Chief Executive’s Review continued
Capital structure We have recently completed the refinancing of one of our long-term debt facilities, which not only increases the maturity by four years until 2031, but also reduces the overall interest rate. As part of the same transaction, we increased our borrowings by £49 million, which has allowed us to repay most of our revolving credit facility and gives us future financial flexibility. Recognising the asset value growth over the period, the loan to value ratio remained stable at the year-end at 21%. Growth and economies of scale We have seen growth this year in two forms: firstly, the valuation growth from the portfolio, which with the use of gearing has increased net assets and secondly, through acquisitions. We have made £25 million of acquisitions, which are earnings accretive, although during the period we have been impacted by stamp duty and other transaction costs. Within our Interim results, we expressed a desire to grow and highlighted the wide discounts across the listed REIT sector, as well as some of the challenges in the UK real estate open ended sector, which are still prevalent. While we have not yet concluded any transactions, we have been proactive in our dialogue with suitable prospects. We will continue to advocate for change, but remain selective to ensure enhanced future performance. Acting responsibly Values and alignment Ultimately, the performance of the business is delivered by those who work here. Having a small team means that we are able to operate quickly and efficiently with clear objectives that are aligned to remuneration. Our values of being principled, progressive and perceptive have guided us through the challenges of this year. We have broadened our team objectives and asked everyone, irrespective of their role, to help to reduce our impact on the environment. Working closely with our occupiers We have spent much of this year focused on a return to normal working practices, as have our occupiers. We have worked with many occupiers to help them rightsize their business. This has enabled us to retain income and de-risk future lease events. We have undertaken 12 transactions where we have extended leases or enabled occupiers to remain in our buildings. 24.3% Total property return 28.3% Total return
One of the advantages of our diversified approach is our ability to position the portfolio as market conditions dictate.
Michael Morris Chief Executive
Operational excellence Efficient platform
We continue to run the business as efficiently as possible and have maintained our cost ratio at 1.0%. We have a small but very dedicated team and use external resource as appropriate. We are not immune from rising costs and it is clear that sustainability focused measures will add to both our workload and costs. We expect to recruit further this year to support our transition to net zero carbon. Adaptable business model One of the advantages of our diversified approach is our ability to position the portfolio as market conditions dictate. As returns become more convergent we are looking more widely across sectors. During the year we acquired two adjoining city centre industrial estates, off attractive pricing. Our most recent acquisition post period end was an office and retail asset in London. This year we introduced SwiftSpace, our flexible lease offering, in response to changes in occupier demand, particularly as we face increased competition from serviced office providers. Our solution provides fast, flexible, inclusive leases, which we are offering in our smaller multi-let offices. Earnings growth Our earnings per share of 27.0p are significantly higher than the preceding year, reflecting the growth in the portfolio value. Our EPRA earnings are 5.5% higher reflecting the enhanced income position.
Picton Property Income Limited Annual Report 2022
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