Morning, and thank you everyone for dialing in and listening to our update presentation for the quarter to December this morning. For those that don't know me, I'm Michael Morris. I'm the Chief Executive at Picton.
I'm Sara Johnson. I'm the Chief Financial Officer.
Thank you. So, in terms of today, this is quite a short update, a quarterly update for the period. Sara will talk to the financial results. I'll give some thoughts on the U.K. property market by way of background, and then we'll dive into the portfolio, the activity, and then give some thoughts on outlook, where we're focused, et cetera. And then there'll be the opportunity, as indicated, for Q&A, after that.
So moving on to the financial update. In terms of the highlights for the quarter, we've continued to see positive earnings and positive total return for the three months and nine months period. And really, there's been a continuation of the themes that we talked about at the interims in terms of continued valuation movements and accretion through our share buyback program. So for the nine months, we're reporting profit after tax of GBP 22.5 million, and a total return of 5.3%. From an earnings per share perspective, earnings per share for the nine-month period were GBP 0.031 . We saw an increase in the last quarter, which is pleasing to see that we're in line with the same nine-month period for the prior year.
Our dividend cover remained at 108% for the nine months, and again, that's been a comfortable level of cover to allow us to reinvest back into the portfolio and give us visibility on cover going forward with these events. From a NAV perspective, we saw NAV on a per share basis increase to GBP 1.024, and that was really driven by the movements I'm going to talk about on the next slide. On a per share basis, the increase of 0.9% was driven by the underlying valuation movements in the portfolio and the accretion from the share buyback program.
In terms of the valuation, the valuation closed at GBP 699 million, or 0.6% increase on the end of September on a gross basis, and 0.3% on a like-for-like basis. That includes the CapEx that we've spent on the portfolio during the period. And that, whilst modest, is actually better than the overall MSCI or benchmark capital performance, which Michael will talk about in a bit more detail later on. I think we were particularly pleased to see our office sector with overall increase of 0.3%, and whilst a small in percentage term, actually, the direction of travel has been important, given the aggressive investment that we've made into that in that sector and in those assets.
From a share buyback perspective, we deployed GBP 6 million of proceeds into the program at an average price of GBP 0.76, and at a discount of 25%. That's been accreted by GBP 0.004 during the three-month period. Moving on to a couple of slides on capital structure. We continue to have an exceptionally strong balance sheet. There's surplus cash from the disposal of our largest office asset earlier on in the financial year, and alongside that, we've got a significant amount of value in our long-term fixed rate debt structure and the two facilities that we have in place with Canada Life and Aviva. And the value of that debt, around about GBP 20 million, isn't seen in our NAV.
It's seen in the net net disposal value and equates to another GBP 0.004 per share or GBP 1.06 on an NDV basis. Our LTV increased marginally over the three-month period. That wasn't as a result of additional drawdowns of borrowings, but it's calculated on a net debt basis, so a lower cash position, reflecting the reduced cash as a result of buybacks and capital expenditure in the period. As a reminder, the weighted average interest rate is 3.7%, which is significantly below current financing rates and the debt maturity of six years. Alongside that, we also have a GBP 50 million undrawn RCF facility with NatWest, which gives us additional operational flexibility. Moving on to talking through a couple of points. On the equity side, as I mentioned, we continued our share buyback program.
The total program, as you'll be aware, was GBP 30 million. We deployed a further GBP 6 million in the quarter, and that's continued to be a large driver of performance from an NAV, both a NAV and an earnings perspective, and we can see that coming through in the total return numbers for this period. In terms of capital priorities, again, this is something that you'll be familiar with from previous updates, but during the quarter, we've continued to prioritize investing in our portfolio. We spent about GBP 2.5 million in the quarter, primarily, again, on office assets in Milton Keynes and Chatham, where we're upgrading those assets and decarbonizing those buildings, with a view to increasing letting attractiveness.
We're really starting to see more data points in that area on the office sector, and we'll come on to talk about those in our case studies. From a share buyback program, we did continue that post-quarter end and deployed a further GBP 0.9 million, and that program was paused in January of this year following the strategic review. From an investment opportunities perspective.
Yeah, I think you, some of you may remember that we said at the time of our interims in November, that we were looking at certain opportunities. I think, you know, the headline really is that there was a specific opportunity that we were looking at, that, quite frankly, as we went through, the diligence didn't stack up, and, you know, in light of other things happening, we withdrew from that, but purely down to the, you know, underlying due diligence. I think that was the right thing to do. So these are just some sort of broad thoughts on the wider property market. Some of you may be familiar, others may be less so. I mean, I think the headline for last year was, you know, modest, but nevertheless positive total returns across all sectors.
