Attacq Limited (ATT) Earnings Call Transcript & Summary

Good morning, everyone, to a really nice full house here this morning from Waterfall at our Gauteng and everyone online, good morning for joining us virtually. I would like to extend a warm welcome to our Board that is joining in person and then also online to all of our stakeholders joining this morning. And most important to the Attacq staff for joining in person and then also online. This slide is at all, a decade of development growth and value creation. So this year, we're 10-years listed, and we're quite proud of the 10-year listing celebration. So if you mind me this, I don't mind me this morning, I'm going to take us a bit back 10 years throughout my early morning session, and then the rest of the team will be presenting on the results. So for this morning, I'm going to talk a little bit about our strategy, our performance. Michael Clampett will take us through the South African Portfolio performance for the year. And then David will state on the developments at Waterfall. Pete will talk about other investments, and then Raj will wrap up with the financial results. And also Raj will talk a little bit also on the financial effects and the pro forma debt metrics on the GEPF transaction, and then I will wrap up with some prospects and we will go into Q&A. On the performance for the year, and I certainly think 2023 is going to be the year that Attacq -- that you remember Attacq was for the GEPF transaction. I think one of our corporate advisers said 100% voting from our shareholders. So thank you very much to everyone that has voted on the transaction, it's a classy deal for Attacq and certainly, it is. Transformative for our capital structure, but also bringing in a sound partner that vertically integrates into the Waterfall city, helps us to build and accelerate some of the opportunities we've got going into the future. Our distributable income per share has increased by 14.5% per share for the year. Raj will go into the detail on the reasons why we've increased our debt for the year. And the next question you will ask me when we talk about prospects, is, Jackie, will you increase your payout ratio next year. So my question is no or not, if it's up to me. The Board will decide at the time, but we're definitely forecasting an 80% payout ratio and also our dividend per share for this year with a 16% growth is based on just over an 80% payout ratio. The reason for maintaining an 80% payout ratio is reinvestment in our portfolio is critical. Cost of occupancy for our clients is so under pressure. We need to ensure that we reinvest in our portfolio, resilience and efficiency is key in managing our portfolio in these uncontrollable ties with Eskom and load shedding and inflation. I mean I don't need to take a go on with the list, but you all know what we're all dealing with. So it's a very, very tough environment. 2018, I remember it so well, and this is where I'm going to start taking everyone back down memory lane this morning is, Melt made the decision we're going to put in generators at all our malls 2018. So today, as I report, our annual growth and trading density of 12.7% is correlated to a mall that's always on and trading. And that is capital investment from 2018, putting in generators into our mall. Sensible capital allocation but ensuring that our portfolio remains relevant and that we stay true to our purpose of providing you a sustainable capital structure into the future. Our occupancy hit 92.5%, and Michael has got some really good news this morning. So I'm going to leave that good news for you, Michael. And the team has done, again, once again, a remarkable job of collections at just over 100%. Developments. We've completed just over 30,000 square meters of development. And David will take us through some of the really exciting pipeline development opportunities we have this year. You asked me to say, Jackie, 30,000 is low. The bars have done much more, but we've also been working really hard in building infrastructure, making sure that our development rights are in place for the future unlock of a big development land at Waterfall Junction which Dave will go through, which most exciting pipeline is on the logistics space. This is where we really go back into the memory bank. So this photo was taken in 2014, a lot of cranes, Mall of Africa being built. And that's been the vision when Attacq listed was brought to the market, a vision of we're going to take this bare piece of land, and we're going to develop it into this beautiful city. And as shareholders, you had to buy into this phenomenal vision of the city. And I think as you were driving here this morning, everyone that came here this morning, it's really a testament of after 10 years, the team is really delivering -- continue to deliver on this beautiful vision that has been brought to live. We're busy putting a book together and we asked for stories from founders and from CEOs and today, you'll see we're all sitting in jeans here. And most of the time, you'll see me in Attacq is running around because developing a city like this is really on the ground management. And partly because of this vision is because of founders, CEOs, Board and their management that is running around in denims and jackets most of the time being on the site and delivering what we see here today. And we've still got a long way to go, 1 million square meters. So David, your work is cut out for you. On the pipe -- on the -- no, now I've lost my words here. The journey of Attacq has been also a journey of simplifying. We started off as a development fund, one of the only one at that stage. Then we can -- Mall of Africa completed in 2016, really trying to establish itself as a super regional shopping center when you had 2 dominant shopping centers in cutting already trading. 2018, a tough decision to convert to a REIT. Certain people said it was too early. Certain people said it was too late, but we made the decision of converting to a REIT. Then in 2020, just before COVID, we launched our first residential development Ellipse. And David will also take you bit through the trajectory of the sales that we've seen over the last few years of how the success of Ellipse on the sales have been. Closer to now 2020, we completed our first Net Zero building and again, our commitment to ESG in the environment. We've also signed our first purchase power agreement, which is currently under construction on a site in the Ore. We also completed the first data center co-owned by Attacq and the data center operator. And we've achieved a Level 1 BE, which is very close to my heart, saying that our purpose is integrated into our company and achieving the Level 1 BE is really something to be very proud of. If we stand back and again, this team said no, I don't put another slide on the history into the presentation. But our business is really simplified over the last few years. Focused on precincts, we've got 5 precincts in the country that we focus on. And maybe also standing back in 2020, our other investments contributed 43% of our distributable income. And now it's only 13%. And that really talks about strategy in action. We made the call to be a South African focused land that focuses on precincts and we had to make the difficult decisions on disposal. In certain times, we reinvestment, debt management, development and now, as you can see, we're a simplified fund focusing on waterfall and our precincts throughout South Africa. This is my last slide. Our ESG actually, we want to change it to the integrated ESG focus in South Africa. Our carbon footprint reduced by 10.4%. Our water -- water is for us a major concern in South Africa because of the decay of infrastructure that we experienced in our developments, especially here around Waterfall. A big focus for us is on water demand management to make sure that our buildings are water efficient, but that we also build the required infrastructure to accommodate for the future more to demand that we will have in our city. On our energy mix, our focus is to mobilize the 5.3 off-grid energy to 25.8%. That is a combination of accelerating our PV installation over the next year and also the power purchase agreement that will come in effect in the next 12 months. On our communities and the most important community for Attacq is our employees. So for the first time, we have done an employment survey, almost said a customer survey. Employee survey, just to get a pulse of what's happening on the ground in our company. And our employee satisfaction score came out of 78%, and I felt that's quite high. As social team, we will work on making sure that we listen to our employees and make sure that we make sure that they are happy and in a good environment that we work in. Something close to my heart, education and training. We packed over 273,000 meals this year. This is not an Attacq score. This is a community score. We've had corporates, retailers, other staff, employers all involved in making sure that we pack food for our communities. For children, every morning that you go to school hungry, we feel you cannot learn and develop if you're not well fit. And that is the basis of what we do in Attacq is making sure that the surrounding communities with all our present are fed and supported by us and the corporates that is our clients. And lastly, on our ESG slide, again, it's a 10-year view of just how our diverse -- our diversity and exclusivity has changed over the last few years. With our Board, we're really focusing on making sure that we got the female and male diversity well-balanced as well in our company. So I'm very proud with the stats that we have produced. I'm going to ask Michael now to tell us a little bit about the SA portfolio.

