Net Asset Value(s)

24 April 2018  

PICTON PROPERTY INCOME LIMITED

(“Picton”, the “Company” or the “Group”)

LEI: 213800RYE59K9CKR4497

Net Asset Value as at 31 March 2018

Picton (LSE: PCTN), the property investment company, announces its Net Asset Value for the quarter ended 31 March 2018.

Highlights during the quarter included:

Continued NAV growth

• Net Assets increased to £487.4 million (31 Dec 2017: £477.4 million).
• NAV/EPRA NAV per share rose 2.1% to 90.4 pence (31 Dec 2017: 88.6 pence).
• Total return for the quarter of 3.1% (31 Dec 2017: 4.1%).
• Net gearing reduced to 26.7% (31 Dec 2017: 27.4%).

Dividend declared and improved cover

• Dividend of 0.875 pence per share declared and to be paid on 31 May 2018 (31 Dec 2017: 0.875 pence per share).
• Annual dividend equivalent to 3.5 pence per share, delivering a dividend yield of 4.0%, based on 20 April 2018 share price.
• Dividend cover for the quarter of 128% (31 Dec 2017: 126%).

Portfolio growth and improved occupancy

• Like-for-like increase in property portfolio valuation for the quarter of 1.4% (31 Dec 2017: 2.1%).
• Exchanged contracts to dispose of a non-core asset for £3.85 million, 5% ahead of the December valuation.
• Completed five lettings, nine lease renewals / regears and one rent review, on average 4.5% ahead of the December ERV, with a combined annual rent of £1.9 million.
• Occupancy increased to 96% (31 Dec 2017: 95%).

Nick Thompson, Chairman of Picton, commented: 

“Picton has had another good quarter and end to its financial year. We remain well placed, delivering further growth in net assets, strong dividend cover and having further reduced our gearing.”

Michael Morris, Chief Executive of Picton Capital, said:

“Our focus on leasing and tenant retention has been the main driver behind the increase in portfolio valuation during the period and our improvement in occupancy reflects this. We have also been helped by the weighting of our portfolio towards the industrial and office sectors, given the recent well publicised difficulties in the retail sector.”

This announcement contains inside information.

For further information:

Tavistock 
Jeremy Carey/James Verstringhe, 020 7920 3150, [e-mail]

Picton Capital Limited
Michael Morris, 020 7011 9980, [e-mail] 

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, [e-mail]

Note to Editors

Picton is a property investment company established in 2005.  It owns and actively manages a £684 million diversified UK commercial portfolio, invested across 51 assets and with around 360 occupiers (as at 31 March 2018). Through an occupier focused, opportunity led approach to asset management, Picton aims to be one of the consistently best performing diversified UK focused property companies listed on the main market of the London Stock Exchange.

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

NET ASSET VALUE

The unaudited Net Asset Value (‘NAV’) of Picton, as at 31 March 2018, was £487.4 million, reflecting 90.4 pence per share, an increase of 2.1% over the quarter:

		31 March 2018 £million	31 Dec 2017 £million	30 Sept 2017 £million
Investment properties *		674.5	665.3	652.1
Other assets		17.9	18.1	18.9
Cash		31.5	31.7	30.1
Other liabilities		(22.5)	(21.4)	(20.7)
Borrowings		(214.0)	(216.3)	(216.6)
Net Assets		487.4	477.4	463.8
Net Asset Value per share		90.4p	88.6p	85.9p

* 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 March 2018, including income for the quarter, but does not include a provision for the dividend this quarter, which will be paid in May 2018. The full year audited annual results are expected to be announced early in June 2018.

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

	Total	Movement	Per share
	£million	%	pence
NAV at 31 December 2017	477.4	-	88.6
Movement in property values	8.5	1.8	1.6
Net income after tax for the period	6.0	1.3	1.1
Dividends paid	(4.7)	(1.0)	(0.9)
Other	0.2	-
NAV at 31 March 2018	487.4	2.1	90.4

The next independent valuation of the property portfolio is scheduled for June 2018 and the unaudited NAV per share, as at 30 June 2018, will be announced in July 2018. 

DIVIDEND DECLARATION

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

Post-tax dividend cover over the quarter was 128% (31 Dec 2017: 126%). 

