower interest costs.
We have also agreed changes to the Canada Life facility which
provide us with greater flexibility going forward, including the
ability to utilise disposal proceeds throughout the Group, rather
than being subject to lender security.
The net property income for the period, at £20.2 million, is
some 8% higher than the previous period. This partly arises from
the impact of the acquisition of Tower Wharf in Bristol and subsequent lettings there, but
also from lower void costs as a high occupancy level has been
maintained, albeit this dipped at the end of the period.
Operating costs for the period were £3.1 million, comprising
£2.0 million of management expenses and £1.1 million of other
corporate costs, which includes exceptional costs of £0.3 million
associated with REIT conversion and the listing change.
During the period we paid out two interim dividends, each of
0.875 pence per share, equal to £9.4
million in total. Dividend cover for the six months was 125%.
Balance Sheet
Overall the net assets of the Group rose by £9.7 million over the
period, to £497.1 million, an increase of 2.0%.
The appraised value of the property portfolio stood at £683
million at 30 September. We made two disposals during the period,
for net proceeds of £11.8 million, ahead of their preceding
valuations. These proceeds, along with existing cash reserves, were
utilised to repay borrowings, as mentioned above.
Borrowings have reduced to £193.4 million, following the early
Canada Life repayment, although this was partly funded by a
drawdown under one of the revolving credit facilities, of £14.5
million. The weighted average debt maturity is now 10.3 years and
the weighted average interest rate is 4.0%. Borrowings now
represents a loan-to-value ratio of 25.5%, and we have the option
to reduce this further by repaying the drawn balances of our
revolving credit facilities, once selected asset sales have been
made.
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 ‘Risk Management’ within
the Strategic Report in the Company’s Annual Report for the year
ended 31 March 2018. The Company’s
principal risks and uncertainties have not changed materially since
the date of that report.
STATEMENT OF GOING CONCERN
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Therefore, they continue 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 Chairman’s Report and Business
Overview (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 Chairman’s Report 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
Mark
Batten
Director
12 November 2018
INDEPENDENT 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 financial statements in
the Half Year Report for the six months ended 30 September 2018 of the Company and its
subsidiaries (together the “Group”) which comprises the Condensed
Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Changes in Equity, Condensed Consolidated
Balance Sheet, Condensed Consolidated Statement of 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 financial statements
in the Half Year Report for the six months ended 30 September 2018 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 and Ireland) 2410 Review of Interim Financial
Information Performed by the Independent Auditor of the Entity
issued by the Auditing Practices Board 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 Year Report and consider whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of 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.
DIRECTORS’ RESPONSIBILITIES
The Half Year Report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Half Year Report in accordance with the DTR of the UK
FCA.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards. The directors are responsible for
preparing the condensed set of financial statements included in the
Half Year Report in accordance with IAS 34.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Half Year Report
based on our review.
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.
