Portfolio outperformance continuing

Picton Property Income 20 November 2018 Update
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Picton Property Income

Portfolio outperformance continuing

Interim results

Real estate

 

20 November 2018

Price

83.10p

Market cap

£448m

Net debt (£m) as at 30 September 2018

174.1

Net LTV as at 30 Sept. 2018

25.5%

Shares in issue

539.0m

Free float

100%

Code

PCTN

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.0)

(8.8)

(2.5)

Rel (local)

(1.2)

(1.2)

3.0

52-week high/low

93.4p

81.8p

Business description

Picton Property Income is an internally managed UK REIT that invests in a diversified portfolio of commercial property across the UK. The investment objective is to provide investors with an attractive level of income and the potential for capital growth.

Next events

December 2018 NAV

January 2019

FY19 results

May 2019

Analysts

Martyn King

+44 (0)20 3077 5745

Andrew Mitchell

+44 (0)20 3681 2500

Picton Property Income is a research client of Edison Investment Research Limited

Picton had a good half year, maintaining a high level of occupancy and income, generating year-on-year growth in EPRA earnings and dividends, and reducing gearing further. The portfolio is strongly biased towards the better-performing industrial and regional office property markets and offers significant reversionary potential. Entry to the UK REIT regime will avoid negative effects from recent UK tax law changes, while the change in its listing status to that of a commercial company, from an investment company, improves administrative flexibility.

Year end

Net rental income (£m)

EPRA EPS* (p)

DPS (p)

EPRA NAV/ share (p)

P/EPRA NAV (x)

Yield (%)

03/17

42.4

3.81

3.35

82

1.02

4.0

03/18

38.4

4.19

3.45

90

0.92

4.2

03/19e

38.5

4.26

3.57

93

0.90

4.3

03/20e

37.0

4.22

3.68

95

0.87

4.4

Note: *EPRA EPS excludes revaluation gains/losses and other exceptional items.

H119: 3.9% total return

H119 EPRA EPS increased c 9% compared with H118, to 2.2p, and covered aggregate dividends per share of 1.75p (+3% y-o-y) by a healthy 1.25x. The portfolio performed well, outperforming the MSCI IPD Quarterly Benchmark on both an income and ungeared total return basis, which it has now done over one, three, five and 10 years. Occupancy was maintained at a good level of 94% (MSCI IPD Quarterly Digest 92%), but lower than the 96% in March, primarily due to planned asset management activity. Like-for-like valuation gains of 1.5% during the period contributed to the increase in EPRA NAV per share to 92p (March: 90p), taking NAV total return (including DPS paid) to 3.9%. The moderate gearing reduced further, to an LTV of 25.5%. Our DPS forecasts remain unchanged, but we have trimmed our near-term income expectation due to the asset management activities and the impact of retailer stress, albeit affecting a small part of Picton’s portfolio.

Reversionary potential supports growth prospects

Portfolio performance continues to benefit from an overweight in industrial and regional office property and a significant underweighting of retail and leisure (with no shopping centre exposure). The economy and property market has remained resilient despite Brexit uncertainties and there is £6.4m of reversionary potential within the existing portfolio, primarily within the industrial and office sectors that account for nearly 80% of the portfolio by value. Supply and demand imbalance, limited new development and occupational demand should continue to drive further rental growth in the industrial and office sectors.

Income focus, with an eye to sustainable growth

Picton offers growing dividends, providing a FY19e yield of 4.3%, and trades at an 10% discount to FY19e EPRA NAV. Although it has a strong income focus its yield is lower than the peer average (c 5.5%), reflecting strong cover (1.25x) that provides scope to reinvest into the portfolio in ways designed to support occupancy and income growth, with the specific goal of enhancing long-term total return.

Investment summary

Picton had a good half year, maintaining a high level of occupancy and income, generating year-on-year growth in EPRA earnings and dividends and reducing gearing further.