Thank you very much, Jackie. So I will take us through the performance of the South African precincts. So this is a summary of all the headline performance indicators. I want to just expand on 2 of them, just to give you more context. First of all, on block #1, the like-for-like value increase in our investment properties you'll see it's 0.3%, just some more context. Our retail properties increased by 4%. That was notwithstanding the impact of load shedding in the additional diesel that we spend. And obviously, now is baked into the DCF going forward. But I think the performance of our retail assets really has made the value determined that future rental income is secure. Our collaboration hubs declined by 5.8%, that was off the back of the assessment of future market rentals we will be able to achieve in the collaboration of sectors. And our logistics portfolio grew by 4.9%. From a reversion rate, you'll see that it's negative 6.3%. It is down from last year's number of 3.1%. Once again, just dialing into the specific categories to give you a bit more context. Our retail portfolio, the reversion rate was negative 3.2%. On the collaboration, it was negative 23.1%. And on logistics, it was an increase of 6.9% on the lease that expired there. The performance of our retail experience hubs, and this is certainly a performance that everyone involved could be very proud of. First of all, I want to highlight Mall of Africa, our super regional in the last 12 months. Trading density grew at 17.3%. And that led to an increase in gross rental income of 10.8% for the 2023 financial period. How do we achieve some of that? We've included some extra detail this time around to give you context as to all the effort and actions that happen in the back end from a property management and asset management perspective. You will see there the 21 new brands we introduced to Mall of Africa in this reporting period, 16 of the existing stores were upgraded and we renewed 33 leases. But it doesn't just stop there. So I think most of you would have seen in the media, EL&N, claiming to be the most Instagramable store in the world, opening in end of August at Mall of Africa. We've got Bounce opening on the 20th of October. And then we've got micro retail concept out of the U.K., Suck opening this weekend. So certainly, there's a lot of movement and a lot of activity happening at Mall of Africa supporting this growth. Also mentioning the Actis at Molting, you will see that turnover over the last 12 months grew by 13.1%. This is the impact that you see today of what we would like to classify as the COVID rigid strategy we embarked on in 2020 and 2021. We really looked at that asset, what it was supposed to deliver to the community and embarked on a leasing strategy to more liner sales that town needed. And we can definitely see that we are now picking the fruit of those decisions made. At MooiRivier mall, a lot of letting activity, although the numbers look slightly low at new brands and upgraded stores, we've gone for a trading floor optimization there. So we've decreased 2 big boxes there being [indiscernible]. And all those reconfigurations will open in October and November of this year. So our expectation is that trading densities will increase as we downsize some of these bigger stores and introduce new brands into MooiRivier Mall. Just quickly a highlight on what we see from a tenant category performance, and I know some analysts really like this category of what's happening in the industry. You will see in the Attacq portfolio, the growth in density really supported by food. So those are our grocers like Woolies and Checkers and also the food services. The food services is off the back of the introduction of a number of new brands, Limit Bridge comes to mind with a lot of new restaurants introduced there as well as at Mall of Africa, and that has led to the significant growth in those 2 categories. I also just want to mention that 20.9% of our total turnover generated in the portfolio comes from apparel, we keep an eagle eye on that. Of course, the South African consumer is under a lot of pressure. We also follow some of the lists quite closely in terms of the sales mix and how much comes from credit. But certainly, what gives us comfort is a lot of these apparel retailers have reinvested into our malls. And certainly, then spending CapEx in our malls means that they must be sitting on the cash flow they can generate from those stores. Just on the Waterfall City. This breaks down the high-level performance for the Waterfall City only. I want to mention 2 things. First of all, you will see there for collaboration, obviously, occupancy as of 30th June was 82.8%. She don't always like the limelight shown on her, but I see, Debbie, you did decide to attend the meeting. Big congratulations to Debbie and a deal-making team. They've led 7,600 square meters of Waterfall Circle. So 1,500 square meters of that is already occupied. The balance will be occupied a bit later in the financial period as we do the reconfiguration, but certainly it is fantastic to now drive to that asset, see some cars in the parking lots and people in the lobby. And when we take other prospective tenants there, the building is all of a sudden alive. So we were committed to reconfiguring that asset into a multi-let and certainly, congratulations Debbie to you and your team for the successful implementation of that. On collaboration, on the reversions, you will see the number of 28.3, a little bit of more context there. Those are 10 leases that renewed. So once again, just -- I'm being cognizant of a really small sample. And what we've also included there are too early resets. So although they were not on the original expiry profile for this financial period, we felt it would be prudent to disclose and include the early resets that we did in that number. Turning our attention to all our precincts outside of Waterfall City. I want to mention occupancy, again, under collaboration hubs. You will see the number there at 87.3. So post year-end, we've also led the final collaboration of space available at Lynnwood Bridge precinct. So that means that the entire Lynnwood Bridge precinct is fully let. And once again to the Lynnwood Bridge team, congratulations. That's a fantastic achievement. The only vacancy that sits in our collaboration of space outside of Lynnwood Bridge is the Brooklyn Bridge property. From a reversion rate, if we look at retail experience hubs, negative 4%. Once again, a question might be asked, there's good trade, there's fantastic growth in density, so why reversioning in renewal rentals. This number is affected really by 2 major boxes. The first one was Virgin Active in Stellenbosch. So a significant renewal that had to be done there. And the other one was at the Dis-Chem lease at Glenfair and that has run for a number of years. And so it's sort of reset at the end of the 10-year period. So that is the reason for the slight decrease in renewal rentals on a group perspective. Waterfall City, it remains a world-class city. And once again, it really attracts blue-chip international clients to set up their African headquarters. You will see that currently, our client base is about 65% international and 35% local from a collaboration perspective. And maybe just highlighting some names that joined Waterfall City in the last 12 months, the likes of Dell, Cisco, Pfizer, Estee Lauder and Reckitt. These are all international blue chip companies that came to Waterfall in the last 12 months. Just providing all the analysts and shareholders some feedback on some of the promises we made on previous presentation. We explained to you what we were doing from a resilience perspective, how we were going to attempt to bring down the cost of occupancy and also the consumption of certain important utilities like electricity and water. And this is how we fared so far. So all the lighting retrofit projects we've embarked on are now complete. From a generator controller, so these are the controllers we installed on generators to switch them off potentially during non-core hours when we feel we don't have to run them. So we've completed an installation on 91.5% of all generators for Attacq. On solar installations, we've added 1.8 megawatts in this financial period. And currently, we're on track to install another 5.2 megawatts in the coming 9 months until the end of this financial period. I just want to stop at property expense analysis. So once again, here we are disclosing some extra information. And you will see that our repairs and maintenance grew by 57% from the prior year. Why is that? Here, you can see the evidence of our investment in resilience projects. So lighting upgrade as an example, it's not really a CapEx, so we put it into the income statement. And you will see all these amounts that we are spending in our income statement to follow our resilience strategy. What's also interesting is we see an increase in generator-related maintenance. I think that goes without saying. And then referring to an earlier slide here, we would have seen a lot of leasing activity and in some cases, we assist with reconfiguring boxes or updating them, stripping them down and there is a recovery for this expense in the income statement, but we don't meet the 2 off. So this increased letting activity has led to an increase in some reinstatement costs in the income statement. That is all that I'm presenting today on the South African portfolio.

