Company Announcements

22 May 2025

 

 

 

PICTON PROPERTY INCOME LIMITED

('Picton', the 'Company' or the 'Group')

 

Preliminary Annual Results

 

 

Picton announces its annual results for the year ending 31 March 2025.

 

Chair of Picton, Francis Salway, commented:

 

"These are very positive results across key metrics. We have delivered a profit of £37 million, 5% growth in EPRA earnings and 4% growth in net assets.

We are focused on income and value growth for the benefit of shareholders. We have outperformed the FTSE 350 REIT Index and this is the fifth consecutive year of EPRA earnings growth. We have again operated with a well-covered dividend and recently announced a 2.7% dividend increase, representing the fifth increase since 2020.

In January of this year, we commenced our share buyback programme, utilising proceeds from asset disposals to enhance earnings. We intend to continue this, as appropriate in the forthcoming year."

 

Michael Morris, Chief Executive of Picton, commented:

 

"We have made further progress repositioning the portfolio, improved occupancy to 94% and reduced office exposure by a fifth, with £51 million of disposals ahead of March 2024 values. Alongside share buybacks, we have used these proceeds to repay debt, reduce financing costs and invest to improve our assets.

Asset management initiatives have created value irrespective of wider market conditions. This is demonstrated by our continued property level outperformance against the MSCI UK Quarterly Index this year, with our diversified approach enabling a track record of upper quartile property outperformance since launch in 2005.

Looking forwards we will seek to grow earnings through further disposals of low yielding assets and accretive redeployment of capital. Our significant reversionary potential in the portfolio, combined with our long-term fixed rate borrowings, puts us in a strong position to deliver income and value growth."

 

Strong financial performance delivering income and value growth

-	Profit after tax of £37.3 million, or 6.9p per share (2024: £4.8 million loss)
-	EPRA earnings of £22.8 million, or 4.2p per share, up 5% (2024: £21.7 million)
-	Total return of 8.1% (2024: -0.9%)
-	Net assets of £533.4 million, or 100p per share (2024: £524.5 million)
-	Dividends paid during the financial year of £20.2 million, a 5.7% increase (2024: £19.1 million)
-	Strong dividend cover of 113% (2024: 114%)
-	£12.5 million share buyback programme initiated, with £7.5 million repurchased at an average price of 67p per share, 33% below the March NAV of 100p per share

 

Outperforming repositioned portfolio with improved income and occupancy

-	Continued MSCI outperformance for 12 consecutive years with a total property return of 7.3% for the year (MSCI UK Quarterly Property Index: 6.3%)
-	Delivered upper quartile outperformance against the MSCI UK Quarterly Property Index over three, five and ten years, and since launch in 2005
-	3.8% like-for-like increase in property valuation, or 2.1% after capital expenditure
-	3.0% like-for-like increase in contracted rent and WAULT increased to 4.9 years to first break
-	3.8% like-for-like increase in ERV
-	Reduction in office exposure from 30% to 24%, with three opportunistic disposals of repositioned assets completed during the year totalling £51 million, 5% above March 2024 valuation
-	Increased occupancy to 94% (2024: 91%)
-	Captured rental growth through:
	-      25 lettings, 7% ahead of March 2024 ERV
	-      36 lease renewals or regears, 10% ahead of March 2024 ERV
	-      13 rent reviews, 7% ahead of March 2024 ERV
-	Portfolio with significant reversionary potential of £7.5 million, 16% above the March 2025 contracted rent with:
	-      £3.4 million from letting vacant space
	-      £4.1 million where market rent is higher than contracted rent

 

Valuable long-term debt structure

-	Revolving credit facility fully repaid reducing annual finance costs by £1.0 million from the prior year
-	Loan to value reduced to 24% (2024: 28%)
-	Weighted average interest rate of 3.7% (2024: 3.9%)
-	100% of drawn borrowings fixed with 2031/32 maturities
-	EPRA NDV of 105p per share, reflecting fair value of debt

 

Upgrading our assets and creating asset management opportunities

-	£11.8 million invested across the portfolio
-	Ten decarbonisation projects converting from gas to electric
-	Improvement in portfolio EPC ratings, with 83% now rated A-C (2024: 80%)
-	97% of leases completed during the year contained green clauses

 

Positive activity post year-end

-	Completed refinancing of £50 million revolving credit facility
-	Dividend increase of 2.7% announced, effective May 2025
-	Secured rooftop residential scheme consent at Farringdon office asset
-	A further £4.0 million repurchased under the share buyback programme at an average price of 74p per share

 

	31 March 2025	31 March 2024	31 March 2023
Property valuation	£723m	£745m	£766m
Net assets	£533m	£524m	£548m
EPRA NTA per share	100p	96p	100p

 

	Year ended 31 March 2025	Year ended 31 March 2024	Year ended 31 March 2023
Profit/(loss) for the year	£37.3m	£(4.8)m	£(90.0)m
EPRA earnings	£22.8m	£21.7m	£21.3m
Earnings per share	6.9p	(0.9)p	(16.5)p
EPRA earnings per share	4.2p	4.0p	3.9p
Total return	8.1%	(0.9)%	(13.9)%
Total shareholder return	16.0%	(1.0)%	(26.4)%
Total dividend per share	3.7p	3.5p	3.5p
Dividend cover	113%	114%	112%

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE UK MARKET ABUSE REGULATION

 

For further information:

Tavistock

James Verstringhe

020 7920 3150, james.verstringhe@tavistock.co.uk

 

Picton

Kathy Thompson, Company Secretary

020 7011 9988, kathy.thompson@picton.co.uk

 

 

About Picton

Established in 2005, Picton is listed on the main market of the London Stock Exchange and is a constituent of a number of EPRA indices including the FTSE EPRA Nareit Global Index.

Picton owns and actively manages a £723 million UK commercial property portfolio, invested across 47 assets and with around 350 occupiers (as at 31 March 2025).

Through an occupier focused, opportunity led approach, Picton aims to be the consistently best performing diversified UK REIT and has delivered upper quartile outperformance and a consistently higher income return than the MSCI UK Quarterly Property Index since launch.

With a portfolio strategically positioned to capture income and capital growth, currently weighted towards the industrial sector, Picton's agile business model provides flexibility to adapt to evolving market trends over the long-term.

Picton has a responsible approach to business and is committed to being net zero carbon by 2040.

For more information please visit: www.picton.co.uk

 

LEI: 213800RYE59K9CKR4497

 

 

Chief Executive's Review

We have successfully continued our long-term track record of outperformance and grown income and value.

 

These are positive results, showing progress across multiple areas. We are pleased to be able to report a profit of £37 million, recognising an increase in the portfolio value over the year and EPRA earnings of £23 million. Net assets have grown to 100 pence per share.

We have improved portfolio occupancy and income, reduced financing costs and invested more than ever before into the portfolio to enhance our assets and retain and attract new occupiers. This has enabled us to grow the like-for-like rental income and reversionary upside within the portfolio, which will underpin future earnings growth.

We have paid dividends of £20 million, up 6% on the preceding year, while maintaining a well-covered dividend of 113%. In January of this year, we launched a share buyback programme utilising some of the proceeds from our asset disposals. These have been accretive and have further contributed to these positive results.

Performance

During the year we have seen growth in both our net assets and our EPRA earnings per share, up 4% and 5% respectively. This led to a total return of just over 8%. Over the same period our shareholder total return was 16%, reflecting an improved share price rating at the year end, in part recognising the impact of our share buyback programme.

Our net asset value is £533 million and although our portfolio valuation reduced, this was because we have made asset disposals. This has allowed us to repay our floating rate debt and reduce our financing costs.

We have again operated with a fully covered dividend and we announced following the year end, a near 3% increase in our dividend effective May 2025, which is the fifth successive increase since 2020.

Portfolio performance

We have continued to outperform the MSCI UK Quarterly Property Index, now for the twelfth consecutive year. Since launch in 2005 we have delivered upper quartile total return performance at a property level.

Occupancy at the year end was 94%, up from 91% a year ago and with two vacant office asset disposals in the final quarter, the full impact of lower property costs has not been fully recognised in this year's results.

There is over £7.5 million of reversion in the portfolio. Approximately £4.1 million is where contracted rent is below ERV, compared with £3.6 million last year and £3.4 million of space available to lease, compared with £5.3 million last year. This will underpin medium-term earnings growth.

Nearly two thirds of the portfolio is now invested in industrial, warehouse and logistics assets and this is where there is the biggest reversionary upside.

Our diversified approach enables us to adjust the portfolio to changing market conditions, and this year has been no exception as we have sought to reduce our office exposure, particularly where we have identified assets that can be repositioned for higher value alternative uses. The two assets identified for disposal a year ago have now been sold, in addition to a third where planning was secured during the year. Total gross proceeds of £51 million were realised, reflecting disposals at a 5% premium to their March 2024 valuation.

During the year, office exposure has reduced from 30% to 24% and we expect this to reduce further this year as we make selective disposals, particularly of lower yielding assets or, where we believe additional value can be extracted from alternative use projects.

Operational excellence

We are in a strong operational position, having conservative but valuable financing arrangements. Overall, our loan to value ratio is a modest 24%. All our drawn debt is currently fixed at interest rates well below prevailing market levels and with the earliest maturity in 2031. Our EPRA NDV, which reflects the fair value of our debt is 105 pence per share or 5% higher than our published EPRA NTA.

Following the year end we completed the refinancing of our revolving credit facility. This is currently undrawn but provides £50 million of additional operational flexibility and opportunity for future investment.

We also have been able to grow earnings by reducing void costs through disposals and managing our administrative costs as efficiently as possible.

Acting responsibly

We have invested £12 million into upgrading assets including key decarbonisation projects in the office sector to aid future leasing prospects. We now have 83% of the portfolio with EPC ratings of A-C, up from 55% in 2020. Equally, 40% of the portfolio is rated A-B, up from 9% in 2020, reflecting our ongoing progress, particularly focused around the timing of lease events.

From a governance perspective, we welcome Francis Salway as our new Chair and Helen Beck as Chair of the Remuneration Committee, who have joined during the year. I would like to take this opportunity to thank Lena Wilson and Maria Bentley for their contributions during their tenure. I would also like to thank the team and the wider Board for all their input and support this year in helping us deliver these results.

Equity capital markets

The Board is well aware of the disconnect in the listed real estate sector between share prices and reported net asset values. This has led to considerable corporate M&A activity this year, with purchasers taking advantage of this arbitrage, as companies have been either taken over or taken private at levels more reflective of book value.

The Board is focused on improving shareholder value and remains mindful of opportunities that might exist to achieve this. It is some comfort to see the discount narrowing this year, alongside our decision to allocate capital for share buybacks.

The Board will continue to repurchase shares this coming year, utilising proceeds from future disposals to achieve this, whilst pursuing other investment opportunities that grow earnings.

Outlook

The team is focused on delivering positive outcomes for shareholders and other stakeholders. We have a strong balance sheet and attractive financing that underpins future success.

In terms of the portfolio, we continue to improve our assets, enabling us to capture rental value growth and increase the reversionary income. We have proven this year our ability to continue unlocking value across the portfolio in terms of the reversion, which primarily is focused within the industrial assets. Whilst the office assets are more challenging, pricing has compensated for some of the additional risks and we have proven our ability to crystallise upside from disposals within this sector, which we expect to continue.

By improving occupancy further we should be able to not only improve rental income but reduce property costs associated with vacant property. Across the portfolio we have a pipeline of opportunities that should provide further potential to capture income or value growth.

Our priorities for the year ahead are:

-      Portfolio rebalancing: continuing to improve the portfolio rental income profile, by reducing exposure to lower yielding assets. We will reinvest into higher yield/growth opportunities

-      Portfolio investment: continuing to invest into the portfolio to upgrade assets and create value and income growth

-      Leverage: maintaining prudent leverage, using our revolving credit facility tactically for accretive opportunities

‒      Shareholder capital: continuing to utilise our share buyback programme, to unlock value whilst the discount remains elevated, providing liquidity to shareholders

We have a long-term track record of property level MSCI outperformance, stretching back nearly 20 years. We are focused on ensuring this continues and equally, that this is reflected in share price performance this forthcoming year.

 

Michael Morris

Chief Executive

21 May 2025

 

 

Our Marketplace

Macroeconomic conditions remain uncertain despite a backdrop of reducing interest rates.

Economic backdrop

Political decisions are influencing the economic backdrop. The US Government's tariff announcement in April caused significant disruption in financial markets and downgrades to economic growth forecasts globally. The situation remains fluid, with the 90-day implementation delay and the more recent announcement of a temporary tariff reduction between the US and China resulting in an equity market recovery.

For the UK, exports to the US account for a relatively small percentage of overall Gross Domestic Product (GDP). Certain industries are likely to face direct challenges, while indirect effects may arise from weakened global demand and heightened trade uncertainty.

On a relatively positive note, if the tariffs are enforced following the 90-day delay, the 10% rate on most UK goods is comparatively lower than what has been suggested for many other nations.

In 2024 UK GDP is estimated to have grown by 1.1%, placing the UK third in the ranking of G7 economies. This compares to the 0.4% recorded for 2023. With mounting concerns over US tariffs, public borrowing and fiscal rules, in the Spring both the Office for Budget Responsibility and the Bank of England halved their GDP growth forecasts for 2025.

Since August 2024, inflation has remained close to the Bank of England's 2% target, with the annual Consumer Prices Index (CPI) standing at 2.6% in March 2025. The Bank of England began its rate-cutting cycle in August, implementing four 25 basis point reductions, which have brought the base rate down to 4.25%. The five-year SONIA swap rate has decreased to 3.8%, compared to around 4% a year ago. In January, concerns over public finances and the UK's economic trajectory led to a sharp rise in the ten-year gilt yield, which surged to a post-Global Financial Crisis high of 4.9%. It has since fallen slightly, but remains above the ten-year average.

Businesses are contending with uncertainty as well as escalating costs, as the tax increases announced in the October budget took effect in April, potentially impacting expansion and hiring decisions.

