Burstone Group Limited (BTN.JO) Q2 FY2026 Earnings Call Transcript & Summary

Good afternoon, and welcome to the interim results for Burstone's first half ending 30 September 2025. While we run through the presentation, there is a live Q&A board. So if you can just keep those questions coming through, and we'll go through the Q&A at the end. But it's live at the moment, so get going. Just taking a snapshot of the group at the end of September and really looking at what we look after and invest in across the globe, ZAR 42.4 billion of total portfolio gross asset value, of which ZAR 23.8 billion of that is third-party gross asset value. We've introduced a new metric just because of where our business is in Australia, and it will become a little bit more evident as we run through the presentation today. But as you think about third-party equity under management today, that sits at ZAR 10.5 billion. Unpacking some of the 26 strategic objectives and the priority and progress that we've made against those during the course of the first 6 months. First and fundamentally is our focus on driving the underlying value of the real estate. And I think that's coming through in the results, strong performance from South Africa, stable performance in Europe and earnings momentum in Australia. As we think about our growth trajectory, the focus has been on our capital partnerships, existing capital partnerships in Europe and Australia and also looking at and trying to move forward the SA Funds Management strategy. In Europe, the Blackstone progress has been slow. The capital markets and the volatility across the globe has been challenging. And certainly, that deployment offshore has been slower than anticipated. There are, however, some near-term opportunities in Europe that we're excited about. In Australia, we've secured a further $170 million of capital commitment from TPG Angelo Gordon. So that's a double up of their existing commitment to the platform. And once that's deployed, would increase our group third-party EUM by 11%. And we do remain committed to delivering the SA Core Plus platform in South Africa alongside local institutional capital partners. As we think about integration, the focus has been leveraging our international infrastructure and looking for operational efficiencies, and that's seen a 5.5% reduction in Group overheads year-over-year. The balance sheet remains a core focus for us as we look to create capacity through effective asset recycling. At the end of the 6 months, we had ZAR 500 million of SA assets pending transfer. Those will be sold at a 10.6% discount to book. The majority of that discount is applicable to Balfour Mall, where we sold that at just over a 33% discount to book, albeit on an earnings accretive basis. And the balance of the assets generated a premium to book of 17.1%. I think it's important to note that over the course of the last 2 to 3 years, we've sold roughly ZAR 3 billion of assets at near or very, very close to book value. As we think about generating further capacity, we've earmarked ZAR 1 billion to ZAR 1.5 billion of assets for disposal over the course of the next 12 to 18 months, and that would generate or create capacity to support ZAR 10 billion of third-party GAV potential. So it's important from our funds management growth perspective. And then lastly, in terms of ESG, we've got or had a significant focus in South Africa. We have -- we've got 8 MW of planned solar generation coming live within the next 12 months, and that's a 60% increase on where we are today. In terms of the strategic highlights, from a group perspective, first half has delivered a DIPS growth number of 3% year-over-year. That's the midpoint of guidance. The dividend payout ratio has remained consistent at 90%. Our results have been underpinned by the real estate performance and increased fee income. We'll unpack that in a little bit more detail. And as I mentioned upfront, a 5.5% saving on overheads has further supported that result. Earnings has been offset partially by dilutive SA sales or the impact of dilutive SA asset sales in FY '25 as well as the funding of CapEx, the funding of Australian investments, the final deferred payment on the management internalization and transactional cash flow timing, and it's left us at a -- from a balance sheet pro forma LTV position of 39%, and Myles will unpack that a little bit later on. Turning to the real estate investment side of our business, nice growth coming through, underpinned by South Africa, delivering 5.3% like-for-like base NOI growth for the period. In Europe, where we've got ZAR 1.8 billion of equity deployed into PEL, our pan-European logistics platform alongside Blackstone, earnings have come in, in line with prior year on a like-for-like basis. And in Australia, our ZAR 700 million co-investment there has delivered ZAR 14 million of investment return compared to last year first half of 0. And that's as our asset management initiatives take effect and our ability to capture that rental growth is coming through. The funds and asset management side of our business is gaining momentum. Fee income was ZAR 58 million for the half, and that now contributes 14.1% to earnings. Irongate leading the way in Australia. As I mentioned upfront, the additional $170 million of equity commitment, certainly an exciting market to be in, although highly competitive. In Europe, as I mentioned, slower with Blackstone, but we are evaluating some new near-term opportunities. And in South Africa, we're still awaiting the final approvals from the local institutional capital partner. South African real estate was unpacking real estate in total. Certainly, the active asset management initiatives across the board have created value for the business. Headline numbers we've spoken through. But in South Africa, we've definitely seen an improvement in market conditions, positive momentum. And the risk in our portfolio really was concentrated to a single industrial tenant currently in default. And you can see through some of the operating metrics, improved vacancy by 200 basis points and a significant improvement in negative reversions from 4.6% at year-end to 2.5% -- negative 2.5% for the first half. In Europe, our strategy there prioritizes maximizing ERV growth over short-term vacancy, and that vacancy has ticked up to 14.8%, but you're seeing strong underlying rental growth coming through as evidenced by the 16.3% reversions that have been achieved in that portfolio. And in Australia, as I mentioned upfront, that investment strategy really is starting to deliver. We've seen some meaningful numbers come through for the group during the period. Strong market occupancy. Our portfolios there are running at a 0% occupancy rate right now, strong double-digit rental reversions being captured. And in terms of capital deployment alongside partners over the first half, we bought the better part of ZAR 1 billion or $85 million worth of assets, industrial assets on the East Coast. Funds and asset management, I think we've spoken a lot about SA Core Plus. It continues to burn in the background. In Europe, as I mentioned, really looking at new opportunities and looking to leverage our existing infrastructure track record, experience. And certainly, that business is set up for growth. And in Australia, as we look to deploy that new equity, we certainly do expect improved operating margins on new equity deployed. So we think that will be around the 60% to 70% level on new equity kind of new operating revenue. And we're also bidding on new core plus industrial assets outside of our existing mandates with capital partners. We'll unpack that a little bit later on. But for now, let's hand over to Myles to run through the financial results.