Thanks, Mike. Good afternoon, everybody. So if we unpack the developments at Waterfall and I will go through each development individually, but as a summary, we've had ZAR 1.3 billion worth of development activity in the last 12 months, split between completed developments and obviously, developments under construction. The completed developments were 2 developments totaling 30,000 squares. And then under construction, we've got 4 schemes totaling 6 separate buildings. On the 76 units, that's essentially referring to Ellipse. I think the 76 units bankable sales for the last 12 months has been an extremely robust performance at a rising interest rate cycle, but I'll talk about Ellipse in a little bit more detail later. And then on the right is a pie chart that we show pretty much every set of results. It essentially shows how our bulk is split. We've got about 1.3 million squares of bulk left if you take the full 600,000 squares of Waterfall junction. I think what's important to note on Waterfall junction is that we haven't had the ability to unlock that land for the last 5 years really due to infrastructure failings from a macro point of view. I'm proud to say that our team has almost secured the water connection, which was the biggest issue, and we're hoping that's going to be connected by November which will allow us the ability to proclaim come February next year, which will unlock Phase 1 of Waterfall junction giving us 150,000 squares. Essentially, the slowdown in bulk rollout -- a big reason for that is that we have just essentially not been able to do logistics developments. And I feel like opening this up is obviously going to allow us the ability to create further rollout in the coming 24 months. If you look at Ellipse, it's a 3-phase development, 4 buildings. We've completed the first one, 98% sold out of 270 units. Phase 2, we completed during the last 12 months, 182 units, of which 96% is already bankable. I think what is a really interesting stat is that 45% of these sales are cash sales. So I think it really talks to the quality of the buyers and the type of buyers that are obviously looking at buying units within waterfall. Unpacking that a little bit more, and I think this is an extremely interesting graph, we've tracked the units sold versus the interest rate. And you can see from Q1 FY '22 to current day, interest rates have obviously gone up, but our sales have obviously followed that process. Why has that happened? You can obviously go many different routes. I think from our point of view, obviously talks of the product works. It's designed correctly. It's marketed correctly. But more importantly, Phase 2 had the amenities. And when clients see the amenities like life day spa, olives and plates, the gym, this really allows these clients, these buyers to live, work, play within their residential precinct. And that is very similar to what we're trying to create at Waterfall. Another component of that as well is what we're trying -- which we think is extremely important within the res space is the mixed-use element. So going forward, I think most of our res developments will have a rather large mix-use development because that's what our clients are looking for. If you look at further completed developments, this is the Plumblink DC, we did an LP22, very similar to a number of our other developments. It's a consolidation of a head office and a warehouse into about 15,000 squares. This improves efficiencies and obviously, occupancy costs. It's going to be our first 4-star GBCSA building within the logistics space. Although PV is not on the building yet, it has got provision for it. And this is a JV with Bidvest Properties, which is obviously, as Mike said, another fantastic JV and a relationship we've created with a blue-chip client. Talking about developments under construction. As I mentioned earlier, we've got 4 different schemes made up of 6 different buildings. The mini units logistic development cost -- consists of 3. The total construction cost for all of these developments is currently at ZAR 740 million. I think what's important to see as well is the variety of developments we are doing. So we're certainly not a one-horse pony and it gives us a bit of diversification as well. So if we unpack Nexus, where we are sitting currently, we're in the Courtyard Hotel. This precinct is going to consist of the Courtyard, which is obviously finished. Nexus 1, which I'm proud to say, Attacq has just moved into it. We've taken 1,400 squares and is our first Net Zero building as well. We are currently building next door, the new head office for DP World, which is owner occupied, although not going to be a Net Zero facility, it's got a number of the same features as Nexus 1 and will be a 5-star GBCSA rated building. With Building 2, we're going to complete the Nexus Plaza and then that will leave us with 2 buildings totaling about 9,000 square, still to develop within the Nexus precinct. On the right is the DP World building. We are looking at finishing that at the back end of this year. This is Emrod. So this is a developed -- we did a number of years ago. It's one of our biggest logistics developments within our precinct sitting at LP 22, you can see Plumblink just behind it. We did the expansion, which we are completing now, which was a further 3,500 squares for the embroidery business. And we also extended out their lease by a further 2 years. We are also trying to focus our CapEx linked transactions to try and manage building costs at the moment, and this transaction was done on that basis. This is the mini units development. So this is 14,500 square split between 3 buildings. We did 4 similar buildings about 4 years ago, which we let very, very successfully. The reason we do 3 or 4 at a time, it creates the economies of scale, which obviously allows you to do the developments within a costing that meets market requirements. So we are bringing this product on the market at ZAR 85 net in line with Attacq sustainability strategy, has a number of different sustainability features. PV, backup water, which is becoming more and more important, low volatile organic compounds, 10m eave height to allow for your circulation and you're racking and we will be finishing this sort of February next year. Ellipse. So we have launched Phase 3. We have already hit 82 bankable sales out of 196 units. I think what's important to note is the scheme was originally consistent in 145 units, we have taken it up to 196 units. The major reason for that is we stripped out the penthouses to increase salability. So that obviously bumps up costs a little bit, but it allows us to sell the units a bit more quickly. Also that you can see there, a like-for-like on the sales rate increase, you can see the increases on your executive, your 1, your 2 beds have been very robust since launch. And then this is Waterfall junction. So I've spoken a little bit about this. We executed on the option 3 to 4 months ago. This is a JV with Sanlam. We had 23%. We are executing to take that up to 50%. We have submitted all our documents to ComCom in the last 2 weeks, and the feedback we received is that we will hopefully know within 45 business days. As I mentioned, we are hoping to sort out the water connection within the next 2 months and then hopefully proclaim early next year. We've already got over 100,000 squares of inquiries. And I think what's really exciting here is as well is on Phase 2, we've secured a further 150 MVA for future data center developments. And with that, I'll hand over to Pete.