Recent data from the Office for National Statistics recorded a further softening in employment; in March payrolled employees decreased by 78,000 (0.3%) on the month to 30.3 million. The number of job vacancies fell for the thirty-third consecutive quarter to 781,000. The unemployment rate is now 4.4%, in line with the ten-year average.

The consistent increases in the household savings ratio since September 2022 reflect the impact of underlying economic uncertainty felt by consumers. Recent retail sales data has been more positive than expected, although thought to be attributable to unseasonably good weather. The April GFK Consumer Confidence Barometer recorded declines across all measures compared to the previous month, indicating that this level of consumer spending growth may not last. However, in real terms, wages continue to show a steady increase; for the three months to February, regular and total pay grew by 1.9%.

Whilst the situation with US tariffs continues to evolve, the outcome could have a disinflationary effect on the UK, potentially prompting a faster reduction in the base rate than anticipated. Furthermore, unlike other recent market shocks, the tariffs are a voluntary measure and could be reversed as quickly as they were announced.

With inflation no longer a pressing concern, the Bank of England's decision to lower interest rates now depends more on economic growth forecasts and labour market data.

The UK's high level of market transparency, coupled with comparative stability, low inflation and interest rates, continues to make it an attractive market for global investors, and well placed to capitalise on any positive momentum during a recovery in commercial property pricing.

UK Property Market

For the year ending March 2025, the MSCI UK Quarterly Property Index recorded an All Property total return of 6.3%, driven by 1.5% capital growth and a 4.8% income return. This marks a notable recovery from the -1.0% total return reported for the year to March 2024.

Looking at the three main sectors, retail and industrial outperformed, achieving total returns of 9.4% and 9.3%, respectively. Meanwhile the office sector lagged, delivering a total return of 1.5%.

MSCI reported four consecutive quarters of capital growth at an All Property level to March 2025. Both the industrial and retail sectors experienced quarter-on-quarter capital growth, whilst capital values in the office sector continued to decline. As of March 2025, the MSCI All Property equivalent yield was 6.6%, in line with March 2024.

The occupier market has remained resilient, with a flight to quality driving consistent quarter-on-quarter rental growth across all three main sectors. All Property ERV growth reached 4.0% for the year to March 2025, up from 3.7% in the previous year.

In terms of investment transaction volumes, MSCI reported £49.9 billion in total purchases for the year, reflecting a 15% increase compared to the prior year, however this is still below the long-term average. Of the total capital invested, 22% was allocated to the industrial sector, 20% to offices, and 18% to retail, while the remaining 40% was directed toward alternative property sectors.

The All Property averages mask nuances at sector and sub-sector levels; further details for the three main sectors are set out in the table below.

 

12 months to March 2025	All Property	Industrial	Office	Retail
Total return	6.3%	9.3%	1.5%	9.4%
Income return	4.8%	4.4%	4.1%	6.0%
Capital growth	1.5%	4.7%	-2.5%	3.3%
Number of positive segments	16	5	1	10
Number of negative segments	8	0	6	2
ERV growth	4.0%	5.8%	3.1%	2.8%
Number of positive segments	21	5	7	9
Number of negative segments	3	0	0	3

 

Source: MSCI UK Quarterly Property Index

 

 

Portfolio Review

 

Our property portfolio consists of 47 assets. Our diverse exposure provides flexibility to adapt as market conditions dictate.

 

Industrial weighting	64%
South East	45%
Rest of UK	19%

 

Office weighting	24%
Rest of UK	9%
Central London	8%
South East	7%

 

Retail and Leisure weighting	12%
Retail Warehouse	8%
High Street Rest of UK	2%
Leisure	2%

 

Proactive asset management

This year we have reduced office exposure, and improved portfolio occupancy, income and rental values.

 

Our portfolio value has increased on a like-for-like basis and we have disposed of our three largest void assets at pricing ahead of the March 2024 valuation. We have used proceeds in part to invest back into the portfolio to upgrade assets. This ongoing programme has enabled income and capital accretive lease transactions, and improved the overall quality of our portfolio.

The portfolio valuation as at 31 March 2025 was £723.1 million, a like-for-like portfolio valuation increase of 3.8% or 2.1% after capital expenditure.

At the year end, the contracted rent, which is the rent receivable after the expiry of lease incentives increased by £1.4 million or 3% on a like-for-like basis, to £48.2 million. The passing rent was £42.3 million, a decrease of £0.7 million or 1.6% on a like-for-like basis, reflecting lease incentives.

The March 2025 ERV of the portfolio was £55.6 million, a 4% like-for-like increase on the prior year. We had ERV growth of 3% in the industrial sector proven by new lettings and active management. The office sector was up 4% driven by our central London holdings and our asset upgrade programme. The retail and leisure sector increased by 5%.

Occupier activity was somewhat subdued reflecting the Budget and other political events. Despite this, we saw rental growth assisted by low levels of supply in many sub-markets. We expect these trends to continue into 2025.

Occupational demand is stable in the industrial sector, supported by a lack of supply in the multi-let market in particular.

The office sector remains in transition though the severe lack of supply of prime space has led to strong rental growth for the best buildings and locations. Poorer quality buildings continue to suffer from weak occupier demand and may lead to further supply being repositioned for alternative uses.

In the retail sector there is competition for space leading to rental growth for prime locations.

We successfully repositioned office assets at Angel Gate, London, (residential via permitted development rights), Charlotte Terrace, London, (residential) and Longcross, Cardiff (student accommodation) and have completed the disposal of all three assets during the period for a combined £51 million, 5% ahead of the 31 March 2024 valuation.

 

Portfolio summary

	FY 2025	FY 2024	Like-for-like % change
Assets	47	49
Occupancy	94%	91%
Valuation	£723.1m	£744.6m	3.8%
Disposal proceeds	£51.0m
Acquisition	£0.5m
Capital expenditure	£11.8m	£4.5m
Equivalent yield	6.8%	6.8%
Passing rent	£42.3m	£44.7m	-1.6%
Contracted rent	£48.2m	£48.7m	3.0%
ERV	£55.6m	£57.6m	3.8%

 

Performance

For the year to March 2025, we produced a total property return of 7.3%, outperforming the MSCI UK Quarterly Property Index which recorded a total return of 6.3%. This outperformance was driven by both income return and capital growth.

Our portfolio income return was 5.2%, outperforming MSCI's income return of 4.8%. Capital growth was 2.1%, compared to MSCI at 1.5%.

We have now outperformed the benchmark for 12 consecutive years and delivered upper quartile performance since launch, ranked 8 out of 72 portfolios.

Occupancy

Occupancy has increased from 91%, rising to 94%. This compares to the MSCI UK Quarterly Property Index of 91%, as at 31 March 2025. The total void ERV is £3.4 million.

The majority of our void is in the office sector, comprising void ERV of £2.6 million, or 76% of the total void. Our offices have an occupancy rate of 86%. Our industrial and retail assets have occupancy rates of 99% and 94%, respectively.

Portfolio activity

We continue to actively manage the portfolio completing over 78 asset management transactions, increasing both contracted rent and estimated rental value (ERV).

-      25 lettings or agreements to lease, securing additional rent of £2.9 million, 7% ahead of ERV

-      36 lease renewals or regears, securing £6.6 million per annum, an uplift of £0.8 million, 10% ahead of ERV

-      13 rent reviews, securing an uplift of £0.4 million per annum, 7% ahead of ERV

‒      Four lease variations to remove occupier break options, securing £0.6 million per annum

Retention

Over the year to March 2025, total ERV at risk, due to lease expiries or break options, totalled £6.4 million. This excludes office buildings which were sold during the year.

We retained 66% of total ERV at risk. Of the ERV that was not retained, a further 18% or £1.1 million was re-let to new occupiers during the year, therefore a positive outcome was achieved on 84% of the ERV that was at risk.

In addition, a further £5.4 million of ERV, which expired in more than 12 months time, was retained by either removing future break options, extending leases, or agreeing back-to-back surrenders and re-letting transactions ahead of lease events.

Investment activity

Investment market activity remained below the long run average over the year, with the anticipated rebound post the general election evaporating amid concerns over the economy. This limited activity to prime assets and value add opportunities.

Over the year, three assets were sold for a combined £51 million, and one tactical acquisition of a trade counter unit, adjoining an existing asset, was made for £0.5 million.

Asset upgrades

This year, we have invested significantly to upgrade the overall quality of the portfolio.

We have utilised proceeds from some of our asset disposals to invest back into the portfolio to upgrade assets to enhance rents and value, improving their appeal to occupiers, in terms of quality of accommodation, energy efficiency measures and occupier amenities.

The majority of these projects have been linked to lease events to maximise prospects for occupier retention or reletting as a result of the investment programme.

Over the year, we have invested £11.8 million into the portfolio across more than 20 projects, with the top six projects accounting for 68% of the spend.

All the works undertaken are in line with our sustainable refurbishment guidelines, which follow industry best practice. Where appropriate, we remove gas from buildings, install solar panels and upgrade insulation, in line with our net zero carbon pathway.

This has resulted in an improvement in our EPC ratings with 83% of our properties (by rental value) now rated C and above, an increase of 3% on the prior year.

1. At Grafton Gate, Milton Keynes we are replacing the original gas fired air conditioning system with a new fully electric system for the whole office. In conjunction with the solar panels previously installed the building's EPC will improve to an A rating. As a result of the works we have renewed two leases securing annual rent of £0.8 million, which represents an uplift of 23% on the previous passing rent and 33% ahead of the pre-upgraded ERV.

2. At Atlas House, Marlow we have replaced the air conditioning in the building and now have a fully electric system with additional rooftop solar panels. As part of the refurbishment we have also added an occupier business lounge and installed new LED lighting. The entire office now has an EPC A rating. As a result of the upgrade we secured a lease renewal at £0.1 million per annum, which represents an uplift of 42% on the previous passing rent but 6% below ERV, due to a lower refurbishment specification.

3. At Madleaze Trading Estate in Gloucester, we are replacing the roofs on a number of units comprising approximately 25% of the total estate. These works were part of asset management transactions agreed last year and as a result, we have regeared a lease and let an additional unit to an existing occupier at £0.5 million per annum, 22% ahead of ERV.

4. At Colchester Business Park, we have completed the first phase of the refurbishment of the largest office building on the business park and have replaced the original air conditioning system which utilises gas, with a new all-electric system. To reduce our embodied carbon emissions we have re-used equipment from our Bristol and Cardiff buildings. As part of the building upgrade we have also delivered market-leading occupier amenities by creating an occupier business lounge and end of trip facilities.

5. At 50 Pembroke Court, Chatham we have replaced the air conditioning system which utilises gas, with a new electric system and have installed rooftop solar panels. The building EPC will achieve an A rating when reassessed.

6. At Tower Wharf, Bristol we have commenced the replacement of the gas powered air conditioning with a new electric system. To reduce our embodied carbon emissions, as part of the refurbishment of the first and third floors we have reused equipment and furniture from our Cardiff building and the previous occupier of the third floor. The EPC of the refurbished floor has a B rating. On completion of the air conditioning works, the entire office will have an A rating.

Summary and outlook

Despite this challenging macro-environment, the UK commercial property market has proven to be remarkably resilient and we have seen positive valuation movement over the year as the strength in occupational markets has helped grow our income and parts of the market have seen greater pricing tension.

With the interest rate cycle having peaked, we expect market liquidity to improve and transaction activity to increase as the year progresses. There may be a short-term softening of rental growth as businesses adopt a more cautious approach, but this is set against a backdrop of tight supply generally and particularly for better quality assets.

Demand at our industrial assets has been resilient, in particular at our multi-let estates where we have continued to capture reversionary potential at lease events and have seen further rental growth over the period. Our distribution portfolio remains fully let with reversionary potential, although an element of this reversion will be captured through lease expiry and reletting, which may have a short-term income impact.

With regard to office assets, we have successfully progressed our alternative use strategy by disposing of three assets at accretive pricing over the year and continue to monitor the office portfolio for enhanced returns via change of use. We have also leveraged our portfolio investment programme to secure income-accretive new lease commitments with existing occupiers. We will continue our selective office asset disposal programme.

Occupier demand will continue to focus on well-located office buildings with good fundamentals, including strong environmental credentials and occupier amenities.

The retail portfolio has seen rental growth and capital value appreciation over the year. The occupier market for well-located high street and retail warehouse is robust, having seen many years of downwards repricing. The high take-up of stores released by insolvent operators such as Wilko and Homebase demonstrates some of the risks and opportunities in this sector.

The portfolio remains well placed and overall of a high quality, enabling us to maintain and enhance income through our occupier focused approach. As at 31 March 2025 there is £7.5 million of reversion in the portfolio. Approximately £4.1 million is where contracted rent is below ERV and £3.4 million is from letting vacant space.

We expect total returns to broadly converge across the sectors following a period of significant repricing of office assets in particular. We believe performance will be location and asset specific and the need to be able to proactively manage assets will become increasingly important to total return performance.

We remain focused on growing income and creating value. The portfolio has been upper quartile versus the MSCI UK Quarterly Property Index on a total return basis since launch and has had an income return ahead of the benchmark every year.

We still have significant reversion to capture through both leasing of void space and as rents are reset to market levels at review or lease expiry. Our proactive approach to asset management will unlock further value through asset repositioning and lease restructuring.

 

Jay Cable

Head of Asset Management

21 May 2025

 

 

Industrial

During the year we have continued to unlock reversionary potential, increasing the contracted rent. High occupancy and active management have supported rental growth and further valuation gains.

 

Industrial snapshot:

	FY 2025	FY 2024	Like-for-like % change
Assets	19	18
Occupancy	99%	98%
Valuation	£463.2m	£439.9m	5.0%
Acquisition	£0.5m
Capital expenditure	£3.0m	£2.4m
Equivalent yield	5.6%	5.7%
Passing rent	£22.6m	£22.3m	0.7%
Contracted rent	£25.7m	£23.6m	8.1%
ERV	£29.5m	£28.5m	3.1%

 

Market backdrop

The industrial, warehouse and logistics sector has been robust throughout the year.

