Principal Risks/Continued
Operational
9 People Risk
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.
Commentary The team has remained stable throughout the year with no leavers. Positive feedback was received from the employee engagement survey. Flexible working arrangements for the team have been maintained.
Risk trend
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.
Financial
10 Finance strategy Risk
Commentary The Group has mainly fixed rate
Risk trend
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.
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.
long-term borrowings in place. Covenants are monitored regularly and there is good headroom against these. The revolving credit facility has been extended for a further year until 2025.
11 Capital structure Risk
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 use of gearing has amplified the valuation movements this year, resulting in lower returns. However, the Group’s loan to value ratio remains low.
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.
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Picton Property Income Limited Annual Report 2023
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