Quarterly Report • Sep 30, 2014
Quarterly Report
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| Who We Are | 2 |
|---|---|
| Financial and Operational Highlights | 3 |
| Chairman's Statement | 5 |
| Investment Manager's Report | 6 |
| Directors' Responsibilities | 10 |
| Condensed Consolidated Statement of Comprehensive Income | 11 |
| Condensed Consolidated Statement of Changes in Equity | 12 |
| Condensed Consolidated Balance Sheet | 13 |
| Condensed Consolidated Statement of Cash Flows | 14 |
| Notes to the Condensed Consolidated Financial Statements | 15 |
| Independent Review Report | 21 |
| Shareholder Information | 22 |
Picton Property Income Limited is an income focused, internally managed investment company listed on the London Stock Exchange.
The Company's investment objective is to provide shareholders with an attractive level of income, together with the potential for capital growth, by investing in the principal UK commercial property sectors.
Picton has a portfolio of UK commercial
property valued at £493.3 million, comprising 59 assets with around 390 occupiers.
The sector and geographic weightings are set out below. Further information is provided in the Investment Manager's Report.
| Total return of 13.3% for the period |
Gains on investment properties of £24.8 million |
Raised £35 million of new equity in May 2014 as part of a £100 million |
|---|---|---|
| 28% increase in net | placing programme | |
| assets to £273.7 million |
Dividend cover of 114% | |
| for the period | Reduction in loan to | |
| Increase in EPRA net | value ratio to 43.2% | |
| asset value of 10.5% over the period to 62.3 |
EPRA earnings per share of 1.6 pence |
|
| pence per share | ||
| Profit after tax of £31.8 million for the period |
Dividends paid of £6.1 million, or 1.5 pence per share |
Occupancy rate increased to 94% from 91% at 31 March 2014
Like-for-like growth in property portfolio valuation of 6.8% over the period
36 lettings completed during the period securing £1.9 million per annum, before incentives
10 lease renewals and re-gears retaining £0.4 million per annum
£2.3 million invested in refurbishment projects across the portfolio
Acquisition of three new assets for £42.7 million, generating £3.2 million of additional income per annum
Disposal of small office building for proceeds of £0.4 million
Increase in portfolio average lot size to £8.4 million
I am pleased to present our interim results for the six months to 30 September 2014, which I believe demonstrate the success that Picton has achieved in the context of an improving commercial property market. There has been considerable portfolio activity, as detailed further within this report, which demonstrates that our occupier focused, opportunity led approach has continued to deliver positive results for shareholders.
The Company's total profit for the six month period was £31.8 million, comprising capital gains of £24.8 million and an income profit of £7.0 million. The income profit was 11% ahead of the equivalent result for last year. This was achieved through significant active management of the portfolio, with increased occupancy and the investment of the proceeds from the placing programme into good quality income producing assets. Dividend cover was 114% for the period which, together with the valuation gains, helped deliver a 10.5% increase in net asset value to 62 pence per share.
The Group's total return for the six months to 30 September was 13.3%. This resulted from the strong valuation gains across the portfolio, enhanced by the gearing in place.
The Company paid two dividends during the period, each of 0.75 pence per share, totalling £6.1 million. The dividend yield, based on the closing share price at 30 September, was 4.7%.
The Company's shares continue to trade at a modest premium to net asset value. As a result the shareholder total return, based on the movement in the share price plus dividends paid, was 15.5% for the period.
The strong valuation gains contributed to a total property return of 8.9% in the six months to 30 September, as calculated by IPD, comprising 5.7% capital gain and 3.1% of income return.
We have continued to improve occupancy within the portfolio, which was 94% at 30 September compared with 91% at 31 March. Rental income totalled £16.2 million, 3.8% ahead of the equivalent period in 2013. The asset management team has also completed a significant number of lettings, adding nearly £2 million of additional annual income. Subsequent to the period end the majority of the available space at Citylink in Croydon, the largest vacancy in the portfolio, has been let. This vacancy accounted for 22% of the total void at 30 September. The asset management activity is discussed in more detail in the Investment Manager's Report.
During the period we have invested nearly £43 million into the property market, acquiring two industrial assets in the East Midlands and a retail unit in Peterborough. One small disposal has been completed, continuing our strategy of re-shaping the portfolio. As a result the average lot size of the portfolio has increased by 13% to £8.4 million.
The portfolio valuation, before adjustments for lease incentives, has risen from £423 million to £493 million at 30 September. On a like-for-like basis (excluding acquisitions and disposals) this represents an increase of 6.8%, in part reflecting the asset management activity, lettings successes and tenant retention, as well as positive movements in the market.