The period also saw shareholders overwhelmingly support the company in joining the UK REIT regime, effective from 1 October 2018, and change its listing status to that of a commercial company, from an investment company. The former will avoid negative effects from recent UK tax law changes, while the latter improves administrative flexibility.

Exhibit 1: Summary of interim results

H119

H118

H119 v H118

FY18

Revenue from properties

24,537

24,323

0.9%

48,782

Property expenses

(4,297)

(5,605)

-23.3%

(10,335)

Net property income

20,240

18,718

8.1%

38,447

Total operating expenses

(3,068)

(2,734)

12.2%

(5,566)

Operating profit

17,172

15,984

7.4%

32,881

Net finance expense

(4,920)

(4,894)

0.5%

(9,747)

Tax

(445)

(286)

(509)

EPRA earnings

11,807

10,804

9.3%

22,625

Debt prepayment fees

(3,245)

0

0

Profit on disposal of investment property

379

2,488

2,623

Investment property valuation movements

9,961

17,362

38,920

IFRS net profit

18,902

30,654

-38.3%

64,168

EPRA EPS (p)

2.2

2.0

9.5%

4.2

IFRS EPS (p)

3.5

5.7

-38.2%

11.9

DPS declared (p)

1.75

1.70

2.9%

3.45

Dividend cover (x)

1.25

1.18

1.22

NAV per share, IFRS & EPRA (p)

92

86

7.4%

90

NAV total return (%)

3.9%

7.0%

14.9%

Investment properties at fair value (incl held for sale)

673,870

652,104

674,524

Net LTV (%)

25.5%

28.2%

26.7%

Source: Picton Property Income. *

Revenue from properties increased 0.9% compared with H118. Within this, rental income increased by c £0.5m to c £20.8m, reflecting letting activity and a full period impact from last August’s Bristol office acquisition, partly offset by the impact of non-core disposals. Other income was c £0.3m lower, mainly as a result of lower dilapidation receipts in the period.

Occupancy remains at a good level of 94% (MSCI IPD Quarterly Digest 92%), but lower than the 96% at end-FY18 mainly due to planned asset management activity.

Property costs benefitted from the completion of some larger revenue generating projects in the prior year, such that net property income was 8.1% higher versus H118.

The increase in reported administrative expenses is mostly accounted for by c £300k of non-recurring REIT conversion costs in H119.

Net finance expense was at a similar level. The July early repayment of £33.7m of borrowing had only a part period impact while the increase in LIBOR had a small negative effect on the cost of the floating rate revolving facility.

The early loan repayment will save c £1.1m in annual finance costs and amendments to the loan documentation covering the lender involved provides Picton with greater operational flexibility. Picton incurred a one-off fee of £3.245m and crystallised un-amortised loan arrangement fees of c £300k. Both are included in IFRS earnings but the early repayment fee is excluded from underlying EPRA earnings.

LTV ended the period at 25.5%, down from 26.7% at end FY18. The debt is c 88% fixed rate and the overall average cost is 4.0%. The average maturity is over 10 years.

EPRA earnings and EPRA EPS both increased by just over 9% y-o-y.

Aggregate quarterly DPS increased 3.0% to 1.75p and dividend cover increased to 1.25x.

The portfolio valuation increased by 1.5% on a like-for-like basis with gains on the (overweight) industrial portfolio more than offsetting the decline in (underweight) retail assets. Two assets were sold for £11.8m, 8.4% ahead of the March 2018 valuation.

Portfolio gains contributed to the increase in NAV (EPRA and IFRS) to 92p from 90p at end-FY18. Including dividends paid, the NAV total return in the period was 3.9%. The early loan repayment had a negative impact on NAV of c 0.7p per share as previously flagged, reducing NAV total return in the period, but increasing future returns by lowering recurring interest costs.

The outlook statement is cautiously optimistic, with management noting that the economy and property markets have remained resilient despite Brexit uncertainties. There is £6.4m of reversionary potential within the existing portfolio, primarily within the industrial and office sectors that account for nearly 80% of the portfolio by value. Management expects the supply and demand imbalance, combined with a lack of development, to drive further rental growth in the industrial sector and it sees continuing strong demand in the regional office sector.