The investment market has seen stable yields, with some yield compression for the best multi-let locations with short-term reversionary potential.

Capital growth has been driven broadly by movements in income. Rents have continued to move upwards against a backdrop of limited supply.

In certain markets, there is a little more supply than there has been historically, but similarly speculative development is now more constrained, which is likely to reduce future pipeline.

Portfolio activity

Our industrial assets increased in value by 5% over the year, from £439.9 million to £463.2 million. The contracted rent increased by 8% from £23.6 million to £25.7 million and the ERV grew by 3% from £28.5 million to £29.5 million. Occupancy increased from 98% to 99%.

The majority of our industrial assets are multi-let, comprising 54% of our total portfolio by value, with the majority located in the South East. At present we only have four vacant units, with one under offer and one currently undergoing refurbishment. Our UK-wide distribution warehouse assets comprise 10% of the total portfolio by value and are fully leased.

The industrial portfolio currently has £3.8 million of reversionary income potential between contracted rent and ERV, with only £0.4 million relating to the void units.

Over the year we completed £7.4 million of lease transactions at an average of 6% ahead of the March 2024 ERV. Of these £1.7 million were new lettings, 8% ahead of ERV, £4.5 million were lease renewals or regears, 7% ahead of ERV and 19% ahead of the previous rents, and £0.9 million of rent reviews securing a rental uplift of £0.3 million, 2% ahead of ERV and 38% ahead of the previous rent. In addition, we removed a break option securing £0.3 million, 18% ahead of ERV.

Key transactions in the year included:

-      Grantham - lease regear securing an increased term certain of 13 years at a rent of £1.6 million per annum, 8% ahead of ERV

-      London, Datapoint - lease renewal securing £0.7 million per annum, 47% ahead of the previous passing rent and 12% ahead of ERV

‒      Harlow - surrendered a lease and simultaneously re-let the unit for £0.6 million per annum, 53% ahead of the passing rent and 5% ahead of ERV

Additionally, we completed lettings in Bracknell, Gloucester, London, Luton and Warrington for a combined £1.2 million per annum, 10% ahead of ERV.

 

 

Office

We have improved occupancy in the year, and completed accretive disposals for higher value alternative uses. We continue to invest significantly into the portfolio by upgrading assets, which has led to rental growth, leasing activity and occupier retention.

 

Office snapshot:

	FY 2025	FY 2024	Like-for-like % change
Assets	14	17
Occupancy	86%	80%
Valuation	£175.3m	£224.9m	-0.4%
Disposal proceeds	£51.0m
Capital expenditure	£8.1m	£1.9m
Equivalent yield	8.2%	7.8%
Passing rent	£14.0m	£14.5m	10.3%
Contracted rent	£14.9m	£16.9m	0.6%
ERV	£18.7m	£22.0m	4.3%

 

Market backdrop

The office sector has been subdued this year with reduced investor demand and elevated vacancy rates.

Occupational demand continues to favour high quality buildings with good environmental credentials and occupier amenities. We are seeing a rental premium for this type of space but conversely occupational and investor demand outside of this is limited. This has led to a general downward repricing, particularly once costs associated with asset upgrading are factored into appraisals. Alternative use strategies are a way of finding liquidity without significant capital investment.

Asset selection is key, as each building must be viewed independently, in respect of its location and dynamics, sustainability credentials, flexibility of floorplates and occupier amenities.

Portfolio activity

During the year we completed the disposal of three office assets that we had repositioned for alternative uses, 5% ahead of the March 2024 valuation. This reduced our office exposure by 20%. The passing rent on our retained office assets increased by 10% to £14 million, the contracted rent increased by 1% to £14.9 million and the ERV grew by 4% to £18.7 million. The value of the retained office assets has decreased on a like-for-like basis by 0.4% over the year to £175.3 million, with our asset upgrades mitigating a larger impact. Occupancy has increased from 80% to 86%.

Our regional office assets comprise 16% of the portfolio by value and have a reversionary yield in excess of 10%. Our central London offices comprise 8% of the portfolio by value, are fully leased and offer alternative use opportunities.

The office portfolio currently has £3.8 million of reversionary income potential between contracted rent and ERV, with a further £2.6 million relating to the void units.

Over the year we completed £1.5 million of lease transactions at an average 15% ahead of the March 2024 ERV. Of these, £0.8 million were new lettings, 10% ahead of ERV and £0.7 million were lease renewals or regears, 22% ahead of ERV and 26% ahead of the previous rent.

We have invested to improve the quality of our office portfolio to assist with future lettings and occupier retention. This has also helped to improve overall office ERVs as the space is upgraded. We have now removed gas from 43% of our office portfolio by value, with a further 26% currently planned. We have completed £1 million per annum of leasing transactions as a direct result of the upgrades, 17% ahead of March 2024 ERV.

Key transactions in the year included:

-      Bristol - upsized an occupier into new space at £0.5 million per annum, 5% ahead of ERV

-      Marlow - lease renewal securing £0.1 million per annum, 42% ahead of the previous passing rent and 6% below ERV

-      Milton Keynes - agreed two lease renewals securing a combined £0.8 million per annum, 23% ahead of the previous passing rent and 33% ahead of ERV

 

 

Retail and leisure

We have seen strong valuation gains from our retail assets, driven by asset management improving the income profile. Whilst we are starting to see rental growth, new rents are often below pre-pandemic levels.

 

Retail and leisure snapshot:

	FY 2025	FY 2024	Like-for-like % change
Assets	14	14
Occupancy	94%	98%
Valuation	£84.6m	£79.8m	6.0%
Capital expenditure	£0.7m	£0.2m
Equivalent yield	7.9%	8.3%
Passing rent	£5.7m	£7.9m	-27.5%
Contracted rent	£7.6m	£8.2m	-7.3%
ERV	£7.4m	£7.1m	5.4%

 

Market backdrop

The retail and leisure sector has been resilient, having seen considerable repricing in prior years. Values have moved upwards and the sector benefits from a relatively high income component.

With elevated interest rates, cost of living concerns and the impact of the October Budget on their cost base, there remain headwinds for operators in the sector. We are also seeing demand from leisure operators for both high street and retails warehouse units.

The significant reduction in rents in prior years provides a relatively low base and for the right quality assets we are seeing tentative signs of rental growth. In a number of instances occupier defaults have led to relatively swift re-leasing at similar rents. It is likely that rents set before 2020 are still above market levels, albeit rents agreed after this time are starting to have upside potential.

We continue to see opportunities in the sector for certain retail warehouse and prime high street locations, but asset selection is key.

Portfolio activity

Our retail assets increased in value by 6% over the year from £79.8 million to £84.6 million. The contracted rent reduced by 7.3% from £8.2 million to £7.6 million as we re-let space following the expiry of over-rented leases. The ERV grew by 5.4% from £7.1 million to £7.4 million. Occupancy decreased from 98% to 94%.

Our retail assets are predominantly retail warehouse, underpinned by value-led retailers and make up 8% of the total portfolio. They consist of 19 units across four parks with one vacant unit in Swansea. Our high yielding high street portfolio makes up 2% of the total portfolio, with only £0.2 million of vacancy.

Over the year we completed £2.9 million of lease transactions at an average 12% ahead of the March 2024 ERV. Of these £0.4 million were lettings, 3% below ERV, £1.5 million were lease renewals or regears, 15% ahead of ERV and £0.3 million of break removals, 21% ahead of ERV.

Key transactions in the year included:

-      Sheffield - regeared the lease securing ten years term certain at a rent of £1.2 million per annum, 14% ahead of ERV

-      Gloucester - leased a unit and regeared a lease, securing ten years term certain on both units at a combined £0.4 million per annum, 9% ahead of ERV

-      Swansea - secured a 10% uplift at an indexed rent review securing £0.4 million per annum, 26% ahead of ERV

 

 

Our top ten properties valued in excess of £20 million

 

Site	Property type	Approximate area (sq ft)	Capital value (£m)	Occupancy rate (%)	EPC rating
Parkbury Industrial Estate, Radlett	Industrial	341,000	>100	98	A-D
River Way Industrial Estate, Harlow	Industrial	454,800	50-75	100	A-D
Stanford Building, London WC2	Office	20,100	30-50	97	B
Datapoint, Cody Road, London E16	Industrial	55,100	30-50	100	B-C
Lyon Business Park, Barking	Industrial	99,400	20-30	100	B-D
Shipton Way, Rushden	Industrial	312,900	20-30	100	C
Sundon Business Park, Luton	Industrial	127,800	20-30	100	A-D
50 Farringdon Road, London EC1	Office	31,300	20-30	100	B
Tower Wharf, Cheese Lane, Bristol	Office	70,200	20-30	88	B-C
Trent Road, Grantham	Industrial	336,100	20-30	100	C

 

Top ten occupiers

The largest occupiers, based on a percentage of contracted rent, as at 31 March 2025, are as follows:

Occupier	Contracted rent (£m)	%
Public sector	1.8	3.8
Whistl UK Limited	1.6	3.4
The Random House Group Limited	1.6	3.4
B&Q Limited	1.2	2.6
Snorkel Europe Limited	1.2	2.4
XMA Limited	1.0	2.0
Portal Chatham LLP	0.9	1.8
Orlight Limited	0.8	1.7
DHL Supply Chain Limited	0.8	1.6
Blanco UK Limited	0.8	1.6
Total	11.7	24.3

 

Longevity of income

As at 31 March 2025, expressed as a percentage of contracted rent, the average length of leases to first termination was 4.9 years (2024: 4.2 years). This is summarised as follows:

	%
0 to 1 year	20.8
1 to 2 years	14.4
2 to 3 years	8.1
3 to 4 years	9.4
4 to 5 years	12.4
5 to 10 years	24.6
10 to 15 years	9.1
15 years or more	1.2
Total	100

 

Although we have increased income longevity in the year, there are a number of lease events in the short term which are a focus for the team. We will be working to ensure the void risk is mitigated and the reversion captured.

 

 

Financial Review

Portfolio repositioning helps to deliver earnings growth and valuation gains.

 

This year we have delivered EPRA earnings growth and a profit of £37.3 million. This has been underpinned by positive valuation movements and by the disposals of three repositioned office assets, totalling £51 million. These proceeds have been used to fully repay the floating rate revolving credit facility, reinvest in the portfolio and return capital to shareholders through the share buyback programme.

EPRA earnings, comprising the operating profit before movement on investments, less the net interest expense, was £22.8 million, an increase of 5% during the financial year. The overall profit for the year includes gains on disposals of £1.5 million and the positive valuation movement of £12.9 million.

We have been focused on growing earnings, whilst delivering an increasing, covered and sustainable dividend, through repositioning the portfolio's sector allocation alongside continued proactive and hands-on asset management.

Looking forward, we are committed to delivering earnings growth over the medium term. We are continually evaluating lease events and the optimal approach to deliver this, accepting some short-term reduction in income to capture the reversion and create value across the portfolio.

Net asset value

The Group's net asset value as at 31 March 2025 was £533.4 million, or 100 pence per share. This reflected an increase of 4% or 4 pence per share over the financial year. The analysis of the net asset value movement is set out below.

	£m
March 2024 net asset value	524.5
EPRA earnings	22.8
Gains on disposals	1.5
Valuation movement	12.9
Share-based awards	0.8
Purchase of shares held in trust	(1.5)
Share cancellation	(7.5)
Dividends paid	(20.1)
March 2025 net asset value	533.4

 

The following table reconciles the net asset value calculated in accordance with International Financial Reporting Standards (IFRS) with that of the European Public Real Estate Association (EPRA).

	2025 £m	2024 £m	2023 £m
Net assets - IFRS and EPRA net tangible asset value	533.4	524.5	547.6
Fair value of debt	26.1	24.7	22.8
EPRA net disposal value	559.5	549.2	570.4
Net asset value per share (pence)	100	96	100
EPRA net tangible asset value per share (pence)	100	96	100
EPRA net disposal value per share (pence)	105	101	105

 

Income statement

Rental income decreased by £0.4 million during the financial year to £43.5 million as a result of the three disposals. These properties contributed £1.7 million of rental income in the previous year, compared to £0.5 million in the current year.

Net rental income, excluding disposals, on a like-for-like basis, increased by £0.9 million or 2.4%, which was underpinned by the increased rents on the industrial assets. The contribution from the industrial assets was 60% for the year, an increase of 5% which is a result of the portfolio repositioning during the year. In particular we saw increases in industrial rental income in Barking, Bracknell, Harlow and Warrington where we benefitted from the full year of rents, following leasing activity in the previous financial year.

Property expenses also reduced as a result of lower void costs and general property operating costs. Property expenses on assets disposed during the year were £1 million (£1.6 million in the prior year).

Other property income decreased as a result of lease events during the year.

We have been focused on cost management recognising that an element of staff costs are performance related. Administration costs were lower than the prior year, due to the exceptional costs incurred in respect of corporate activity. We have during the year incurred some non-recurring costs due to Board transition, totalling £0.3 million.

Our EPRA cost ratio (excluding direct vacancy costs) has decreased from 23% to 22% during the financial year in part due to the non-recurring items noted above.

The Group cost ratio has increased from 1.2% to 1.3%, which is primarily due to the lower average net asset value over the period.

Net finance costs

Our financing costs decreased from £8.9 million to £7.7 million as a result of repaying the floating rate revolving credit facility in April 2024 and interest on the increased cash balances as a result of the disposals in the year.

Dividends

In April 2024, we increased our annual dividend by 6% to 3.7 pence per share, following the sale of Angel Gate, London and subsequent debt repayment.

On 6 May 2025 we announced a further increase in the dividend to 3.8 pence per share, a 2.7% increase. We have maintained dividend cover at 113% giving comfortable headroom.

Investment properties

As at 31 March 2025 the portfolio comprised 47 assets and the appraised value was £723.1 million, with revaluation gains on the portfolio of £12.9 million, net of capital expenditure and lease incentives.