The Company raised £35 million in a placing and open offer in May, which was oversubscribed and supported by both existing and new shareholders. The proceeds raised have now been fully invested, in the assets mentioned above, as well as in refurbishment projects across the existing portfolio, such as at Citylink in Croydon, in order to provide high quality space that will be attractive to occupiers.
It is the intention of the Board to continue with the placing programme as market conditions allow and as attractive real estate opportunities are identified in the coming months.
Over the period net assets have grown by 28% to £274 million, while the Group's market capitalisation has risen to over £280 million at 30 September, providing greater liquidity in the Company's shares for investors. As net assets grow the benefits of the internalised structure are increasingly apparent, with a reduction in the relative cost of running the business.
The Group's borrowings have remained in place throughout the period, and the low fixed interest rates have contributed to the strong positive total return. The overall loan to value ratio, based on net gearing, reduced to 43% from 48% at 31 March, as a result of the increase in the portfolio valuation and the new equity invested.
We have undertaken an external evaluation of the Board over the summer, using Trust Associates who have carried out previous such evaluations for us, and will be implementing any relevant recommendations in the coming months.
I would also like to thank shareholders on behalf of the Board for passing all the resolutions at the annual general meeting held on 12 November.
Picton is operating in better and more stable markets than we have experienced for some time and this, we believe, is set to continue as the UK economic recovery maintains momentum. We are increasingly seeing property transactions completing ahead of both capital and rental values and believe on balance that valuation risks to the portfolio remain on the upside.
Notwithstanding this positive outlook, we are not complacent. As we approach an election year and with a less certain global outlook, both the Board and the wider Picton team remain committed to ensuring we build on the continued success of this period.
Nicholas Thompson Chairman 17 November 2014
At 30 September 2014, the portfolio comprised 59 assets valued at £493.3 million, reflecting a net initial yield, based on contracted income, of 6.4%. The estimated rental value of the portfolio was £37.7 million, with a net reversionary yield of 7.3%.
| Sector | Value £m | % | Annual Income £m | Occupancy % | No. of Assets |
|---|---|---|---|---|---|
| Ind ustrial |
208.3 | 42 | 15.2 | 98 | 19 |
| Offic e |
155.2 | 32 | 10.4 | 86 | 21 |
| Retail and leisure |
129.8 | 26 | 8.3 | 98 | 19 |
| Total Portfolio | 493.3 | 100 | 33.9 | 94 | 59 |
Annual income above represents the contracted rent passing at the Balance Sheet date and therefore excludes leases in rent free periods. At 30 September 2014, £1.1 million of annual income was in rent free periods.
As at 30 September 2014, based as a percentage of current annual income, the weighted average lease length to first termination was 6.4 years.
The largest assets in the portfolio as at 30 September 2014, ranked by capital value, represent just under 50% of the total portfolio valuation and are detailed below.
| Asset | Sector | Location |
|---|---|---|
| Parkbury Ind ustrial Estat e, Radl ett, Herts. |
Industrial | South East |
| Riv er Way Ind ustrial Estat e, Ha rlow , Ess ex |
Industrial | South East |
| Stanfo rd Ho use, Long Acre, London WC2 |
Retail | London |
| Ang el Gate Offic e Villag e, City Road , london ec1 |
Office | London |
| 50 Farringdon Road , London EC1 |
Office | London |
| Bo unda ry Ho use, Jewry Street, London EC3 |
Office | London |
| Shipton Way, Rushden, Northants |
Industrial | East Midlands |
| Phase II Parc Taw e, Swans ea |
Retail Warehouse | Wales |
| Colc hester Busin ess Park, Colc hester, Ess ex |
Office | South East |
| 1-3 Chanc ery Lan e, London WC2 |
Office | London |
A full portfolio listing is available on the Company's website, www.pictonproperty.co.uk.
The top ten occupiers, based as a percentage of annualised contracted rental income, after lease incentives, as at 30 September 2014, is summarised as follows:
| Occupier | % |
|---|---|
| Belkin Limited |
4.5 |
| DHL Suppl y Chain Limited |
3.7 |
| Sno rkeL europ e Limited |
2.8 |
| The Rando m Ho use Group Limited |
2.7 |
| Cad enc e Design Systems Limited |
2.7 |
| Trainlin e.co m Limited |
2.3 |
| Edwa rd Stanfo rd Limited |
1.8 |
| Rico h UK Limited |
1.8 |
| Vigl en Limited |
1.7 |
| Asda Stores Limited |
1.6 |
| Total | 25.6 |
In the six months to September, we have improved the occupancy rate from 91% to 94% and have concluded 36 lettings, adding £1.9 million per annum following incentives, on average 4.7% above estimated rental value. Ten leases were renewed securing more than £430,000 per annum, on average 3% above estimated rental value. One occupier break option was removed securing £42,000 per annum and seven leases were surrendered to facilitate asset management initiatives.