Thank you, Andrew. Great. Good afternoon, everyone. And as already said, welcome to Burstone's interim results for the period 30 September 2025 and my first set of results for the group. For those of you who don't know me, my name is Myles Kritzinger, and I was appointed as CFO during the month of September this year. Now before I start, I'd just like to extend a big thank you to the Burstone team for the support that I've received over the last few months in transitioning into the role. I really feel it's a testament to the team and continuity that's been built up in the business over the past few years. Since joining, the key focus of the team has been to try and improve on things where possible, specifically by better aligning financial information with published financials and also simplifying some of our presentations and disclosures to the market. So hopping into performance and the results. And as Andrew mentioned, the past 6 months has been pretty much business as usual with very little transactional activity. Not only has this provided us an opportunity to bed down the implementation of the Blackstone deal, but it's also given us a chance to consolidate on the underlying real estate performance and ensure that certain key disciplines are in place within the business, which when taking a step back means that from an income statement perspective, we have seen stable performance throughout the period. And when looking through to the balance sheet, there's been very little movement year-to-date. We're looking at the highlights, our distributable income per share or DIPS has increased by 3% year-on-year and lands us at the midpoint of guidance. As Andrew mentioned, this was largely driven by strong top line and NOI growth and also increased fee income, offset by the timing effects of CapEx, deployment into -- of capital into Australia and the drag effects of transactional cash flows. In terms of our dividend per share, so our actual distribution declared, we have held our payout ratio at 90%, resulting in a cash dividend of ZAR 0.4596 per share, also 3% up from prior year. From a balance sheet standpoint, our pro forma LTV sits at 39%, and this is after deducting about ZAR 0.5 billion worth of SA asset sales that are pending transfer, highlighting the key priority area of building balance sheet capacity within the business. Then when looking at DIPS in a bit more detail, the year-on-year DIPS movement is underpinned by 2 significant items. Firstly, the loss of PEL earnings through the sale of our stake to Blackstone and then the consequential reduction in finance costs from the settling of debt with those proceeds. When breaking it up into -- when breaking up the improved performance into the various pieces from a real estate perspective, and as Andrew has already outlined, the asset portfolio has delivered good like-for-like growth of 5.3%. In terms of the PEL portfolio and our co-investment there, we've seen stable performance where like-for-like growth has remained flat year-on-year. And then in Aussie, we really starting to see positive momentum in terms of real estate returns where the region generated about ZAR 14 million worth of real estate earnings. As mentioned, fee income has seen an effective increase in third-party fees of about ZAR 24 million, and this is largely a result of the Blackstone management mandate. And then in terms of costs, Graham and the team are constantly working hard to manage operating costs, which has seen a reduction in savings in operational overheads of about ZAR 7 million year-to-date, so about 5.5% for the period. All right. Moving on to balance sheet. And as mentioned, there hasn't been massive movement across various line items on the balance sheet. In terms of our LTV and reporting a pro forma 39% at 30 September, in unpacking this ratio, it's important to deal with 3 key considerations when comparing to year-end 31 March. Firstly, the year-end pro forma adjustments took into account or took into consideration the sale of Thunderbel, a deal which was subsequently canceled, and that property was added back into our asset base. Then in terms of the asset leg, there's been marginal increase in that asset base with the increase largely driven by South African CapEx and fair value gains on the SA portfolio as well as new deployment of capital into Australia reduced by the amortization of our intangible assets held on our books. The marginal increase in our assets has been slightly outweighed by an increase in debt due to the funding of CapEx, as I've already mentioned, and the deployment of capital into Australia, FX movements on our foreign-denominated loans and the payment of transactional costs. The last item in unpacking our LTV and our pro forma is the LTV adjustment for sales at period end, which equates to about ZAR 0.5 billion worth of SA asset sales pending transfer and already transferred and held into noncurrent assets held for sale. It's important to note that these sales are currently unconditional and that post the reporting date, we've already transferred out about ZAR 150 million or 1/3 of that value. Then when looking at our NAV bridge and our net asset value per share, there's been a marginal decrease in NAV per share, and that's predominantly and effectively driven by noncash accounting items, which can be broken down into South African, European and group adjustments, which largely include amortization and the mark-to-market on our derivative contracts. When moving into treasury and looking at our treasury management, we have a total net debt balance of ZAR 6.8 billion at the period end with an improved cost of funding of 6.83%, where we are currently taking advantage of floating interest rates in South Africa. Although in terms of our hedging, we remain well hedged both from an interest rate and also from a capital exposure perspective, being 80% and 99%, respectively. From a group debt maturity standpoint, our average debt maturity is currently sitting at about 2.6 years, and our swap maturity is 2 years. And where we currently hold bank debt, we have an ICR cover of 2.8x, providing confirmation that we're comfortably within our covenants across our loans. When looking at the debt expiry profile, we have about ZAR 1.1 billion of debt sitting in current, which is up for redemption in and around March 2026. And this can be split into ZAR 519 million of commercial paper and the balance in unsecured bonds with the intention of refinancing these positions as and when they become due. From a liquidity perspective and making sure that we're covered, we have about ZAR 1.3 billion of cash and undrawn facilities available to ensure that we're adequately and appropriately covered on those exposures. Then in closing off from my side today, we've included a slide to deal specifically with our offshore currency hedge positions and the rationale behind our hedging ratio on those investments. So when taking a step back, I think it's important to note that at the end of the day, we are a real estate fund. And despite shifting into funds management, predictability of cash flows and capital preservation is a key consideration in how we hedge our positions. In setting the landscape, we have effectively hedged 100% of all of our offshore exposures where our policy requires us to be hedged at a minimum 60% to mitigate any foreign currency or FX risk. The rationale of our position is actually similar to that of interest rate hedges and that certainty is more important than speculative FX gains. So when unpacking our rationale and looking at the reasons for hedging at a higher rate, the takeaways are that it eliminates principal FX exposure and balance sheet volatility. It matches assets and funding in terms of currency, and it also achieves a lower cost of funding and delivers more predictable returns that are not dilutionary to earnings. The outcome of this position is that, yes, we do sacrifice potential FX upside, but we also protect against FX downside if the rand has to appreciate. And as mentioned, we lock into stable, predictable cash flows, but more importantly, still get the benefit of any value uplift or gain in the underlying investment. I'd now like to hand back over to Andrew, and he can talk you through the rest of the real estate asset performance. Thank you.

