Picton Property Income Ltd - Net Asset Value and Corporate Update

PR Newswire

24 January 2018

PICTON PROPERTY INCOME LIMITED
(“Picton”, the “Company” or the “Group”)
LEI: 213800RYE59K9CKR4497

Net Asset Value as at 31 December 2017 and Corporate Update

Picton (LSE: PCTN), the property investment company, announces its Net Asset Value for the quarter ended 31 December 2017.

Highlights during the quarter included:

Continued NAV growth

  • Increase in Net Assets to £477.4 million (30 Sept 2017: £463.8 million).
  • NAV/EPRA NAV per share rose 3.1% to 88.6 pence (30 Sept 2017: 85.9 pence).
  • Total return for the quarter of 4.1% (30 Sept 2017: 3.5%).
  • Reduction in net gearing to 27.4% (30 Sept 2017: 28.2%).

Improved dividend cover

  • Increased quarterly dividend of 0.875 pence per share declared (30 Sept 2017: 0.85 pence per share) - see separate announcement of today’s date.
  • Annual dividend equivalent to 3.5 pence per share, delivering a dividend yield of 4.0%, based on 22 January 2018 share price.
  • Dividend cover for the quarter of 126% (30 Sept 2017: 119%).

Portfolio growth and stable occupancy

  • Like-for-like increase in property portfolio valuation for the quarter of 2.1% (30 Sept 2017: 1.9%).
  • Completed the disposal of one non-core asset for £0.6 million, in line with the September valuation.
  • Completed five lettings, seven rent reviews and five lease renewals, securing additional annual income of £0.26 million, on average 1.9% ahead of the September ERV.
  • Occupancy maintained at 95% (30 Sept 2017: 95%).

Nick Thompson, Chairman of Picton, commented:

“The Company has concluded 2017 strongly as we have continued to deliver robust NAV growth, increased our dividend to shareholders, improved dividend cover and reduced gearing.  We are well placed as we start 2018 and finalise plans to enter the UK REIT regime.”

Michael Morris, Chief Executive of Picton Capital, said:

“We are pleased with these results, having maintained occupancy and delivered good portfolio valuation growth, particularly in the industrial sector.  Encouragingly, post quarter end we have also got off to a busy start with a double letting success at our recent Bristol acquisition.”


This announcement contains inside information.

For further information:

Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150, james.verstringhe@tavistock.co.uk

Picton Capital Limited
Michael Morris, 020 7011 9980, michael.morris@picton.co.uk

The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL

Andy Le Page, 01481 745 001, team_picton@ntrs.com

Note to Editors

Picton is a property investment company established in 2005.  It owns and actively manages a £674 million diversified UK commercial portfolio, invested across 51 assets and with around 350 occupiers (as at 31 December 2017). Through an occupier-focused, opportunity-led approach to asset management, Picton aims to be one of the consistently best performing diversified UK property companies listed on the main market of the London Stock Exchange.

For more information please visit: www.picton.co.uk

NET ASSET VALUE

The unaudited Net Asset Value (‘NAV’) of Picton, as at 31 December 2017, was £477.4 million, reflecting 88.6 pence per share, an increase of 3.1% over the quarter:

                                                31 Dec 2017
£million
30 Sept 2017
£million
30 June 2017
£million
Investment properties * 665.3 652.1 626.5
Other assets 18.1 18.9 17.9
Cash 31.7 30.1 32.9
Other liabilities      (21.4) (20.7) (20.4)
Borrowings (216.3) (216.6) (204.4)
Net Assets 477.4 463.8 452.5
Net Asset Value per share 88.6p 85.9p 83.8p

* The investment property valuation is stated net of lease incentives.

The NAV attributable to the ordinary shares is calculated under IFRS and incorporates the independent market valuation as at 31 December 2017, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in February 2018.

During the quarter the Company’s Employee Benefit Trust acquired 1,070,000 ordinary shares to satisfy future vesting of awards made under the Long-term Incentive Plan. These shares have been excluded in the above calculation of net asset value per share.

The movement in Net Asset Value can be summarised as follows:

Total Movement Per share
£million % pence
NAV at 30 September 2017 463.8 85.9
Movement in property values 13.2 2.8 2.5
Net income after tax for the period 5.8 1.3 1.1
Dividends paid (4.6) (1.0) (0.9)
Other (0.8) - -
NAV at 31 December 2017 477.4 3.1 88.6

The next independent valuation of the property portfolio is scheduled for March 2018 and the unaudited NAV per share, as at 31 March 2018, will be announced in April 2018.

DIVIDEND DECLARATION

A separate announcement has been released today (24 January 2018) declaring a dividend of 0.875 pence per share in respect of the period 1 October 2017 to 31 December 2017 (1 July 2017 to 30 September 2017: 0.85 pence).

