Picton Property Income — Focused on growing earnings

Picton Property Income (LSE: PCTN)

Last close As at 22/05/2024

GBP0.68

0.50 (0.74%)

Market capitalisation

GBP373m

More on this equity

Research: Real Estate

Picton Property Income — Focused on growing earnings

Having previously updated on Picton Property Income’s H124 results, we are re-instating forecasts following the cessation of merger discussions with UKCM. In a challenging environment, H124 financial performance was resilient, supporting fully covered DPS. Meanwhile, the company continues to believe that there are strategic and financial benefits to combining complementary businesses, particularly within an internal management structure, including economies of scale and enhanced earnings.

Martyn King

Written by

Martyn King

Director, Financials

Picton-Property-Income_resized

Real Estate

Picton Property Income

Focused on growing earnings

Re-instating forecasts

Real estate

17 January 2024

Price

65p

Market cap

£354m

Net debt (£m) at 30 September 2023

209.6

Net LTV at 30 September 2023

27.7%

Shares in issue

545.2m

Free float

100%

Code

PCTN

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.3)

(0.5)

(20.8)

Rel (local)

(5.1)

(1.0)

(17.6)

52-week high/low

82.30p

61.60p

Business description

Picton Property Income is an internally managed UK REIT that invests in a diversified portfolio of commercial property across the UK. It is total return driven with an income focus and aims to generate attractive returns through proactive management of the portfolio.

Next events

Q324 NAV announcement

26 January 2024

Analyst

Martyn King

+44 (0)20 3077 5700

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

Having previously updated on Picton Property Income’s H124 results, we are re-instating forecasts following the cessation of merger discussions with UKCM. In a challenging environment, H124 financial performance was resilient, supporting fully covered DPS. Meanwhile, the company continues to believe that there are strategic and financial benefits to combining complementary businesses, particularly within an internal management structure, including economies of scale and enhanced earnings.

Year end

Net property income (£m)

EPRA earnings* (£m)

EPRA
EPS* (p)

DPS
(p)

NAV** per share (p)

P/NAV
(x)

Yield
(%)

03/23

36.3

21.3

3.9

3.50

100

0.65

5.4

03/24e

36.6

20.5

3.8

3.50

99

0.66

5.4

03/25e

37.8

22.0

4.0

3.60

99

0.65

5.5

03/26e

39.0

23.3

4.3

3.70

100

0.65

5.7

Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.

Seeking to lever long-term performance

At a portfolio level, Picton has outperformed the MSCI index in each of the past 10 years, and has delivered upper quartile performance since inception in 2005. This has driven strong accounting returns, averaging approximately 10% pa over the past 10 years. The company has repeatedly expressed its view that consolidation is a positive for the sector, creating larger companies, with improved share liquidity and better access to capital, and has sought opportunities to leverage its strong portfolio performance track record and internal management structure. Merger talks with UK Commercial Property REIT (UKCM) were not supported by UKCM’s largest shareholder and were halted in December. We expect Picton to seek similar opportunities and meanwhile it continues to be proactive in pursuing organic asset management initiatives aimed at building on its performance track record.

While driving organic value creation

As we have previously published, H124 EPRA earnings of £10.0m or 1.8p per share fully covered DPS by 1.05x with Q2 cover increasing versus Q1. Portfolio rents continued to increase, and active asset management plans are in place to capture significant reversionary potential, including well-advanced plans for repurposing of selected office properties. We expect this to drag on earnings in the near term but to reverse through H225 as vacated properties are disposed of and the proceeds redeployed, benefiting income, reducing void costs and finance expense, and providing potential for capital uplift. Our FY24e EPRA EPS forecast reduced by 6% (FY25 by 2%) but c 3% DPS growth is fully covered. We expect FY26e to show good growth, with 1.15x cover indicating potential for faster DPS growth than we forecast. Our NAV forecasts fall slightly, in line with H124.

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 5.4%. We forecast DPS growth, fully covered, in FY25 and FY26. Meanwhile the shares trade at a 34% discount to H124 NAV.

Seeking to participate in sector consolidation

Picton has for some time made clear its view that consolidation is a positive for the sector, creating companies with increased scale, providing improved share liquidity, better access to capital and the potential for operational and financial synergies to drive faster earnings growth. In particular, the company has been open to opportunities to leverage its strong portfolio performance track record and internal management structure, able to support an increased asset base without a proportional increase in costs.