During the year we disposed of three assets for total gross proceeds of £51 million, and £50 million net of disposal costs. The disposals realised a gain of £1.5 million reflecting the uplift from March 2024 values.

We have continued to invest in the property portfolio with £11.8 million in capital expenditure during the financial year to support the rental income increases and capital values over the medium to longer term. Capital expenditure has been across all sectors with a focus on the office assets, which comprised approximately 70% of the spend during the year. The key office projects included the refurbishment of Tower Wharf, Bristol, Atlas House, Marlow, Grafton Gate, Milton Keynes, Pembroke Court, Chatham and Colchester Business Park.

The value of the floor that we occupy at Stanford Building, London, has been excluded from the value of Investment Properties and included separately within Property, Plant and Equipment. Any capital movements arising from the revaluation of this element of the property are shown within the Consolidated Statement of Comprehensive Income and classified as owner-occupied property.

Borrowings

Total borrowings were £209.6 million at 31 March 2025, with the loan to value ratio at 24%. The weighted average interest rate on our borrowings was 3.7% while the average loan duration was 6.7 years.

The fair value of our drawn borrowings at 31 March 2025 was £183.5 million, lower than the book value by £26.1 million. As a result, our EPRA NDV asset value was £559.5 million at 31 March 2025, higher than the reported net assets under IFRS. Market rates continue to be higher relative to the rates set on our facilities.

At 31 March 2025, the revolving credit facility was undrawn, remaining undrawn since April 2024, when it was repaid with the proceeds from Angel Gate. The £50.0 million facility was due to mature in May 2025 and has been refinanced post year end for a further three years in order to provide operational flexibility and future investment opportunity. Under the revolving credit facility extension, the margin will increase to 165 bps for the first £25 million drawn and 170 bps thereafter. We have strong banking relationships with our lenders; the Group has remained fully compliant with its loan covenants and has made scheduled amortisation payments during the year of £1.5 million.

Cash flow and liquidity

During the year, our cash balances increased to £35.3 million, mainly due to the disposals during the year. The cash flow from operating activities this year was £24.9 million and dividends paid were £20.1 million.

Net disposal proceeds of £50 million have primarily been used to repay debt (£17.9 million), invest in the property portfolio (£11.8 million), purchase shares (£7.5 million), hedge employee share schemes (£1.5 million) and one tactical acquisition (£0.5 million). The remaining proceeds will be used to fund the amounts outstanding under the share buyback programme (approximately £5 million, as at 31 March 2025) and future capital expenditure.

 

Summary of borrowings

	2025	2024	2023
Fixed rate loans (£m)	209.6	211.1	212.6
Drawn revolving facility (£m)	-	16.4	11.9
Total borrowings (£m)	209.6	227.5	224.5
Borrowings net of cash (£m)	174.3	207.7	204.4
Undrawn facilities (£m)	50.0	33.6	38.1
Loan to value ratio (%)	24.1	27.9	26.7
Weighted average interest rate (%)	3.7	3.9	3.8
Average duration (years)	6.7	7.2	8.4

 

Share capital

No new ordinary shares were issued during the year. We announced a share buyback programme on 30 January 2025 which, on 4 April 2025, was increased to £12.5 million and extended to 21 May 2025. As at 31 March 2025, a total of 11,205,596 shares had been purchased and cancelled at a cost of £7.5 million, at an average price of 67 pence. This equates to a 33% discount to the March 2025 NAV per share and has been accretive to both earnings and NAV growth. Post year end, a further 5,360,795 shares have been purchased and cancelled as at 19 May 2025.

The Company's Employee Benefit Trust (EBT) purchased 2,100,000 shares during the year and holds 2,942,959 shares as at 31 March 2025. Shares are held by the EBT to hedge awards outstanding under employee share schemes. As the Trust is consolidated into the Group's results, these shares are effectively held in treasury and therefore have been excluded from the net asset value and earnings per share calculations, from the date of purchase.

 

Saira Johnston

Chief Financial Officer

21 May 2025

 

 

Managing Risks

The Board recognises that there is inherent risk that could have a material impact on the Group's operations and is committed to effective risk management to protect stakeholder value.

 

Macroeconomic and geopolitical challenges have continued into 2025 which has provided some uncertainty around interest rates and inflation. Our approach to risk management remains key to managing our ongoing operations and performance, as well as positioning ourselves to take advantage of the changing landscape in the medium and long term.

Review of risk management framework

The Board has ultimate responsibility for risk management and internal controls. The Board has adopted a structured approach to considering risks and defined a framework that informs decision making so that the risks can be reported, monitored and mitigated.

During the year, the Board reviewed and updated the Risk Management Policy to strengthen the management of risks and incorporate risk and controls scoring into its framework and risk matrix. Based on this scoring, the Board has identified 11 principal risks as disclosed in the Principals Risks section.

In addition the Board reviews risk appetite to manage risks and operations, whilst acknowledging that the nature of the Company's operations involves taking risks. Whilst the risk appetite might change over time and different points in the property cycle, the overall appetite for risk remains low and aligned to our long-term strategic objectives.

Emerging risks

In addition to monitoring the principal risks, the Board considers emerging risks. Last year the Board identified six emerging risks which have been incorporated into the principal risks under economic market conditions, discount and the ability to attract capital, portfolio strategy, regulatory compliance, climate change and operational risk.

We recognise that these risks are rapidly evolving and are harder to predict in longer-term timescales. We will in particular continue to monitor the rapid changes in technology such as AI to determine how this will affect us, our occupiers and wider stakeholders.

Responsibilities

Board

The Board has ultimate responsibility for risk management and internal controls within the Company as well as determining the risk appetite. The Board reviews the Risk Management Policy at least annually and will ensure that it is aligned with the Company's strategic priorities.

Audit and Risk Committee

Responsible for overseeing the development and implementation of the Risk Management Policy, including a six-monthly or as necessary, review of the existing and emerging risks alongside mitigating controls and their effectiveness. The Audit and Risk Committee will report to the Board on such matters.

Executive Committee

The Executive Committee is responsible for detailed risk assessment including maintaining a risk matrix setting out risks, detailed controls and risk appetite as well as embedding a culture of risk awareness in relation to day-to-day operational matters.

Management committees

Support the Executive Committee in these matters. The Transaction and Finance Committee has oversight of all property transactions and the Responsibility Committee specifically has input on the ESG risks across all areas.

 

Principal Risks

The principal risks have the potential to affect the business meeting its strategic objectives materially. These are summarised in the table below, which also includes commentary on updates of any changes during the year.

 

Market
A. Economic market conditions
The Company's performance is adversely impacted by wider economic factors such as inflation, interest rates, political changes, recession and geopolitical events.	Impact Investors required return increases and there is a difference between the Company's achieved returns compared to their return requirements. Occupiers' businesses are adversely impacted by poor economic conditions. Inflation impacts the Company's cost base.	How is the risk managed The Board considers economic and market conditions when reviewing its strategy and making investment decisions.	Commentary Current macroeconomic conditions and geopolitical events mean the outlook remains uncertain. The outlook for GDP growth, inflation, the labour market and other factors will influence the central bank's decision making on interest rates. Risk trend: No change/stable
Link to strategic priorities: 1. Portfolio Performance 2. Operational Excellence 3. Acting Responsibly
B. Discount and ability to attract capital
The Company's share price discount to NAV will persist or widen and there is insufficient appetite from new or existing shareholders to support an equity raise or growth.	Impact A share price discount will prevent the Company raising more equity which adversely affects the Company's ability to achieve economies of scale from an internally managed model. Shareholder dissatisfaction increases susceptibility to corporate activity/interest. Unable to attract broader coverage from analysts/rating agencies/investors due to scale.	How is the risk managed The level of discount relative to the NAV is closely monitored by the Board. The Board has prioritised the allocation of capital to repay the floating rate debt in order to support earnings growth and narrow the discount. New investment opportunities have been de-prioritised and a share buyback programme has commenced. Proactive push to widen shareholder base with brokers, as well as increase shareholder engagement for example, hosting a capital markets day.	Commentary The Board is working closely to address the discount at which the shares trade through capital allocation and executing the planned office repositioning strategy. Risk trend: Increasing
Link to strategic priorities: 1. Portfolio Performance 2. Operational Excellence 3. Acting Responsibly

 

Portfolio
C. Portfolio strategy
Diversification across geographies and 'traditional' sectors may lead to the Company's portfolio delivering below MSCI/peer group performance.	Impact Underperformance vs. peer group and insufficient clarity to investors on return profile. The Company is unable to meet investors' required returns and is perceived to hold sectors/assets which generate lower returns than either the overall benchmark or specialists.	How is the risk managed The composition of the portfolio is reviewed regularly alongside market trends to determine whether a pivot in sector or geography weightings is appropriate. Annual asset level business plans are completed with forecast returns. Team remuneration is linked to MSCI and peer performance.	Commentary The Group has continued to reduce its exposure to the office sector by pursuing alternative use strategies and executing on disposals. As a result, the portfolio is most concentrated in the industrial sector. The portfolio has outperformed the MSCI UK Quarterly Property Index this year. Risk trend: No change/stable
Link to strategic priorities: 1. Portfolio Performance 2. Operational Excellence 3. Acting Responsibly
D. Investment
Lack of acquisitions or reinvestment opportunities that are accretive to returns. Where suitable investments can be identified, there may be pricing competition which affects the ability to transact. Issues not identified in due diligence.	Impact Underperformance in the property portfolio. Unable to recycle capital and reprofile returns and/or yield on the portfolio.	How is the risk managed The team is actively engaging with the market, seeking new deals and building an investment pipeline. Acquisitions are subject to Board-level approval and post-acquisition reviews are carried out after two years.	Commentary Notwithstanding the current prioritisation of share buybacks, we continue to monitor future opportunities and evaluate returns. MSCI recorded a 15% increase in transaction volumes in the year to March 2025, albeit investment volumes remain below the long-term average. Risk trend: No change/stable
Link to strategic priorities: 1. Portfolio Performance 2. Operational Excellence
E. Occupiers
Occupier defaults, increasing numbers of lease breaks actioned. Poorer occupational property market.	Impact Immediate impact on earnings and dividend capacity. Risk of bank covenant breaches.	How is the risk managed The property portfolio is diversified across sectors, assets and occupiers. Our occupier focused approach, underpinned by our key Picton Promise commitments, ensures strong occupier engagement, evidenced by our annual occupier survey. Monthly meetings monitor Property Manager performance, with weekly rent collection reporting.	Commentary The occupier market has remained resilient, with MSCI reporting four consecutive years of robust levels of rental growth to March 2025. Our rent collection is 99%. Risk trend: No change/stable
Link to strategic priorities: 1. Portfolio Performance 3. Acting Responsibly
F. Valuation
Property valuations are subjective and dependent on geopolitical, macroeconomic and cyclical factors, such as inflation and interest rates in addition to structural changes in certain sectors and regions.	Impact Decreasing valuations reduce investor confidence and share price. Volatile or unsupportable valuations could lead to loss of investor confidence in the NAV. Breach of banking covenants.	How is the risk managed The properties are valued quarterly by an independent valuer with oversight from the Property Valuation Committee, which facilitates an in-depth quarterly review. Mandatory valuation rotation with a maximum of five years for an individual and ten years for a firm. No development or land.	Commentary Commercial property values have stabilised during the year and headroom exists on banking covenants. Knight Frank were appointed as external valuer effective June 2025 due to mandatory valuer rotation. As at 31 March 2025 a shadow valuation was carried out alongside CBRE, and reviewed by the Property Valuation Committee. Risk trend: No change/stable
Link to strategic priorities: 1. Portfolio Performance

 

Finance and tax
G. Liquidity and working capital
The Company requires cash flows from rental income and contractual lease payments in order to meet its liabilities to lenders, suppliers and dividend payments to shareholders.	Impact Insufficient cash to meet liabilities which may mean delayed payments to suppliers, insufficient cash for dividends payments.	How is the risk managed The revolving credit facility (RCF) allows flexibility to draw, repay and manage working capital, capital expenditure and disposal/acquisitions. The Board reviews quarterly cash flow forecasts.	Commentary During the year the Company disposed of three assets and the disposal proceeds have been utilised during the year to repay the RCF. Post year end we refinanced the RCF with NatWest, extending the maturity for an initial term of three years with two further one year extension options. The RCF is undrawn but provides operational flexibility and opportunity for investment. Risk trend: Decreasing
Link to strategic priorities: 2. Operational Excellence
H. Gearing
Potential to enhance returns but in falling markets there may also be an adverse impact on performance. A breach of debt covenants or failure to manage refinancing events could lead to a funding shortfall. Cost base exposed to interest rate risk.	Impact Loan amounts become immediately due in the event of a breach or a refinancing which may have to be resolved by forced asset sales or penal interest rates. Increased cost base if interest rate increases.	How is the risk managed The Board reviews quarterly cash flow forecasts and loan covenants. Interest rate hedging is in place through the fixed rate loans. We have a diverse lender base and longstanding relationships.	Commentary Disposal proceeds have been utilised during the year to repay the RCF and reduce our LTV from 28% to 24%. The RCF has been refinanced and the maturity extended for an initial term of three years with two further one year extension options. Debt maturity is 6.7 years. Risk trend: Decreasing
Link to strategic priorities: 2. Operational Excellence

 