Thanks, Myles. So we'll run into a little bit more detail in terms of the real estate and then funds management, some of which we have covered, but certainly in the underlying sectors and portfolios, there's a little bit more detail that we thought would be relevant to give here. So unpacking South Africa and the real estate performance there, you've seen a lot of these headline numbers, very strong performance coming through, positive earnings trajectory, which is good to see. And when we close out, you'll see where we think that lands for the full year. Also good to see the negative reversions coming down, although they do persist, and you'll see that in the office piece in a few slides' time. In terms of that office portfolio, really strong performance over the first 6 months. We've continued that trajectory off the back of the last 12 to 18 months, although vacancy rates across the broader sector have come down. There is still the oversupply issue. So rental growth is still muted. But certainly, in our portfolio, good to see some of the operating metrics trending in the way that they are. Gross income growth of 5.7%. If you look at vacancy, I know they're sitting at 8.2% today, but we think that will come in at below 6% within the next few months. Reversions, as I mentioned, are easing, and we've unpacked on the right-hand side, longer-dated and shorter-dated leases. So on a total basis, 14% negative reversions, still an improvement from full year of '25, which was negative 21%. But interesting to see the long-dated leases still driving the majority of that overall negative reversion, and we've been saying to the market for a while that market escalations or market growth aren't keeping up with compound escalations. But you can see those that have been regeared or released within the last 5 or so years in the short -- what we call shorter dated, and that negative reversion is coming down was significantly lower. And so certainly, our feel is that the bottom is behind us, and we're excited about -- we're certainly positive about where things are moving forward. And ultimately, if you look at the like-for-like performance from that portfolio, positive 4.1%, playing the full year number -- sorry, H1 '25 of negative 5.9%. That's a significant change year-over-year. In terms of industrial, which is the smallest of our 3 South African portfolios, there is volatility here just given its size. So the headline of negative 3.8% NOI growth really just impacted by one significant business default. But across that portfolio, the metrics are strong. Low vacancy at 3%. That's come off from 7.7% at year-end, and you're seeing strong reversionary potential here, and we've captured 6.5% over the course of the first 6 months. So a good place to be and certainly positive about that sector moving forward. Retail continues to perform and deliver for us. The headline in terms of 11.5% like-for-like NOI growth is significant. We did have the benefit of Zevenwacht Mall coming back online at 100%. It was in a partial redevelopment last year. So we took the downside last year, but really strong trading statistics right across the portfolio, turnover growth of 7.5%, trading density still sitting at north of 3,000 a square meter and cost of occupation below that 6.5% level, which kind of shows that we've got room to grow. And then if you look at reversionary potential, 2.9% captured on new leases during the first half and vacancy is still low at 4.1%. A significant amount of that vacancy sits within Balfour Mall. And I think once that is transferred, that vacancy in retail goes below 2% or even 1%. So a really positive outcome for that portfolio. Moving to our co-investments offshore in Europe, alongside Blackstone, as I mentioned, right up front, like-for-like earnings will be in line with prior year. The additional vacancy has been offset by surrender premiums. And I unpacked some of those operational metrics earlier. But as you've seen in the higher vacancy, you've also seen the 16.3% positive reversions coming through. And that is the dynamic strategy playing out. In terms of the first loss exposure that we took on when we closed the Blackstone transaction, that's in relation to the valuation gap on some or certain properties within that PEL portfolio. At 31 March, we recognized a ZAR 400 million provision to cover that exposure, and we believe we're adequately provided and certainly being proactive in mitigating and managing that risk position. We're in several discussions at the moment. And then we also do, just as a reminder, have step-in rights into that portfolio and assets at a point in time. In Australia, if we split our investment into 2 where we were invested in industrial platforms alongside TPG, Angelo Gordon and Phoenix, we have ZAR 330 million deployed or just short of $30 million. Our investments there are into initially low-yielding assets, but those that have significant reversionary potential. And you're starting to see some of that potential in earnings come through in the first half, as we've mentioned, ZAR 14 million of earnings coming