Our core focus remains enhancing both income and value within the property portfolio. This is achieved through maintaining and growing income, reducing costs and
completing business plans to add value through active management.
In the six months to September 2014, the property portfolio delivered a total return of 8.9%, as calculated by IPD. This was driven by an income return of 3.1%, reflecting the income bias of the portfolio and was ahead of the IPD Quarterly Benchmark of 2.6%. Capital growth was 6.8% on a like-for-like basis, or 5.7% including capital expenditure incurred during the period. This compares with the IPD Benchmark of 6.6% and reflects lower capital growth in the retail and industrial sectors. Overall the IPD Quarterly Benchmark delivered a total return of 9.3%.
The strongest uplift in capital growth was in the office sector at 12%, driven by central
London assets, followed by industrial at 6.8%, retail warehouse at 3.4%, leisure at 1.1% and retail at 0.5%. The portfolio also recorded 1.8% like-for-like rental growth as further detailed in the table below, which is above the 1.5% recorded in the IPD Quarterly Digest for the six months to September.
One small non-core property was sold and three properties were acquired, including two distribution units in the East Midlands for £31.5 million and a prime retail block in Peterborough for £9.1 million, before costs. The purchases reflect our strategy of buying larger lot sizes where we see added value opportunities and these transactions are detailed further below.
| Capital Value Growth % | Rental Value Growth % | Capital Value £psf | |
|---|---|---|---|
| Ind ustrial : |
6.8 | 2.3 | 75 |
| greater London | 4.9 | 5.8 | 125 |
| so uth east |
6.7 | 1.5 | 102 |
| rest of uk |
7.8 | 2.9 | 50 |
| Offic es: |
11.7 | 3.5 | 185 |
| Central London | 14.7 | 7.8 | 449 |
| Rest of UK |
7.7 | 0.0 | 102 |
| Retail | 0.5 | -3.2 | N/A |
| Retail Warehouse |
3.4 | 0.0 | 173 |
| Leisure | 1.1 | -0.2 | 203 |
| Total | 6.8 | 1.8 | N/A |
Source – Based on CBRE Valuation, prior to capital expenditure.
The central London assets have continued to perform strongly and we have quickly let those properties which have been refurbished.
24 Angel Gate, London EC1 was comprehensively refurbished creating light flexible office space and was let, prior to the refurbishment completing, at a rent of £216,200 per annum, some 50% ahead of the previous estimated rental value and setting a new rental tone of £36 per sq ft on the estate. Six further lettings have taken place at the property, generating additional annual income of £264,200 per annum. The property is now fully let, with the exception of 28 Angel Gate, which is being refurbished in a similar style to number 24, with the works due to complete by the end of this year.
A suite at Boundary House, London EC3 was previously surrendered where the occupier was paying a rent of £23 per sq ft. This suite was lightly refurbished and re-let at £36.50 per sq ft, over 50% ahead of the previous agreed rent and 12% ahead of the estimated rental value in March. Two further vacant suites were refurbished and let at a combined rent of £252,220 per annum, 4% above estimated rental value. A new rental tone for the property has been set and it is now fully let.
Elsewhere, at Queens House in Glasgow there has been an upturn in demand for the office suites, allowing us to complete five lettings at a combined rent of £71,400 per annum. A comprehensive refurbishment of the common areas has just completed and we have further interest in the vacant suites. We have re-geared the lease of an office
building at Colchester Business Park let to an international law firm, extending it to 2024 at an initial rent of £151,500 per annum, with a minimum increase at review in 2019 to £202,000 per annum.
Following the period end, we obtained a resolution to grant planning permission for a foodstore and outline planning for a 70 unit residential scheme at Westlea Campus in Swindon. Once the process is completed, Aldi will purchase the land for the foodstore for £1.65 million under an agreement entered into in March 2014. The remaining 4.4 acre site will be marketed to specialist residential developers.
As at 30 September the largest void within the portfolio was at Citylink in Croydon, which has undergone a substantial refurbishment this year, providing Grade A space opposite East Croydon station. Again, following the end of the period we have concluded the letting of the majority of the space to BPP, at a rent of £521,000, which is in line with the estimated rental value.
The Group's small office property at Dartford was sold during the period for £0.4 million, in line with valuation and following our strategy of disposing of smaller assets.
The Group acquired a 335,000 sq ft distribution warehouse in Grantham, Lincolnshire for £11.5 million. This property has good access to the UK road network, located immediately adjacent to the A1 arterial route. The property is let to The Random House Group Limited for just under nine years and currently produces an annual rent of £1 million, equivalent to just under £3 per sq ft. The purchase price represents a net initial yield of 8.2% and capital value of £34 per sq ft.