Other
I. Regulatory compliance
The Company must comply with a wide range of legislation and regulation including health and safety, tax and listing rules, environmental reporting and accounting matters. New or revised legislation or regulations may have an adverse impact on operations and increase costs.	Impact Financial loss and reputational damage or REIT status withdrawn. Litigation, fines and reputational damage from health and safety failures. Additional costs as a result of increasing legislation and loss of shareholder confidence as a result of any breaches.	How is the risk managed Appointment of Deloitte as tax advisers. The Board monitors changes to legislation with its professional advisers and through industry bodies such as the Better Buildings Partnership and British Property Federation. The governance structure supports this further with the Health and Safety and Responsibility committees.	Commentary Planning reforms have been beneficial to our change of use strategy and securing planning permission for alternative use at four office assets. The Government is expected to continue support of the REIT regime and its focus to decarbonise and transition to net zero. Risk trend: No change/stable
Link to strategic priorities: 2. Operational Excellence 3. Acting Responsibly
J. Operational
A small team with higher key person reliance and simple operational structure which may be impacted by a major event/business disruption.	Impact Loss of certain individuals will have a material impact on operations and shareholder engagement/market perception. An unexpected business disruption event would have an adverse financial impact and restrict the ability to operate.	How is the risk managed A succession plan is in place and reviewed annually. We have in place an employee incentive package to support retention. Incident Management Strategy and Business Continuity Plan is in place. We engage regularly with our employees.	Commentary The risk of cyber events and business disruption events remains. During the year we reviewed our Incident Management Strategy and Business Continuity Plan. Our internal audit scope included a review of IT controls, and our cyber certifications were updated. We rolled out IT Security training for all our employees. Risk trend: No change/stable
Link to strategic priorities: 2. Operational Excellence
K. Climate change
Transition risks associated with the long-term trends arising from climate change. These include increasing regulation, reporting, insurance, Government response and business models of landlords and occupiers changing. Physical risks associated with the impact of climate change on our buildings.	Impact Cost base increased by increased reporting requirements and regulation. Valuation adversely impacted by capital expenditure needed to transition, manage obsolescence and stranded asset risk.	How is the risk managed ESG governance processes are embedded into investment, asset and operational processes. Environmental consultants available on a retainer basis to advise on upcoming transition risks. The portfolio is diversified across a number of sectors, assets and geographic locations. Flood risk assessments have been carried out for all properties in respect of pluvial, fluvial and reservoir flooding. EPC ratings are closely monitored and reported.	Commentary We continue to improve our EPC profile and remain fully MEES compliant. Our assessments show that the flood risk in the portfolio remains de minimis. Our due diligence process alerts us to any physical or transition risk associated with property acquisitions. Risk trend: No change/stable
Link to strategic priorities: 2. Operational Excellence 3. Acting Responsibly

 

 

Viability assessment and statement

The UK Corporate Governance Code requires the Board to make a 'viability statement' which considers the Company's assessment of the future prospects for the Company, in order that the Board can state that the Company will be able to continue its operations over the period of their assessment.

The Board conducted this review over a five-year timescale, considered to be the most appropriate for long-term investment in commercial property. The assessment has been undertaken taking into account the principal and emerging risks and uncertainties faced by the Group which could impact its investment strategy, future performance, financing and liquidity.

The major risks identified were those relating to a persistently higher bond yield environment and geopolitical uncertainty as well as the inability to raise capital, portfolio and investment risks.

In the ordinary course of business, the Board reviews quarterly forecasts, including forecast market returns. The forecasts include assumptions on lease events and expenditure. For the purposes of the viability assessment of the Group, the model covers a five-year period and is stress tested under various scenarios.

The Board considered a number of scenarios and their impact on the Group's property portfolio and financial position. These scenarios included different levels of rent collection, occupier defaults, void periods and incentives within the portfolio, and the consequential impact on property costs and loan covenants. Forecast movements in capital values were based on input from external economic consultants. The Group's long-term loan facilities mature after the assessment period, and the Board has assumed that the Group will continue to have access to, but is not reliant on, its revolving credit facility. The Board considered the impact of these scenarios on its ability to continue to pay dividends at different rates over the assessment period.

These matters were assessed over the period to 31 March 2030 and will continue to be assessed over rolling five-year periods.

The Directors consider that the scenario testing performed was sufficiently robust and that even under stressed conditions the Company remains viable.

Based on their assessment, and in the context of the Group's business model and strategy, the Directors expect that the Group will be able to continue in operation and meet its liabilities as they fall due over the five-year period to 31 March 2030.

 

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with International Financial Reporting Standards, as issued by the IASB, and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.

In preparing these financial statements, the Directors are required to:

-      Select suitable accounting policies and then apply them consistently;

-      Make judgements and estimates that are reasonable, relevant and reliable;

-      State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-      Assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

‒      Use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies (Guernsey) Law, 2008. They are responsible for such internal controls as they determine are necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error, and have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website, and for the preparation and dissemination of financial statements. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Directors' responsibility statement in respect of the Annual Report and financial statements

We confirm that to the best of our knowledge:

-      The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

‒      The Strategic Report includes a fair review of the development and performance of the business and the position of the Issuer, together with a description of the principal risks and uncertainties that they face.

We consider the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

By Order of the Board

 

Saira Johnston

21 May 2025

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2025

	Notes	2025 £000	2024 £000
Income
Revenue from properties	3	54,019	54,690
Property expenses	4	(16,343)	(16,799)
Net property income		37,676	37,891
Expenses
Administrative expenses	6	(7,100)	(7,219)
Total operating expenses		(7,100)	(7,219)
Operating profit before movement on investments		30,576	30,672
Investments
Revaluation of owner-occupied property	14	128	223
Investment property valuation movements	13	12,859	(26,757)
Profit on disposal of investment property	13	1,496	-
Total profit/(loss) on investments		14,483	(26,534)
Operating profit		45,059	4,138
Financing
Interest income	8	813	604
Interest expense	8	(8,549)	(9,531)
Total finance costs		(7,736)	(8,927)
Profit/(loss) before tax		37,323	(4,789)
Tax	9	-	-
Profit/(loss) after tax		37,323	(4,789)
Total comprehensive income/(loss) for the year		37,323	(4,789)
Earnings per share
Basic	11	6.9p	(0.9)p
Diluted	11	6.8p	(0.9)p

 

All items in the above statement derive from continuing operations.

All of the profit and total comprehensive income for the year is attributable to the equity holders of the Company.

Notes 1 to 27 form part of these consolidated financial statements.

 

 

Consolidated Statement of Changes in Equity

for the year ended 31 March 2025

	Notes	Share capital £000	Retained earnings £000	Other reserves £000	Total £000
Balance as at 31 March 2023		164,400	384,406	(1,182)	547,624
Loss for the year		-	(4,789)	-	(4,789)
Dividends paid	10	-	(19,089)	-	(19,089)
Share-based awards		-	-	729	729
Balance as at 31 March 2024		164,400	360,528	(453)	524,475
Profit for the year		-	37,323	-	37,323
Dividends paid	10	-	(20,159)	-	(20,159)
Share-based awards		-	-	751	751
Purchase of shares held in trust	7	-	-	(1,519)	(1,519)
Purchase and cancellation of own shares	20	-	(7,493)	-	(7,493)
Balance as at 31 March 2025		164,400	370,199	(1,221)	533,378

 

Notes 1 to 27 form part of these consolidated financial statements.

 

 

Consolidated Balance Sheet

as at 31 March 2025

	Notes	2025 £000	2024 £000
Non-current assets
Investment properties	13	700,694	688,310
Property, plant and equipment	14	3,504	3,499
Total non-current assets		704,198	691,809
Current assets
Investment properties held for sale	13	-	35,733
Accounts receivable	15	25,122	26,601
Cash and cash equivalents	16	35,320	19,773
Total current assets		60,442	82,107
Total assets		764,640	773,916
Current liabilities
Accounts payable and accruals	17	(20,048)	(20,622)
Loans and borrowings	18	(1,388)	(1,194)
Obligations under leases	22	(115)	(114)
Total current liabilities		(21,551)	(21,930)
Non-current liabilities
Loans and borrowings	18	(207,153)	(224,940)
Obligations under leases	22	(2,558)	(2,571)
Total non-current liabilities		(209,711)	(227,511)
Total liabilities		(231,262)	(249,441)
Net assets		533,378	524,475
Equity
Share capital	20	164,400	164,400
Retained earnings		370,199	360,528
Other reserves		(1,221)	(453)
Total equity		533,378	524,475
Net asset value per share	23	100p	96p

 

These consolidated financial statements were approved by the Board of Directors on 21 May 2025 and signed on its behalf by:

Saira Johnston

Chief Financial Officer

21 May 2025

Notes 1 to 27 form part of these consolidated financial statements.

 

 

Consolidated Statement of Cash Flows

for the year ended 31 March 2025

	Notes	2025 £000	2024 £000
Operating activities
Operating profit		45,059	4,138
Adjustments for non-cash items	21	(13,597)	27,406
Interest received		1,248	102
Interest paid		(8,540)	(9,085)
Decrease/(increase) in accounts receivable		1,044	(3,350)
(Decrease)/increase in accounts payable and accruals		(291)	996
Cash inflows from operating activities		24,923	20,207
Investing activities
Purchase of investment properties	13	(533)	-
Disposal of investment properties	13	50,031	-
Capital expenditure on investment properties	13	(11,794)	(4,458)
Purchase of property, plant and equipment	14	(12)	(4)
Cash inflows/(outflows) from investing activities		37,692	(4,462)
Financing activities
Borrowings repaid	18	(17,897)	(1,433)
Borrowings drawn	18	-	4,500
Purchase of shares held in trust	7	(1,519)	-
Purchase and cancellation of own shares	20	(7,493)	-
Dividends paid	10	(20,159)	(19,089)
Cash outflows from financing activities		(47,068)	(16,022)
Net increase/(decrease) in cash and cash equivalents		15,547	(277)
Cash and cash equivalents at beginning of year		19,773	20,050
Cash and cash equivalents at end of year	16	35,320	19,773

 

Notes 1 to 27 form part of these consolidated financial statements.

 

 

Notes to the Consolidated Financial Statements

for the year ended 31 March 2025

1. General information

Picton Property Income Limited (the 'Company' and together with its subsidiaries the 'Group') was established in Guernsey on 15 September 2005. It has a listing on the main market of the London Stock Exchange as a commercial company and entered the UK REIT regime on 1 October 2018. The consolidated financial statements are prepared for the year ended 31 March 2025 with comparatives for the year ended 31 March 2024.

2. Material accounting policies

Basis of accounting

The financial statements have been prepared on a going concern basis and adopt the historical cost basis, except for the revaluation of investment properties, share-based awards and property, plant and equipment. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. The financial statements, which give a true and fair view, are prepared in accordance with International Financial Reporting Standards (IFRS Accounting Standards) as issued by the IASB and the Companies (Guernsey) Law, 2008.

The Directors have assessed whether the going concern basis remains appropriate for the preparation of the financial statements. They have reviewed the Group's principal and emerging risks, existing loan facilities, access to funding and liquidity position and then considered different adverse scenarios impacting the portfolio and the potential consequences on financial performance, asset values, dividend policy, capital projects and loan covenants. Under all these scenarios the Group has sufficient resources to continue its operations, and remain within its loan covenants, for the foreseeable future and in any case for a period of at least 12 months from the date of these financial statements.

Based on their assessment and knowledge of the portfolio and market, the Directors have therefore continued to adopt the going concern basis in preparing the financial statements.

The financial statements are presented in pounds sterling, which is the Company's functional currency. All financial information presented in pounds sterling has been rounded to the nearest thousand, except when otherwise indicated.

New or amended standards issued

The accounting policies adopted are consistent with those of the previous financial period, as amended to reflect the adoption of new standards, amendments and interpretations which became effective in the year as shown below.

-      Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

-      Non-current Liabilities with Covenants (Amendments to IAS 1)

-      Amendments to IAS 7 and IFRS 7 - Supplier Finance Arrangements

‒      Amendments to IAS 21 - Lack of Exchangeability

The adoption of these standards has had no material effect on the consolidated financial statements of the Group. At the date of approval of these financial statements, there are a number of new and amended standards in issue but not yet effective for the financial year ended 31 March 2025 and thus have not been applied by the Group.

-      IFRS 18 Presentation and Disclosure in Financial Statements

-      IFRS 19 Subsidiaries without Public Accountability

-      Sale or Contributions of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

-      Amendments to IFRS 9 and IFRS 7 - Contracts referencing Nature-dependent Electricity

‒      Annual Improvements to IFRS Accounting Standards

The adoption of these new and amended standards, together with any other IFRSs or IFRIC interpretations that are not yet effective, are not expected to have a material impact on the financial statements of the Group other than IFRS 18 (Presentation and Disclosure in Financial Statements).

IFRS 18 will replace IAS 1 Presentation of Financial Statements and applies for annual reporting periods beginning on or after 1 January 2027. The new standard introduces the following key new requirements.

-      Entities are required to classify all income and expenses into five categories in the statement of profit or loss, namely the operating, investing, financing, discontinued operations and income tax categories. Entities are also required to present a newly-defined operating profit subtotal. Entities' net profit will not change.

-      Management-defined performance measures (MPMs) are disclosed in a single note in the financial statements.

‒      Enhanced guidance is provided on how to group information in the financial statements.

In addition, all entities are required to use the operating profit subtotal as the starting point for the statement of cash flows when presenting operating cash flows under the indirect method.

The Group is still in the process of assessing the impact of the new standard, particularly with respect to the structure of the Group's consolidated statement of comprehensive income, the consolidated statement of cash flows and the additional disclosures required for MPMs. The Group is also assessing the impact on how information is grouped in the financial statements, including for items currently labelled as 'other'.

Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of estimates about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

Significant judgements and estimates

Judgements made by management in the application of IFRSs that have a significant effect on the financial statements and major sources of estimation uncertainty are disclosed in Note 13.

The critical estimates and assumptions relate to the investment property and owner-occupied property valuations applied by the Group's independent valuer. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company at the reporting date. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. These financial statements include the results of the subsidiaries disclosed in Note 12. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Fair value hierarchy

The fair value measurement for the Group's assets and liabilities is 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.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

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.

Investment properties

Freehold property held by the Group to earn income or for capital appreciation, or both, is classified as investment property in accordance with IAS 40 'Investment Property'. Property held under head leases for similar purposes is also classified as investment property. Investment property is initially recognised at purchase cost plus directly attributable acquisition expenses and subsequently measured at fair value. The fair value of investment property is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and who has recent experience in the location and category of the investment property being valued.

The fair value of investment properties is measured based on each property's highest and best use from a market participant's perspective and considers the potential uses of the property that are physically possible, legally permissible and financially feasible.