through the first half and equating to circa 7%, 8% yield on cost of that ZAR 330 million investment. And we expect that to continue to grow as those rental reversions are captured with asset management and CapEx initiatives. The other half of the deployment into Australia is through the ITAP fund, ZAR 334 million. ITAP is effectively a development fund. We'll unpack that on the next slide, I think, and is a total return play. We expect returns to come back to the group over the medium term. And as it's a development-focused platform, we are currently capitalizing interest and have done from the beginning of around about ZAR 14 million for the half. In terms of the funds management business, as we see a significant growth vector, I think we've spoken enough about Blackstone and some of the opportunities, but certainly a focus in the near term in establishing additional third-party fund platforms, leveraging our existing base and attracting new institutional capital. In Australia, Irongate now manages just south of $700 million of equity. It's a 7% increase year-over-year. And although the fee income number that you'll see in our income statement is only ZAR 4 million for the half, that's expected to accelerate into the second half as a lot of the deployment and acquisition activity only took place towards the very back end of FY '25 and early '26. So the benefit is yet to come through. As I mentioned, upfront capital commitments increasing with TPG doubling down. And if we unpack and look at the revenue and margin outlook, and this really is, as we think about new deployment management fees earned, and there's a whole suite of fees, and we'll unpack that a little bit later on. But across our Australian business within Irongate, we earn somewhere between 75 basis points and 1% of gross asset value through Irongate. Obviously, we own 50%. And in terms of operating margins, we believe that on new business, that margin will be 60% to 70%. So a significant increase of the existing margin, which I think is tracking at closer to 20% on a run-through basis. Just unpacking the Australian structure, and I know there have been some questions around this in the past and unpacking Irongate, its role and then the investments that Burstone has into the platforms and funds that Irongate as a manager is involved in. The Irongate joint venture is 50% owned by Burstone Group and the other 50% owned by the Irongate management led by Graeme Katz, Adam Broder and George Rose. Irongate looks after 3 platforms or funds. Firstly, ITAP, where we have $450 million of external equity that is deployed into opportunities that will, once fully developed, be worth somewhere around the $3.3 billion value. It's a medium-term -- medium- to longer-term liquidity profile. ITAP fund itself has $161 million of equity under management. That is invested into projects like The Grove, Phillip Street, Rundle Place, Yarraville, Younghusband. And separately, we have raised or the Irongate team have raised another almost $300 million of capital from Phoenix, Ivanhoe Cambridge, Built and Metrics that invests into the same opportunities, The Grove, Phillip Street, Rundle, et cetera, et cetera, alongside ITAP. Then you've got the TPG Angelo Gordon platform and Phoenix platform, both invested into industrial platforms. The combined gross asset value of both of those is somewhere around the $400 million mark. And you'll see there the list of assets, individual assets that they are invested in, including Hemmant, Glendenning that passed or closed during the course of the first 6 months. Our investment is ZAR 700 million deployed into ITAP, the TPG platform and the Phoenix platform and our ownership percentages are shown on the screen. So hopefully, that gives a better sense of how Australia is set up, but ultimately, one team looking after all of that, significant amounts of capital being managed alongside very well-known institutional and international capital partners. So closing out, first, maybe stepping back as we think about the funds and asset management business, an illustrative view of where we think we're headed, and we start where we were in September '24 and roll forward kind of 3 to 5 years from now. And you've seen on the left-hand side in the gray blocks, the level of direct investment reduced to March '25 remained fairly consistent to September '25. And as we roll that forward over the next 12 to 24 months and then on to 3 to 5 years from now, you see how that direct investment level we'd expect to reduce. But it's effectively replaced by the solid blue bar chart line where you see is minimal to start off with but starts to grow in 12 to 24 months and even greater thereafter. And that's our co-invest. So effectively recycling from our direct investment position into co-investment position. So ultimately, our total capital deployed as we think about our strategy remains very constant. The earnings from real estate will remain consistent because we are moving from direct investments into co-invests and ultimately, just replacing one with the other. And then ultimately, that