In addition, we acquired a 312,000 sq ft modern warehouse building in Rushden, Northamptonshire for £20 million, again with good transport links. The property is let to Belkin Limited until 2020 and currently produces an annual rent of £1.6 million, equivalent to £5.21 per sq ft. The purchase price represents a net initial yield of 7.7% and a capital value of £64 per sq ft.
At Parkbury Industrial Estate, Radlett, which was acquired in March 2014 and is the Group's largest asset, we have completed both the re-branding of the estate and the improvement works to the common areas. Two units at the property, which had been vacant since construction in 2009, have now been let for a combined rent of £218,000 per annum. A further unit, which became vacant in April, was subsequently re-let in July for £107,000 per annum. There is now only one vacant unit on the estate, which came back in June, and terms have been agreed, subject to contract, to let it to a national retailer. Overall the lettings have been 6% ahead of the estimated rental value on purchase.
During the period we completed a letting to Toolstation at Nonsuch Industrial Estate, Epsom following a surrender and subsequent combination of two units to fulfil their space requirements, in line with our objective of creating a trade park at this property. There is strong demand for space at the estate with the one remaining vacant unit under offer to an existing occupier.
Other notable lettings were completed during the quarter at Luton, Middleton, Warrington and Wokingham, all ahead of estimated rental value.
In September, the Group acquired a freehold city centre retail property in Peterborough for £9.1 million, reflecting a net initial yield of 6.5%. The property, which totals 89,000 sq ft, comprises two prime high street retail units with significant frontage to pedestrianised Bridge Street, and is let to TK Maxx and New Look until 2020 and 2021 respectively. It produces an annual rent of £625,000, reflecting a low average overall rent of £7.00 per sq ft, which is subject to review in 2015 and 2016.
During the period we received planning permission to combine four vacant retail units into one in Carlisle. Following this we completed a letting to toy shop chain The Entertainer for 12 years at £65,000 per annum. Also at this property we agreed
the June 2013 rent review on the Crown and Mitre Hotel, which increased the rent by £25,500 to £137,500 per annum, representing a 23% increase.
In respect of the Luton hotel property, we are pursuing the guarantor to the occupational lease through legal action which we expect to be resolved in 2015. In the interim this has had an adverse effect on both valuation and income.
In September Phones 4u at Broadmead, Bristol went into administration and vacated the unit, which is now being marketed. This, along with two restaurants at Regency Wharf in Birmingham and a ground floor unit in Southampton, forming part of a small office building, are the only available units within this part of the portfolio.
Elsewhere in the portfolio, we have surrendered a temporary occupational lease and re-let a unit in Huddersfield at a rent of £42,500 per annum, 6% ahead of estimated rental value. This has improved the occupier line up, with Savers Health & Beauty joining Peacocks and Argos at the property. In Stockport, a unit which became vacant in March this year is now let to British Heart Foundation on a five year lease at £75,000 per annum, slightly below estimated rental value. The property is fully let, the other occupier being The Entertainer.
The Company's assets comprise direct investments in UK commercial property. Its principal risks are therefore related to the commercial property market in general and its investment properties. Other risks faced by the Company include economic, investment and strategic, regulatory, management and control, operational, and financial risks. These risks, and the way in which they are managed, are described in more detail under the heading 'Risk Management' within the Strategic Report in the Company's Annual Report for the year ended 31 March 2014. The Company's principal risks and uncertainties have not changed materially since the date of that report.
We confirm that to the best of our knowledge:
remaining six months of the year, and their impact on the condensed set of consolidated financial statements; and
c) the Chairman's Statement together with the condensed set of consolidated financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
By Order of the Board Robert Sinclair Director 17 November 2014
| 6 months ended 30 September 2014 unaudited |
6 months ended 30 September 2013 unaudited |
Year ended 31 March 2014 audited |
||||
|---|---|---|---|---|---|---|
| For the period from 1 April 2014 to 30 September 2014 | Note | Income £000 |
Capital £000 |
Total £000 |
Total £000 |
Total £000 |
| Income | ||||||
| Revenue from properties | 3 | 18,662 | - | 18,662 | 18,309 | 36,749 |
| Property expenses | 4 | (4,135) | - | (4,135) | (4,747) | (8,992) |
| Net property income | 14,527 | - | 14,527 | 13,562 | 27,757 | |
| Expenses | ||||||
| Manag ement expenses |
(1,246) | - | (1,246) | (1,015) | (2,127) | |
| Other operating expenses |
(622) | - | (622) | (530) | (1,139) | |
| Total operating expenses | (1,868) | - | (1,868) | (1,545) | (3,266) | |
| Operating profit before movement on investments | 12,659 | - | 12,659 | 12,017 | 24,491 | |
| Gains and (losses) on investments | ||||||
| (LOSS)/Profi T on disposal of inv estment properties |
9 | - | (11) | (11) | (4) | 5,660 |
| Inv estment property val uation mov ements |
9 | - | 24,854 | 24,854 | 3,413 | 18,422 |
| Total gains and (losses) on investments | - | 24,843 | 24,843 | 3,409 | 24,082 | |
| Operating profit | 12,659 | 24,843 | 37,502 | 15,426 | 48,573 | |
| Financing | ||||||
| Interest receiva ble |
105 | - | 105 | 69 | 164 | |
| Interest payable | (5,597) | - | (5,597) | (5,557) | (11,032) | |
| Total finance costs | (5,492) | - | (5,492) | (5,488) | (10,868) | |
| Profit before tax | 7,167 | 24,843 | 32,010 | 9,938 | 37,705 | |
| Tax | (176) | - | (176) | (194) | (357) | |
| Total comprehensive income | 6,991 | 24,843 | 31,834 | 9,744 | 37,348 | |
| Earnings per share Basic and diluted |
7 | 1.6p | 5.9p | 7.5p | 2.8p | 10.4p |
The total column of this statement represents the Group's Condensed Consolidated Statement of Comprehensive Income. The supplementary income return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
All income is attributable to the equity holders of the Company. There are no minority interests.