Portfolio update and performance

The external appraisal value of the portfolio at 30 September was c £683m, little changed from the 31 March 2018 valuation, with net valuation gains and disposals (at book value) broadly offsetting each other. With an annualised contracted rental income of £40.3m the valuation reflects a net initial yield of 5.4%. The weighted average unexpired lease term (WAULT) was 5.2 years (5.0 years to first break), slightly reduced from March 2018 but by less than the time elapsed. Occupancy remained at a good level of 94%, which compares with 92% in the MSCI IPD Quarterly Digest. The reduction from 96% at 31 March substantially reflecting planned asset management actions at Stanford House in London WC2, discussed below.

Although Picton owns a diversified portfolio, the portfolio is currently deliberately focused on the better-performing industrial and office sectors, with a clear underweighting in retail and leisure. The rental stream is earned from a broad range of c 350 occupiers, with the largest representing c 4% and the ten largest c 27%. The top 10 assets represent c 50% of the portfolio by value and during H119 the average lot size increased further to £13.9m. For acquisitions, management targets a lot size of £10-30m, believing this provides a good balance between the efficiency/lower management complexity that larger assets bring and the added competition amongst potential buyers that they typically attract.

The income opportunity in the existing portfolio is reflected in the higher annualised reversionary income (estimated rental value or ERV) of £46.7m, reflected in a net reversionary yield of 6.4%. Of the £6.4m reversionary potential in the portfolio, £2.9m is from the opportunity to let additional space, with the remainder from lease renewals, rent reviews and contracted uplifts.

Exhibit 2: Portfolio summary

Sep-18

Mar-18

Portfolio appraisal valuation*

£683m

£684m

Number of properties

49

51

Average lot size

£13.9m

£13.4m

Net initial yield

5.4%

5.5%

Net reversionary yield

6.4%

6.6%

Annualised rental income

£40.3m

£41.4m

Annualised reversionary income

£46.7m

£47.9m

Occupancy as % of ERV

94%

96%

Weighted average lease length

5.0 years

5.2 years

Source: Picton Property Income. Note: *Portfolio appraisal value differs from balance sheet fair value shown in Exhibit 1, which is stated after lease incentive and finance lease adjustments.

Diversified portfolio with focus on industrials and offices

The industrial weighting of 43.7% at end-H119 compares with 24% for the MSCI IPD Quarterly Benchmark with a particular overweighting in the South-east where rental growth and capital values were noticeably strong in H119. The 34.5% weighting in office properties is also ahead of the Benchmark weight of 27%, while the 21.8% exposure to retail/leisure assets is nearly half the index level of 47%, with no exposure to shopping centres.

Exhibit 3 shows the portfolio positioning as at 30 September 2018, as well as the like-for-like change in valuations during the six months. The portfolio industrial valuations grew strongly, office valuations increased and retail and leisure valuations declined. Overall, the portfolio saw 1.5% capital growth, with the positive effects of asset allocation and asset management offsetting the negatives. For the six-month period, on an ungeared basis and including income, the portfolio returned 4.4%, outperforming the MSCI IPD Quarterly Benchmark return of 3.2%. The income return of 2.9% was 0.4% ahead of the benchmark income return. Picton has now outperformed the benchmark on both a total return and income return basis over one, three, five and 10 years, consistent with its aim of being one of the consistently best-performing, diversified, UK-focused property companies listed on the Main Market of the London Stock Exchange.

