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Picton Property Income
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== FY22 results in detail == In this section, Edison Investment Research discusses the FY22 financial and operational performance. Its forecast and valuation analysis are discussed later in the report. Key features of the FY22 financial results include: * Rental income increased by £3.5m (9.8%) to £40.1m compared with £36.6m in FY21. The increase included acquisitions made during the year, increased occupancy and a £1.5m reduction in bad debt provisions compared with the prior year. Partly offset by lower non-recurring property income (primarily dilapidation receipts) and a slight inflation-driven increase in property expenses, net rental income increased £1.9m (6.0%) to £35.4m. * Operating expense growth of £0.4m (6.8%) to £5.8m included a 6% increase in staff costs and additional costs relating to the development of the pathway to net zero carbon and other sustainability linked costs. * Interest costs of £8.5m included additional amortisation costs and drawings under the revolving credit facility to fund acquisitions/investments. A debt refinancing at the year-end increased borrowing capacity by £49m, reduced the cost of borrowing and extended the average term. Edison Investment Research discusses this in detail later in this report. * EPRA earnings increased by £1.1m (5.5%) to £21.2m, or 3.9p per share, covering dividends paid by 1.15x. * IFRS earnings of £147m included positive realised and unrealised property valuation movements of £129.8m (FY21: £13.8m) and £4.0m of early debt repayment fees resulting from refinancing. IFRS NAV and EPRA NTA increased to 120p versus 97p in FY21. * EPRA NTA total return (change in NTA plus dividends paid) was 27.9%. Based on the DPS declared, Picton calculates a total return of 28.3%. * A low loan to value ratio was maintained through the year (end-FY22: 21.2%). {| class="wikitable" |+Exhibit 1: Summary of FY22 financial performance<ref>Source: Picton Property Income reported data, Edison Investment Research FY22 forecast.</ref> |Year end March (£m unless stated otherwise) |FY22 |FY21 |FY22/FY21 |Edison FY22 forecast |- |Rental income |40.1 |36.6 |9.8% |39.2 |- |Other income |0.2 |1.5 |N/M |0.3 |- |Net property operating costs |(2.5) |(2.4) |3.9% |(2.5) |- |Void costs |(2.4) |(2.2) |9.5% |(1.9) |- |Net property income |35.4 |33.5 |6.0% |35.0 |- |Total operating expenses |(5.8) |(5.4) |6.8% |(5.6) |- |Net finance expense |(8.5) |(8.0) |6.4% |(8.0) |- |EPRA earnings |21.2 |20.1 |5.5% |21.5 |- |Debt prepayment fees |(4.0) |0.0 | |0.0 |- |Profit on disposal of investment property |0.0 |0.9 | |0.0 |- |Investment property valuation movements |129.8 |12.9 | |92.0 |- |IFRS net profit |147.0 |33.8 | |113.5 |- |EPRA EPS (p) |3.9 |3.7 |5.5% |3.9 |- |IFRS EPS (p) |26.9 |6.2 | |20.8 |- |DPS declared (p) |3.45 |2.93 |17.9% |3.45 |- |DPS paid (p) |3.38 |2.75 | |3.38 |- |Dividend cover (x) |1.15 |1.34 | |1.14 |- |Net assets, IFRS & EPRA |657.1 |528.2 | |623.9 |- |NAV per share, IFRS & EPRA (p) |120 |97 |24.4% |114 |- |NAV total return based on DPS paid (%) |27.9% |6.6% | |21,7% |- |Carried value of investment properties |830.0 |665.4 | |778.0 |- |Net LTV (%) |21.2% |20.9% | |20.1% |} Operationally, Edison Investment Research highlights: * A total property portfolio return of 24.3% was ahead of the MSCI UK Quarterly Property Index return of 19.6%. This was driven by a strong weighting to the industrial sector, which continued to perform strongly, and asset management initiatives across the portfolio. * Successful leasing activity, particularly the letting of recently refurbished assets, saw EPRA occupancy increase to 93% from 91% at the end of FY21. A total of 34 new lettings or lease agreements were completed, securing £4.9m pa of rent at an average 8% premium to the March 2021 ERV; 21 leases were renewed or regeared, retaining £2.2m pa of rent at an average 3% above the March 2021 ERV, and 12 rent reviews secured an additional £0.2m pa at an average 7% premium to the March 2021 ERV. * On a like-for-like basis, passing rent increased by 2.1%, driven by lettings and asset management activity, valuations by 5.4% and ERV by 5.0%. * Rent collection has now returned to normal levels at close to 100%. * Two multi-let industrial assets were acquired for an aggregate £23.5m during the year and one small retail unit was sold for £0.7m, 16% ahead of the March 2021 valuation.
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