Deborah Smith
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants, Guernsey
12 November 2018
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE HALF YEAR ENDED 30 SEPTEMBER
2018
|
Note |
Income
£000 |
Capital
£000 |
6 months
ended
30 Sept
2018
unaudited
Total
£000 |
6 months ended
30 Sept
2017
unaudited
Total
£000 |
Year ended
31 March
2018
audited
Total
£000 |
Income |
|
|
|
|
|
|
Revenue from
properties |
3 |
24,537 |
– |
24,537 |
24,323 |
48,782 |
Property expenses |
4 |
(4,297) |
– |
(4,297) |
(5,605) |
(10,335) |
Net property
income |
|
20,240 |
– |
20,240 |
18,718 |
38,447 |
Expenses |
|
|
|
|
|
|
Management
expenses |
|
(2,006) |
– |
(2,006) |
(1,810) |
(3,652) |
Other operating
expenses |
|
(1,062) |
– |
(1,062) |
(924) |
(1,914) |
Total operating
expenses |
|
(3,068) |
– |
(3,068) |
(2,734) |
(5,566) |
|
|
|
|
|
|
|
Operating profit
before movement on investments |
|
17,172 |
– |
17,172 |
15,984 |
32,881 |
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
Profit on disposal of
investment properties |
9 |
– |
379 |
379 |
2,488 |
2,623 |
Investment property
valuation movements |
9 |
– |
9,961 |
9,961 |
17,362 |
38,920 |
Total profit on
investments |
|
– |
10,340 |
10,340 |
19,850 |
41,543 |
|
|
|
|
|
|
|
Operating
profit |
|
17,172 |
10,340 |
27,512 |
35,834 |
74,424 |
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
Interest
receivable |
|
16 |
– |
16 |
10 |
35 |
Interest payable |
|
(4,936) |
– |
(4,936) |
(4,904) |
(9,782) |
Debt prepayment
fees |
10 |
– |
(3,245) |
(3,245) |
– |
– |
Total finance
costs |
|
(4,920) |
(3,245) |
(8,165) |
(4,894) |
(9,747) |
|
|
|
|
|
|
|
Profit before
tax |
|
12,252 |
7,095 |
19,347 |
30,940 |
64,677 |
Tax |
|
(445) |
– |
(445) |
(286) |
(509) |
Profit and total
comprehensive income for the period |
|
11,807 |
7,095 |
18,902 |
30,654 |
64,168 |
|
|
|
|
|
|
|
Earnings per
share |
|
|
|
|
|
|
Basic and diluted |
7 |
2.2p |
1.3p |
3.5p |
5.7p |
11.9p |
The total column of this statement represents the Group’s
Condensed Consolidated Statement of Comprehensive Income. The
supplementary income return and capital return columns are both
prepared under guidance published by the Association of Investment
Companies. All items in the above statement derive from continuing
operations.
All income 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 YEAR ENDED 30 SEPTEMBER
2018
|
Note |
Share
Capital
£000 |
Other
Reserves
£000 |
Retained
Earnings
£000 |
Total
£000 |
Balance as at 31
March 2017 |
|
157,449 |
– |
284,476 |
441,925 |
Profit for the
period |
|
– |
– |
30,654 |
30,654 |
Share based awards |
|
– |
358 |
– |
358 |
Dividends paid |
6 |
– |
– |
(9,181) |
(9,181) |
|
|
|
|
|
|
Balance as at 30
September 2017 |
|
157,449 |
358 |
305,949 |
463,756 |
Profit for the
period |
|
– |
– |
33,514 |
33,514 |
Dividends paid |
6 |
– |
– |
(9,306) |
(9,306) |
Share based awards |
|
– |
284 |
– |
284 |
Purchase of shares held
in trust |
|
– |
(893) |
– |
(893) |
|
|
|
|
|
|
Balance as at 31
March 2018 |
|
157,449 |
(251) |
330,157 |
487,355 |
Profit for the
period |
|
– |
– |
18,902 |
18,902 |
Dividends paid |
6 |
– |
– |
(9,432) |
(9,432) |
Share based awards |
|
– |
319 |
– |
319 |
|
|
|
|
|
|
Balance as at 30
September 2018 |
|
157,449 |
68 |
339,627 |
497,144 |
Notes 1 to 15 form part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2018
|
Note |
30 September
2018
unaudited
£000 |
30 September
2017
unaudited
£000 |
31 March
2018
audited
£000 |
Non-current
assets |
|
|
|
|
Investment
properties |
9 |
673,870 |
652,104 |
670,674 |
Tangible assets |
|
25 |
12 |
5 |
Total non-current
assets |