Exhibit 3: Portfolio positioning

Sector

Portfolio weighting (%)

September 2018 valuation (£m)

Like-for-like change in H119

Industrial

43.7%

298.8

6.0%

South East

30.6%

6.9%

Rest of UK

13.1%

4.0%

Offices

34.5%

235.4

0.3%

London City & 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 & Leisure

21.8%

148.8

-4.9%

Retail warehouse

8.6%

-9.2%

High Street - rest of UK

5.6%

-9.2%

Hight Street - South East

5.7%

6.3%

Leisure

1.9%

-1.6%

Total portfolio

100.0%

683.0

1.5%

Source: Picton Property Income

Selective disposals

Management remains alert for new investment opportunities but no acquisitions were made during H119, which in part reflects the seasonal summer slowdown in market activity but also the failure of those assets reviewed to meet the company’s acquisition criteria. Two non-core assets were sold, both office properties – Ricoh House in Northampton and Merchants House in Chester – and both sold to local authority investors. Ricoh House was sold for £8.0m, a 13% premium to the March valuation, but a more significant 54% uplift on the June 2017 valuation. Similarly, the £3.9m (plus £150k top-up) disposal of Merchants House was modestly ahead of the £3.9m March valuation, but 35% up on the June 2017 valuation.

Stanford House repositioning

Stanford House is Picton’s flagship store in Covent Garden, taking its name from the Stanfords map and travel shop that currently occupies three floors, with three office and one residential floor above. Picton is in the process of securing vacant possession, which it expects to achieve by early next year. This will be the first time in over 100 years that the building as a whole has been available to lease, and early discussions are underway with interested parties. We estimate that vacation of office space had a c £500k impact on contracted rent roll in H119, although £170k was received by the occupiers to secure an early exit, and we would expect an additional c £1.0m impact on annualised rent roll between now and early 2019 when full vacant possession is expected.

Industrial and office rent roll ahead but retail and leisure lower

The H119 like-for-like increases in annualised contracted rent roll show a similar pattern to the valuation data above. Like-for-like growth for the industrial portfolio was 3.8% and for the office portfolio it was 1.9%, with both sectors continuing to benefit from occupier demand and tight supply in many areas. Occupancy of the industrial portfolio is a high 99% and the focus remains on capturing the c £2.2m of reversionary potential through lease events. In the office sector, the regional assets are performing well due to the continued demand for space and the potential for rents to increase from relatively low levels. Within the City of London, 50 Farringdon Road benefitted from the letting of the final suite, to an existing occupier, at 5% ahead of ERV, and is now fully let. Overall occupancy in the office portfolio is 91% providing further letting opportunities to capture more of the £3.7m reversionary potential.

As has been widely reported, the situation in the retail and leisure sector is rather different, with retailers facing a continuing trend shift towards online, increased labour costs and business rates. Struggling operators are showing a greater propensity to aggressively use Company Voluntary Arrangements (or CVAs). Although significantly underweight in retail and leisure, Picton saw a 9.5% reduction in H119 contracted rental income from the sector. Around half of this (47%) was deliberate, reflecting the planned asset management activity at Stanford House where the company is in the process of securing vacant possession. Retail failures accounted for 37% of the reduction, and the remainder reflects lease events. The softness in market rents can be seen in the retail and leisure estimated rental value (ERV), now £10.2m, which is slightly lower than contracted rent would be on a full occupancy basis (£10.2m/89% or £10.9m). As a result of the New Look CVA, Picton will take back its retail unit in Peterborough, which is already under offer from a replacement tenant. The Homebase CVA and Poundworld administration will see Picton taking back two units on the same retail park in Swansea. Picton reports good early interest in the Homebase unit.

Exhibit 4: Annualised contracted rent roll by segment

March 2018

September 2018

Industrial

15.6

16.2

Like for like change

3.8%

Office*

15.0

14.4

Like for like change*

1.9%

Retail & leisure

10.7

9.7

Like for like change

-9.5%

Total portfolio

41.3

40.3

Like for like change

-0.4%

Source: Picton Property Income. Note: Overall reduction in office rent roll reflects property disposals.

We expect Picton to broadly maintain its current portfolio balance for the time being. The prospects for industrial assets and regional offices are good and although retail assets may suffer further, capital values have been weak for some time and yields are at a premium.