The fair value of investment property generally involves consideration of:

-      Market evidence on comparable transactions for similar properties;

-      The actual current market for that type of property in that type of location at the reporting date and current market expectations;

-      Rental income from leases and market expectations regarding possible future lease terms;

-      Hypothetical sellers and buyers, who are reasonably informed about the current market and who are motivated, but not compelled, to transact in that market on an arm's length basis; and

‒      Investor expectations on matters such as future enhancement of rental income or market conditions.

Gains and losses arising from changes in fair value are included in the Consolidated Statement of Comprehensive Income in the year in which they arise. Purchases and sales of investment property are recognised when contracts have been unconditionally exchanged and the significant risks and rewards of ownership have been transferred.

An investment property is derecognised for accounting purposes upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Consolidated Statement of Comprehensive Income in the year the asset is derecognised. Investment properties are not depreciated.

The majority of the investment properties are charged by way of a first ranking mortgage as security for the loans made to the Group; see Note 18.

Property, plant and equipment

Owner-occupied property

Owner-occupied property is stated at its revalued amount, which is determined in the same manner as investment property. It is depreciated over its remaining useful life (in this case 40 years) with the depreciation included in administrative expenses. On revaluation, any accumulated depreciation is eliminated against the gross carrying amount of the property concerned, and the net amount restated to the revalued amount. Subsequent depreciation charges are adjusted based on the revalued amount. Any difference between the depreciation charge on the revalued amount and that which would have been charged under historic cost is transferred between the revaluation reserve and retained earnings as the property is used. Any gain arising on this remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve. Any loss is recognised in profit or loss. However, to the extent that an amount is included in the revaluation surplus for that property, the loss is recognised in other comprehensive income and reduces the revaluation surplus within equity.

Plant and equipment

Plant and equipment is depreciated on a straight-line basis over the estimated useful lives of each item of plant and equipment. The estimated useful lives are between three and five years.

Leases

Where the Group holds interests in investment properties other than as freehold interests (e.g. as a head lease), these are accounted for as right of use assets, which is recognised at its fair value on the Balance Sheet, within the investment property carrying value. Upon initial recognition, a corresponding liability is included as a lease liability. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability so as to produce a constant periodic rate of interest on the remaining lease liability. Contingent rent payable, being the difference between the rent currently payable and the minimum lease payments when the lease liability was originally calculated, are charged as expenses within property expenditure in the years in which they are payable.

The Group leases its investment properties under commercial property leases which are held as operating leases. An operating lease is a lease other than a finance lease. A finance lease is one where substantially all the risks and rewards of ownership are passed to the lessee. Lease income is recognised as income on a straight-line basis over the lease term. Direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income. Upon receipt of a surrender premium for the early termination of a lease, the profit, net of dilapidations and non-recoverable outgoings relating to the lease concerned, is immediately reflected in revenue from properties if there are no relevant conditions attached to the surrender.

Cash and cash equivalents

Cash includes cash in hand and cash with banks. Cash equivalents are short-term and are held for short-term commitments, highly liquid investments that are readily convertible to known amounts of cash with original maturities in three months or less and that are subject to an insignificant risk of change in value.

Income and expenses

Income and expenses are included in the Consolidated Statement of Comprehensive Income on an accruals basis. All of the Group's income and expenses are derived from continuing operations.

Lease incentive payments are amortised on a straight-line basis over the period from the date of lease inception to the end of the lease term and presented within accounts receivable. Lease incentives granted are recognised as a reduction of the total rental income, over the term of the lease.

Property operating costs include the costs of professional fees on letting and other non-recoverable costs.

The income charged to occupiers for property service charges and the costs associated with such service charges are shown separately in Notes 3 and 4 to reflect that, notwithstanding this money is held on behalf of occupiers, the ultimate risk for paying and recovering these costs rests with the property owner.

Employee benefits

Defined contribution plans

A defined contribution plan is a retirement benefit plan under which the Company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an expense in the Consolidated Statement of Comprehensive Income in the periods during which services are rendered by employees.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share-based payments

The fair value of the amounts payable to employees in respect of the Deferred Bonus Plan, when these are to be settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. Where the awards are equity settled, the fair value is recognised as an expense, with a corresponding increase in equity. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised under the category staff costs in the Consolidated Statement of Comprehensive Income.

The grant date fair value of awards to employees made under the Long-term Incentive Plan is recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related non-market performance conditions at the vesting date. For share-based payment awards subject to market conditions, the grant date fair value of the share-based awards is measured to reflect such conditions and there is no adjustment between expected and actual outcomes.

The cost of the Company's shares held by the Employee Benefit Trust is deducted from equity in the Consolidated Balance Sheet. Any shares held by the Trust are not included in the calculation of earnings or net assets per share.

Dividends

Dividends are recognised in the period in which they are declared.

Share buybacks

When shares are redeemed or purchased wholly out of profits available for distribution, a sum equal to the total amount paid by the Company is deducted from the Company's retained earnings.

Accounts receivable

Accounts receivable are stated at their nominal amount as reduced by appropriate allowances for estimated irrecoverable amounts. The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected impairment provision for all applicable accounts receivable. Bad debts are written off when identified.

Loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in profit or loss in the Consolidated Statement of Comprehensive Income when the liabilities are derecognised for accounting purposes, as well as through the amortisation process.

Assets classified as held for sale

Any investment properties on which contracts for sale have been exchanged but which had not completed at the period end are disclosed as properties held for sale as control over the properties is still retained over the period end. Investment properties included in the held for sale category continue to be measured in accordance with the accounting policy for investment properties.

Other assets and liabilities

Other assets and liabilities, including trade creditors, accruals, other creditors, and deferred rental income, which are not interest bearing are stated at their nominal value.

Share capital

Ordinary shares are classified as equity.

Revaluation reserve

Any surplus or deficit arising from the revaluation of owner-occupied property is taken to the revaluation reserve. A revaluation deficit is only taken to retained earnings when there is no previous revaluation surplus to reverse.

Taxation

The Group elected to be treated as a UK REIT with effect from 1 October 2018. The UK REIT rules exempt the profits of the Group's UK property rental business from UK corporation and income tax. Gains on UK properties are also exempt from tax, provided they are not held for trading. The Group is otherwise subject to UK corporation tax.

Principles for the Consolidated Statement of Cash Flows

The Consolidated Statement of Cash Flows has been drawn up according to the indirect method, separating the cash flows from operating activities, investing activities and financing activities. The net result has been adjusted for amounts in the Consolidated Statement of Comprehensive Income and movements in the Consolidated Balance Sheet which have not resulted in cash income or expenditure in the related period.

The cash amounts in the Consolidated Statement of Cash Flows include those assets that can be converted into cash without any restrictions and without any material risk of decreases in value as a result of the transaction.

3. Revenue from properties

	2025 £000	2024 £000
Rents receivable (adjusted for lease incentives)	43,531	43,910
Surrender premiums	7	102
Dilapidation receipts	368	952
Other income	286	124
	44,192	45,088
Service charge income	9,827	9,602
	54,019	54,690

 

Rents receivable have been adjusted for lease incentives recognised of £0.6 million (2024: £nil).

4. Property expenses

	2025 £000	2024 £000
Property operating costs	2,629	3,075
Property void costs	3,887	4,122
	6,516	7,197
Recoverable service charge costs	9,827	9,602
	16,343	16,799

 

5. Operating segments

The Board is responsible for setting the Group's strategy and business model. 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 Consolidated Balance Sheet, assuming dividends are reinvested, 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 47 commercial properties, which are in the industrial, office, retail and leisure sectors.

 

6. Administrative expenses

	2025 £000	2024 £000
Director and staff costs	4,444	4,191
Auditor's remuneration	256	248
Other administrative expenses	2,400	2,780
	7,100	7,219

 

Auditor's remuneration comprises:	2025 £000	2024 £000
Audit fees:
Audit of Group financial statements	138	120
Audit of subsidiaries' financial statements	80	103
Audit-related fees:
Review of interim financial statements	38	25
	256	248

 

7. Director and staff costs

	2025 £000	2024 £000
Wages and salaries	2,436	2,422
Non-Executive Directors' fees	298	287
Social security costs	526	435
Other pension costs	51	47
Share-based payments - cash settled	311	189
Share-based payments - equity settled	822	811
	4,444	4,191

 

Employees participate in two share-based remuneration arrangements: the Deferred Bonus Plan and the Long-term Incentive Plan (the 'LTIP').

For all employees, a proportion of any discretionary annual bonus will be an award under the Deferred Bonus Plan. With the exception of Executive Directors, awards are cash settled and vest after two years. The final value of awards is determined by the movement in the Company's share price and dividends paid over the vesting period. For Executive Directors, awards are equity settled and also vest after two years. On 6 June 2024, awards of 1,063,607 notional shares were made which vest in June 2026 (2024: 834,885 notional shares). The next awards are due to be made in June 2025 for vesting in June 2027.

The table below summarises the awards made under the Deferred Bonus Plan. Employees have the option to defer the vesting date of their awards for a maximum of seven years.

Vesting date	Units at 31 March 2023	Units granted in the year	Units cancelled in the year	Units redeemed in the year	Units at 31 March 2024	Units granted in the year	Units cancelled in the year	Units redeemed in the year	Units at 31 March 2025
29 June 2022	9,755	-	-	(9,755)	-	-	-	-	-
22 June 2023	531,108	-	-	(391,152)	139,956	-	-	(139,956)	-
17 June 2024	500,905	-	(2,117)	-	498,788	-	-	(498,788)	-
14 June 2025	-	834,885	(2,305)	-	832,580	-	-	-	832,580
6 June 2026	-	-	-	-	-	1,063,607	-	-	1,063,607
	1,041,768	834,885	(4,422)	(400,907)	1,471,324	1,063,607	-	(638,744)	1,896,187

 

The Group also has a Long-term Incentive Plan for all employees which is equity settled. Awards are made annually and vest three years from the grant date. Vesting is conditional on three performance metrics measured over each three-year period. Awards to Executive Directors are also subject to a further two-year holding period. On 4 June 2024, awards for a maximum of 1,190,840 shares were granted to employees in respect of the three-year period ending on 31 March 2027. In the previous year, awards of 1,219,010 shares were made on 14 June 2023 for the three-year period ending on 31 March 2026.

The metrics are:

-      Total shareholder return (TSR) of Picton Property Income Limited, compared to a comparator group of similar listed companies;

-      Total property return (TPR) of the property assets held within the Group, compared to the MSCI UK Quarterly Property Index; and

‒      Growth in EPRA earnings per share (EPS) of the Group.

The fair value of share grants is measured using the Monte Carlo model for the TSR metric and a Black-Scholes model for the TPR and EPS metrics. The fair value is recognised over the expected vesting period. For the awards made during this year and the previous year the main inputs and assumptions of the models, and the resulting fair values, are:

Assumptions
Grant date	6 June 2024	14 June 2023
Share price at date of grant	67.4p	76.2p
Exercise price	Nil	Nil
Expected term	3 years	3 years
Risk-free rate - TSR condition	4.3%	4.8%
Share price volatility - TSR condition	26.7%	27.4%
Median volatility of comparator group - TSR condition	29.2%	27.2%
Correlation - TSR condition	50.2%	38.6%
TSR performance at grant date - TSR condition	7.0%	7.0%
Median TSR performance of comparator group at grant date - TSR condition	4.4%	2.3%
Fair value - TSR condition (Monte Carlo method)	29.0p	35.0p
Fair value - TPR condition (Black-Scholes model)	67.4p	76.2p
Fair value - EPS condition (Black-Scholes model)	67.4p	76.2p

 

The Trustee of the Company's Employee Benefit Trust acquired 2,100,000 ordinary shares during the year for £1,519,000 (2024: nil) and sold or transferred 799,481 shares for awards that were redeemed in the year (2024: 746,254 shares).

The Group employed 12 members of staff at 31 March 2025 (2024: 12). The average number of people employed by the Group for the year ended 31 March 2025 was 12 (2024: 11).

8. Interest expense and interest income

Interest paid	2025 £000	2024 £000
Interest payable on loans	8,081	9,146
Interest on obligations under finance leases	173	174
Non-utilisation fees	295	211
	8,549	9,531

 

The loan arrangement costs incurred to 31 March 2025 are £3,328,000 (2024: £3,328,000). These are amortised over the duration of the loans with £304,000 amortised in the year ended 31 March 2025 and included in interest payable on loans (2024: £303,000).

Interest income of £813,000 (2024: £604,000) was generated on cash balances which earn interest at floating rates based on daily deposit rates.

9. Tax

The charge for the year is:

	2025 £000	2024 £000
Tax expense in year	-	-
Total tax charge	-	-

 

A reconciliation of the tax charge applicable to the results at the statutory tax rate to the charge for the year is as follows:

	2025 £000	2024 £000
Profit/(loss) before taxation	37,323	(4,789)
Expected tax charge/(credit) on ordinary activities at the standard rate of taxation of 25% (2024: 25%)	9,331	(1,197)
Less:
UK REIT exemption on net income	(5,710)	(5,437)
Revaluation movement not taxable	(3,621)	6,634
Total tax charge	-	-

 

As a UK REIT, the income profits of the Group's UK property rental business are exempt from corporation tax, as are any gains it makes from the disposal of its properties, provided they are not held for trading. The Group is otherwise subject to UK corporation tax at the prevailing rate.

As the principal company of the REIT, the Company is required to distribute at least 90% of the income profits of the Group's UK property rental business. There are a number of other conditions that are also required to be met by the Company and the Group to maintain REIT tax status. These conditions were met in the year and the Board intends to conduct the Group's affairs such that these conditions continue to be met for the foreseeable future. Accordingly, deferred tax is no longer recognised on temporary differences relating to the property rental business.