Thanks, Dave. Moving on one slide, like usual. Other investments, that comprises MAS, our investment in MAS PLC as well as our rest of Africa retail investments. Our investment in MAS is unchanged at 46.2 million shares. We will deal with all the questions about whether that will change later. From a distributable income perspective, MAS contributed 9.5cps to our DI, so that's about 13%. As market will be aware, MAS has recently suspended all their dividends for the foreseeable future, reading in from what management says, it looks to be in the region of 3 years. So as we account for MAS on a cash basis, that will impact our distributable income from 2024 and onwards. And moving on to Rest of Africa retail investments. It comprises our investment in AttAfrica, which is our entry point into Ghana -- retail malls in Ghana. And then the Ikeja City Mall, which is located in Nigeria, where we have a 25% interest is in a separate vehicle called Gruppo. At the moment, we've terminated all formal discussions for the disposal of AttAfrica assets. So there's no formal processes on the go at the moment there. Ikeja City Mall is still subject to a conditional disposal to Actis. The conditions remaining to be met to remain Actis closing on its equity funding. That process is ongoing. And it's definitely been hampered just by general economic conditions as well as lack of U.S. dollar liquidity in Nigeria which persists. If we look at the numbers, people might think, well, things are going quite well in AttAfrica. But just bear in mind, from last year to this year, we did invest a further ZAR 81 million into AttAfrica that those funds are used to settle external debt as well as the rand would have moved out about 15% against the dollar. So back of a matchbox cox, we probably went back about ZAR 50 million on AttAfrica like-for-like. And then Ikeja is flat. But bear in mind, the underlying dollar investment, we've impaired further this year. We've got a shareholder loan into Ikeja so the accounting for that is, I'll leave to Raj, if he wants to explain if any accounting news you want to know, you can come and see me afterwards. But IFRS 9 requires us to impair that loan or assess it in terms of an expected credit loss methodology. So like-for-like, we also moved that down during the year, and we'll see that impact coming through the income statement. That's all I have to say, and I look forward to answering your questions on MAS later.