It's clear that industrial and retail were the standout sectors of the year. Offices clearly still struggling, and driven by that lower, well, in fact, not capital growth, but actually still seeing capital declines more widely across the sector. I think the headline also, just to note, is the positive rental growth story that continues. And a lot of last year had some sort of, you know, quite challenging backdrops. If we think about all the sort of pre-Budget noise, you know, these things aren't good for sentiment. But, you know, I think the positive sort of growth story across both capital and income relates to the tightness of supply, the underlying quality assets really driving that growth.
If we look now, sort of month by month over the last year, at the top, you can see a wider view across the sectors of rental value growth. So it ties in with what I've said, you know, modest, but nevertheless positive growth, literally month-on-month. It turned negative for retail in December. I think we saw, you know, a couple of retail failures in the final quarter. I imagine that's had a slightly wider effect on the market, but nevertheless, office and industrial positive. Recognizing that some of the office rental growth is being driven by the capital investment that's required to deliver that. And that really shows through in the bottom charts, where, again, a reasonably consistent story.
You can see where offices have been more challenging throughout the year. But actually, as we look into the final quarter, we're seeing that rate of decline reducing, and I think in our view, you know, tied in with the positive occupancy story. Some of those write-downs that have been quite prevalent in the office sector for a period of time are really starting to moderate now. So if we think about our own portfolio and how it sits in that context, again, for those that are unfamiliar with the business, geographically, most of our assets are located towards the southern half of the U.K. Nearly 2/3 of the portfolio is invested in industrial warehouse logistics, just over 20% in offices and the balance in retail and leisure.
Again, that retail and leisure component is slightly more skewed towards out-of-town retail warehouse parks. 300 occupiers, so a really diverse cash flow spread across 46 assets. The portfolio has significant reversion. Part of that reversion is driven through occupancy, and part of that through the underlying rents being higher or ERVs being higher than contracted rent. So we'll talk to that in more detail in a couple of slides' time. Over the quarter, you know, a number of transactions that I think support the underlying valuation where we've done lettings, those have been ahead of ERVs, lease renewals, which were primarily in the industrial, but some in the office sector as well, significantly ahead of previous passing rent, and the same with rent reviews.
Sara has previously mentioned the capital investment primarily into some of our office assets to improve the quality of those ahead of re-leasing, and that's had a positive impact. And Sara also mentioned the positive valuation uplift net of capital expenditure. We've just put three examples in of transactions over the quarter that hopefully bring to life some of those stats. So Colchester was a building that came back the year before last. We refurbished or finished the refurbishment last year and having refurbished approximately half of the space, we now have interest and actually following the quarter end leased one of the units there, and we've got other space in that building under offer, which is really encouraging.
And the fact that the rents are nearly 50% higher than what the outgoing occupier was paying, in part, is a reflection of the underlying refurbishment and upgrading that's gone on in that, that building, and also the sort of relative tightness of supply in that location. In Harlow, this is one of our larger industrial assets. We had one occupier there that got into financial difficulties in the quarter. We were able to surrender that lease, simultaneously re-lease it to a new occupier. And again, I think reassuringly, the fact that we were able to re-lease it at a higher rent than was passing, and again, ahead of our March ERV, is encouraging, and it was for a 10-year term as well. So, so what could have been a tricky situation actually turned into a positive.
And then just to add in, you know, one of our other, regional offices, this time up in Glasgow, you know, a number of transactions with both existing occupiers and, new occupiers coming into the buildings at, quite meaningful rents ahead of ERV. And that shows, again, I think part of that is the strength of this location, but for the right quality space, occupiers are prepared to pay higher rents. And we've got a program in hand to upgrade, the common parts here, which again, should further drive, rental growth, across the whole building. In terms of, vacancy or indeed occupancy, occupancy is at 83%.
That is a reduction from September, and we announced to the market in October a number of transactions that we've done that reduced occupancy, but in turn, there were some quite meaningful payments to Picton as those occupiers leased. And you can see that in the top chart on the right-hand side, the new vacancy, which is predominantly in the industrial sector. And if we look at the bottom table, you can see there we've got two larger industrial assets that's in green that came back over the period. Those are both being refurbished ahead of re-leasing as we speak now.
And then we have a series of office assets, which again, a number of those are on site, being refurbished ahead of re-leasing, as I mentioned in the previous slides about activity at Colchester and Glasgow, for example.