In November 2023, the company confirmed discussions with UKCM regarding a possible all-share merger, on an EPRA NTA for EPRA NTA basis. However, later that month Picton was informed by UKCM that its largest shareholder, Phoenix Life Limited, which controls approximately 43% of UKCM’s share capital, did not support a merger on the terms proposed. Picton subsequently confirmed that it no longer intended to make an offer for UKCM.

While merger discussions with UKCM have ended, we expect Picton to seek similar opportunities and it is worth examining the strategic logic on which the proposed transaction was based.

The diversified portfolios of UKCM and Picton are complementary and both companies seek to provide investors with an attractive level of income together with the potential for capital and income growth. The combined gross assets would have been c £2.1bn (c £0.8bn from Picton and £1.3bn from UKCM).

Although UKCM benefits from relatively low external management charges,2 a merger with Picton would have provided the enlarged company with a significant cost saving opportunity. UKCM’s administrative expenses in the six months to 30 June 2023 were £4.5m or 0.7% of average net assets, of which the largest element was the external management fees of £3.4m. Total administrative expenses incurred by Picton in the six months to 30 September 2023 were £3.4m, less than the equivalent figure for UKCM of £4.5m, but a higher 1.0% of its lower average net assets. From this lower cost base, Picton manages a portfolio that comprises more properties than UKCM (c 49 at the interim stage compared with 39 for UKCM) let to a larger number of tenants (c 400 vs c 200), providing a further indication of the potential to remove costs from a combined vehicle, not simply confined to external management fees.

  1 Since 1 April 2022, the fees payable to UKCM’s external manager, abrdn, are 0.525% on gross assets up to £1.75bn and 0.475% on gross assets of more than £1.75bn.

Exhibit 1: Picton and UKCM portfolio structures

Sector weights at 30 September 2023

Picton

UKCM

Industrial weighting

58.0%

58.8%

o/w South East

42.1%

33.7%

o/w Rest of UK

15.9%

25.1%

Office weighting

31.6%

12.2%

o/w London City & West End

7.1%

1.9%

o/w Inner & outer London

5.4%

o/w South East

8.8%

4.8%

o/w Rest of UK

10.3%

5.5%

Retail & Leisure weighting

10.4%

19.5%

o/w Retail Warehouse

6.8%

12.1%

o/w High Street Rest of UK

2.1%

o/w Supermarkets

-

2.1%

o/w Leisure

1.5%

5.3%

Other weighting

-

9.5%

o/w Student accommodation

-

4.7%

o/w Hotels*

-

4.8%

Total

100.0%

100.0%

Source: Picton H124 report. UKCM 30 September 2023 factsheet. Note: *UKCM has one hotel that is under development and targeted to open in the third quarter of 2024.

At a portfolio level, Picton has outperformed its benchmark MSCI UK Quarterly Property Index in each of the past 10 years and has delivered upper quartile performance since inception in 2005. UKCM uses an alternative benchmark, the MSCI UK Balanced Portfolios Quarterly Property Index, the performance of which differs slightly from that adopted by Picton. Over the past one, three, five and 10 years, UKCM has also outperformed its benchmark, although less so. Over 10 years the Picton portfolio has generated a total return of 9.9% pa compared with 6.7% pa for UKCM.

Exhibit 2: Portfolio level performance versus respective benchmarks

Annualised total return per annum

1 year

3 years

5 years

10 years

Picton

-7.6%

6.6%

5.9%

9.9%

Benchmark: MSCI UK Quarterly Property Index

-12.0%

2.2%

1.2%

5.9%

UKCM

-12.9%

4.5%

2.5%

6.7%

Benchmark: MSCI UK Balanced Portfolios Quarterly Property Index

-13.3%

2.0%

1.3%

6.0%

Source: Picton data taken from H124 financial report to 30 September 2023. UKCM data taken from quarterly factsheet for three months to 30 September 2023.

Picton’s strong property returns have been the main driver of financial performance, supporting an average 9.5% pa accounting total return, without assuming reinvestment of dividends, over the c 10-year period beginning 1 January 2014 to 30 September 2023 (end-H124).3

  2 We have taken this period on a calendar year basis rather than a fiscal year basis to ease comparison with UKCM, which has a December year-end compared with a March year-end for Picton.

