Editing Picton Property Income (section)

== Summary ==
'''Picton Property Income’s FY22 total earnings of £147m were the strongest since the company launched in 2005. Income gains and normalised rent collection underpinned DPS growth and while strong valuation uplifts mirrored broad market trends, Picton continued to build on its long-term record of portfolio outperformance. Returns are likely to moderate from the exceptional level of FY22, but Picton remains positive despite global economic and political challenges. The prospects for further uplifts in occupancy and rents are good with scope for accretive external growth.'''
{| class="wikitable"
|+Key financials<ref>Note: *EPRA earnings exclude revaluation gains/losses and other exceptional items. **NAV measure is net tangible assets (NTA), currently the same as IFRS NAV.</ref>
!Year end
!Net property income (£m)
!EPRA earnings*(£m)
!EPRA

EPS* (p)
!DPS

declared (p)
!NAV** per share (p)
!P/NAV

(x)
!Yield

(%)
|-
|03/21
|33.5
|20.1
|3.7
|2.93
|97
|0.96
|3.2%
|-
|03/22
|35.4
|21.2
|3.9
|3.45
|120
|0.77
|3.7%
|-
|03/23e
|37.1
|21.6
|4.0
|3.60
|130
|0.71
|3.9%
|-
|03/24e
|38.6
|22.7
|4.2
|3.66
|133
|0.69
|4.0%
|}

=== Pandemic bounce back supports 28% NAV return ===
NAV per share increased to 120p (FY21: 97p), driven by a strong weighting to the industrial sector and asset management initiatives. Including DPS paid the FY22 total return was 28%. Having increased twice during the year, the annualised rate of quarterly DPS is back to the pre-pandemic level of 3.5p. EPRA earnings were up 5.5% to £21.2m or 3.9p per share, covering DPS by 1.15x. The ungeared property total return of 24.3% outperformed the MSCI UK Quarterly Property Index (19.6%) as it has done for the past nine years with upper-quartile performance over three, five and 10 years and since inception. Edison Investment Research's forecasts include an increase in NAV and slight reduction in EPS driven by cost inflation with DPS growth maintained.

=== Organic and acquisition-led growth potential ===
The financial and operational performance continues to benefit from active asset management, including capex that aims to enhance the quality, sustainability and occupier appeal of assets, and sector positioning. The organic growth opportunity remains strong with an c £11m gap between passing rent and estimated rental value (ERV) at end FY22 and rents continuing to increase across most of the portfolio. Picton has seen no direct impact from the war in Ukraine at this point. Gearing is low (LTV: 21.2%) and primarily long-term fixed rate, with the average cost reduced by the FY22 refinancing. Additional undrawn facilities are available to support further accretive acquisitions. The company also continues to explore consolidation opportunities, leveraging its performance record and scalable platform where there is an opportunity to create additional value.

=== Valuation: Good yield with total return potential ===
The current annualised rate of DPS (3.5p) represents a prospective yield of 3.8% with further growth reflected in Edison Investment Research's forecasts. The FY22 P/NAV is c 0.77x, which is below the five-and 10-year average of c 0.95x and a peak of c 1.1x.