Picton Property reports earnings growth and dividend uplift

Picton Property has reported solid earnings growth in full year results that support a 5.7% uplift in its annual dividend.

The company posted a 2% increase in EPRA earnings to 4p per share in the year to 31 March 2024, which covered its annual dividend of 3.5p – which has now been increased to 3.7p.

EPRA net tangible assets (NTA) was down 4.2% to 96p following a 2.8% fall in the value of its portfolio to £745m.

The company’s balance sheet remained solid, with a loan to value of 28% and a weighted average interest rate of 3.9%. 93% of drawn borrowings are fixed with 2031/32 maturities. Post period end, 100% of debt is now fixed at 3.7%.

Operational highlights

• Continued MSCI outperformance for 11 consecutive years with a total property return of 1.6% for the year (versus -1.0% for the MSCI UK Quarterly Property Index)
• Repositioned portfolio to reduce office exposure with two office assets held for sale at year end (totalling £35.7m)
• 26 lettings during the year, 3% ahead of March 2023 ERV
• 31 lease renewals or regears, 2% ahead of March 2023 ERV
• 13 rent reviews, 2% ahead of March 2023 ERV
• 3% increase in passing rent, contracted rent and ERV
• 4.5% increase in net property income
• Occupancy stable at 91%, with WAULT of 4.2 years to break or 5.8 years to expiry
• Portfolio with significant reversionary potential of £12.8m, 29% above the March 2024 passing rent

Post year-end activity

• Sold Angel Gate office in London EC1 for £29.6m (sale proceeds used in part to repay £16.4mn drawn under RCF)
• Occupancy increases to 93% when excluding assets held for sale
• Completed lease extensions at Grantham (industrial), Radlett (industrial) and Marlow (office) for a combined rent of £2.5m per annum, a 14% increase on the previous passing rent
• Pipeline of leasing activity, agreed subject to contract, for a combined rent of £0.9m per annum, at Bristol (office), Bracknell (industrial), Warrington (industrial) and Gloucester (industrial)

Chair, Lena Wilson CBE, commented: “These results demonstrate that we have been able to grow EPRA earnings despite the impacts of inflation, higher interest rates and a weaker economic backdrop.

“This year, helped by our industrial exposure and strategy to reposition non-core office assets for alternative uses, our portfolio has outperformed the MSCI UK Quarterly Property Index. This marks our eleventh consecutive year of outperformance and maintains our track record of upper quartile performance since launch in 2005.

“We have a resilient business model with long-term fixed rate financing, and we are confident in our ability to capture the significant income upside potential from our portfolio. I am pleased that we were able to announce in April a near 6% dividend increase.”

Michael Morris, chief executive of Picton, added: “Our approach capitalises on real estate being an ever-evolving asset class, with buildings continually adapted, upgraded or repurposed to meet changing occupier demand.

“There remains significant income upside within the portfolio, whether that is captured directly at rent review or lease expiry or through the recycling of assets and reinvestment.

“Our priority in the short-term is continuing to grow EPRA earnings while focusing on improving our share price rating to be more reflective of the performance and potential of the business.”