ability to recycle into co-investments creates the capacity and the ability for us to invest alongside third-party capital that drives third-party gross asset value, which ultimately drives additive fee income. And that delta between where we think real estate earnings and yield moves, i.e., the dotted blue line, combined with that additive fee income generates that broader total earnings illustrative outcome that's highlighted in the green line. So effectively, constant capital deployed, consistent earnings from real estate, even though we're moving from direct to co-investment and additive fee revenue that ultimately bolsters and adds to total returns to shareholders. I have captured this, I think, on the previous slide, but just to reiterate, the NOI that we lose as we recycle out of direct real estate will be replaced by investment income and ultimately is enhanced by the fund management revenues generated of third-party capital. The benefit to us as a company and to shareholders, we think, is fairly simple to see. It creates additive earnings beyond the real estate yields, creates and generates asset and geographical diversification for us and creates multiple platforms in each region, secures multiple capital mandates. And you're seeing that play out just through the names of the capital partners that we've listed on here. The types of roles that we play across the different regions at the moment, Australia is a really good example of where we'd like to be right across all 3 markets and into the future, where we act as fund manager, investment manager, asset manager, we provide leasing and acquisition support and deal flow. In Europe, it's contained more to asset management and leasing and acquisition. And if we roll forward the SA Core Plus fund, you'll see us play up the food chain there. We've given a suite of the types of roles that we play. The kinds of fees that we will typically earn are market related, obviously, and would range between 50 and 150 basis points on GAV. It's all dependent on the role we play, the market we're in and the strategy that we roll out. And as we think about our operating leverage or operating margin on new business, similar to Australia, we do think across the group, that's somewhere between the 60% to 70% level. Concluding in terms of results and where we're going, earnings momentum is certainly building. Our underlying real estate performance is strengthening. Funds and asset management growth is gaining traction. The balance sheet remains critical from a focus perspective as we look to create capacity to scale platforms and international integration always remain key, but it's a renewed focus as we look at strategic and operational alignment across our geographies. We're expecting some further cost efficiencies and process improvements to flow through in the short term. In terms of the real estate, South Africa has rebounded, strong market fundamentals or improving market fundamentals, and we've seen that coming through, positive momentum expected into '26 and solar deployment pipeline of that 8 MW is certainly going to support that growth. In Europe, although the strategy has led to higher strategic vacancies amid a softer occupier market, we still believe rental growth to be strong and robust, and we're positioning for ERV growth over short -- filling short-term vacancies. Australia, I think we've mentioned, but you can see the returns coming through and the strategy playing out in terms of the impact of those asset management and capital CapEx programs. Fund and Asset Management, we're excited about. First half, even though EUM was only up 2%, it really has set us up for the next half and 12 to 24 months from now. Strong demand coming through in Australia alongside our existing partners, both into existing mandates and into potential new mandates, Core Plus, industrial being one of them. And we do expect material operating margin expansion as we grow that business. In Europe, we are exploring new light industrial opportunities. We've mentioned that before. We see some near-term opportunities coming through. And again, that business, as we grow, should unlock significant operating leverage for the group. Balance sheet-wise, the focus really is on the ability to fund our co-invest, which ultimately lead to the growth of the funds management business. The further ZAR 1 billion to ZAR 1.5 billion earmarked for sale in the next 18 months is critical. And then managing our risk position, we keep all eyes on that. And as I mentioned, really focused on where we are there and some of the contractual obligations and rights that we retain from that. So I think that's us for the first half. Before we move to Q&A, I think this is a quick round of thank you, obviously, to the team across the business, across the group for a tremendous effort in the first half. Myles for joining, taking on the role and really stepping straight into the deep end, your impact has already been felt. And then to our capital partners for their continued trust in us as we look to grow the business over time. Thank you.