Exhibit 3: Picton accounting/EPRA NTA* total return (dividends not reinvested)

Pence per share

2014

2015

2016

2017

2018

2019

2020

2021

2022

9m 2023

1/1/2014–30/9/2023

Opening EPRA NTA

53.8

66.0

75.7

80.4

88.6

92.5

95.2

95.5

112.8

102.2

53.8

Closing NTA

66.0

75.7

80.4

88.6

92.5

95.2

95.5

112.8

102.2

99.0

99.0

Dividend paid

2.25

3.00

3.23

3.30

3.40

3.50

3.50

2.83

3.30

2.63

30.93

Capital return

22.7%

14.7%

6.2%

10.2%

4.4%

2.9%

0.3%

18.1%

-9.4%

-3.1%

84.0%

Dividend return

4.2%

4.5%

4.3%

4.1%

3.8%

3.8%

3.7%

3.0%

2.9%

2.6%

57.5%

Total return (TR)

26.9%

19.2%

10.5%

14.3%

8.2%

6.7%

4.0%

21.1%

-6.5%

-0.6%

141.5%

Annual average TR

9.5%

Source: Picton data, Edison Investment Research. Note: *EPRA net tangible assets.

With property return being the driver, we calculate an average 4.8% total return for UKCM over the same period.

Exhibit 4: UKCM accounting/EPRA NTA* total return (dividends not reinvested)

Pence per share

2014

2015

2016

2017

2018

2019

2020

2021

2022

9m 2023

1/1/2014–30/9/2023

Opening EPRA NTA

73.7

83.7

86.7

86.5

93.0

93.4

89.8

86.7

102.0

79.7

73.7

Closing NTA

83.7

86.7

86.5

93.0

93.4

89.8

86.7

102.0

79.7

80.7

80.7

Dividend paid

4.1

3.7

3.7

3.7

3.7

3.7

2.3

2.9

5.2**

2.6

35.4

Capital return

13.5%

3.6%

-0.2%

7.5%

0.4%

-3.9%

-3.5%

17.6%

-21.9%

1.3%

9.5%

Dividend return

5.5%

4.4%

4.2%

4.3%

4.0%

3.9%

2.6%

3.4%

5.1%

3.2%

48.0%

Total return (TR)

19.1%

8.0%

4.0%

11.8%

4.4%

0.1%

-0.9%

21.0%

-16.8%

4.5%

57.5%

Annual average TR

4.8%

Source: UKCM data, Edison Investment Research. Note: *EPRA net tangible assets. **2022 includes a special dividend paid of 1.92p.

While remaining open to value-creating M&A, Picton continues to be proactive in pursuing organic asset management initiatives aimed at building on its performance track record. In this respect, asset repurposing, mostly of selected office assets, is significant.

Asset repurposing should unlock value

During H124 Picton continued to grow contracted rents and estimated rental value (ERV), albeit modestly. Contracted rent benefited from new lettings, renewals and regears, and reviews, all on average above March ERV and/or previous contracted rents. However, including lease maturities, on an EPRA basis, occupancy reduced to c 90% from c 91% at end-FY23. The £10.4m gap between ERV (£56.2m) and contracted rents (£45.8m) comprised £2.8m reversion potential from increasing current rents to market levels and £4.5m from letting vacant space. The top five portfolio voids, accounting for 63% of the total, were all office properties, and reducing voids can often bring twin benefits from increased income and reduced empty property costs. Notwithstanding the positive leasing and regear activity that Picton achieved in its office properties in H124, it has identified opportunities to respond proactively to significant changes in the market by adapting some of its assets to alternative use.

There are currently three projects under way, at Angel Gate in London EC1, Longcross in Cardiff and Charlotte Terrace in London W14.

At Angel Gate (14% of the portfolio void), during H123, Picton identified an opportunity to secure planning consent for the conversion of 30,000 sq ft of vacant office space to residential use, with plans for 34 dwellings. After extensive dialogue with the local authority, the company has since been able to release (from Article 4 restrictions) 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 Longcross (12% of the portfolio void), contracts have been exchanged for its sale to an experienced purpose-built student accommodation developer. The transaction is conditional on planning permission, which will be submitted by June 2024. The sale price is dependent on the exact planning consent obtained and, in particular, upon the number of rooms secured, subject to a collar and cap. Picton says that in all scenarios the transaction is NAV accretive.

Charlotte Terrace (11% of the portfolio void) comprises four adjoining buildings, which total 28,500 sq ft of office space and 4,400 sq ft of retail space, arranged over five floors. It is located close to Olympia, which is currently undergoing a £1bn redevelopment delivering a new creative district, with a new theatre, entertainment venue, hotel, office, retail and leisure space that is expected to enhance the surrounding area. Having achieved vacant possession in one of the four buildings, a planning application has been submitted for alternative residential use.

On a lesser scale, but nonetheless reflective of its active approach to asset management, at Colchester Business Park (14% of the portfolio void), Picton secured planning permission for the change of use of a vacant office suite, enabling it to be let to a healthcare occupier. An office building became vacant on the last day of the period, accounting for 60% of the void, with the majority of the remaining void, a recently refurbished industrial unit, under offer.

