Last close As at 05/08/2026
GBP0.74
▲ 1.10 (1.50%)
Market capitalisation
GBP382m
Research: Real Estate
Picton Property Income’s (PCTN’s) Q324 trading update details a range of positive leasing events that provided underpinning to income, reflected in its well-covered DPS. Together with progress on specific asset management initiatives this mitigated the impact of market-wide outward yield movements on NAV.
Picton Property Income |
Capturing rent potential in Q3 |
December FY24 NAV update |
Real estate |
31 January 2024 |
Share price performance
Business description
Next event
Analyst
Picton Property Income is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Picton Property Income’s (PCTN’s) Q324 trading update details a range of positive leasing events that provided underpinning to income, reflected in its well-covered DPS. Together with progress on specific asset management initiatives this mitigated the impact of market-wide outward yield movements on NAV.
Year end |
Net property income (£m) |
EPRA earnings* (£m) |
EPRA |
DPS |
NAV** per share (p) |
P/NAV |
Yield |
03/23 |
36.3 |
21.3 |
3.9 |
3.50 |
100 |
0.67 |
5.2 |
03/24e |
36.6 |
20.5 |
3.8 |
3.50 |
96 |
0.70 |
5.2 |
03/25e |
37.8 |
22.0 |
4.0 |
3.60 |
97 |
0.69 |
5.4 |
03/26e |
39.0 |
23.3 |
4.3 |
3.70 |
98 |
0.69 |
5.5 |
Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.
Rent uplifts support income and capital values
The Q324 DPS of 0.875p was 108% covered by EPRA earnings (H124: 105%). Leasing activity locked in some significant rental increases, all at or above estimated rental value (ERV) and/or passing rent, while overall occupancy was unchanged at 90% (or 92% adjusted for the alternative use strategies being undertaken in Cardiff and Angel Gate). MSCI monthly market data show a negative total return of 1.4% for the period including a negative capital return of 2.7%. The 1.5% like-for-like decline in Picton’s portfolio values was ahead of this, supported by asset management and continuing to benefit from a strong weighting to better-performing industrial assets (59% by value). NAV per share was 2.5% lower at 96p and, adjusted for DPS paid, the NAV total return was -1.6%. We have reduced forecast NAVs by c 2p to take account of the Q3 valuation movement and continue to assume flat valuations going forwards, with no other forecast changes.
Focused on growing income
At a portfolio level, Picton has outperformed the MSCI index in each of the past 10 years, delivering upper quartile performance since inception in 2005. This has driven strong accounting returns, averaging approximately 10% pa over the same period. Picton remains open to value creating consolidation opportunities, seeking to lever its performance record and internal management structure, but realising its strong organic growth opportunities are its focus. While portfolio rents continue to increase across all sectors, as is true of the broader market, there is a significant opportunity to close the wide (£13.2m at H1) gap between current passing rents and ERV. Active asset management plans, aimed at unlocking this, and including repurposing of selected office properties, are making good progress. With sector capital values an average 25% lower from the peak in 2022, the much-anticipated decline in interest rates should have a stabilising effect.
Valuation: Fully covered DPS with room for growth
The current annualised run rate of DPS (3.5p), which we expect to be fully covered, represents a prospective yield of 5.2%. We forecast DPS growth, fully covered, in FY25 and FY26. Meanwhile the shares trade at a 30% discount to Q324 NAV.
Further details from the trading update
We have recently published updates on Picton’s robust H124 performance in a challenging market and updated our forecasts following the closure of merger discussions with UK Commercial Property REIT (UKCM).
Exhibit 1 shows clearly how Q324 dividends were fully covered by EPRA earnings (108% adjusting for the rounding of data in the table) with property revaluation movements reducing NAV.
Exhibit 1: Quarterly NAV movements FY24 year-to-date
30-Jun-23 |
30-Sep-23 |
31-Dec-23 |
|
Pence per share |
Q124 |
Q224 |
Q324 |
Opening NAV/EPRA NTA per share |
100.4 |
99.4 |
98.5 |
Movement in property values |
(1.0) |
(1.1) |
(2.5) |
Net income after tax |
0.8 |
1.0 |
0.9 |
Dividends paid |
(.8) |
(0.9) |
(0.9) |
Other |
0.0 |
0.1 |
0.0 |
Closing NAV/EPRA NTA per share |
99.4 |
98.5 |
96.0 |
Source: Picton Property Income
Positive leasing events during the quarter mirrored the key reversionary opportunities within the portfolio, of raising industrial rents to market levels and reducing void space in the office sector. They included:
■
Four rent reviews in the industrial and retail sectors, with annual rent of £2.3m, which were at an average 33% uplift to previous passing rent and a 5% premium to the H124 ERV or the ERV at the time of the review if prior.