Post-tax dividend cover over the quarter was 126% (30 Sept 2017: 119%).

DEBT

Total borrowings at 31 December were £216.3 million, with a weighted average interest rate of 4.1% (94% fixed) and a weighted average debt maturity profile of approximately 10.5 years. Net gearing, calculated as total debt less cash, as a proportion of gross property value, was 27.4% (30 Sept 2017: 28.2%).

The Company has a further £39 million available from its undrawn revolving credit facilities.

REIT CONVERSION

In 2018, the Company intends to bring forward proposals to enter the UK REIT regime as set out in the 2017 Half Year Report. This follows the changes to the taxation of non-resident landlord companies announced in the November Budget. At the same time it will seek to change its technical listing status to that of a commercial company.

It is expected that following publication of the Company’s audited full year results in June, it will seek shareholder consent at a General Meeting with a view to effect the changes by 1 October 2018.

PORTFOLIO UPDATE

The portfolio valuation increased by 2.1% or £13.6 million, with the industrial sector delivering the strongest growth followed by the office sector. The retail and leisure sector valuation saw a modest decline over the quarter. Performance over the quarter primarily came from asset management and tenant retention, ERV growth and further yield compression on certain assets.

The portfolio consisted of 51 assets with an average lot size of £13.2 million, 4% higher than September.  The sector weightings at 31 December 2017 and valuation movements over the quarter are shown below:

Sector Portfolio
weightings
Like for like valuation change
Industrial 40.7% 3.5%
South East 28.1%
Rest of UK 12.6%
Offices 35.7% 2.2%
London City and West End 4.1%
Inner and Outer London 8.8%
South East 10.7%
Rest of UK 12.1%
Retail and Leisure 23.6% -0.5%
Retail warehouse 9.6%
High Street - Rest of UK 6.6%
High Street - South East 5.4%
Leisure 2.0%
Total 100% 2.1%

Occupancy remained unchanged at 95%.

As at 31 December 2017, the portfolio had a net initial yield of 5.7% (allowing for void holding costs) or 5.8% (based on contracted net income) and a net reversionary yield of 6.7%. The weighted average unexpired lease term, based on headline rent, was 5.2 years.

The top ten assets, which represent 48% of the portfolio by capital value, are detailed below.

Asset Sector Location
Parkbury Industrial Estate, Radlett Industrial South East
River Way Industrial Estate, Harlow Industrial South East
Angel Gate Office Village, City Road, EC1 Office London
Stanford House, Long Acre, WC2 Retail London
50 Farringdon Road, EC1 Office London
Shipton Way, Rushden, Northants Industrial East Midlands
Tower Wharf, Bristol Office South West
Pembroke Court, Chatham Office South East
Colchester Business Park, Colchester Office South East
Parc Tawe North, Swansea Retail Warehouse Wales

Key highlights in the quarter included:

Industrial

We settled seven rent reviews, 2% ahead of ERV, at units in Bracknell, Epsom, Luton, Radlett and York, increasing the annual passing rent by £0.11 million or 17%.

At Datapoint, London E16, following a lease surrender in August we re-let the unit without any capital expenditure, securing a 55% uplift on the previous passing rent to £0.12 million per annum, 1% ahead of ERV.

Two leases were renewed in Epsom and Luton at a combined rent of £0.12 million per annum, 10% ahead of the previous passing rent and in line with ERV.

Office

The disposal of a non income producing asset in Belfast completed for £0.6 million, the sale price in line with the September valuation and 35% ahead of the June valuation.

At Colchester Business Park we secured an occupier on renewal and let a small suite at a combined rent of £57,000 per annum, 11% ahead of ERV.

Retail and Leisure

The Crown & Mitre complex in Carlisle is now fully let having expanded an occupier into an adjoining unit and securing a new ten year lease at a rent of £66,000 per annum, 1% ahead of ERV. In addition we let a further small vacant unit at the property in line with ERV.

We renewed a lease at Scots Corner in Kings Heath, Birmingham for a further ten years, at a rent of £36,000 per annum, 2% ahead of ERV.

MARKET BACKGROUND

According to the MSCI IPD Monthly Index, the All Property total return was 3.4% for the quarter to December 2017, compared to 2.7% for the previous quarter. Capital growth was 2.0% (September 2017: 1.3%) and rental growth was unchanged from the previous quarter at 0.6% (September 2017: 0.6%).

IPD quarterly growth*

IPD Sectors Rental value Capital value
Industrial 1.3% 5.0%
Office 0.5% 1.3%
Retail 0.1% 0.6%

Number of IPD segments with positive growth*

Rental value Capital value
Industrial 7 7
Office 8 10
Retail 12 14

Number of IPD segments with negative growth*

Rental value Capital value
Industrial - -
Office 2 -
Retail 8 6

*Source: MSCI IPD Monthly Digest, December 2017

ENDS