Forecasts and valuation

Picton’s alternative use plans create several forecasting uncertainties, which, in the near term, predominantly relate to the more advanced projects at Angel Gate and Longcross. In particular we highlight:

Proceeds. Although no actual book values have been published for Angel Gate and Longcross, the valuation ranges provided by the company4 indicate that they are £20–30m and £5–10m respectively. Recognising the enhanced attraction of the assets for alternative use, we have assumed aggregate proceeds at the high end of these ranges, or £40m.

  3 The £2030m for Angel Gate is taken from the data for the largest 10 property investments at end-H124. The £510m for Longross is taken from the portfolio-wide data provided at end-FY22.

Timing of completion. We do not expect either transaction to complete until FY25 and assume that Angel Gate completes at the end of September 2024 (end-H125) and Longcross at the end of March 2025 (end-FY25).

Use of proceeds. The proceeds of disposal are likely to be deployed in portfolio re-investment and debt reduction. We assume repayment of drawing on the higher cost, floating rate revolving credit facility (RCF), £14.9m, at end-H124, and reinvestment of the balance.

Impact on income and NAV. Picton has said that it expects all the projects to be value creating, likely a combination of disposal gains, lower void costs and reinvestment. We expect both Angel Gate and Longcross to be worth more for alternative use than as office space5 but while assuming disposal at the higher end of the indicative current valuations, we have not specifically included any gains in our forecasts. Where we have assumed reinvestment of proceeds (during H225) this is at an initial yield of 6%, generating income of c £1.5m pa, well ahead of that currently received on the disposed assets. With leases surrendered to facilitate vacant possession, we estimate the current income, net of void costs, to be relatively modest at c £0.5m pa. Picton says that excluding Angel Gate and Longcross, H124 occupancy would have been two percentage points higher. Lower occupancy has a positive impact on our forecasts for void property costs.

  4 For Angel Gate, Picton’s portfolio data indicate a capital value of £460 per sq ft compared with an average Islington residential value of c £900 per sq ft (£9,700 per sqm), according to data from the Office of National Statistics (ONS). On a similar basis, although Longcross is to be sold as student accommodation, by way of example, it has a carried value of £70–140 per sq ft compared with average Cardiff residential values of c £200 per sq ft (ONS: c £2,100 per sqm). The comparisons take no account of conversion costs and many other factors but illustrate the potential for value creation.

More broadly, our forecasts assume no material changes in occupancy or rent roll other than the above. Additional asset management initiatives may prove this to be conservative, although market conditions remain uncertain. Upon our assumed repayment of the RCF, the remaining debt is all long term (maturing in 2031 and 2032) at a blended rate of 3.7%.

Market-wide property values have remained under moderate pressure since end-H124. The industrial sector remains relatively robust, while the office sector in particular remains under pressure. Picton’s portfolio valuation was 1.2% lower on a like-for-like basis in H124. The December property valuation and NAV update will be published on 26 January. At this stage we see little utility in second-guessing the Q324 movement and maintain our assumption of flat valuation through H224 and the forecast period. Each 1% reduction in portfolio value reduces our FY24 EPRA NTA forecast of 99p (H124: 99p) by 1.4%.

Our forecasts for EPRA earnings in FY24 and, to a lesser extent, FY25 are reduced, and we introduce a forecast for FY26.

The FY24 and FY25 changes are driven by lower rental income and higher property costs, to a large extent reflecting the near-term impact of the change of use initiatives. The positive impact of these initiatives is seen in H225 and through FY26e.

As with H124, we expect DPS to be full covered throughout the period and forecast DPS growth of 3% in each of 2025 and 2026.

Exhibit 5: Summary of forecasts and changes

£m

Forecast

Previous forecast

Change

FY24

FY25

FY26

FY24

FY25

FY24

FY25

FY24

FY25

Gross rental income

43.7

44.3

45.6

45.1

46.0

(1.4)

(1.7)

-3.0%

-3.8%

Other income

0.6

0.5

0.5

0.5

0.5

0.1

0.0

Non-recoverable property costs

(7.7)

(7.0)

(7.1)

(7.2)

(7.4)

(0.5)

0.4

7.3%

-4.9%

Net rental income

36.6

37.8

39.0

38.4

39.2

(1.7)

(1.4)

-4.6%

-3.5%

Administrative expenses

(6.6)

(6.9)

(7.2)

(6.6)

(6.9)

(0.1)

0.0

0.9%

0.0%

Net interest

(9.5)

