Picton Property Income Limited Annual Report 2023

Strategic Report

Governance

Financial Statements

Additional Information

The following table reconciles the net asset value calculated in accordance with International Financial Reporting Standards (IFRS) with that of the European Public Real Estate Association (EPRA).

The early part of this financial year saw the UK economy continue to grow, and at 30 June 2022 our net asset value reached £670 million. However, the September mini-budget caused a significant shock to UK markets, with rising interest rates and bond yields impacting commercial property pricing. The negative capital growth between September and December was the largest ever quarterly movement recorded by MSCI. Our overall loss for the year was £90.0 million, comprising a negative valuation movement of £111.3 million and EPRA earnings of £21.3 million. This year, we have seen the reversal of some of the record valuation gains recorded in 2021/22. Our EPRA earnings, comprising the operating results and net interest expense were £21.3 million for the year, a small increase over the equivalent figure last year. As discussed below, rental income rose by 7.1% compared to 2022; however, this increase was largely offset by higher property operating and void costs. Commercial property values fell in the latter half of 2022 as interest rates and bond yields rose rapidly. Although we have seen valuation movements moderating in the first quarter of 2023, further interest rate rises may still have an adverse impact this year. Based on these results our total return for the year was -13.9%, compared to 28.3% for the year to 31 March 2022. Net asset value The net assets of the Group at 31 March 2023 were £547.6 million, or 100 pence per share, which was a fall of 16.7% over the year. The chart below shows the components of this decrease. £m March 2022 net asset value 657.1 EPRA earnings 21.3 Valuation movement (111.3) Share-based awards 0.7 Purchase of shares (1.1) Dividends paid (19.1) March 2023 net asset value 547.6

2023 £m

2022 £m

2021 £m

547.6

Net assets – IFRS and EPRA net tangible asset value

657.1 528.2

22.8

Fair value of debt

(6.7)

(21.0)

570.4

EPRA net disposal value

650.4 507.2

100 100 105

Net asset value per share (pence)

120 120 119

97 97 93

EPRA net tangible asset value per share (pence) EPRA net disposal value per share (pence)

Income statement The result for the year is dominated by the adverse valuation movement at the end of 2022 as property yields moved out. However, EPRA earnings were stable, with increased rental income largely offset by increased property costs. Total revenue from the property portfolio for the year was £51.8 million, up from £46.5 million last year. Rental income has increased by 7.1% compared to 2022, as a result of the impact of new acquisitions over the full year, as well as rental growth. Property operating and void costs have shown a marked increase this year, from £4.9 million to £7.1 million. This is partly the result of the higher vacancy rate, but also demonstrates the impact of inflation and higher costs over the past year. Administrative expenses, however, only increased by a small amount, £0.2 million, or 3.5%, to a little under £6.0 million. Staff costs were broadly in line with the previous year, while some one- off costs incurred this year increased other corporate expenses. Interest and other finance costs have increased from £8.5 million to £9.0 million. This is partly due to the additional interest on the increased Canada Life facility, which completed in March 2022. This transaction also extended the facility to 2031, reduced the interest rate to 3.25% and enabled us to repay most of the revolving credit facility.

95% of our borrowings are at fixed rates and do not mature until 2031/32. This year we have drawn down further under our revolving credit facility to finance acquisitions. Although only a relatively small element of our total borrowings, the interest rate on our revolving credit facility has increased from 2.3% in March 2022 to its current rate of 5.8%. The negative capital movement on the portfolio was £111.3 million for the year, including the movement on owner-occupied property. The industrial sector saw the largest movement, especially where yields were lowest.

 Picton Property Income Limited  Annual Report 2023

39

Powered by