| Share Capital | Retained Earnings |
Total | ||
|---|---|---|---|---|
| For the period from 1 April 2014 to 30 September 2014 | Note | £000 | £000 | £000 |
| Balance as at 31 March 2013 | 39,149 | 130,267 | 169,416 | |
| iss ue of ordina ry shares |
6,324 | - | 6,324 | |
| profit for the period |
- | 9,744 | 9,744 | |
| Divid ends paid |
6 | - | (5,180) | (5,180) |
| Balance as at 30 September 2013 | 45,473 | 134,831 | 180,304 | |
| Issue of ordina ry shares |
11,719 | - | 11,719 | |
| Profit for the period |
- | 27,604 | 27,604 | |
| Divid ends paid |
6 | - | (5,531) | (5,531) |
| Balance as at 31 March 2014 | 57,192 | 156,904 | 214,096 | |
| Issue of ordina ry shares |
35,000 | - | 35,000 | |
| Issue costs of shares |
(1,114) | - | (1,114) | |
| Profit for the period |
- | 31,834 | 31,834 | |
| Divid ends paid |
6 | - | (6,143) | (6,143) |
| Balance as at 30 September 2014 | 91,078 | 182,595 | 273,673 |
| 30 September | 30 September | 31 March | ||
|---|---|---|---|---|
| 2014 unaudited |
2013 unaudited |
2014 audited |
||
| As at 30 September 2014 | Note | £000 | £000 | £000 |
| Non-current assets | ||||
| Inv estment properties |
9 | 487,057 | 396,708 | 417,207 |
| Tangi ble ass ets |
122 | 162 | 140 | |
| Acco unts receiva ble |
3,809 | 4,281 | 4,046 | |
| Total non-current assets | 490,988 | 401,151 | 421,393 | |
| Current assets | ||||
| Inv estment properties held for sal e |
9 | - | - | 425 |
| Acco unts receiva ble |
12,425 | 9,749 | 10,102 | |
| Cash and cas h equival ents |
20,954 | 19,210 | 32,352 | |
| Total current assets | 33,379 | 28,959 | 42,879 | |
| Total assets | 524,367 | 430,110 | 464,272 | |
| Current liabilities | ||||
| Acco unts payable and acc ruals |
(14,648) | (14,232) | (14,330) | |
| Loans and borrowings |
10 | (2,766) | (3,010) | (2,935) |
| Obligations under financ e leases |
(104) | (107) | (104) | |
| Total current liabilities | (17,518) | (17,349) | (17,369) | |
| Non-current liabilities | ||||
| Loans and borrowings |
10 | (231,450) | (230,733) | (231,081) |
| Obligations under financ e leases |
(1,726) | (1,724) | (1,726) | |
| Total non-current liabilities | (233,176) | (232,457) | (232,807) | |
| Total liabilities | (250,694) | (249,806) | (250,176) | |
| Net assets | 273,673 | 180,304 | 214,096 | |
| Equity | ||||
| Share capital | 11 | 91,078 | 45,473 | 57,192 |
| Retain ed earnings |
182,595 | 134,831 | 156,904 | |
| Total equity | 273,673 | 180,304 | 214,096 | |
| Net asset value per share | 13 | £0.62 | £0.50 | £0.56 |
These condensed consolidated financial statements were approved by the Board of Directors on 17 November 2014 and signed on its behalf by:
Robert Sinclair Director
| 6 months ended 30 September 2014 unaudited |
6 months ended 30 September 2013 unaudited |
Year ended 31 March 2014 audited |
||
|---|---|---|---|---|
| For the period from 1 April 2014 to 30 September 2014 | Note | £000 | £000 | £000 |
| Operating activities | ||||
| Operating profit |
37,502 | 15,426 | 48,573 | |
| Adjustments for non -cas h items |
12 | (26,915) | (4,795) | (25,428) |
| Interest received | 105 | 69 | 164 | |
| Interest paid | (4,444) | (4,479) | (8,932) | |
| Tax paid | (130) | (7) | (394) | |
| Cash inflows from operating activities | 6,118 | 6,214 | 13,983 | |
| Investing activities | ||||
| purchase of inv estment properties |
9 | (42,661) | (10,002) | (19,611) |
| Capital expendit ure on inv estment properties |
9 | (2,335) | (960) | (2,060) |
| Disposal of inv estment properties |
414 | 392 | 10,850 | |
| Purchase of tangi ble ass ets |
(7) | (15) | (17) | |
| Cash outflows from investing activities | (44,589) | (10,585) | (10,838) | |
| Financing activities | ||||
| Borrowings repaid |
(670) | (469) | (1,031) | |
| Issue of equity | 11 | 35,000 | 6,337 | 18,229 |
| Equity iss ue costs |
11 | (1,114) | (13) | (186) |
| Divid ends paid |
6 | (6,143) | (5,180) | (10,711) |
| Cash inflows from financing activities | 27,073 | 675 | 6,301 | |
| Net (decrease)/increase in cash and cash equivalents | (11,398) | (3,696) | 9,446 | |
| Cash and cash equivalents at beginning of period/year | 32,352 | 22,906 | 22,906 | |
| Cash and cash equivalents at end of period/year | 20,954 | 19,210 | 32,352 |