(8.9)

(8.5)

(10.0)

(9.9)

0.5

0.9

-5.2%

-9.4%

EPRA earnings

20.5

22.0

23.3

21.8

22.4

(1.3)

(0.4)

-5.9%

-2.0%

Realised & unrealised property gains/(losses)

(11.6)

0.0

0.0

0.0

0.0

(11.6)

0.0

IFRS earnings

8.9

22.0

23.3

21.8

22.4

(12.9)

(0.4)

EPRA EPS (p)

3.8

4.0

4.3

4.0

4.1

(0.2)

(0.1)

-5.9%

-2.0%

IFRS EPS (p)

1.6

4.0

4.3

4.0

4.1

(2.4)

(0.1)

DPS declared (p)

3.5

3.6

3.7

3.6

3.7

(0.1)

(0.1)

-2.8%

-2.7%

Dividend cover (x)

1.08

1.12

1.15

1.11

1.11

EPRA NTA per share (p)

99

99

100

101

102

(2.2)

(2.2)

-2.2%

-2.2%

EPRA NTA total return

1.8%

4.2%

4.4%

4.1%

4.2%

LTV

27.8%

25.7%

25.7%

28.1%

28.1%

Source: Edison Investment Research

In Exhibit 6 we show a comparison of Picton with a dwindling range of close peers. Those recently excluded from the list include:

CT Property Trust, acquired by LondonMetric in an all-share transaction announced in May 2023 and completed in August of that year. In December 2023, LondonMetric and LXi announced that they are in discussions regarding a possible all-share merger.

Ediston Property, which in September 2023 completed the sale of its entire portfolio following a strategic review that highlighted the constraints of the low market capitalisation.

Palace Capital, which is well-advanced with its strategy of maximising cash returns to shareholders, with a focus on asset disposals, while ‘remaining mindful of consolidation in the real estate sector’.

Circle Property, which has now de-listed following a managed liquidation of its portfolio.

Compared with its peer group, Picton shares trade at a lower P/NAV than the average and also at a lower trailing dividend yield, although unlike some peers, it has a fully covered dividend.6

  5 abrdn Property Income Trust reported cover of 0.80x for the three months to September 2023 and AEW UK REIT reported 0.92x over the same period.

Exhibit 6: Picton peer group comparison

Price
(p)

Market cap
(£m)

P/NAV
(x)*

Trailing yield (%)**

Share price performance

1 month

3 months

12 months

3 years

AEW UK REIT

96

152

0.90

8.3

-3%

-4%

-8%

22%

Balanced Commercial Property Trust

72

502

0.63

6.7

0%

9%

-20%

-5%

Custodian Property Income

85

376

0.89

6.5

0%

-3%

-8%

-4%

Schroder REIT

43

211

0.71

7.7

-6%

2%

-11%

12%

abrdn Property Income Trust

50

190

0.59

8.0

0%

0%

-26%

-16%

UK Commercial Property REIT

60

780

0.74

5.7

1%

8%

1%

-6%

Average

0.75

7.2

-2%

2%

-12%

1%

Picton Property Income

65

354

0.66

5.4

-5%

-3%

-20%

-20%

UK property sector index

1,339

-2%

13%

-6%

-15%

UK equity market index

4,134

0%

0%

-4%

9%

Source: Company data, Refinitiv prices at 16 January 2024 close. Note: *Based on last reported EPRA NAV/NTA. **Based on trailing 12-month DPS declared.

Exhibit 7: 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)

3.88

3.90

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%

1.8%

4.2%

4.4%

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

743.1

726.4

732.2

Investment properties

830.0

746.3

739.6

722.9

728.7

Other non-current assets

4.4

3.4

3.5

3.5

3.5

Current assets

61.4

42.8

41.8

47.1

45.5

Debtors

22.9

22.7

26.1

26.1

26.1

Cash

38.5

20.1

15.8

21.0

19.5

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

538.4

541.6

545.6

NAV per share (p)

120

100

99

99

100

EPRA NTA per share (p)

120

100

99

99

100

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)

16.6

(5.8)

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)

5.3

(1.5)

Opening cash

23.4

38.5

20.1

15.8

21.0

Closing cash

38.5

20.1

15.8

21.0

19.5

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)

(190.8)

(192.4)

Net LTV

21.2%

26.7%

27.8%

25.7%

25.7%

Source: Picton Property Income historical data, 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 Income. Edison Investment Research standard fees are £60,000 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 research department of Edison 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 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 Income. Edison Investment Research standard fees are £60,000 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 research department of Edison 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 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). 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

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

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.

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

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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