Okay. So we'll move on to Q&A. We've got Graham, obviously, live with us, but we've also got Paul Rodger sitting in Europe. He didn't get the dress memo today, so he's not in blue, but we said it's a shade of blue. So we've got the questions coming, and I'll hand them out. The first always is from [ Rachel ], so I think this one really is for you, Graham. Great SA performance. You don't hear that very often. Please confirm what percentage of the tenant's electricity needs are covered by solar. If I remember correctly, you're reluctant to overinvest in solar. So there should be a lot of opportunity to increase solar rollout.

Sure. So once we've rolled out the additional 8 MW that Andrew spoke to earlier, 24% of our total portfolio consumption will be catered for. Yes, we certainly are cautious. We don't want to over spec or over roll out. But we're very comfortable with the capacity that we're rolling out currently. We are still achieving very attractive yields, approximately 25% gross yields on that rollout. We're starting to investigate more battery type systems to continue to expand that rollout over time. And again, not only just pure yield for us, we're also working very closely with our clients as to how we, over time, start sharing those savings and reducing their overall cost of occupation.

Okay. [ Evan Francisca ], I knew you would ask this question. I think I heard you say a deferred payment. Was that to Investec for the Manco? If so, please unpack because I believe that it was AUM dependent, and you've been a net seller. I think I'll pick that one up [ Eve ]. There were 2 elements to it. There was the deferred consideration element and then [indiscernible] performance related. The former was ZAR 200 million of the original purchase price effectively to be settled 12 and 24 months later on an equal basis. And then -- and that wasn't linked to any sort of growth or performance measures. And then there was the [indiscernible] and performance side, which is AUM linked. The payment to them in these 6 months was linked to the former, i.e., that contractual deferred consideration position. And that's the last of the contractual. There's 1 year to run on potential outperformance and potential [indiscernible] based on AUM growth. It looks like Myles and Paul are getting off scot-free. But another one for you, Graham, from [indiscernible]. It seems surprising -- in relation to retail, it seems surprising that the cost-to-income ratio in retail would increase that much. Can we expect it to flatten or decrease when solar PV is rolled out?