Thanks, Pete. Welcome, everybody. Thanks for joining us this afternoon. I think the team's reflected on what I think is a good operational performance for this financial year, and it's also translated to a good set of financial results. With our dips increasing by 14.5% for the year, with an 80.7% payout ratio that's translated into a dividend increase of 16%. Another highlight that I want to maybe chat about is the reduction in our weighted average margin for the year. The team refinanced ZAR 1.1 billion with the facility and achieved a 64 basis points reduction in that funding. And then maybe just touching on the interest cover ratio and gearing interest cover ratio improving to 1.69x on the back of a better operational performance and a slightly lower finance costs for the year, and then gearing increasing just marginally from 37.2% last year to 37.3% on the back of a muted valuation performance by the properties and a slight increase in our drawn facilities. And back in the distributable income, if you look at Waterfall City on the top part of the table, that contributes roughly 57% of the group's distributable income and grew by 27.5%. So quite a substantial increase for the year. I think Mike has shared the stellar performance by Mall of Africa growing its rental income by 10.8%. Its turnover rentals almost doubling for the period. And so really a star performance, which has positively impacted the Waterfall City segment. If you look at rest of South Africa, that grew by around about 2.5%. It contributes roughly 30% of the group's DI. And that was weighed a little bit by the increase in the diesel expenses as a result of load shedding, some maintenance costs, et cetera, and an office environment which is obviously still under pressure. If you look at other investments, Pete chatted about it, it contributes roughly 13% of the group's total distributable earnings, marginally declining for the period notwithstanding that we had a higher rent dividend from MAS for the period, but we also had some additional expenses, which reduced the contribution. That gave us a total distributable income of ZAR 506.8 million. David chatted about the exceptional performance by the Ellipse development, and that continues to show good sales -- exceptional sales year-on-year. But the difference between our last reporting period and this reporting period is that in Phase 2 and Phase 3, we're participating at about a 20% participation level in the development, whereas in Phase 1, we had a 50% stake and obviously, that contributed to a higher contribution to the overall profit. These profits, given the trading nature we exclude from our distributable income, but if you had to add them to our distributable income, that gave us a total income of ZAR 533 million for this particular period. If you look at our distributable income bridge, this effectively maps out the key movements from last year's distributable income being the period ending 30 June 2022 up to 30 June 2023. You can see the net increase in diesel expenses. That's the unrecovered portion as a result of additional load shedding during the period, and that's roughly ZAR 6 million down on distributable earnings, obviously, an increase in the expense. During the last period, we sold 3 properties that Deloitte head office, our 50% share therein as well as the 50% share that we hold in the MAS building and the Amrod properties. Those were sold sometime during FY '22 and the NOI that we've lost as a result is ZAR 31 million. A number of small movements that aggregated to a negative ZAR 12 million impact on our distributable income. And then if you look at what's helped us this year, like-for-like NOI increase of about ZAR 66 million. So that's the in-force portfolio year-on-year growing. It's net operating income. And then new buildings, so this is additional properties that were brought online either during the course of FY '22, which is now in for the full financial year or the Plumblink development that was completed during FY '23, that's added an additional ZAR 40 million of distributable income. As mentioned, we've had a slight decrease in our interest expense contributing to an overall saving and that give us the distributable income of ZAR 506.8 million. The ZAR 26 million obviously is that trading profit that we recognized from the sale of sectional title units giving us the total income of ZAR 533 million by applying our 80.7% payout ratio on distributable income. It means that we'll be paying out ZAR 409 million for the year in total, and we'll be retaining ZAR 124 million, to Jackie's point, to reinvest in our existing portfolio and some additional PV projects, et cetera. Turning our focus to the balance sheet. Total assets increased by just 1%. If you look at Waterfall City, that comprises roughly 60% of the total asset base that increased by 2.1%. What assisted us there was the positive fair value adjustment on Mall of Africa, which was almost 8% for the year on the back of a really good trading period in rental adjustments. If you look at rest of South Africa declining by 3.7%, contributing to 29% of the total asset base there. Again, some of the negative impact on that asset base was the collaboration hub valuations that were largely negative for the period. I think they came in at a negative 10.6%, obviously weighing down in that segment. And then turning to our liabilities, a slight increase of 1.1% and really just a function of a small increase in our net -- interest bearing debt for the period. This translated into our equity base increasing by just under 1% to ZAR 12.4 billion. And on a per share basis, that was ZAR 17.65. If you look at our interest-bearing borrowings, an increase of approximately ZAR 100 million for the period taking us to just under ZAR 8.4 billion. Our weighted average loan term just under 3 years at 2.9, and our gearing at 37.3%, a marginal uptick from the prior year of 37.2%. I think what stands out in the slide here is that our hedging percentage has reduced significantly at 56.3%, that is on the back of our anticipated closing of the Waterfall transaction with the GPF, and I've got another slide to show what some of these metrics will look like on a pro forma basis once that transaction has been implemented. I think the other thing that worth mentioning here is that we are well within our banking covenants, no concerns there. Obviously, the weighted average cost of debt has ticked up. We've had a 2.25% increase in the repo rate over the last 12 months and having a large floating portion of our debt, having only 56% hedged, this has translated into our weighted average cost of debt being at 10.3%. I'm not going to spend any time on this slide. So this was our debt maturity profile at the end of June, which is less relevant. The team has been refinancing this and engaging with all of our lenders. So this changes significantly in the next 3 weeks. So I'm going to rather turn to the slide, which is a bit more of a sort of forward-looking view. It's actually prepared on a pro forma basis. And so these are pro forma metrics. We're expecting our gross interest-bearing debt to reduce from the ZAR 8.4 billion, down to just under ZAR 6 billion. This excludes any cash that we're looking to park against some of these facilities, which are comprised of revolving credit facilities. You can see our weighted average loan term increases from 2.9 to 4 years. We're effectively refinancing all the remaining debt that we're not settling, and our gearing ratio drops to below 26%. And again, this is on a pro forma basis, using our June valuations and our expected debt going forward. As a result of the reduction in debt, our hedge percentage moves up from the sort of 56% mark up to 78%, so increasing significantly, and we'd look to hedge out -- hedge that further out, increasing that hedge percentage, but also, we're monitoring the markets and it's been extremely volatile and quite expensive to hedge at the moment. And given our low gearing levels, we don't feel under pressure to hedge out a significant portion of our debt at this point in time. Our weighted average cost of debt will drop by 30 basis points, and that's largely on the back of a reduced margin that we've negotiated with our lenders. And on a pro forma basis, our interest cover ratio increased to 2.4x. You can see that from a maturity profile. None of our debt comes up in the next 12 months. There's just 10% that comes up in the following 12 months. And then a big part of our debt is structured in a 3-year tranche. And then we'll -- that contributes roughly 52% of the overall debt maturity. We have consolidated our funding somewhat. We will have 5 key lenders going forward from the 6 that we had in our previous results, and that's, I think, just a function of our debt reducing significantly. Where are we with the refinancing? We've accepted credit approved term sheets from all of our lenders. We're in the legal process of drafting and finalizing those facility agreements, and we're looking to close that out in the next 14 days, so that we receive the funds from the GPF around the -- during the course of October. Those funds will flow directly into the bank and reduce those facilities. I'm going to hand over to Jackie.