|
673,895 |
652,116 |
670,679 |
|
|
|
|
|
Current
assets |
|
|
|
|
Investment properties
held for sale |
|
– |
– |
3,850 |
Accounts
receivable |
|
16,420 |
15,743 |
15,273 |
Cash and cash
equivalents |
|
20,130 |
30,071 |
31,510 |
Total current
assets |
|
36,550 |
45,814 |
50,633 |
|
|
|
|
|
Total
assets |
|
710,445 |
697,930 |
721,312 |
|
|
|
|
|
Current
liabilities |
|
|
|
|
Accounts payable and
accruals |
|
(20,113) |
(19,421) |
(21,471) |
Loans and
borrowings |
10 |
(808) |
(615) |
(712) |
Obligations under
finance leases |
|
(109) |
(109) |
(109) |
Total current
liabilities |
|
(21,030) |
(20,145) |
(22,292) |
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
Loans and
borrowings |
10 |
(190,559) |
(212,315) |
(209,952) |
Obligations under
finance leases |
|
(1,712) |
(1,714) |
(1,713) |
Total non-current
liabilities |
|
(192,271) |
(214,029) |
(211,665) |
|
|
|
|
|
Total
liabilities |
|
(213,301) |
(234,174) |
(233,957) |
|
|
|
|
|
Net assets |
|
497,144 |
463,756 |
487,355 |
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
11 |
157,449 |
157,449 |
157,449 |
Retained earnings |
|
339,627 |
305,949 |
330,157 |
Other reserves |
|
68 |
358 |
(251) |
|
|
|
|
|
Total
equity |
|
497,144 |
463,756 |
487,355 |
|
|
|
|
|
Net asset value per
share |
13 |
92p |
86p |
90p |
These condensed consolidated financial statements were approved
by the Board of Directors on 12 November
2018 and signed on its behalf by:
Mark Batten
Director
Notes 1 to 15 form part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 30 SEPTEMBER
2018
|
Note |
6 months
ended
30 September 2018
unaudited
£000 |
6 months ended
30 September
2017
unaudited
£000 |
Year ended
31 March
2018
audited
£000 |
Operating
activities |
|
|
|
|
Operating profit |
|
27,512 |
35,834 |
74,424 |
Adjustments for
non-cash items |
12 |
(10,018) |
(19,480) |
(40,889) |
Interest received |
|
16 |
10 |
35 |
Interest paid |
|
(4,603) |
(4,532) |
(9,160) |
Tax paid |
|
(80) |
(202) |
(328) |
(Increase)/ decrease in
accounts receivables |
|
(1,715) |
(202) |
267 |
(Decrease)/ increase in
payable and accruals |
|
(1,566) |
(709) |
1,286 |
Cash inflows from
operating activities |
|
9,546 |
10,719 |
25,635 |
|
|
|
|
|
Investing
activities |
|
|
|
|
Acquisition of
investment properties |
9 |
– |
(24,543) |
(24,543) |
Capital expenditure on
investment properties |
9 |
(275) |
(2,266) |
(3,553) |
Disposal of investment
properties |
|
11,837 |
9,725 |
10,285 |
Purchase of tangible
assets |
|
(23) |
(7) |
– |
Cash
inflows/(outflows) from investing activities |
|
11,539 |
(17,091) |
(17,811) |
|
|
|
|
|
Financing
activities |
|
|
|
|
Borrowings repaid |
|
(34,288) |
(546) |
(3,104) |
Borrowings drawn |
|
14,500 |
12,500 |
12,500 |
Debt prepayment
fees |
|
(3,245) |
– |
– |
Financing costs |
|
– |
(213) |
(213) |
Purchase of shares held
in trust |
|
– |
– |
(893) |
Dividends paid |
6 |
(9,432) |
(9,181) |
(18,487) |
Cash
(outflows)/inflows from financing activities |
|
(32,465) |
2,560 |
(10,197) |
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents |
|
(11,380) |
(3,812) |
(2,373) |
|
|
|
|
|
Cash and cash
equivalents at beginning of period/year |
|
31,510 |
33,883 |
33,883 |
|
|
|
|
|
Cash and cash
equivalents at end of period/year |
|
20,130 |
30,071 |
31,510 |
Notes 1 to 15 form part of these condensed consolidated
financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 30 SEPTEMBER
2018
1. GENERAL INFORMATION
Picton Property Income Limited (the “Company” and together with
its subsidiaries the “Group”) was registered on 15 September 2005 as a closed ended Guernsey
investment company.