FOR THE period from 1 april 2014 to 30 september 2014
Picton Property Income Limited (the "Company" and together with its subsidiaries the "Group") was registered on 15 September 2005 as a closed ended Guernsey investment company.
The financial statements are prepared for the period from 1 April to 30 September 2014, with unaudited comparatives for the period from 1 April to 30 September 2013. Comparatives are also provided from the audited financial statements for the year ended 31 March 2014.
The financial information for the year ended 31 March 2014 is derived from the financial statements delivered to the UK Listing Authority and does not constitute statutory accounts.
These financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting'. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the financial statements of the Company as at and for the year ended 31 March 2014.
The accounting policies applied by the Company in these financial statements are the same as those applied by the Company in its financial statements as at and for the year ended 31 March 2014, with the exception of the following which have had no material effect on the financial statements:
The annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the IASB. There have been no significant changes to management judgement and estimates.
| 3 Revenue from properties |
|||
|---|---|---|---|
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
| £000 | £000 | £000 | |
| rents receiva ble (adj usted for lease inc entiv es) |
16,241 | 15,553 | 31,036 |
| surrender premiumS | 58 | 60 | 157 |
| dilapidation receipts |
297 | 195 | 677 |
| other inco me |
67 | 59 | 97 |
| servic e charge inco me |
1,999 | 2,442 | 4,782 |
| 18,662 | 18,309 | 36,749 |
Rents receivable includes lease incentives recognised of £0.3 million (30 September 2013: £0.7 million, 31 March 2014: £1.0 million).
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
|---|---|---|---|
| £000 | £000 | £000 | |
| property operating expenses |
747 | 1,190 | 2,527 |
| property void costs |
1,389 | 1,115 | 1,683 |
| recov erable servic e charge costs |
1,999 | 2,442 | 4,782 |
| 4,135 | 4,747 | 8,992 |
The Board is charged with setting the Company's investment policy and strategy in accordance with the Company's investment restrictions and overall objectives. The key measure of performance used by the Board to assess the Group's performance is the total return on the Group's net asset value. As the total return on the Group's net asset value is calculated based on the net asset value per share calculated under IFRS as shown at the foot of the Balance Sheet, assuming dividends are re-invested, the key performance measure is that prepared under IFRS. Therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.
The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the opinion that the Group, through its subsidiary undertakings, operates in one reportable industry segment, namely real estate investment, and across one primary geographical area, namely the United Kingdom and therefore no segmental reporting is required. The portfolio consists of 59 commercial properties, which are in the industrial, office, retail, retail warehouse, and leisure sectors.
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
|---|---|---|---|
| £000 | £000 | £000 | |
| Declared and paid: | |||
| interim divid end for the period ended 31 march 2013: 0.75 penc e |
- | 2,590 | 2,590 |
| interim divid end for the period ended 30 JUNE 2013: 0.75 penc e |
- | 2,590 | 2,590 |
| interim divid end for the period ended 30 september 2013: 0.75 penc e |
- | - | 2,682 |
| interim divid end for the period ended 31 december 2013: 0.75 penc e |
- | - | 2,849 |
| interim divid end for the period ended 31 march 2014: 0.75 penc e |
2,849 | - | - |
| interim divid end for the period ended 30 june 2014: 0.75 penc e |
3,294 | - | - |
| 6,143 | 5,180 | 10,711 |
The interim dividend of 0.75 pence per ordinary share in respect of the period ended 30 September 2014 has not been recognised as a liability as it was declared after the period end. A dividend of £3,294,000 will be paid on 28 November 2014.