Thank you to my colleagues for the update and the feedback. Guidance for the year, our debt guidance for the year between 8% to 10%. And just to qualify that excluded out of this guidance, we've made no assumption of any dividend received by MAS for this year. And I also know that in the circular, we met with the circular out, we gave a pro forma effect of around about 20% to 25% guidance. I mean, you can work it out, just add the MAS potential deficit that they were supposed to pay out to it and then you'll get to the 20%, 25% guidance for the year. Dividend powered ratio, as I said, 80%. That's not [indiscernible]. It is by Board that we will make that decision closer to the time. But as you can hear, we're quite passionate about reinvestment back into our portfolio to remain the quality and the performance. I really believe it's because of the sensible capital allocation that we apply into our portfolio. So before I open up the floor for questions, I have asked the team just to quickly play out a video. And again, it shows of what have we achieved over the last 10 years. And I've shown you a picture of cranes, and I'm going to show you a picture of a really well working city. So just bear with me for 2 minutes to watch the video and then we're going to open up the floor for questions. [Presentation]

We'll open up the floor for questions. I think let's start in person, and then we'll go online -- to the questions online. Any questions? Yesh?

Two questions from me. Maybe a question for Michael. I just want to understand why the retail vacancies tick up to 4.1%, I think, 4.1% from 3.2%. Just some color on that would be helpful.

So during the presentation, I mentioned a couple of brands opening at some of our assets post year-end. So while we were reconfiguring these boxes, some of them are 2,000, 2,500 square meters, they are vacant at year-end because we relinquished the incumbent from the lease, reconfigure and the lease usually starts then. Those leases will all kick off in October. So the only vacant [ here involved ], we do the reconfiguration. So that's a slight anomaly.

So this is more adjustment -- simply adjustment. And then maybe a question for Raj. I just want to understand the drivers behind the like-for-like NOI of ZAR 66 million in the distributable income in the Waterfall chart that you showed.

There's a bit more detail in our slide deck, let me get a page for you. Yesh, I am going to find the slide for you -- now answer your question shortly -- so please be with me a second. So, Yesh, it's actually on Slide 60. So we've got a like for like NOI breakdown there. So the 5.9% growth, which is the Rand value that you quoted, largely driven by an increase in logistics hotel and retail. So those were all above 6%, and then collaboration hubs doing a like-for-like growth of 3%, giving us an average of 5.9%.

