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Principal Risks / Continued
Operational
9 People
Commentary The Group’s Finance Director retired at the end of March, and there has been a transition period with his successor. The Group’s company secretarial function has been brought in-house. Feedback from the employee engagement survey remained positive.
Risk trend
Risk The Group relies on a small team to implement the strategy and run the day-to-day operations. Failure to retain or recruit key individuals with the right blend of skills and experience may result in poor decision making and underperformance.
Mitigation The Board has a remuneration policy in place which incentivises performance and is aligned with shareholders’ interests. All employees receive an annual performance appraisal, including training and development needs. There is a Non-Executive Director responsible for employee engagement who provides regular feedback to the Board.
Financial
10 Finance strategy Risk The Group has a number of loan facilities to finance its activities. Failure to comply with covenants or to manage refinancing events could lead to a funding shortfall for operational activities.
Mitigation The Board reviews financial forecasts for the Group on a regular basis, including sensitivity against financial covenants. The Group’s property assets are valued quarterly by an independent valuer with oversight by the Property Valuation Committee. Market commentary is provided regularly by the independent valuer. The Audit and Risk Committee considers the going concern status of the Group biannually. Mitigation The Board regularly reviews its gearing strategy and debt maturity profile, at least annually, in light of changing market conditions. The Group has a revolving credit facility in place which can be repaid if required to reduce the level of gearing.
Commentary The Group has mainly fixed rate
Risk trend
long-term borrowings in place with maturities in 2031 and 2032. Covenants are monitored regularly and there is good headroom against these. The revolving credit facility does not mature until 2025.
11 Capital structure Risk
Commentary Following asset sales the Group’s revolving credit facility has been fully repaid subsequent to the year-end. As a result the Group’s loan to value ratio has reduced.
Risk trend
The Group operates a geared capital structure, which magnifies returns from the portfolio, both positive and negative. An inappropriate level of gearing relative to the property cycle could lead to lower investment returns.
Picton Property Income Limited / Annual Report 2024 46
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