The financial statements are prepared for the period from 1
April to 30 September 2018, with
unaudited comparatives for the period from 1 April to 30 September 2017. Comparatives are also provided
from the audited financial statements for the year ended
31 March 2018. Certain comparative
amounts in the condensed consolidated balance sheet have been
reclassified to conform with the current year’s presentation. The
reclassification does not affect the previously reported profit and
total comprehensive income or net asset value.
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
2018.
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 2018.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the IASB. The Group’s annual financial
statements for the year ended 31 March
2018 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
2018.
3. REVENUE FROM PROPERTIES
|
6 months
ended
30 September
2018
£000 |
6 months ended
30 September
2017
£000 |
Year ended
31 March
2018
£000 |
Rents receivable
(adjusted for lease incentives) |
20,825 |
20,366 |
41,412 |
Surrender premiums |
342 |
133 |
200 |
Dilapidation
receipts |
230 |
689 |
1,111 |
Other income |
79 |
134 |
132 |
Service charge
income |
3,061 |
3,001 |
5,927 |
|
24,537 |
24,323 |
48,782 |
Rents receivable includes lease incentives recognised of £0.5
million (30 September 2017: £0.1
million, 31 March 2018: £0.2
million).
4. PROPERTY EXPENSES
|
6 months
ended
30 September
2018
£000 |
6 months ended
30 September
2017
£000 |
Year ended
31 March
2018
£000 |
Property operating
costs |
848 |
1,704 |
2,578 |
Property void
costs |
388 |
900 |
1,830 |
Recoverable service
charge costs |
3,061 |
3,001 |
5,927 |
|
4,297 |
5,605 |
10,335 |
5. OPERATING SEGMENTS
The Board is charged with setting the Company’s investment
policy and strategy in accordance with the Company’s investment
restrictions and overall objectives. 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, retail warehouse and leisure
sectors.
6. DIVIDENDS
Declared and paid: |
6 months
ended
30 September
2018
£000 |
6 months ended
30 September
2017
£000 |
Year ended
31 March
2018
£000 |
Interim dividend for
the period ended 31 March 2017: 0.85 pence |
- |
4,590 |
4,590 |
Interim dividend for
the period ended 30 June 2017: 0.85 pence |
- |
4,591 |
4,591 |
Interim dividend for
the period ended 30 September 2017: 0.85 pence |
- |
- |
4,590 |
Interim dividend for
the period ended 31 December 2017: 0.875 pence |
- |
- |
4,716 |
Interim dividend for
the period ended 31 March 2018: 0.875 pence |
4,716 |
- |
- |
Interim dividend for
the period ended 30 June 2018: 0.875 pence |
4,716 |
- |
- |
|
9,432 |
9,181 |
18,487 |
The interim dividend of 0.875
pence per ordinary share in respect of the period ended
30 September 2018 has not been
recognised as a liability as it was declared after the period end.
A dividend of £4,716,000 will be paid on 30
November 2018.
7. EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing
the net 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 profit and share data used in the
basic and diluted profit per share calculation:
|
6 months
ended
30 September 2018 |
6 months ended
30 September
2017 |
Year ended
31 March
2018 |
Net profit attributable
to ordinary shareholders of the Company from continuing operations
(£000) |
18,902 |
30,654 |
64,168 |
Weighted average number
of ordinary shares for basic profit/(loss) per share |
538,983,660 |
540,053,660 |
539,734,126 |
Weighted average number
of ordinary shares for diluted profit/(loss) per share |
541,093,417 |
541,084,131 |
539,738,613 |
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
2018.
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
2018.