DEBT 

Total borrowings at 31 March 2018 were £214.0 million, with a weighted average interest rate of 4.1% and a weighted average debt maturity profile of approximately 10.3 years. 95% of the drawn debt is fixed under long term facilities, with the remainder at a flexible floating rate under the Company’s Revolving Credit Facilities (RCFs). Net gearing, calculated as total debt less cash, as a proportion of gross property value, was 26.7% (31 Dec 2017: 27.4%). 

The Company has a further £41 million available from its undrawn RCFs. 

PORTFOLIO UPDATE 

The portfolio valuation increased by 1.4% or £9.3 million, with the industrial sector delivering the strongest growth followed by the office sector. The retail and leisure sector valuation declined over the quarter as detailed below. The performance over the quarter can primarily be attributed to asset management and tenant retention, ERV growth and further yield compression on certain assets.

The sector weightings at 31 March 2018 and valuation movements over the quarter are shown below:

Sector	Portfolio weightings	Like for like valuation change
Industrial	41.2%	2.6%
South East	28.6%
Rest of UK	12.6%
Offices	35.9%	2.0%
London City and West End	4.1%
Inner and Outer London	8.5%
South East	10.9%
Rest of UK	12.4%
Retail and Leisure	22.9%	-1.6%
Retail warehouse	9.5%
High Street - Rest of UK	6.1%
High Street - South East	5.3%
Leisure	2.0%
Total	100%	1.4%

Occupancy has increased to 96%.

As at 31 March 2018, the portfolio had a net initial yield of 5.5% (allowing for void holding costs) or 5.6% (based on contracted net income) and a net reversionary yield of 6.6%. The weighted average unexpired lease term, based on headline rent, was 5.2 years. 

The top ten assets, which represent 49% 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
Tower Wharf, Bristol	Office	South West
Shipton Way, Rushden, Northants	Industrial	East Midlands
Pembroke Court, Chatham	Office	South East
Colchester Business Park, Colchester	Office	South East
Metro Building, Salford Quays, Manchester	Office	North West

Key highlights in the quarter included:

Industrial 

Three units were let at Easter Court in Warrington and Abbey Business Park in Belfast, securing £0.1 million per annum, 2% ahead of ERV. Both estates are now fully let.

In York, we surrendered a lease for a premium of £0.3 million and, in a back-to-back transaction, re-let the unit, extending the income for a further eight years at a stepped rent to £0.55 million per annum, 10% ahead of ERV.

At Datapoint, London E16, we removed a December 2019 break option securing the occupier for a further five years at a passing rent of £0.27 million per annum, which is subject to review in 2019. The estate remains fully let.

Office 

We let two floors totalling 19,100 sq ft at Tower Wharf in Bristol, generating rental income of £0.54 million per annum, which was 2% ahead of ERV. 90% of the building is now leased, leaving one final suite of 6,425 sq ft available.

At Colchester Business Park, we renewed a lease and secured a 26% uplift on the annual passing rent to £0.53 million, 2% ahead of ERV. The property is 98% let.

We have exchanged contracts to sell Merchants House in Chester for £3.85 million. The sale price reflects a net initial yield of 6.4% and a 5% premium to the December valuation. The sale is due to complete in June and a further top-up payment is due, as detailed in the announcement made on 29 March 2018.

Retail and Leisure

The retail and leisure sector valuation decreased by 1.6% during the quarter, generally reflecting prevailing adverse trading conditions in the retail sector.  The only direct consequence of various retailer failures was at our Peterborough asset where New Look entered into a Company Voluntary Arrangement (CVA). This has resulted in a drop in income (£0.2 million to £0.1 million) until October, after which the unit will come back to us.  We have already instructed leasing agents to re-market the unit.

MARKET BACKGROUND

According to the MSCI IPD Monthly Index, the All Property total return was 2.3% for the quarter to March 2018, compared to 3.4% for the previous quarter. 

Capital growth was 1.0% (December 2017: 2.0%) and rental growth was 0.4% for the quarter (December 2017: 0.6%). A more detailed breakdown is shown below:

IPD rental growth

		Number of IPD segments
	Quarterly growth	Positive growth	Negative growth
Industrial	0.9%	7	-
Office	0.4%	9	1
Retail	0.0%	10	10
All Property	0.4%	26	11

IPD capital value growth

		Number of IPD segments
	Quarterly growth	Positive growth	Negative growth
Industrial	3.0%	7	-
Office	0.7%	9	1
Retail	-0.2%	7	13
All Property	1.0%	23	14

*Source: MSCI IPD Monthly Digest, March 2018

ENDS