Financials

Although we do not publish half-yearly financial estimates, the H119 EPRA earnings and NAV were both a little ahead of the levels reflected in our forecasts. However, the group annualised contracted rent roll of £40.3m at 30 September, and carried forward into H219, is a little lower than we had expected (£40.7m), due entirely to the retail and leisure segment of the portfolio. This, and a small increase in forecast management expenses, has a small negative impact on our forecasts, most notably in FY20. Despite this, we make no change to our forecast DPS growth and expect FY20 DPS cover to remain a healthy 1.15x. It is also worth noting that our forecasts assume an unchanged portfolio, although management remains alert for new investment opportunities and has the financial resources to pursue these, with c £26m available from the revolving credit facilities.

Exhibit 5: Forecast revisions

Net rental income (£m)

EPRA EPS (p)

EPRA NAV/share (p)

DPS (p)

Old

New

% change

Old

New

% change

Old

New

% change

Old

New

% change

FY19e

37.8

38.5

1.8

4.27

4.26

(0.1)

93.5

92.6

(0.9)

3.57

3.57

0.0

FY20e

38.1

37.0

(3.1)

4.43

4.22

(4.8)

96.1

95.1

(1.0)

3.68

3.68

0.0

Source: Edison Investment Research

Taking our forecasts for changes in EPRA NAV and DPS together, the implied EPRA NAV total return is 6.4% in FY19 (after the refinancing impact) and 6.7% in FY20.

The like-for-like increases in annualised contracted rent roll in the industrial and office portfolios were both stronger than we had anticipated, but the reduction in retail and leisure more than offset this. As noted above, around half of the reduction in retail and leisure rent roll was due to planned asset management activity, and we have adjusted our forecasts to include this, although the benefits are likely to fall outside of the forecast period. Most of the balance of the retail and leisure rent roll reduction resulted from retailer failure that we had not anticipated. Taking all of these factors together, rent roll was slightly (c £0.4m) lower than we had expected at 30 September.

Our forecasts continue to reflect growth in like-for-like occupancy in the industrial portfolio, and to a lesser extent within the office portfolio, although for both we prudently assume a slowdown, as previously. For industrial, we assume 2% growth in H219 and a further 2% for FY20 as a whole. For office, we assume 1% growth in H219 and 1% growth for FY20 as a whole. In retail and leisure, we have allowed for some (c £300k) of the recent income loss relating to retail failures to be recovered but this is more than offset in the near term by the asset management at Stanford House, where we have allowed for full vacant possession to temporarily reduce contracted rents by an additional c £1m. We have prudently assumed that only around £1m of the c £1.5m contracted income forgone (including the H119 impact) is recovered by end FY20, with no material impact on revenue in the period. For the group as a whole, our forecasts reflect an end FY19 contracted rent roll of £39.8m, with £41.5m at end FY20.

Our forecasts include modest revaluation gains driven by expected rental growth. We assume no change in market yields, either up or down, but estimate that a 0.25% increase in market yields would reduce FY20 NAV per share by c 5p per share, while a 0.25% reduction would increase it by c 7p per share.

Finance costs are based on the current 4.0% average cost of debt (95% fixed) and no change in drawn debt (£194.2m at 30 September). Given the forecast modest growth in portfolio value and positive net cash flow, we expect net LTV to drift lower, below 25% by end FY20.

Valuation

With its strong income focus, Picton pays quarterly dividends that currently annualise at 3.5p per share, a prospective yield of 4.3% at the current share price. The dividend is well covered by EPRA earnings, providing management with the flexibility to reinvest into the portfolio in ways designed to support occupancy and income growth, with the specific goal of enhancing total return over the long run. As a REIT (from 1 October 2018) Picton will continue to pay dividends quarterly, primarily in the form of Property Income Distributions (PIDs). The quarterly dividend that is expected to be paid in February 2019 (in respect of the three months ending December 2018) will be the first payment under the REIT regime. Before then, the board will review the company’s dividend in the light of REIT distribution requirements (a minimum of 90% of the income profits from property rental business, which differs slightly from reported income earnings) and market conditions, although we do not expect significant changes to distribution policy and have not changed our DPS forecasts.