9. INVESTMENT PROPERTIES
|
6 months
ended
30 September 2018
£000 |
6 months
ended
30 September
2017
£000 |
Year ended
31 March
2018
£000 |
Fair value at start of
period/year |
*674,524 |
615,170 |
615,170 |
Acquisitions |
– |
24,543 |
24,543 |
Capital expenditure on
investment properties |
275 |
2,266 |
3,553 |
Disposals |
(11,269) |
(9,725) |
(10,285) |
Realised gains on
disposal |
406 |
2,520 |
2,655 |
Realised losses on
disposal |
(27) |
(32) |
(32) |
Unrealised gains on
investment properties |
22,558 |
25,416 |
49,664 |
Unrealised losses on
investment properties |
(12,597) |
(8,054) |
(10,744) |
Transfer to assets
classified as held for sale |
– |
– |
(3,850) |
Fair value at the
end of the period/year |
673,870 |
652,104 |
670,674 |
Historic cost at
the end of the period/year |
646,759 |
659,722 |
660,263 |
*Includes assets classified as held for sale at year end.
The fair value of investment properties reconciles to the
appraised value as follows:
|
30 September
2018
£000 |
30 September
2017
£000 |
31 March
2018
£000 |
Appraised value |
682,950 |
661,415 |
683,800 |
Valuation of assets
held under finance leases |
1,623 |
1,660 |
1,657 |
Lease incentives held
as debtors |
(10,703) |
(10,971) |
(10,933) |
Assets classified as
held for sale |
– |
– |
(3,850) |
Fair value at the
end of the period/year |
673,870 |
652,104 |
670,674 |
As at 30 September 2018, 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 2018 on
the basis of fair value in accordance with the RICS Valuation –
Global Standards 2017 which incorporates the International
valuation standards and the RICS Valuation – Professional Standards
UK January 2014 (revised April 2015). There were no significant changes to
the inputs into the valuation process (ERV, net initial yield,
reversionary yield and true equivalent yield), or assumptions and
techniques used during the period, further details on which were
included in note 14 of the consolidated financial statements of the
Group for the year ended 31 March
2018.
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 September
2018
£000 |
30 September
2017
£000 |
31 March
2018
£000 |
Current |
|
|
|
|
Aviva facility |
– |
1,178 |
1,128 |
1,153 |
Capitalised finance
costs |
– |
(370) |
(513) |
(441) |
|
|
808 |
615 |
712 |
Non-current |
|
|
|
|
Santander revolving
credit facility |
18 June
2021 |
10,500 |
12,500 |
10,500 |
Santander revolving
credit facility |
20 June
2021 |
14,500 |
– |
– |
Canada Life
facility |
– |
– |
33,718 |
33,718 |
Canada Life
facility |
24 July
2027 |
80,000 |
80,000 |
80,000 |
Aviva facility |
24 July
2032 |
88,074 |
89,252 |
88,669 |
Capitalised finance
costs |
– |
(2,515) |
(3,155) |
(2,935) |
|
|
190,559 |
212,315 |
209,952 |
|
|
191,367 |
212,930 |
210,664 |
In 2012, the Group entered into loan facilities with Canada Life
Limited and Aviva Commercial Finance Limited for £113.7 million and
£95.3 million respectively. The facility with Canada Life has a
term of 15 years, with £33.7 million originally repayable on the
tenth anniversary of drawdown. The Aviva facility has a term of 20
years with approximately one third repayable over the life of the
loan in accordance with a scheduled amortisation profile.
On 20 July 2018 the Group repaid
£33.7 million of debt under the Canada Life facility incurring an
early repayment charge of £3.2 million.
The fair value of the secured loan facilities at 30 September 2018, estimated as the present value
of future cash flows discounted at the market rate of interest at
that date, was £185.9 million (30 September
2017: £223.2 million, 31 March
2018: £235.1 million). The fair value of the secured loan
facilities is classified as Level 2 under the hierarchy of fair
value measurements.