FOR THE period from 1 april 2014 to 30 september 2014
Basic earnings per share is calculated by dividing the net profit for the period attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the period. The following reflects the profit and share data used in the basic and diluted profit per share calculation:
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
|---|---|---|---|
| Net profit att ributable to ordina ry sharehold ers of the Compan y from contin uing operations (£000) |
31,834 | 9,744 | 37,348 |
| Weighted averag e number of ordina ry shares for basic and diluted profit per share |
422,335,229 | 347,084,396 | 359,866,250 |
The fair value measurement for the financial assets and financial liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. The different levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date. The fair value of the zero dividend preference shares issued by the Group is included in level 1.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group's secured loan facilities, as disclosed in note 10, is included in level 2.
Level 3: unobservable inputs for the asset or liability. The fair value of the Group's investment properties is included in level 3.
The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the transfer has occurred. There were no transfers between levels for the period ended 30 September 2014.
The fair value of all other financial assets and liabilities is not materially different from their carrying value in the financial statements.
The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 31 March 2014.
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
|---|---|---|---|
| £000 | £000 | £000 | |
| Fair val ue at sta rt of period /year |
417,632 | 382,729 | 382,729 |
| Acq uisitions |
42,661 | 10,002 | 53,611 |
| capital expendit ure on inv estment properties |
2,335 | 960 | 2,060 |
| disposals | (414) | (392) | (44,850) |
| realis ed (loss es)/gains on disposal |
(11) | (4) | 5,660 |
| chang e in fair val ue |
24,854 | 3,413 | 18,422 |
| Fair value at the end of the period/year | 487,057 | 396,708 | 417,632 |
| Historic cost at the end of the period/year | 611,490 | 559,720 | 566,494 |
The fair value of investment properties reconciles to the Appraised Value as follows:
| 30 September 2014 | 30 September 2013 | 31 March 2014 | |
|---|---|---|---|
| £000 | £000 | £000 | |
| app raisal val ue |
493,300 | 401,140 | 423,020 |
| val uation of ass ets held under financ e leases |
1,185 | 1,406 | 1,166 |
| lease inc entiv es held as debtors |
(7,428) | (5,838) | (6,554) |
| Fair value at the end of the period/year | 487,057 | 396,708 | 417,632 |
As at 30 September 2014, all of the Group's properties are level 3 in the fair value hierarchy as it involves the use of significant inputs and there were no transfers between levels during the period. Level 3 inputs used in valuing the properties are those which are unobservable, as opposed to level 1 (inputs from quoted prices) and level 2 (observable inputs either directly, i.e. as prices, or indirectly, i.e. derived from prices).
The investment properties were valued by CBRE Limited, Chartered Surveyors, as at 30 September 2014 on the basis of fair value in accordance with the RICS Valuation – Professional Standards (2014). There were no significant changes to the valuation process, assumptions and techniques used during the period, further details on which were included in note 14 of the consolidated financial statements of the Group for the year ended 31 March 2014.
The Group's borrowings (note 10) are secured by a first ranking fixed charge over the majority of investment properties held.
FOR THE period from 1 april 2014 to 30 september 2014
| Maturity | 30 September 2014 | 30 September 2013 | 31 March 2014 | |
|---|---|---|---|---|
| £000 | £000 | £000 | ||
| Current | ||||
| secured loan facilit y |
- | 990 | 948 | 968 |
| unsecured loan stock |
- | 1,776 | 2,062 | 1,967 |
| 2,766 | 3,010 | 2,935 | ||
| Non-current | ||||
| secured loan facilit y |
20 july 2022 | 33,718 | 33,718 | 33,718 |
| secured loan facilit y |
24 july 2027 | 80,000 | 80,000 | 80,000 |
| secured loan facilit y |
24 july 2032 | 92,494 | 93,483 | 92,995 |
| zero divid end preferenc e shares |
15 octo ber 2016 |
25,238 | 23,532 | 24,368 |
| 231,450 | 230,733 | 231,081 | ||
| 234,216 | 233,743 | 234,016 |
The Group has loan facilities with Canada Life Limited and Aviva Commercial Finance Limited for £113.7 million and £95.3 million respectively. The facility with Canada Life has a term of 15 years, with £33.7 million repayable on the tenth anniversary of drawdown. The Aviva facility has a term of 20 years with approximately one third repayable over the life of the loan in accordance with a scheduled amortisation profile.