In Exhibit 6 we show a summary performance and valuation comparison of Picton and what we consider to be its closest income-oriented peers. The valuation comparison is based on last reported EPRA NAV per share and trailing 12 month DPS declared. Over the past year Picton shares have performed slightly better than the peer group average and the FTSE All-Share Index. As a result of its strong dividend cover, the Picton yield is below the average for the group while its P/NAV per share is slightly below the average.

Exhibit 6: Peer comparison (historical data*)

Price (p)

Market cap. (£m)

P/NAV (x)

Yield (%)

Share price performance

1 month

3 months

12 months

From 12M high

Ediston Property

105

221

0.91

5.5

-3%

-5%

-6%

-10%

F&C UK Real Est Inv

88

213

0.82

5.7

-8%

-9%

-16%

-19%

F&C Com Prop

135

1082

0.95

4.4

-2%

-8%

-6%

-13%

Custodian REIT

115

454

1.06

5.6

-3%

-4%

0%

-6%

Regional REIT

99

370

0.87

8.0

-2%

5%

-4%

-6%

Schroder REIT

57

295

0.82

4.4

-6%

-11%

-6%

-15%

Standard Life Inv Prop

89

360

0.97

5.4

-1%

-7%

-1%

-8%

Average

0.92

5.6

-4%

-5%

-6%

-11%

Median

0.91

5.5

-3%

-7%

-6%

-10%

Picton

83

448

0.90

4.2

-2%

-9%

-2%

-11%

UK property index

1,687

3.0

-2%

-6%

-3%

-11%

FTSE All-Share Index

3,835

1.8

-1%

-9%

-6%

-12%

Source: Company data, Edison Investment Research. Prices as at 20 November 2018. Note: *Last reported EPRA NAV per share and trailing 12-month DPS declared.

Bringing together dividend distributions and the impact of reinvesting for growth, in Exhibit 7 we show the trend in EPRA NAV per share in the five years ended FY18 ie total return of 117% over the period or a compound annual return of 16.8% pa. As noted above, NAV total return for the first six months of FY19 was 3.9% including the impact of the refinancing; we estimate c 4.6% excluding it.

Exhibit 7: EPRA NAV total return

2014

2015

2016

2017

2018

2014-18

Opening EPRA NAV per share (p)

49

56

69

77

82

49

Closing EPRA NAV per share (p)

56

69

77

82

90

90

DPS paid (p)

3.00

3.00

3.30

3.33

3.43

16

EPRA NAV total return

21.0%

26.9%

17.6%

10.2%

14.7%

117.0%

Compound annual total return

16.8%

Source: Company data, Edison Investment Research. Note: Annual data differs slightly from Picton published data which assumes dividend reinvestment during the year.

Exhibit 8: Financial summary

Year end 31 March

£'000s

2016

2017

2018

2019e

2020e

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

40,770

47,911

42,855

41,893

41,280

Service charge income

5,153

6,487

5,927

6,061

6,000

Total revenue

 

 

45,923

54,398

48,782

47,954

47,280

Gross property expenses

(10,001)

(12,011)

(10,335)

(9,447)

(10,300)

Net rental income

 

 

35,922

42,387

38,447

38,507

36,980

Administrative expenses

(1,510)

(1,613)

(1,914)

(1,812)

(1,500)

Operating Profit before revaluations

 

 

34,412

40,774

36,533

36,695

35,480

Revaluation of investment properties

44,171

15,087

38,920

12,461

10,000

Profit on disposals

799

1,847

2,623

379

0

Management expenses

(2,901)

(3,636)

(3,652)

(4,006)

(4,000)

Operating Profit

76,481

54,072

74,424

45,529

41,480

Net finance expense

(11,417)

(10,823)

(9,747)

(9,283)

(8,726)

Profit Before Tax

 

 

65,064

43,249

64,677

36,246

32,755

Taxation

(216)

(499)

(509)

(445)

0

Profit After Tax

64,848

42,750

64,168

35,801

32,755

Profit After Tax (EPRA)

