Financial Statements
Strategic Report
Governance
Additional Information
25. Risk management/ Continued Market risk
The Group’s activities are primarily within the real estate market, exposing it to very specific industry risks. The yields available from investments in real estate depend primarily on the amount of revenue earned and capital appreciation generated by the relevant properties, as well as expenses incurred. If properties do not generate sufficient revenues to meet operating expenses, including debt service costs and capital expenditure, the Group’s operating performance will be adversely affected. Revenue from properties may be adversely affected by the general economic climate, local conditions such as oversupply of properties or a reduction in demand for properties in the market in which the Group operates, the attractiveness of the properties to occupiers, the quality of the management, competition from other available properties and increased operating costs. In addition, the Group’s revenue would be adversely affected if a significant number of occupiers were unable to pay rent or its properties could not be rented on favourable terms. Certain significant expenditure associated with investment in real estate (such as external financing costs and maintenance costs) is generally not reduced when circumstances cause a reduction in revenue from properties. By diversifying in regions, sectors, risk categories and occupiers, senior management expects to mitigate the risk profile of the portfolio effectively. The Board continues to oversee the profile of the portfolio to ensure risks are managed. The valuation of the Group’s property assets is subject to changes in market conditions. Such changes are taken to the Consolidated Statement of Comprehensive Income and thus impact on the Group’s net result. A 5% increase or decrease in property values would increase or decrease the Group’s net result by £38.3 million (2022: £42.5 million). Interest rate risk management Interest rate risk arises on interest payable on the revolving credit facility only. The Group’s senior debt facilities have fixed interest rates over the terms of the loans. The amount drawn under the revolving credit facility makes up a small proportion of the overall debt, the Group therefore has limited exposure to interest rate risk on its borrowings and no sensitivity is presented. Interest rate risk The following table sets out the carrying amount, by maturity, of the Group’s financial assets/(liabilities).
More than 5 years £000
1 to 5 years £000
Less than 1 year £000
Total £000
31 March 2023
Floating Cash and cash equivalents Secured loan facilities Fixed Secured loan facilities Obligations under leases
20,050
–
– –
20,050 (11,900)
–
(11,900)
(1,433) (114) (6,401) (204,733) (212,567) (2,697) 18,503 (18,706) (206,911) (207,114) (405) (2,178)
More than 5 years £000
1 to 5 years £000
Less than 1 year £000
Total £000
31 March 2022
Floating Cash and cash equivalents Secured loan facilities Fixed Secured loan facilities Obligations under leases
38,547
–
– –
38,547 (4,900)
–
(4,900)
(1,372)
(6,127) (206,436) (213,935)
(114) (2,707) 37,061 (11,437) (208,619) (182,995) (410) (2,183)
Picton Property Income Limited Annual Report 2023
153
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