10. Dividends

	2025 £000	2024 £000
Declared and paid:
Interim dividend for the period ended 31 March 2023: 0.875 pence	-	4,771
Interim dividend for the period ended 30 June 2023: 0.875 pence	-	4,770
Interim dividend for the period ended 30 September 2023: 0.875 pence	-	4,771
Interim dividend for the period ended 31 December 2023: 0.875 pence	-	4,777
Interim dividend for the period ended 31 March 2024: 0.925 pence	5,050	-
Interim dividend for the period ended 30 June 2024: 0.925 pence	5,039	-
Interim dividend for the period ended 30 September 2024: 0.925 pence	5,038	-
Interim dividend for the period ended 31 December 2024: 0.925 pence	5,032	-
	20,159	19,089

 

The interim dividend of 0.95 pence per ordinary share in respect of the period ended 31 March 2025 has not been recognised as a liability as it was declared after the year end. This dividend of £5,019,000 will be paid on 30 May 2025.

11. Earnings per share

Basic and diluted earnings per share is calculated by dividing the net profit for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the year, excluding the average number of shares held by the Employee Benefit Trust for the year. The diluted number of shares also reflects the contingent shares to be issued under the Long-term Incentive Plan.

The following reflects the profit and share data used in the basic and diluted profit per share calculation:

	2025	2024
Net profit/(loss) attributable to ordinary shareholders of the Company from continuing operations (£000)	37,323	(4,789)
Weighted average number of ordinary shares for basic earnings per share	544,037,179	545,437,264
Weighted average number of ordinary shares for diluted earnings per share	545,502,180	547,092,154

 

12. Investments in subsidiaries

The Company had the following principal subsidiaries as at 31 March 2025 and 31 March 2024:

Name	Place of incorporation	Ownership proportion
Picton UK Real Estate Trust (Property) Limited	Guernsey	100%
Picton (UK) REIT (SPV) Limited	Guernsey	100%
Picton (UK) Listed Real Estate	Guernsey	100%
Picton UK Real Estate (Property) No 2 Limited	Guernsey	100%
Picton (UK) REIT (SPV No 2) Limited	Guernsey	100%
Picton Capital Limited	England & Wales	100%
Picton (General Partner) No 2 Limited	Guernsey	100%
Picton (General Partner) No 3 Limited	Guernsey	100%
Picton No 2 Limited Partnership	England & Wales	100%
Picton No 3 Limited Partnership	England & Wales	100%
Picton Financing UK Limited	England & Wales	100%
Picton Financing UK (No 2) Limited	England & Wales	100%
Picton Property No 3 Limited	Guernsey	100%

 

The results of the above entities are consolidated within the Group financial statements.

Picton UK Real Estate Trust (Property) Limited and Picton (UK) REIT (SPV) Limited own 100% of the units in Picton (UK) Listed Real Estate, a Guernsey Unit Trust (the 'GPUT'). The GPUT holds a 99.9% interest in both Picton No 2 Limited Partnership and Picton No 3 Limited Partnership and the remaining balances are held by Picton (General Partner) No 2 Limited and Picton (General Partner) No 3 Limited, respectively.

13. Investment properties

The following table provides a reconciliation of the opening and closing amounts of investment properties classified as Level 3 recorded at fair value.

	2025 £000	2024 £000
Fair value at start of year	724,043	746,342
Capital expenditure on investment properties	11,794	4,458
Acquisitions	533	-
Disposals	(50,031)	-
Profit on disposal of investment properties	1,496	-
Unrealised movement on investment properties	12,859	(26,757)
Fair value at the end of the year	700,694	724,043
Historic cost at the end of the year	647,863	685,576

 

The fair value of investment properties reconciles to the appraised value as follows:

	2025 £000	2024 £000
Current
Appraised value of properties held for sale	-	35,900
Lease incentives held as debtors of properties held for sale	-	(167)
	-	35,733
Non-current
Appraised value	723,145	708,740
Valuation of assets held under head leases	2,074	2,046
Owner-occupied property	(3,438)	(3,391)
Lease incentives held as debtors	(21,087)	(19,085)
	700,694	688,310
Fair value at the end of the year	700,694	724,043

 

As at 31 March 2024, contracts had been exchanged to sell Angel Gate, London EC1 and Longcross, Cardiff so these assets were classified as assets held for sale, net of lease incentives. The sale of Angel Gate completed in April 2024 and the sale of Longcross completed in March 2025. As at 31 March 2025, there were no assets classified as held for sale.

The investment properties were valued by independent valuers, CBRE Limited, Chartered Surveyors, as at 31 March 2025 and 31 March 2024 on the basis of fair value in accordance with the version of the RICS Valuation - Global Standards (incorporating the International Valuation Standards) and the UK national supplement (the Red Book) current as at the valuation date. The total fees earned by CBRE Limited from the Group are less than 5% of their total UK revenue.

The fair value of the Group's investment properties has been determined using an income capitalisation technique, whereby contracted and market rental values are capitalised with a market capitalisation rate. The resulting valuations are cross-checked against the equivalent yields and the fair market values per square foot derived from comparable market transactions on an arm's length basis.

In addition, the Group's investment properties are valued quarterly by CBRE Limited. The valuations are based on:

-      Information provided by the Group, including rents, lease terms, revenue and capital expenditure. Such information is derived from the Group's financial and property systems and is subject to the Group's overall control environment

‒      Valuation models used by the valuers, including market-related assumptions based on their professional judgement and market observation

The assumptions and valuation models used by the valuers, and supporting information, are reviewed by senior management and the Board through the Property Valuation Committee. Members of the Property Valuation Committee, together with senior management, meet with the independent valuer on a quarterly basis to review the valuations and underlying assumptions, including considering current market trends and conditions, and changes from previous quarters. The Board will also consider whether circumstances at specific investment properties, such as alternative uses and issues with occupational tenants, are appropriately reflected in the valuations. The fair value of investment properties is measured based on each property's highest and best use from a market participant's perspective and considers the potential uses of the property that are physically possible, legally permissible and financially feasible.

As at 31 March 2025 and 31 March 2024, all of the Group's properties, including owner-occupied property, are Level 3 in the fair value hierarchy as it involves use of significant judgement. There were no transfers between levels during the year and the prior year. 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, as derived from prices).

Information on these significant unobservable inputs per sector of investment properties is disclosed as follows:

	2025			2024
	Office	Industrial	Retail and Leisure	Office	Industrial	Retail and Leisure
Appraised value (£000)	175,305	463,220	84,620	224,885	439,945	79,810
Area (sq ft, 000's)	706	3,227	692	874	3,240	692
Range of unobservable inputs:
Gross ERV (sq ft per annum)
- range	£12.45 to £93.46	£3.92 to £29.96	£3.35 to £28.12	£6.00 to £87.81	£3.79 to £27.95	£3.35 to £21.53
- weighted average	£43.74	£13.69	£12.42	£38.26	£13.37	£11.63
Net initial yield
- range	3.51% to 12.10%	2.89% to 8.21%	0.00% to 24.58%	-4.85% to 10.73%	2.30% to 7.75%	6.80% to 42.40%
- weighted average	6.96%	4.53%	6.15%	5.22%	4.63%	9.17%
Reversionary yield
- range	5.12% to 15.39%	4.76% to 9.17%	6.97% to 17.13%	5.09% to 15.01%	4.82% to 8.05%	7.00% to 12.72%
- weighted average	9.37%	5.83%	8.16%	8.81%	5.86%	8.20%
True equivalent yield
- range	5.14% to 11.30%	4.78% to 8.39%	6.50% to 12.75%	4.85% to 10.83%	4.75% to 8.00%	7.25% to 12.25%
- weighted average	8.20%	5.63%	7.91%	7.75%	5.66%	8.29%

 

An increase/decrease in ERV will increase/decrease valuations, while an increase/decrease to yield decreases/increases valuations. We have reviewed the ranges used in assessing the impact of changes in unobservable inputs on the fair value of the Group's property portfolio and concluded these were still reasonable. The table below sets out the sensitivity of the valuation to changes of 50 basis points in yield.

 

Sector	Movement	2025 Impact on valuation	2024 Impact on valuation
Industrial	Increase of 50 basis points	Decrease of £39.3m	Decrease of £35.7m
	Decrease of 50 basis points	Increase of £47.3m	Increase of £43.1m
Office	Increase of 50 basis points	Decrease of £11.8m	Decrease of £14.6m
	Decrease of 50 basis points	Increase of £13.5m	Increase of £16.5m
Retail and Leisure	Increase of 50 basis points	Decrease of £5.0m	Decrease of £4.3m
	Decrease of 50 basis points	Increase of £5.7m	Increase of £4.9m

 

14. Property, plant and equipment

Property, plant and equipment principally comprises the fair value of owner-occupied property. The fair value of these premises is based on the appraised value at 31 March 2025.

	Owner Occupied Property £000	Plant and equipment £000	Total £000
At 1 April 2023	3,248	167	3,415
Additions	-	4	4
Depreciation	(80)	(63)	(143)
Revaluation	223	-	223
At 31 March 2024	3,391	108	3,499
Additions	-	12	12
Depreciation	(81)	(54)	(135)
Revaluation	128	-	128
At 31 March 2025	3,438	66	3,504

 

15. Accounts receivable

	2025 £000	2024 £000
Tenant debtors (net of provisions for bad debts)	3,034	5,279
Lease incentives	21,087	19,252
Other debtors	1,001	2,070
	25,122	26,601

 

The estimated fair values of receivables are the discounted amount of the estimated future cash flows expected to be received and the approximate value of their carrying amounts.

Amounts are considered impaired using the lifetime expected credit loss method. Movement in the balance considered to be impaired has been included in the Consolidated Statement of Comprehensive Income. As at 31 March 2025, tenant debtors of £105,000 (2024: £193,000) were considered impaired and provided for.

16. Cash and cash equivalents

	2025 £000	2024 £000
Cash at bank and in hand	20,771	19,747
Short-term deposits	14,549	26
	35,320	19,773

 

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and one month depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates. The carrying amounts of these assets approximate to their fair value.

17. Accounts payable and accruals

	2025 £000	2024 £000
Accruals	5,622	4,839
Deferred rental income	5,822	7,963
VAT liability	2,715	1,899
Trade creditors	658	631
Other creditors	5,231	5,290
	20,048	20,622

 

18. Loans and borrowings

	Maturity	2025 £000	2024 £000
Current
Aviva facility	-	1,564	1,497
Capitalised finance costs	-	(176)	(303)
		1,388	1,194
Non-current
Canada Life facility	24 July 2031	129,045	129,045
Aviva facility	24 July 2032	79,027	80,591
NatWest revolving credit facility	26 May 2025	-	16,400
Capitalised finance costs	-	(919)	(1,096)
		207,153	224,940
		208,541	226,134

 

The following table provides a reconciliation of the movement in loans and borrowings to cash flows arising from financing activities.

	2025 £000	2024 £000
Balance at start of year	226,134	222,764
Changes from financing cash flows
Proceeds from loans and borrowings	-	4,500
Repayment of loans and borrowings	(17,897)	(1,433)
	(17,897)	3,067
Other changes
Amortisation of financing costs	304	303
	304	303
Balance as at 31 March	208,541	226,134

 

The Group has a £129.0 million loan facility with Canada Life which matures in July 2031. Interest is fixed at 3.25% per annum over the remaining life of the loan. The loan agreement has a loan to value covenant of 65% and an interest cover test of 1.75. The loan is secured over the Group's properties held by Picton No 2 Limited Partnership and Picton UK Real Estate Trust (Property) No 2 Limited, valued at £350.9 million (2024: £348.1 million).

Additionally, the Group has a £95.3 million term loan facility with Aviva Commercial Finance Limited which matures in July 2032. The loan is for a term of 20 years and was fully drawn on 24 July 2012 with approximately one-third repayable over the life of the loan in accordance with a scheduled amortisation profile. The Group has repaid £1.5 million in the year (2024: £1.4 million). Interest on the loan is fixed at 4.38% per annum over the life of the loan. The facility has a loan to value covenant of 65% and a debt service cover ratio of 1.4. The facility is secured over the Group's properties held by Picton No 3 Limited Partnership and Picton Property No 3 Limited, valued at £168.3 million (2024: £184.3 million).

The Group also has a £50.0 million revolving credit facility (RCF) with National Westminster Bank Plc which matures in May 2025. As at 31 March the facility was undrawn (2024: £16.4 million), interest is charged at 150 basis points over SONIA on drawn balances and there is an undrawn commitment fee of 60 basis points. The facility is secured on properties held by Picton UK Real Estate Trust (Property) Limited, valued at £141.3 million (2024: £138.7 million).

The fair value of the drawn loan facilities at 31 March 2025, estimated as the present value of future cash flows discounted at the market rate of interest at that date, was £183.5 million (2024: £202.8 million). The fair value of the drawn loan facilities is classified as Level 2 under the hierarchy of fair value measurements.

There were no transfers between levels of the fair value hierarchy during the current or prior years.

The weighted average interest rate on the Group's borrowings as at 31 March 2025 was 3.7% (2024: 3.9%).

19. Contingencies and capital commitments

The Group has entered into contracts for the refurbishment of 11 properties (2024: eight properties) with commitments outstanding at 31 March 2025 of approximately £5.3 million (2024: £4.2 million). No further obligations to construct or develop investment property or for repairs, maintenance or enhancements were in place as at 31 March 2025 (2024: £nil).

20. Share capital and other reserves

	2025 £000	2024 £000
Authorised:
Unlimited number of ordinary shares of no par value	-	-
Issued and fully paid:
536,400,000 ordinary shares of no par value (31 March 2024: 547,605,596)	-	-
Share premium	164,400	164,400

 

The Company has 536,400,000 ordinary shares in issue of no par value (2024: 547,605,596).

No new ordinary shares were issued during the year ended 31 March 2025.

	2025 Number of shares	2024 Number of shares
Ordinary share capital	547,605,596	547,605,596
Shares cancelled in the year	(11,205,596)	-
Number of shares held in Employee Benefit Trust	(2,942,959)	(1,642,440)
Number of ordinary shares	533,457,041	545,963,156

 

The fair value of awards made under the Long-term Incentive Plan is recognised in other reserves.