■
Two leases were renewed/regeared in the industrial sector, with a combined annual rent of £0.1m, double the previous passing rent and in line with the Q324 ERV.
■
Five lettings in the industrial and office sectors, securing a combined annual rent of £0.5m, in line with the Q324 ERV.
Additionally, the repurposing initiative of offices at Angel Gate in London EC1 were advanced by the securing of permitted development rights on the remaining 34,000 sq ft, enabling residential use across the whole property. Picton says that it is now in the process of bringing this asset to the market for disposal in early 2024.
At end-Q323, Picton’s portfolio valuation reflected a net initial yield of 5.3% (allowing for void holding costs) compared with 5.0% at end-H124, and a reversionary yield of 7.0% (H124: 6.8%). The outward drift of yields affected all sectors but particularly offices and less so in industrials. The impact on valuation was mitigated by the income progress detailed above.
Exhibit 2: Portfolio valuation movements during Q3
Portfolio value by sector |
Like-for-like change |
Average equivalent yield movement in basis points |
|
Industrials |
58.9% |
-1.0% |
+11 |
o/w South East |
42.0% |
||
o/w Rest of UK |
16.9% |
||
Office |
30.4% |
-2.4% |
+18 |
o/w London City & West End |
7.1% |
||
o/w Inner & Outer London |
1.7% |
||
o/w South-East |
8.0% |
||
o/w Rest of UK |
8.9% |
||
o/w Alternative use assets |
4.7% |
||
Retail & Leisure |
10.7% |
-1.9% |
+13 |
o/w Retail Warehouse |
6.7% |
||
o/w High Street Rest of UK |
2.4% |
||
o/w Leisure |
1.6% |
||
Portfolio total |
100.0% |
-1.5% |
Source: Picton Property Income
Exhibit 3: Financial summary
Year end 31 March (£m) |
2022 |
2023 |
2024e |
2025e |
2026e |
PROFIT & LOSS |
|||||
Rental income |
40.1 |
43.0 |
43.7 |
44.3 |
45.6 |
Other income |
0.2 |
0.4 |
0.6 |
0.5 |
0.5 |
Service charge income |
6.2 |
8.4 |
9.6 |
9.7 |
10.0 |
Revenue from properties |
46.5 |
51.8 |
53.9 |
54.5 |
56.1 |
Property operating costs |
(2.5) |
(3.5) |
(3.2) |
(3.2) |
(3.3) |
Property void costs |
(2.4) |
(3.6) |
(4.5) |
(3.8) |
(3.8) |
Recoverable service charge costs |
(6.2) |
(8.4) |
(9.6) |
(9.7) |
(10.0) |
Property expenses |
(11.1) |
(15.6) |
(17.3) |
(16.7) |
(17.1) |
Net property income |
35.4 |
36.3 |
36.6 |
37.8 |
39.0 |
Administrative expenses |
(5.8) |
(6.0) |
(6.6) |
(6.9) |
(7.2) |
Operating Profit before revaluations |
29.7 |
30.3 |
30.0 |
30.9 |
31.8 |
Revaluation of investment properties |
129.8 |
(110.8) |
(11.6) |
0.0 |
0.0 |
Profit on disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Operating Profit |
159.5 |
(80.5) |
18.4 |
30.9 |
31.8 |
Net finance expense |
(8.5) |
(9.0) |
(9.5) |
(8.9) |
(8.5) |
Debt repayment fee |
(4.0) |
||||
Profit Before Tax |
147.0 |
(89.5) |
8.9 |
22.0 |
23.3 |
Taxation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Profit After Tax (IFRS) |
147.0 |
(89.5) |
8.9 |
22.0 |
23.3 |
Adjust for: |
|||||
Investment property valuation movement |
(129.8) |
110.8 |
11.6 |
0.0 |
0.0 |
Profit on disposal of investment properties |
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
Exceptional income /expenses |
4.0 |
0.0 |
0.0 |
0.0 |
0.0 |