Any other questions? I am not expecting any questions from the staff. We might redirect some of our questions to some of our colleagues on the -- should we go over to the Pete, you've got there questions.

Yes. I have got a few questions coming through. I'm going to kick off with Nazeem, I think he posted this about 2 minutes into the presentation. He said, "hi team, what you intend to do with your 6.5% interest in MAS?" I'm just going to park that one because our next question is also MAS related from Sandile of Umthombo Wealth, and congratulations on a great set of numbers. What is a fan about the investment in MAS given dividend flows, likely to many, muted for the next 3 years. Can you kindly give us an insight on the liquidity position of Prime Kapital, a party in the MAS JV structure? And is there anything concerning to you about the agreement between MAS and Prime Kapital from an alignment of interest point of view in the DJV. So I think the common question between Nazeem and Sandile is, what do we intend doing with our investment in MAS? Obviously, I think if you look at the share price reaction, a number of market participants, we're somewhat surprised that there was a total cessation of dividends and it looks like as I reading into management's not formal guidance, but what they're trying to tell -- what they're trying to tackle from a balance sheet perspective, it looks like it could be up to 3 years. However, as you know, from our perspective, our MAS position is not geared. So I mean we're certainly not forced into doing anything. The income is a knock to us, but we've always been very transparent as to what we get from MAS and how it flows through to our shareholders. And we've seen some weakness in our share price after the MAS results and people went home and did some math and figured out, it was bad for us as well. So from our perspective, it remains a capital allocation decision. It's not a knee-jerk reaction. We're not pressured in to do anything even more so with a much stronger group balance sheet once we implement the GPF transaction. And it remains something to be decided by [indiscernible] Board because it's a large investment for us. And it also depends on what other uses we have for that capital. So the answer is no decision has been taken yet. And we'll continue to evaluate that position as we do with all of our assets. Sandile had few other questions tagged on is right as that. Can you give us any sights into the liquidity position of Prime Kapital? Unfortunately not. We're not private to any information that you are not private to you being anyone who wants to go into the MAS website or look at historical MAS documentation. I think the best description of the Prime Kapital relationship will be found in the type circular, which was probably put out 2018, if I'm not mistaken, I might be out by COVID was long. So yes, from our perspective, we don't have any insight other than our views based on what's currently available. There's certainly not a liquidity issue. MAS has got certain commitments in terms of their JV agreement, which they need to comply with. Unfortunately, they don't just get to turn those commitments on and off as they see fit. And Prime Kapital is legally and contractually able to require certain drawdowns to be met in certain stages. So they're party to an agreement. And unfortunately, that's what they've decided to honor that agreement, which I think is the right thing to do and hold on to their cash and build up a stronger balance sheet at this stage. Is anything concerned about the agreement between MAS and Prime Kapital from the alignment of interest point of view in the DJV? There I'll also point you towards documentation that MAS put out probably in most slides, which says how the alignment of interest lies or not. I think it's up to shareholders to decide if they feel there's alignment or not. But whether shareholders like it or not, MAS is party to that agreement. There's a certain ticket that they bought and that gives them a 40% stake in the DJV with certain funding requirements, but they also get a preferential dividend out of that business as well. So there are pros and cons to it. And I think it's up for each shareholder to decide and make their own decision. Moving on, Nazeem again, he's only got another 4 questions. For Mike, first, do you intend to do more early resets from office given limited GLA up for renewals per annum?

So I'm going to try my best to answer the question with outstanding like a politician. And the only way to do that is to explain what sort of philosophy is around some of these early renewals. By now you should understand that we don't mind investing capital into our buildings when they make them more efficient. When there is an opportunity to invest capital into some of our buildings, it opens up the option to have a discussion with the incumbent tenant there. And we would like some return on some of the investments we do make and at that stage, we could have a discussion about extending the lease before we spend some of that capital. So it's really difficult to say yes or no, whether we're going to do more discussions. It's really building based and opportunity based if there's an opportunity to spend capital to make the building more efficient.

Thanks, Mike. Another question from Nazeem. Slide 27, that deals with the Waterfall junction rollout. Can you provide an indicative value of build-out for this at 100%? And what will be your effective share?

So currently, we are 23% shareholder. We have executed an option, as I mentioned, taking us up to potentially 50%, but that's on the back of ComCom approval obviously going through. The other 50% will be owned by Sanlam Properties. On a rollout cost at 100%, you're looking at top structure at about ZAR 6 billion. That's taking into account a full 600,000 squares a bulk and then you've got infrastructure costs on top of that, about another ZAR 700 million. So it's a 6.7% and then obviously 50% of that.

Thank you, David. Question perhaps for Jackie. [indiscernible] Attacq identified 4 business areas for its focused approach. The fourth focus area is business diversification. Will you please elaborate what you mean by this? And also how this focus will differ from the other 3 focus areas, namely Waterfall City, rest of South Africa and other investments?

So our fourth business focus areas really extended largely around our environmental focus is our PV investment, the capital allocation into the PV, our purchase power agreement. And we really see a massive focus and a great business diversification for Attacq but enhancing our own portfolio. We really believe that all our investment and our capital allocation will be sensibly enhancing our portfolio. So that is the fourth business driver. We also add that with a lot of technology. Our team is busy developing a utility hub, proactively monitoring all of our utilities and all of that sits into the fourth business driver. We've not been reporting on that quite a lot because it's in the development and also in the build phase at this stage.