The Group has two revolving credit facilities (“RCF”) with
Santander Corporate & Commercial Banking which expire in
June 2021. In total the Group has
£51.0 million available under both facilities, of which £25.0
million has been drawn.
The weighted average interest rate on the Group’s borrowings as
at 30 September 2018 was 4.0%
(30 September 2017: 4.1%,
31 March 2018: 4.1%).
11. SHARE CAPITAL AND OTHER
RESERVES
The Company has 540,053,660 ordinary shares in issue of no par
value (30 September 2017:
540,053,660, 31 March 2018:
540,053,660).
The balance on the Company’s share premium account as at
30 September 2018 was £157,449,000
(30 September 2017: £157,449,000,
31 March 2018: £157,449,000).
|
30 September
2018 |
30 September
2017 |
31 March
2018 |
Ordinary share
capital |
540,053,660 |
540,053,660 |
540,053,660 |
Number of shares held
in Employee Benefit Trust |
(1,070,000) |
- |
(1,070,000) |
Number of ordinary
shares |
538,983,660 |
540,053,660 |
538,983,660 |
The fair value of awards made under the Long Term Incentive 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 1,070,000 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
ended
30 September 2018
£000 |
6 months
ended
30 September
2017
£000 |
Year ended
31 March
2018
£000 |
Profit on disposal of
investment properties |
(379) |
(2,488) |
(2,623) |
Investment property
valuation movements |
(9,961) |
(17,362) |
(38,920) |
Share based
provisions |
319 |
358 |
642 |
Depreciation of
tangible assets |
3 |
12 |
12 |
|
(10,018) |
(19,480) |
(40,889) |
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 2018, the Company
had a net asset value per ordinary share of £0.92 (30 September 2017: £0.86, 31 March 2018: £0.90).
14. RELATED PARTY TRANSACTIONS
The total fees earned during the period by the five Directors of
the Company were £138,000 (30 September
2017: £103,000, 31 March 2018:
£232,000). As at 30 September 2018
the Group owed £nil to the Directors (30
September 2017 and 31 March
2018: £nil).
There have been no changes in the related parties 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
On 1 October 2018 the Company
converted to a UK REIT and changed its listing status to that of a
commercial company from an investment company.
A dividend of £4,716,000 (0.875
pence per share) was approved by the Board on 22 October 2018 and is payable on 30 November 2018.
SHAREHOLDER INFORMATION
DIRECTORS
Nicholas Thompson (Chairman)
Andrew Dewhirst (appointed
1 October 2018)
Maria Bentley (appointed
1 October 2018)
Mark Batten
Michael Morris
Robert Sinclair (resigned
30 September 2018)
Roger Lewis
Vic Holmes (resigned 30 September 2018)
REGISTERED OFFICE
UK OFFICE
PO Box 255
1st Floor
Trafalgar Court
28 Austin Friars
Les Banques
London
St Peter
Port
EC2N 2QQ
Guernsey
GY1 3QL
T: 020 7628 4800
Registered Number: 43673
E: enquiries@picton.co.uk
ADMINSTRATOR AND SECRETARY
Northern Trust International
Fund Administration Services (Guernsey)
Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL
T: 01481 745 001
E: team_picton@ntrs.com
REGISTRAR
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
T: 0370 707 4040
GY1 1DB
E: info@computershare.co.je
CORPORATE BROKERS
JP Morgan Securities Limited
25 Bank Street
London
E14 5JP
Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
INDEPENDENT AUDITOR
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
MEDIA
Tavistock Communications
1 Cornhill
London
EC3V 3ND
T: 020 7920 3150
E: jverstringhe@tavistock.co.uk
SOLICITORS
As to English law
Norton Rose Fulbright LLP
3 More London Riverside
London
SE1 2AQ
As to English property law
DLA Piper UK LLP
Walker House
Exchange Flags
Liverpool
L2 3YL
As to Guernsey law
Carey Olsen
PO Box 98
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
PROPERTY VALUERS
CBRE Limited
Henrietta House
Henrietta Place
London
W1G 0NB
TAX ADVISER
Deloitte LLP
Hill House
1 Little New Street
London
EC4A 3TR
SHAREHOLDER ENQUIRIES
All enquiries relating to holdings in Picton Property Income
Limited, including notification of change of address, queries
regarding dividend/interest payments or the loss of a certificate,
should be addressed to the Company’s registrar.
