Dipula Properties Limited (DIB) Earnings Call Transcript & Summary

Good morning, everybody. Good morning to all the people online. Thank you for attending our annual results. Hope you'll find the presentation insightful. Got a few colleagues with me. Taryn, from our Investor Relations and Romy and Sudesh from our finance team. So all the [indiscernible] Questions at the end, if we go once I hope for the finance team. I'll deal with all the fording property things. Welcome. Just -- Let me just start with our strategic objectives for 2022. I think we set out 2 years, 3 years ago to try and have some sort of intervention to try and improve liquidity in our share and I think consolidating the A and B share has actually been really great for us. As you've seen a big increase in trading volumes of about 203% on a year-on-year basis. It was about ZAR 765 million in value traded compared to about ZAR 65 million the year before. Just looking at the DIB share. So we're quite pleased with that. And we also set out to reduce our portfolio vacancy to about 7.5%. I'll provide more color on this number. But I mean, our vacancies have come down quite nicely, and we've done quite nice leasing sitting at about 6.4%. We set out to have a Board succession. We had about 3 board members that were in the mid-70s. So those have been replaced now with younger Board members. There's still good continuity on the Board to the moment because we still have Brian and Zanele continuing, and I think they will continue for some time to come. And I must say that we're very pleased with the candidates that we've actually put forward, good experience, and they've actually hit the ground running quite nicely, and it's a good mix of people. Continuous process automation. We've been very cautiously going into trying to improve our processes to do the implementation of systems that are sort of -- that improves our efficiencies. I mean you won't see that in the numbers yet, but I think going forward, you'll probably see it so we've got DocuWare, which is a process management system that we implemented about 4 modules of. So just by way of example, I mean, my team wants me to release something now. I don't have to sit with a pack of documents. But literally released that from my cellphone from anywhere. So it is quite beautiful. The other thing about DocuWare on the utility side, you receive a municipal account, we upload the account. The system then does all of the intelligent things in the background in terms of just comparing and looking for reasonability and then giving an exception report and things like that. So that's actually quite useful. Again, from a process point of view, limiting that human error. So we've done procurement on that system, and we've got utilities on it. The big module that we're looking to roll out on the system going forward is leasing, which is a lot more involved because there's contracts involved in that. But, I mean, I think, it's really done wonders on the procurement side and the municipal side for us. And we've also got on the leasing side, have implemented some system there that interfaces with our property management system and basically start anticipating vacancies and producing vacancy report that then goes sits on our website, and we are introducing all kinds of interesting things because I mean beside just seeing a list of properties, I think what you'll see in the future is we were able to pick a property, and it will take you to a location and basically start interacting but hopefully, down the line, what we'll do with that system also is try and get it to a point where people can actually submit offers -- offers online. So I was saying we want to get it to a level where between that and DocuWare, we can get tenants to submit offers online and you start actually interacting in that way again. The moment you conclude that lease, you'd be able to actually populate the lease without having that human interference, especially with smaller tenants where you're not negotiating too many terms and residential tenants where those leases are literally almost nonnegotiable. But on the commercial side, the complication is how do you deal with the shoprite but we can deal with a shoprite of Pick n Pay to agree all the hybrid agreements so that you literally just put in the new terms and then the system can do it for you. So these are the sort of things we're looking at now going forward. And then what we've also done is we've got Power BI now that we're utilizing for the reporting site and our scenario planning. There's quite a bit of work happening in background in terms of trying to automate things. Noncore disposals that we wanted to do was about ZAR 200 million. We've achieved ZAR 190 million of that. ZAR 30 million or so are still awaiting transfer at the end. Those transactions were done at a 9% yield and that was roughly 3% below our book value. That restructure, effective 1 September. We've -- we have about ZAR 3.6 billion of debt in our books. We raised 3.8%, well, refinanced ZAR 3.6 billion and raised another ZAR 200 million. And the fund will be utilized for renewables and et cetera. Growth in portfolio, about 5% is what we set out to achieve rather ambitiously, I think, under market conditions, but we achieved about 3%. I'll give you color of that in the later slide. And we have set out a spin about ZAR 370 