Question from Jarred from All Weather. Given the pro forma debt position and a large discount to NAV, how does the share buyback rank in the capital allocation stack? Please confirm what percentage you have authority to buy back and if you're allowed to start buying back immediately post to those results. I think I'll put that to Raj.

So we definitely part of management's plan is to buy back shares. We've got a 10% authority as per the AGM of last year, and we'll go back to shareholders this year in November to get the 10% renewed. And yes, we are finally out of a close period, so we can affect the share buyback.

Probably the longest closing period to any management team has been there.

Sandile from Umthombo, again. What is the risk to your full year dividend guidance range? Where do you see interest cover stabilizing on a 1- to 3-year view? And secondly, what is your appetite? What is your appetite of the debt you can take into your capital structure without compromising returns? Raj, if you can?

Maybe, Raj, you can just start with the first quarter, the dividend guidance, the risk. Look, we sit with a lot of risks. So in our guidance, we do make assumptions on renewals, we make assumptions on running the business for the next 12 months. So any black swan, any COVID, but we do qualify them very nicely now in our guidance that we provide. There is some risk, but it's, I would say, normal business risk, that we take as a business. We sit around the table. We look at that as part of our budgeting process and that there's a lot of time and effort that we put into making sure that we hit our guidance -- in the guidance that we provide to yourselves. Raj, do you want to do the interest cover ratio?

So the question is where do you see interest cover ratio stabilizing on 1 to 3 year view. Certainly, what we've said in terms of the pro forma matrix, we're going to be at least 2.4x. We think we'll get to closer to sort of 2.7, 2.8x over the 3-year period. I think as a management team, we'll be happy just to maintain above 2.5x. The second part of the question is, what is your appetite of debt that you can take into your capital structure without compromising returns? I think at the moment, it's all about capital allocation and a big debate that we have internally is where to allocate capital given. On the development side, speculative developments are under pressure from a return perspective. But certainly what we're seeing is on the light industrial and logistics developments and the inquiries that we're seeing, we can certainly draw down on debt and allocate that to achieve a sort of 9.5% to 10% cash-on-cash yield. So I think if we continue with that strategy of rolling out light industrial developments, we'll certainly be able to draw down on debt and not compromise on returns in the short term.

Thanks, Raj. Next question is from Chris Reddy from All Weather. An update on buying out the minorities in Mall of Africa. Any update in that respect, Jackie?

No update yet. And really, for us, it's about good sound capital allocation. So we'll only allocate the capital if it is non-dilutive to our return.

Fayyaz from Sanlam Investments. He has got a question which either Jackie or maybe Jackie, Raj, you guys can decide. Is the 80% payout ratio the most tax efficient way to distribute? Would you consider a share buyback coupled with an even lower payout ratio?

So I think at this point in time we are fortunate that we still got assessed losses within the group structure so we have 5 or so main operating entities and the majority of which have got assessed losses so we are able throttle the distributions within the group to get an overall group payout ratio of 80% without actually triggering any tax. Obviously, those assessed losses will sort of decline or get depleted over time. And so maintaining an 80% in the future will be a little bit more difficult to achieve without triggering some tax, but for -- sort of, the next 2 to 3 years we are still comfortable that we can do that without coupling it with a share buyback.

Question from Yara. I think this is for you, Raj. Can you provide some color on the movements in bad debt written off and ECLs on trade and other receivables relative to FY '22?

So put some detail in front of me. I think the largest movement for this particular financial year from an ECL perspective is what Pete alluded to from a Gruppo perspective, we have impaired our loan into the Gruppo entity and there was a significant impairment of roughly, I think, ZAR 30 million. There is trade receivables. We haven't really increased any of our ECL provisioning there in actual fact, the book is looking really, really strong. I think we disclosed a collection rate of over 100%. And when we do a detailed analysis on trade receivables, there's nothing there that is beyond sort of 30 days that we haven't provided for. So actually, no major movements in ECLs other than the ECL and the Gruppo loan.

Final question at the moment, also from Fayyaz. Would you look to exit the MAS stake? I think we've answered that already. Just checking if there any last questions coming in. Likely for you in the audience not. Any questions from the floor still? Yesh want to ask another question.

I'll ask my quick questions. Last question, I promise. So this is a hypothetical question. If MAS had to offer you a DRIP in the next 3 years before they start paying out the dividend, would you guys consider it or taking it?

Yesh, I think it depends on the mechanics of that DRIP. We obviously do like income because we like giving our shareholders income, and they seem to you like it as well. So -- but often with DRIPs, the company offering the DRIP does force your hand on were other by offering at a diluted price. So if you take the income, you're kind of getting slowly diluted. So I think it all depends on those mechanics. However, we're having also attended the MAS results and also at management they've got a different challenge to solve at the moment. They need to build that cash to fund the commitments as well as to -- they're going to impending obviously, bond redemption to [indiscernible]. And in the meantime, they've got to transition from bonds to bilateral funding and not be paying double into 6 digits. So there's a bit of a tight line to walk there. So we would probably always be swayed by looking towards income but it depends on the mechanics, but we also think that the likelihood of it being offered is low at this stage.

Any further questions from the floor? Once again, thank you for your time. Thank you to my colleagues for the hard work. And if you've got any further questions, please reach out to us at any time. Have a wonderful afternoon, further. Thank you very much.