So just in terms of the look forward and the reversion in the portfolio and a few more data points on that, we still believe there's significant reversion in the portfolio with the net initial yield of just under 5% and a reversion yield of near 7.5%. And that reversion really comes through in terms of the vacancy, which Michael has talked to, and the reversion by resetting those rents. So in terms of the latter, so reversion in the portfolio, that resetting of rents comes through either rent reviews or releasing at breaks or expiries, and that's concentrated predominantly in the industrial sector assets that we hold, and that's one that we feel quite comfortable from.
From the lettings stats that we see coming through on the portfolio, those are achievable ERVs in terms of meeting that and unlocking that reversion. The profile below just gives you a feel for the timings of when those might come into play. In terms of the vacancy, as Michael said, the green element there, or the industrial bit, forms almost half of that reversion in the vacant units, and that's those two industrial units. The balance of that vacancy is in the office sector. We're really now starting to see the fruition of the capital investment program that we've undertaken, and we started almost 18 or 20 months ago now. That rollout of capital investment across the office portfolio is really starting to come to show results in leasing transactions.
We've talked about a couple of those, but there's also more in the pipeline that we are seeing traction on, which we find pleasing and exciting opportunity. Worthy of note was the final ERV at 55.9. It's actually higher than we reported in September, so we still see that being a large area of opportunity in the portfolio.
So really, to summarize, this quarterly update, you know, the quarter in question has been a little bit tricky. You know, the budget, as we know, is just a cloud over the whole sort of U.K. economy, I think, really. But actually, what we've seen across the wider market and indeed in our own portfolio, is modest rental and capital growth, much of that capital growth being driven by transactional activity. So resetting rents, extending leases, improving occupancy, you know, very much at an asset level. I think, 2026 has got off to a really positive start, actually. Maybe people are just bored with the narrative from the end of last year, but we've certainly seen a good pipeline and, you know, occupiers wanting to upgrade space, relocate, expand, whatever.
I think that's really encouraging, not just for us, but the sector as a whole. But it does relate to having the right sort of space in the right locations. You know, as Sara has just mentioned, upgrading and refurbishing our space definitely helps us be in the right box, so to speak. Corporately, not just through the quarter, but during the whole of last year, we've unlocked, we think, quite a lot of value through that share buyback program. We announced this strategic review in January, and we are through that exploring options to maximize value for all shareholders. You know, that is with a range of parties.
And you know, really for the team here, that is going on in the background, but actually operationally, it's business as usual. So all of the portfolio activity is very much running in an ordinary course. And that really ties on, you know, the activity that we're doing is driving ERV growth, having a positive valuation impact. We referenced in our RNS a pipeline of GBP 1.6 million of transactions under offer. They're primarily in the office sector, which again, I think is interesting and ties back to what Sara said. The key recent industrial vacancies are under refurbishment, but again, you know, we are engaging with potential occupiers about that space. Nothing is agreed, but we are doing viewings and having discussions, and I think that's encouraging.
And then this continued theme of, of investing into the portfolio to accelerate that leasing activity, and through that, create value continues. So I think I'm gonna end there, and maybe we can do some Q&A.
Thank you for the update today. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated in the right-hand corner of your screen. And for your reference, a recording of today's presentation will be available on the Investor Meet Company platform shortly after the meeting has ended. As you can see, we've received a number of questions during today's presentation. Michael, could I please hand back to you to chair the Q&A, and I'll pick up from you at the end?
Yeah, thank you very much. And maybe before I start the Q&A, I should just preface that. And as I mentioned on the last slide, we announced a strategic review early January or mid-January. That that's quite a formal process and is governed by you know, the Takeover Code, and that does somewhat restrict what I'm able to say and how we'll answer some of the questions that have come in today. So hopefully, I'll try and be or answer those questions as best I can, but within the constraints of that process, and hopefully people appreciate and understand that. I mean, I think if people aren't aware of it, there's quite a detailed announcement. It was released on the thirteenth of January.
And what it says within that is that the board is looking at exploring all options for maximizing value for shareholders, and is, and indeed, has had to date consultation with shareholders. Very happy to receive incoming feedback, which we have done already, and also engage with possible counterparties to establish how value can be created for shareholders. So that's the broad backdrop. Some people have asked the question very specifically in relation to the announcement that we made yesterday, which referenced LondonMetric. Again, that announcement was put out as a requirement of the process that we're in and the Takeover Panel rules because there was a press leak that we were required to identify that specific counterparty named in that press leak.