million over 18 months in revamps and we spent roughly ZAR 150 million during this 12 months. Touch on that a bit later. And then PV solar, that's an ongoing project. I mean we've taken our time there because we just cannot get our minds around cost-effective storage and cost-effective backup. It's still quite a big question around that. And there's rapid technology in that space. But we've appointed the cloud called [ V3 Engineers ]. So we'll be working quite closely with them. I think from about early next year in the first quarter, we'll start rolling out a few strategies around. And it's not just solar. So what our brief to the engineers as an energy strategy that we're embarking upon. It's much broader than just solar what you're looking at there. On the ESG side, as reported in Feb, I mean we have appointed Ernst & Young to just help us with our framework. All that is done now. We're adopting the JSE reporting framework and you start seeing us actually obviously report in a comparable manner I mean if you think about it [Ford] versus all other guys that are -- have embarked on ESG, it will be a lot more comparable and this thing will then be auditable going forward, just to make sure that the numbers in there can be in relied of. That's basically just broadly what we did this year. Coming back to the numbers for this year, and I'll just fly through this. Sudesh will provide a lot more color around this. Revenue is up to about ZAR 1.4 billion, 3% on the prior year. We'll unpack that for you later. And distributable earnings were down 7%. That's mainly due to interest. And on the leasing side, we have done about 188 leases -- new leases, that is about 50,000 square meters. The size of a big regional shopping center. And the value of those new leases was roughly about ZAR 334 million. So between renewals and new leases, we have done about ZAR 1 billion worth of leases, which is a very good work. On the renewal side, as I said, about ZAR 700 million worth of business there, 130,000 square meters roughly. Our retention rate went up 12% from 72% last year to 84% this year. We'll unpack that on a sectorial basis to show you what happened there. And obviously, average interest rates are almost up 1% and [ SAB ] rates were up about 3% between the 2 periods, but thanks to some hedging that affected us to about a -- to an extent of about a percentage point. The portfolio value was up ZAR 9.8 billion. I mean that's an accounting number. like-for-like valuation number is about 3%, and we'll talk about that and NAV was up about 2% on the back of all of that, debt remaining stable at about ZAR 3.5 billion, ZAR 3.6 billion mark. I've already mentioned the sales for this year. So gearing is still at a very impressive about 35.7%. I mean we're not -- I think we'll -- as long as we have this volatility in the market and high interest rates, we're quite happy to retain our gearing at sort of those levels. On a hedging side, Sudesh will touch that later on, basically, at the end, we are setting at about 65%. I'm not going to spend too much time bitching and moaning about the tough trading conditions. I think we all know what we're facing here. But I suppose the interesting thing is that it does feel and look like everybody is starting to think that interest rates might actually come off a bit. I mean we would welcome that if it ever happened. And basically, the important thing from a property point of view is -- I mean this graph is quite interesting, basically just showing you that volumes on the physical property side in terms of transactions is actually quite low at the moment. So that's obviously because of a number of reasons. I think very little liquidity on the physical property side. And the listed funds are not actually either developing to the same extent as what they did in the past, but also buying property from developers. So I mean, developers can't exit the investments I think they tend to actually develop far less. So I mean, a strategy that involves capital recycling and the selling of assets obviously becomes fairly challenging in the market where there's limited liquidity. But what we're seeing is that there are smaller owner occupiers and rather than taking a much longer view on property and cannot do not have really -- do not have confidence to allocate money into the listed markets and they still see property as a safe haven but it's a few small guys really chasing the smaller assets. So if we were to put some of our better assets in the market, I think we've moved them, which is actually quite a positive thing meaning that we're sitting on tradable stock at our average size. Graphs on the side there just shows you basically a 5-year pattern in our portfolio, dropping GLA increase in value, therefore, increasing the average size of the portfolio per asset -- on a per asset basis. As you can see in that line graph, basically, where we're sitting at 2019 given we're something at about ZAR 44 million on average stock, asset size sitting at about ZAR 55 million. And obviously, that could be accelerated by acquisitions because I mean at the moment, we're not really acquiring property. So it's purely from asset recycling and asset management that leads to valuation uptick. Just looking at the leasing overall, key numbers to mention here is that we did 50,000 worth of leases on the new leases, and that was at