WEBSITE
The Company has a corporate website which contains more detailed
information about the Group www.picton.co.uk
GLOSSARY
AIC |
Association of
Investment Companies. |
Contracted
rent |
The contracted gross
rent receivable which becomes payable after all the occupier
incentives in the letting have expired. |
DTR |
Disclosure and
Transparency Rules, issued by the United Kingdom Listing
Authority. |
Dividend
cover |
Income profit after tax
divided by dividends paid. |
Earnings per share
(EPS) |
Profit for the period
attributable to equity shareholders divided by the average number
of shares in issue during the period. |
EPRA |
European Public Real
Estate Association, the industry body representing listed companies
in the real estate sector. |
Estimated rental
value (ERV) |
The external valuers’
opinion as to the open market rent which, on the date of the
valuation, could reasonably
be expected to be obtained on a new letting or rent review of a
property. |
Fair value |
The estimated amount
for which a property should exchange on the valuation date between
a willing buyer
and a willing seller in an arm’s length transaction after the
proper marketing and where parties had each acted knowledgeably,
prudently and without compulsion. |
Fair value
movement |
An accounting
adjustment to change the book value of an asset or liability to its
fair value. |
FRI lease |
A lease which imposes
full repairing and insuring obligations on the tenant, relieving
the landlord from all liability for the cost of insurance and
repairs. |
Gearing |
Total borrowings, less
cash, as a proportion of gross property asset value. |
Group |
Picton Property Income
Limited and its subsidiaries. |
IASB |
International
Accounting Standards Board. |
IFRS |
International Financial
Reporting Standards. |
Initial
yield |
Annual cash rents
receivable (net of head rents and the cost of vacancy), as a
percentage of gross property value, as provided by the Group’s
external valuers. Rents receivable following the expiry of
rent-free periods are not included. |
Lease
incentives |
Incentives offered to
occupiers to enter into a lease. Typically this will be an initial
rent-free period, or a cash contribution to fit-out. Under
accounting rules the value of the lease incentives is amortised
through the Income Statement on a straight-line basis until the
lease expiry. |
MSCI IPD |
An organisation
supplying independent market indices and portfolio benchmarks to
the property industry. |
NAV |
Net Asset Value is the
equity attributable to shareholders calculated under IFRS. |
Over-rented |
Space where the passing
rent is above the ERV. |
Passing
rent |
Cash rents passing at
the Balance Sheet date. |
Property income
return |
The ungeared income
return of the portfolio as calculated by MSCI IPD. |
Rack-rented |
Space where the passing
rent is the same as the ERV. |
RCF |
Revolving credit
facility |
REIT |
Real Estate Investment
Trust |
Reversionary
income |
Where the passing rent
is different to the estimated rental value. The increase or
decrease of rent arises on rent reviews and letting of vacant space
or re-letting of expiries. |
Reversionary
yield |
The estimated rental
value as a percentage of the gross property value. |
Weighted average
debt maturity |
Each tranche of Group
debt is multiplied by the remaining period to its maturity and the
result is divided by total Group debt in issue at the period
end. |
Weighted average
interest rate |
The Group loan interest
per annum at the period end, divided by total Group debt in issue
at the period end. |
Weighted average
lease term |
The average lease term
remaining to first break, or expiry, across the portfolio weighted
by contracted rental income. |
Picton Property Income Limited
1st Floor
28 Austin Friars
London
EC2N 2QQ
T: 020 7628 4800
www.picton.co.uk
END