Yes. So I think just important to unpack that cost-to-income ratio is that is referring to a base cost-to-income ratio. And previously, in the prior year number, design quota set in a development line. That has gone back up and DQ, just given the nature of the asset does have a relatively high cost-to-income ratio. So it is largely stabilized. Yes, you -- with the rollout and as I previously spoke to, the attractive yields, you should see a decrease in that cost income over time, but not only just relating to the solar rollout, again, as reiterated over a number of these cycles, we have a big focus on reduction of cost of occupation, not only for us but for our clients. And I do think you see that cost coming through overall when looking at our net expense increases. So our net expense increases for the SA portfolio is looking relatively high at 11%. But if you strip out the bad debt provision that Andrew spoke to largely coming out of industrial, our net expense increase like-for-like is actually only 1% for the SA portfolio, which I think speaks to the efforts of the team in managing that overall cost base and the result in cost of occupation for our clients.

Well, I see [ Rachel ] has sent another question through, and we'll give other guys an opportunity to post their questions. Maybe, Paul, given that you're online, maybe just a quick 30 seconds from you in terms of the market in Europe, just seeing in terms of what you're seeing play out occupier-wise as well as capital.

Yes, the occupier market, as we know, has been softening in Europe for the past several quarters. Can you hear me now, Andrew?

Yes, you're good.

Yes. So as I was saying, the occupier market in Europe has been weakening for the past several quarters, and we have not been immune to the weakness in the Eurozone. So we've seen, as you mentioned earlier, the occupancy come off on several of our larger states. But we are -- the positive news is since the summer period, we've seen inquiry levels increase, and we are now working hard to try and convert those new interests into let things to back solve that void. I think on the capital market side, we are seeing quite increased interest from new entrants coming in where capital has been waiting on the sidelines, specifically around the light industrial stage and value add to opportunistic mid-box logistics. So I think the news there is that there's certainly been a number of material transactions traded between the core markets over the past sort of 3 to 6 months. So hopefully, as we go into the 2026 period, it will continue to be positive in terms of transaction volumes stabilizing and hopefully increasing.

So [ Rachel ], coming back to yours, finally, you're putting Myles under the -- in the spotlight here. The decrease in the group ICR, the breakdown behind that? And then what pricing are you getting on new swaps in ZAR and what are margins looking like?

Perfect. So I think just in terms of interest specifically and where we've gone to on South African interest rates and how that swap book looks is that we have come off in terms of our hedging ratio. We've decreased that hedging ratio to close to 75%, so a significant reduction from last year. And that's obviously been a key driver in terms of bringing over that overall cost of funding down from just over 7% to the 6.83%. In terms of new swaps that we are entering into, it has been very much a case of stepping out of existing as and when they obviously come up for maturity and then considering blend and extend positions in terms of the existing swap book. So wherever there is obviously opportunity to extend swap positions or to get pricing benefit, we very much -- we've moved along that tact as opposed to entering into new swap arrangements at new pricing. I think in terms of the actual swap books themselves, so we have seen a significant flattening in terms of the curve. We know that ZAR has dropped off significantly over the course of the last 12 months. And we have seen big opportunity in terms of, a, either floating or taking out slightly shorter-dated swaps as opposed to extending for 3- or 4-year periods. And I think that's also largely a function of where we are as a business in context with our debt maturity and then also strategically with the various, I suppose, milestones that we're embarking on. We've got Core Plus around the corner. We're very much going through the sale of the residual assets or some of the SA assets. So from a debt perspective and from a hedging perspective, haven't necessarily looked at anything that is longer dated than 2 years just to take that into consideration as well.