The fair value of the secured loan facilities at 30 September 2014, estimated as the present value of future cash flows discounted at the market rate of interest at that date, was £197.7 million (31 March 2014: £188.3 million). The fair value of the secured loan facilities is classified as level 2 under the hierarchy of fair value measurements.
The Group has 22,000,000 zero dividend preference shares (ZDPs) in issue. These accrue additional capital at a rate of 7.25% per annum, resulting in a final capital entitlement at maturity of 132.3 pence per share. The fair value of the ZDPs at 30 September 2014, based on the quoted market price at that date, was £27.2 million (31 March 2014: £25.9 million). The fair value of the ZDPs is classified as level 1 under the hierarchy of fair value measurements.
The weighted average interest rate on the Group's borrowings as at 30 September 2014 was 4.52% (30 September 2013: 4.49%, 31 March 2014: 4.51%).
The Company has 439,191,763 ordinary shares in issue of no par value (30 September 2013: 357,641,303, 31 March 2014: 379,869,729).
During the period the Company issued 59,322,034 new ordinary shares of no par value at 59 pence per share for cash. The consideration received net of expenses has been credited to the share premium account.
The balance on the Company's share premium account as at 30 September 2014 was £91,078,000 (30 September 2013: £45,473,000, 31 March 2014: £57,192,000).
| 6 months ended 30 September 2014 |
6 months ended 30 September 2013 |
Year ended 31 March 2014 |
|
|---|---|---|---|
| £000 | £000 | £000 | |
| loss /(profit ) on disposal of inv estment properties |
11 | 4 | (5,660) |
| inv estment property val uation mov ements |
(24,854) | (3,413) | (18,422) |
| depreciation of tangi ble ass ets |
25 | 24 | 47 |
| inc rease in receiva bles |
(2,323) | (1,804) | (2,158) |
| inc rease in payables |
226 | 394 | 765 |
| (26,915) | (4,795) | (25,428) |
The net asset value per ordinary share is based on net assets at the period end and 439,191,763 (30 September 2013: 357,641,303, 31 March 2014: 379,869,729) ordinary shares, being the number of ordinary shares in issue at the period end.
At 30 September 2014, the Company had a net asset value per ordinary share of £0.62 (30 September 2013: £0.50, 31 March 2014: £0.56).
The total fees earned during the period by the five Directors of the Company were £101,000 (30 September 2013: £101,000 and 31 March 2014: £202,000). As at 30 September 2014 the Group owed £nil to the Directors (30 September 2013 and 31 March 2014: £nil).
Picton Property Income Limited has no controlling parties.
A dividend of £3,294,000 (0.75 pence per share) was approved by the Board on 23 October 2014 and payable on 28 November 2014.
The Group has exchanged contracts for the disposal of two properties since 30 September 2014 for proceeds of £3.3 million.
LIMITED ("The Company")
We have been engaged by the Company to review the condensed set of financial statements in the Interim Report for the six months ended 30 September 2014 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
The Interim Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The condensed set of financial statements included in this Interim Report has been prepared in accordance with IAS 34 'Interim Financial Reporting'.
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the Interim Report based on our review.
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Interim Report for the six months ended 30 September 2014 is not prepared, in all material respects, in accordance with IAS 34 and the DTR of the UK FCA.
Neale D Jehan For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognised Auditors Guernsey 17 November 2014
All enquiries relating to holdings in Picton Property Income Limited, including notification of change of address, queries regarding dividend/interest payments or the loss of a certificate, should be addressed to the Company's registrar.
Picton has a corporate website which has further information about the Group and the property portfolio at:
www.pictonproperty.co.uk
Nicholas Thompson (Chairman) Trevor Ash Vic Holmes Roger Lewis Robert Sinclair
Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Registered Number: 43673
Computershare Investor Services (Guernsey) Limited
NatWest House Le Truchot St Peter Port Guernsey
GY1 1WD
JP Morgan Securities Limited 25 Bank Street London E14 5JP Oriel Securities Limited
150 Cheapside London EC2V 6ET
KPMG Channel Islands Limited Glategny Court Glategny Esplanade St Peter Port Guernsey GY1 1WR
Northern Trust International Fund Administration Services (Guernsey) Limited
PO Box 255 Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL
Contact: David Sauvarin T: 01481 745 001 E: [email protected]
28 Austin Friars London EC2N 2QQ
131 Finsbury Pavement London EC2A 1NT
Contact: James Verstringhe T: 020 7920 3150 E: [email protected]
Norton Rose Fulbright LLP
3 More London Riverside London SE1 2AQ
PO Box 98 Carey House Les Banques St Peter Port Guernsey GY1 4BZ
Interim REPORT 2014 22
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