Subject to the solvency test contained in the Companies (Guernsey) Law, 2008 being satisfied, ordinary shareholders are entitled to all dividends declared by the Company and to all of the Company's assets after repayment of its borrowings and ordinary creditors. The Trustee of the Company's Employee Benefit Trust has waived its right to receive dividends on the 2,942,959 shares it holds but continues to hold the right to vote. Ordinary shareholders have the right to vote at meetings of the Company. All ordinary shares carry equal voting rights.

The Directors have authority to buy back up to 14.99% of the Company's ordinary shares in issue, being 82,086,078 shares, subject to the annual renewal of the authority from shareholders. Any buyback of ordinary shares will be made subject to Guernsey law, and the making and timing of any buybacks will be at the absolute discretion of the Board. Between 30 January 2025 and 31 March 2025 the Company bought back and cancelled 11,205,596 ordinary shares at a cost of £7.5 million (2024: £nil). The value of the shares cancelled of £7.5 million is deducted from Retained Earnings. The remaining authority following this repurchase has now reduced to 70,880,482 ordinary shares.

21. Adjustment for non-cash movements in the cash flow statement

	2025 £000	2024 £000
Movement in investment property valuation	(12,859)	26,757
Profit on disposal of investment property	(1,496)	-
Revaluation of owner-occupied property	(128)	(223)
Share-based provisions	751	729
Depreciation of tangible assets	135	143
	(13,597)	27,406

22. Obligations under leases

The Group has entered into a number of head leases in relation to its investment properties. These leases are for fixed terms and subject to regular rent reviews. They contain no material provisions for contingent rents, renewal or purchase options nor any restrictions outside of the normal lease terms.

Lease liabilities in respect of rents on leasehold properties were payable as follows:

	2025 £000	2024 £000
Future minimum payments due:
Within one year	185	185
In the second to fifth years inclusive	740	740
After five years	8,527	8,712
	9,452	9,637
Less: finance charges allocated to future periods	(6,779)	(6,952)
Present value of minimum lease payments	2,673	2,685

 

The present value of minimum lease payments is analysed as follows:

	2025 £000	2024 £000
Current
Within one year	115	114
	115	114
Non-current
In the second to fifth years inclusive	413	409
After five years	2,145	2,162
	2,558	2,571
	2,673	2,685

 

Operating leases where the Group is lessor

The Group leases its investment properties under commercial property leases which are held as operating leases.

At the reporting date, the Group's future income based on the unexpired lease length was as follows (based on annual rentals):

	2025 £000	2024 £000
Within one year	44,938	43,818
One to two years	38,906	38,530
Two to three years	35,263	33,085
Three to four years	31,903	28,687
Four to five years	28,594	24,411
After five years	135,958	98,539
	315,562	267,070

 

These properties are measured under the fair value model as the properties are held to earn rentals. Commercial property leases typically have lease terms between five and ten years and include clauses to enable periodic upward revision of the rental charge according to prevailing market conditions. Some leases contain options to break before the end of the lease term.

23. Net asset value

The net asset value per share calculation uses the number of shares in issue at the year end and excludes the actual number of shares held by the Employee Benefit Trust at the year end; see Note 20.

24. Financial instruments

The Group's financial instruments comprise cash and cash equivalents, accounts receivable, secured loans, obligations under head leases and accounts payable that arise from its operations. The Group does not have exposure to any derivative financial instruments. Apart from the secured loans, as disclosed in Note 18, the fair value of the financial assets and liabilities is not materially different from their carrying value in the financial statements.

Categories of financial instruments

31 March 2025	Notes	Held at fair value through profit or loss £000	Amortised  cost £000	Total £000
Financial assets
Debtors	15	-	4,035	4,035
Cash and cash equivalents	16	-	35,320	35,320
		-	39,355	39,355
Financial liabilities
Loans and borrowings	18	-	208,541	208,541
Obligations under head leases	22	-	2,673	2,673
Creditors and accruals	17	-	11,511	11,511
		-	222,725	222,725

 

31 March 2024	Notes	Held at fair value through profit or loss £000	Amortised  cost £000	Total £000
Financial assets
Debtors	15	-	7,349	7,349
Cash and cash equivalents	16	-	19,773	19,773
		-	27,122	27,122
Financial liabilities
Loans and borrowings	18	-	226,134	226,134
Obligations under head leases	22	-	2,685	2,685
Creditors and accruals	17	-	10,760	10,760
		-	239,579	239,579

 

25. Risk management

The Group invests in commercial properties in the United Kingdom. The following describes the risks involved and the risk management framework applied by the Group. Senior management reports regularly both verbally and formally to the Board, and its relevant Committees, to allow them to monitor and review all the risks noted below.

Capital risk management

The Group aims to manage its capital to ensure that the entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through optimising its capital structure. The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business.

The capital structure of the Group consists of debt, as disclosed in Note 18, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued share capital, retained earnings and other reserves. The Group is not subject to any external capital requirements.

The Group monitors capital primarily on the basis of its gearing ratio. This ratio is calculated as the principal borrowings outstanding, as detailed under Note 18, divided by the gross assets. There is a limit of 65% as set out in the Articles of Association of the Company. Gross assets are calculated as non-current and current assets, as shown in the Consolidated Balance Sheet.

At the reporting date the gearing ratios were as follows:

	2025 £000	2024 £000
Total borrowings	209,636	227,533
Gross assets	764,640	773,916
Gearing ratio (must not exceed 65%)	27.4%	29.4%

 

The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders. The Group has managed its financing risk by entering into long-term loan arrangements with different maturities, which will enable the Group to manage its borrowings in an orderly manner over the long term. The Group also has a revolving credit facility which provides greater flexibility in managing the level of borrowings.

The Group's net debt to equity ratio at the reporting date was as follows:

	2025 £000	2024 £000
Total liabilities	231,262	249,441
Less: cash and cash equivalents	(35,320)	(19,773)
Net debt	195,942	229,668
Total equity	533,378	524,475
Net debt to equity ratio at end of year	0.37	0.44

 

Credit risk

The following tables detail the balances held at the reporting date that may be affected by credit risk:

31 March 2025	Notes	Held at fair value through profit or loss £000	Financial assets and liabilities at amortised cost £000	Total £000
Financial assets
Tenant debtors	15	-	3,034	3,034
Cash and cash equivalents	16	-	35,320	35,320
		-	38,354	38,354

 

31 March 2024	Notes	Held at fair value through profit or loss £000	Financial assets and liabilities at amortised cost £000	Total £000
Financial assets
Tenant debtors	15	-	5,279	5,279
Cash and cash equivalents	16	-	19,773	19,773
		-	25,052	25,052

 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining collateral where appropriate, as a means of mitigating the risk of financial loss from defaults.

Tenant debtors consist of a large number of occupiers, spread across diverse industries and geographical areas. Ongoing credit evaluations are performed on the financial condition of tenant debtors and, where appropriate, credit guarantees or rent deposits are acquired. As at 31 March 2025, tenant rent deposits held by the Group's managing agents in segregated bank accounts totalled £2.5 million (2024: £2.5 million). The Group does not have access to these rent deposits unless the occupier defaults under its lease obligations. Rent collection is outsourced to managing agents who report regularly on payment performance and provide the Group with intelligence on the continuing financial viability of occupiers. The Group does not have any significant concentration risk whether in terms of credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with strong credit ratings assigned by international credit rating agencies.

The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group's maximum exposure to credit risk. The Board continues to monitor the Group's overall exposure to credit risk.

The Group has a panel of banks with which it makes deposits, based on credit ratings assigned by international credit rating agencies and with set counterparty limits that are reviewed regularly. The Group's main cash balances are held with National Westminster Bank Plc (NatWest), Nationwide International Limited (Nationwide), Santander plc (Santander) and Lloyds Bank Plc (Lloyds). Insolvency or resolution of the bank holding cash balances may cause the Group's recovery of cash held by them to be delayed or limited. The Group manages its risk by monitoring the credit quality of its bankers on an ongoing basis. NatWest, Nationwide, Santander and Lloyds are rated by all the major rating agencies. If the credit quality of any of these banks were to deteriorate, the Group would look to move the relevant short-term deposits or cash to another bank. Procedures exist to ensure that cash balances are split between banks to reduce overall exposure to credit risk. At 31 March 2025 and at 31 March 2024, Standard & Poor's short-term credit rating for each of the Group's bankers was A-1.

There has been no change in the fair values of cash or receivables as a result of changes in credit risk in the current or prior periods, due to the actions taken to mitigate this risk, as stated above.

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board, which has put in place an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group's liquidity risk is managed on an ongoing basis by senior management and monitored on a quarterly basis by the Board by maintaining adequate reserves and loan facilities, continuously monitoring forecasts, loan maturity profiles and actual cash flows and matching the maturity profiles of financial assets and liabilities for a period of at least 12 months.

The table below has been drawn up based on the undiscounted contractual maturities of the financial assets/(liabilities), including interest that will accrue to maturity.

31 March 2025	Less than 1 year  £000	1 to 5 years £000	More than 5 years £000	Total £000
Cash and cash equivalents	35,800	-	-	35,800
Debtors	4,035	-	-	4,035
Obligations under head leases	(185)	(740)	(8,527)	(9,452)
Fixed interest rate loans	(9,262)	(37,049)	(215,104)	(261,415)
Creditors and accruals	(11,511)	-	-	(11,511)
	18,877	(37,789)	(223,631)	(242,543)

 

31 March 2024	Less than 1 year £000	1 to 5 years £000	More than 5 years £000	Total £000
Cash and cash equivalents	20,366	-	-	20,366
Debtors	7,349	-	-	7,349
Obligations under head leases	(185)	(740)	(8,712)	(9,637)
Fixed interest rate loans	(9,262)	(37,049)	(224,367)	(270,678)
Floating interest rate loans	(1,117)	(16,571)	-	(17,688)
Creditors and accruals	(10,760)	-	-	(10,760)
	6,391	(54,360)	(233,079)	(281,048)

 

The Group expects to meet its financial liabilities through the various available liquidity sources, including a secure rental income profile, asset sales, undrawn committed borrowing facilities and, in the longer term, debt refinancing.

Market risk

The Group's activities are primarily within the real estate market, exposing it to very specific industry risks.

The yields available from investments in real estate depend primarily on the amount of revenue earned and capital appreciation generated by the relevant properties, as well as expenses incurred. If properties do not generate sufficient revenues to meet operating expenses, including debt service costs and capital expenditure, the Group's operating performance will be adversely affected.

Revenue from properties may be adversely affected by the general economic climate, local conditions such as oversupply of properties or a reduction in demand for properties in the market in which the Group operates, the attractiveness of the properties to occupiers, the quality of the management, competition from other available properties and increased operating costs.

In addition, the Group's revenue would be adversely affected if a significant number of occupiers were unable to pay rent or its properties could not be rented on market terms. Certain significant expenditure associated with investment in real estate (such as external financing costs and maintenance costs) is generally not reduced when circumstances cause a reduction in revenue from properties. By diversifying in regions, sectors, risk categories and occupiers, management expects to mitigate the risk profile of the portfolio effectively. The Board continues to oversee the profile of the portfolio to ensure these risks are managed.

The valuation of the Group's property assets is subject to changes in market conditions. Such changes are taken to the Consolidated Statement of Comprehensive Income and thus impact on the Group's net result. A 5% increase or decrease in property values would increase or decrease the Group's net result by £36.2 million (2024: £37.2 million).

Interest rate risk management

Interest rate risk arises on interest payable on the revolving credit facility only. The Group's senior debt facilities have fixed interest rates over the terms of the loans. The revolving credit facility remains undrawn, therefore the Group has limited exposure to interest rate risk on its borrowings and no sensitivity is presented. The Group manages its interest rate risk by entering into long-term fixed rate debt facilities.

Interest rate risk

The following table sets out the carrying amount, by maturity, of the Group's financial assets/(liabilities).

31 March 2025	Less than 1 year  £000	1 to 5 years £000	More than 5 years £000	Total £000
Floating
Cash and cash equivalents	35,320	-	-	35,320
Fixed
Secured loan facilities	(1,564)	(6,983)	(201,089)	(209,636)
Obligations under leases	(115)	(413)	(2,145)	(2,673)
	33,641	(7,396)	(203,234)	(176,989)

 

31 March 2024	Less than 1 year £000	1 to 5 years £000	More than 5 years £000	Total £000
Floating
Cash and cash equivalents	19,773	-	-	19,773
Secured loan facilities	-	(16,400)	-	(16,400)
Fixed
Secured loan facilities	(1,497)	(6,686)	(202,950)	(211,133)
Obligations under leases	(114)	(409)	(2,162)	(2,685)
	18,162	(23,495)	(205,112)	(210,445)

 

Concentration risk

As discussed above, all of the Group's investments are in the UK and therefore the Group is exposed to macroeconomic changes in the UK economy. Furthermore, the Group derives its rental income from around 350 occupiers, although the largest occupier accounts for only 3.8% of the Group's annual contracted rental income.

Currency risk

The Group has no exposure to foreign currency risk.

26. Related party transactions

The total fees earned during the year by the Non-Executive Directors of the Company amounted to £298,000 (2024: £287,000). As at 31 March 2025, the Group owed £nil to the Non-Executive Directors (2024: £nil).

The remuneration of the Executive Directors is set out in Note 7 and in the Annual Remuneration Report. Picton Property Income Limited has no controlling parties.

27. Events after the Balance Sheet date

A dividend of £5,019,000 (0.95 pence per share) was approved by the Board on 2 May 2025 and will be paid on 30 May 2025.

The Company purchased and cancelled 5,360,795 ordinary shares between 1 April 2025 and 19 May 2025 at a cost of £3,960,000.

The £50 million revolving credit facility, which was due to expire on 26 May 2025, has been refinanced with National Westminster Bank Plc with an initial term of three years and the option of two one-year extensions.

Knight Frank were appointed as independent external valuer effective June 2025, replacing CBRE Limited.

 

END