I mean this one, I guess, we can both cover off, but it's a question from Lawrence at [indiscernible]. Just wanting to understand the difference between fund management and investment management and then the different fee profile for each. I mean, Myles, you come from some of that background. And there are nuances to it. But as I -- certainly, as we think about it, fund management ultimately is outright responsibility and control over a strategy and platform. And that also includes raising the capital, the equity and having almost full discretion over that equity as well as then all the key decision-making rights that then sit in terms of that equity and the underlying strategy in relation to buying, selling, financing, et cetera, et cetera. And then investment management is one layer down where if you think about the sourcing and executing of transactions and monitoring of a portfolio as opposed to the pure active management of either the direct assets or active management of the equity that sits above that. And so it sits somewhere in between that fund management and asset management level. I don't know if you want to add to that.

Yes. I think the key word there is discretion in terms of funds management. And when you look at capital commitments or external third-party capital specifically, it's very much backing a strategy and then committing equity that the management team then effectively goes to deploy on their behalf at its discretion. So spot on, where the investment fee income or the fee charges, like you said, a level down from that, a little bit less discretionary, a little bit more input and insight from the capital that sits behind it.

Yes. And from an overall fee perspective, I guess, obviously, given the nature of fund management, the fees there typically are higher touch linked to equity and also typically performance related as an upside. You don't tend to find that at an investment management level. And investment management is typically kind of transactional-driven acquisition, almost acquisition fee and then a monitoring fee, which would be low down that kind of fee scale. Tony at Anchor, just to come back to you, yes, we will post the audio presentation online as soon as we've had a chance to completely change it and put it back there. But yes, it will be live a little bit later today. It looks like everyone has gone a little bit quiet. So maybe just one final one for Graham and really thinking about the South African portfolio and outlook there. Obviously, we've had a really good first 6 months, almost surprising on the upside even from an internal perspective. But just your feel on what you're seeing play out, maybe just give a few anecdotal pieces of info [indiscernible].

Yes, sure. So I think maybe looking at a little bit of macro SA, there's definitely been a significant increase in activity, both from investment and leasing activity and generally far more positive sentiment on the ground. We're speaking to a lot of clients who are looking to expand and invest, which I think is very encouraging. When distilling it down into our portfolio, I think you touched on some of the metrics earlier. But if you look at the retail portfolio, not only has it delivered very strong growth on an NOI basis now, but I think the number that really encourages us is the trade figure. I mean, 7.5% turnover growth is a really strong number with really strong cost of occupation. So we think that is very sustainable growth and still good runway to come within that portfolio. The office portfolio has been stable for a long time. It has been plagued by the negative reversions again, which you touched on. Very pleasing to see those coming to an end. I'm very surprised I haven't got a question, which I always get every 6 months about when those long dated due come to an end. But we really are coming to the end of that long-dated cycle with 2 large leases that will come in H2 of this year. And post that, we should be back into, let's call it, the more ordinary short-dated leasing cycle. And as you saw from some of the statistics that Andrew spoke to earlier, those are starting to -- while they are negative, they're very, very marginal and the overall locked-in contractual escalation is getting that into positive growth territory. So I think we're very comfortable that office is in a very stable position. Is it going to be a growth driver from us in the short term? Probably not. But the real challenges we've had over the medium term are, in our opinion, behind us. Industrial, I think from a macro perspective, has been really positive, a lot of demand in the space. I think we have seen some changes in the type of user demand in terms of the smaller, very functional boxes, which our portfolio is very well suited to cater for. I think the one can't really read too much into the results, and we did touch on it previously. Given the scale of that portfolio, there will be ups and downs based on single lease events or bad debt events as we're currently seeing. But as we work through that, it will normalize to pretty solid growth. So I think we're very comfortable with where the SA business is, and we think it's back into a very sustainable growth territory. But just broadly, we've been very encouraged also by the transaction activity, a lot of inbound interest in our assets. Obviously, we have earmarked ZAR 1 billion to ZAR 1.5 billion very comfortable that we'll trade that at very strong and acceptable levels to continue to create that balance sheet capacity. So I think overall, internally and what we're seeing in the market is actually looking very positive from a South African perspective.

Okay. So I think that really brings us to an end. We obviously are on the road for the next 3 to 4 days. So we'll no doubt see a lot of you over the course of the week. But as always, we remain available, phone calls, e-mails, any questions you've got, very happy to pick that up in any sort of dialogue. But thank you very much. Hope you guys -- I hope you all have a good afternoon and a good break. And let's hope that break comes sooner rather than later. So thank you.