19,878

20,566

22,625

22,961

22,755

Average Number of Shares Outstanding (m)

540.1

540.1

539.7

539.0

539.0

EPS (p)

 

 

12.01

7.92

11.89

6.04

6.08

EPRA EPS (p)

 

 

3.68

3.81

4.19

4.26

4.22

Dividends declared per share (p)

 

 

3.300

3.350

3.450

3.570

3.680

Dividend cover (x)

1.12

1.14

1.22

1.19

1.15

Ongoing charges ratio (excluding property expenses)

1.1%

1.2%

1.1%

1.0%

1.0%

BALANCE SHEET

Fixed Assets

 

 

649,406

615,187

670,679

678,145

691,645

Investment properties

646,018

615,170

670,674

678,120

691,620

Other non-current assets

3,388

17

5

25

25

Current Assets

 

 

37,408

49,424

50,633

35,499

36,051

Debtors

14,649

15,541

19,123

14,614

14,970

Cash

22,759

33,883

31,510

20,885

21,081

Current Liabilities

 

 

(47,521)

(20,635)

(22,292)

(19,915)

(20,378)

Creditors/Deferred income

(18,430)

(20,067)

(21,580)

(19,107)

(19,570)

Short term borrowings

(29,091)

(568)

(712)

(808)

(808)

Long Term Liabilities

 

 

(222,161)

(202,051)

(211,665)

(192,274)

(192,274)

Long term borrowings

(220,444)

(200,336)

(209,952)

(190,559)

(190,559)

Other long term liabilities

(1,717)

(1,715)

(1,713)

(1,715)

(1,715)

Net Assets

 

 

417,132

441,925

487,355

501,455

515,044

Net Assets excluding goodwill and deferred tax

 

 

417,132

441,925

487,355

501,455

515,044

NAV/share (p)

77

82

90

93

96

EPRA NAV/share (p)

77

82

90

93

95

CASH FLOW

Operating Cash Flow

 

 

33,283

36,283

35,088

30,733

32,211

Net Interest

(8,836)

(9,211)

(9,125)

(8,950)

(8,726)

Tax

(426)

(232)

(328)

(80)

0

Net cash from investing activities

(68,123)

48,691

(17,811)

9,777

(3,524)

Ordinary dividends paid

(17,822)

(17,957)

(18,487)

(19,072)

(19,766)

Debt drawn/(repaid)

14,591

(46,450)

9,183

(23,033)

0

Net proceeds from shares issued/repurchased

0

0

(893)

0

0

Other cash flow from financing activities

Net Cash Flow

(47,333)

11,124

(2,373)

(10,625)

196

Opening cash

 

 

70,092

22,759

33,883

31,510

20,885

Closing cash

 

 

22,759

33,883

31,510

20,885

21,081

Debt as per balance sheet

(249,535)

(200,904)

(210,664)

(191,367)

(191,367)

Un-amortised loan arrangement fees

0

(3,740)

(3,376)

(2,885)

(2,885)

Closing net (debt)/cash

 

 

(226,776)

(170,761)

(182,530)

(173,367)

(173,171)

Net LTV

34.6%

27.3%

26.7%

25.2%

24.7%

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Picton Property Income and prepared and issued by Edison, in consideration of a fee payable by Picton Property IncomeEdison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Picton Property Income and prepared and issued by Edison, in consideration of a fee payable by Picton Property IncomeEdison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Neither this Communication nor any copy (physical or electronic) of it may be (i) taken or transmitted into the United States of America, (ii) distributed, directly or indirectly, in the United States of America or to any US person (within the meaning of regulations Regulation S made under the US Securities Act 1933, as amended), (iii) taken or transmitted into or distributed in Canada, Australia, the Republic of Ireland or the Republic of South Africa or to any resident thereof, except in compliance with applicable securities laws, (iv) taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities or in the context where the distribution thereof may be construed as such solicitation or offer, or (v) or taken or transmitted into any EEA state other than the United Kingdom. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this Communication in or into other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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