EPRA earnings |
21.2 |
21.3 |
20.5 |
22.0 |
23.3 |
Fully diluted average Number of Shares Outstanding (m) |
547.3 |
546.9 |
547.1 |
547.6 |
547.6 |
EPS (p) |
26.93 |
(16.42) |
1.64 |
4.03 |
4.27 |
EPRA EPS (p) |
3.9 |
3.9 |
3.8 |
4.0 |
4.3 |
Dividend declared per share (p) |
3.45 |
3.50 |
3.50 |
3.60 |
3.70 |
Dividends paid per share (p) |
3.375 |
3.500 |
3.500 |
3.575 |
3.675 |
Dividend cover (x) EPRA EPS/DPS declared |
1.13 |
1.12 |
1.08 |
1.12 |
1.15 |
Dividend cover (x) - paid dividends |
1.15 |
1.12 |
1.08 |
1.14 |
1.19 |
Total return |
27.9% |
-13.7% |
-0.6% |
4.3% |
4.5% |
EPRA cost ratio (excluding direct vacancy costs) |
19.9% |
21.3% |
21.8% |
22.1% |
22.4% |
BALANCE SHEET |
|||||
Non-current assets |
834.4 |
749.8 |
729.8 |
713.0 |
718.7 |
Investment properties |
830.0 |
746.3 |
726.3 |
709.5 |
715.2 |
Other non-current assets |
4.4 |
3.4 |
3.5 |
3.5 |
3.5 |
Current assets |
61.4 |
42.8 |
41.8 |
47.2 |
45.8 |
Debtors |
22.9 |
22.7 |
26.1 |
26.1 |
26.1 |
Cash |
38.5 |
20.1 |
15.8 |
21.1 |
19.7 |
Current Liabilities |
(20.3) |
(20.7) |
(19.7) |
(19.7) |
(19.7) |
Creditors/Deferred income |
(19.3) |
(19.6) |
(18.6) |
(18.6) |
(18.6) |
Current borrowings |
(1.1) |
(1.1) |
(1.2) |
(1.2) |
(1.2) |
Non-Current Liabilities |
(218.4) |
(224.2) |
(226.8) |
(212.2) |
(212.5) |
Non-current borrowings |
(215.8) |
(221.6) |
(224.2) |
(209.6) |
(209.9) |
Other non-current liabilities |
(2.6) |
(2.6) |
(2.6) |
(2.6) |
(2.6) |
Net assets |
657.1 |
547.6 |
525.1 |
528.3 |
532.3 |
NAV per share (p) |
120 |
100 |
96 |
97 |
98 |
EPRA NTA per share (p) |
120 |
100 |
96 |
97 |
98 |
CASH FLOW |
|||||
Operating cash flow |
28.1 |
30.9 |
26.4 |
31.6 |
32.5 |
Net Interest |
(8.1) |
(7.9) |
(9.1) |
(8.6) |
(8.2) |
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net cash from investing activities |
(33.8) |
(26.8) |
(4.8) |
16.7 |
(5.7) |
Ordinary dividends paid |
(18.4) |
(19.1) |
(19.1) |
(19.5) |
(20.0) |
Debt drawn/(repaid) |
52.2 |
5.4 |
2.3 |
(14.9) |
0.0 |
Net proceeds from shares issued/repurchased |
(0.7) |
(1.1) |
0.0 |
0.0 |
0.0 |
Other cash flow from financing activities |
(4.0) |
||||
Net cash from financing activities |
29.0 |
(14.8) |
(16.8) |
(34.4) |
(20.0) |
Change in cash |
15.2 |
(18.5) |
(4.3) |
5.4 |
(1.4) |
Opening cash |
23.4 |
38.5 |
20.1 |
15.8 |
21.1 |
Closing cash |
38.5 |
20.1 |
15.8 |
21.1 |
19.7 |
Debt as per balance sheet |
(216.8) |
(222.8) |
(225.4) |
(210.8) |
(211.1) |
Un-amortised loan arrangement fees |
(2.0) |
(1.7) |
(1.4) |
(1.1) |
(0.8) |
Closing net (debt)/cash |
(180.3) |
(204.4) |
(211.0) |
(190.7) |
(192.2) |
Net LTV |
21.2% |
26.7% |
28.3% |
26.1% |
26.1% |
Source: Picton Property Income historical data, Edison Investment Research forecasts
|
|
Research: Real Estate
Impact Healthcare REIT’s Q423 update shows a continued strengthening in operational and financial tenant performance, reflected in a record level of rent cover and 100% rent collection. With cash flow remaining strong, we expect the FY23 DPS of 6.77p (+3.5%) was fully covered by adjusted ‘cash’ earnings and the FY24 DPS target has been set at 6.95p (+2.7%). We will review our forecasts with the full year results in late March.