But if you've read that announcement, what it also says is the board is engaging with all parties that have expressed interest in the process. So I can't talk to any more specifics about that process, but hopefully, that just gives a flavor of what we're doing, why we're doing it, and you know, we will provide updates to shareholders as and when we are able. I've been asked a specific question about the industrial units that came back last quarter as to whether those refurbishments that we did, we are doing are speculative or do we have tenants committed to take the space? The answer to that is those refurbishments are speculative, insofar as we don't have anyone signed yet.
The works that we're doing, we think, you know, are works that any occupier would require. They, you know, they reflect the fact that the buildings may have been occupied for 10 or 15 years previously, and there's a degree of upgrading that needs to happen to bring them back into a lettable space. So I'm very confident the works that we're doing, you know, will suit, you know, any, any, any occupier, as opposed to those being specific works for a specific occupier.
It's also worth noting that a lot of the works are covered by the dilapidations settlements that we've received in relation to those assets. So it's, in a nutshell, to some extent, being funded by those outgoing payments.
Yeah, and those outgoing payments, just to remind people, were over GBP 3.5 million, so they, they were meaningful numbers.
Let me just go through the questions. Sorry, but there's a question on why we stopped the buybacks. Maybe Sara could.
So our buyback program we commenced in January last year, and we thought and think that was a well-run program. We see value where our shares were trading, in that program, and it's been accretive from a NAV and an earnings perspective. However, following the announcement of the strategic review, we didn't think it was appropriate to continue to buy back shares at a point in time where we were looking to maximize shareholder, shareholder value through the formal sales process.
Thank you. I've been asked quite a specific question about Farringdon. So this is an office building located very close to Crossrail in central London. Some of you maybe are aware that we got permitted development rights in 2025 to put a storey of residential accommodation on the top of that building, and someone has asked about, you know, what will the cost of those works be? That's something I can't disclose at the minute. Actually, we are in the process of relooking at that application and considering options to perhaps change that planning to allow for offices rather than residential on the upper floors. It's quite a complicated planning position there.
But, at this moment in time, you know, we are reviewing options as opposed to going out to tender to cost the works, because we think there could be some interesting angles with the office component there, recognizing, you know, the proximity to Crossrail and the strength of office demand in that kind of Farringdon location. There's another question about the leasing pipeline referred to in our RNS. And that's really transactions that we had agreed really in the final quarter of last year that haven't yet gone through to completion. They're still in the legal process.
I mean, I think, what's interesting is that nearly three-quarters of that pipeline is in the office sector, and that's maybe what you would expect, because the majority of our void is in the office sector, save the two industrial units that literally came back, you know, in the weeks before Christmas. And I think what's encouraging about that is that, you know, where we are seeing that leasing pipeline ties in exactly with where we have been upgrading assets. And I think, you know, we clearly have to sort of dot i's and cross t's on those transactions, but we will, you know, provide further detail when we're able, and that's happened. We've been asked a question about occupancy, and what might the medium-term occupancy target be.
I think, you know, what I would say to people is over the longer term, you know, Picton has generally operated with occupancy probably somewhere between 92%-96%. That, you know, the type of portfolio we have, it would be rare for us to be up at 98%, 99%, 100% occupancy. There's too much granularity, too much churn within the portfolio. But clearly, where we are at 83% is definitely well below what we'd expect to be the sort of medium-term run rate. And actually, you know, you can tell by the previous slide showing that, you know, it only takes two, three, four transactions to really move the dial and change that occupancy. So we've got to do some works, upgrade units, but we very much see that coming through later this year.
And there's a question that asks about value creation with specific parties, part of the overall process, and I'm afraid that's. I understand where the person's asking from, but it's not something that I can comment on in the current framework, so apologies about that. I think we've all answered all the questions we're able to. I don't see any more questions having appeared in Q&A, so I think we can end that there.
That's great. Thank you for answering questions from investors today. Before we ask investors to share their feedback, which I know is very important to you and the company, Michael, could I please just ask you for a few closing comments?
Yes. Thank you for hosting. Thank you everyone that's dialed in this morning and taken the time to listen in. A copy of this presentation is on our website. Equally, there is a section on our website specifically relating to the strategic review, and that has all the announcements that the company's made, in relation to the process itself and any other relevant factors. So, by all means, read that if you haven't seen it. And if in any shape or form, shareholders want to reach out to the company, whilst we are, as I say, limited in what we can answer at the minute because of the restrictions placed upon us, we're always welcome to feedback, and we have a enquiries@picton.co.uk email address for any such questions. So, with that, thank you all very much.
Thank you both once again. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team of Picton Property Income, we would like to thank you for attending today's presentation, and good morning to you all.