about 1% below what our asking rentals were at the weighted average escalation of about 7% and a WALE of 2.4%. So guys are still not committing -- committing long term on the leasing side. It's only, as I'll show you later on that I mean, if you sign your large national tenants are committing fashion guys between 3 and 5 years. And basically, if we do leases with the process because they invest so much in those properties, they still give you longer leases. But on the office side, and I'll show you there that it's still -- guys are still feeling the market a bit. To speak about the valuations for a minute, our cap rates were more or less the same year-on-year. There was small decrease in cap rates for residential. On an average, you're still sitting at about -- exit cap about 10.2%. I think [indiscernible] sitting about 9.5% average capital at the moment. So our portfolio is definitely not over valued on a comparative basis. And the average discount rate was sitting at about 14%, 13.9% versus 13.8% in the prior year. And i think that although it feels like a far less riskier market, I mean the uncertainty around growth and things like that, is still leading to value as being a little bit conservative on the valuation side. Basically, what that resulted in our portfolio is with 3% growth in retail and a 2.5% reduction in our office portfolio. I think that's to be expected. And basically, industrial went up about 9.7% on a year-on-year basis, pure income on that side because discount rates are more or less the same. And then residential were recovering from a write-down in prior years during COVID when our incomes were actually fairly low in terms of the rental that we accepted to just move the stock at the time. All right. Just looking at retail quickly. As mentioned, 3% growth on a valuation like-for-like basis. We've been spending most of the money on the repurchase, we're spending on the retail portfolio basically at the moment. So that sustains our rentals. Load shedding not really a big factor in our lives given the nature of our assets and the fact that most of the anchor tenants have their own back up but it is always quite expensive. So it's sort of more the secondary effects of low charting that we're worried about because the tenants are feeling that it's affecting their margins. What does that mean in terms of rentals going forward. One has to be concerned about that. Our net under recovery on diesel this year was about ZAR 1.8 million. That's more than double last year, but it's still not a big number relative to our turnover of about ZAR 1.4 billion. And I think our portfolio is obviously still showing signs of defensiveness. I always said to people that it doesn't mean that during a better time, this portfolio will necessarily not outperform. I think it will outperform because people at retail. So at better times, people shop more, there's more demand for space and I think you increase your rentals more. So that's -- we are hoping for better times as well economically. The vacancy went down from 9.8% to 7.5% in this portfolio. And our weighted average rent went up from about ZAR 140 a square meter to ZAR 147 per square meter. And escalations continue to go down a bit. I think very hard to close deals with the flight to quality. I mean we've gone from a lower percentage of strong blue-chip national tenants to a much higher percentage of PAT. So they negotiate a bit harder on the escalations. And that's why you've been seeing a lower trend. Anywhere between 5% and 7% is where you conclude leases with national tenants on escalations now. And our retention rate has gone up to about 77% in this portfolio. We've decided to just give you a bit more color, as we did during pre-close, just to give you a sense of how the vacancy looks, the actual retail centers are sitting at about 4%. And the CBD, mixed-use, retail at the bottom, offices on top noncore stuff. Our closure to that is about 4%, and the vacancy there is the highest at about 29%. And then stand-alone sort of strip properties in the CBD that our exposure is quite small. It's about 2,000 square meters that we have of that type of property, which obviously is sitting in our noncore. Vacancy there is 8%. And then basically strip retail would be non-CBD properties in residential areas basically, and that's sitting at about 11% at the moment. From a leasing perspective here a price-taking scenario for us this year, about 5% less than what we are asking on the rentals. Again, I think that speaks to the type of tenant that we're negotiating with. They drive a hard bargain. But our renewals were actually done at a 2% positive renewal rate. So I suppose hooked a guy, get him in there, get him trading well and then maybe you've been a stronger negotiating position to actually retain them in the property. This show you turnovers. On the left-hand side, we've got our trading densities and cost of occupation. But basically, on average monthly trading density of about [ 3.3 ] cost of occupation of about 4.4%. So lots of room, especially in better market conditions to grow this number because I think on average, you're looking about anywhere between 6% and 8% in comparable properties. They're at 4.4%, we definitely have room for growth in this portfolio. Again, what would unleash that growth would be penetrating condition. I mean there's no way of retailers in our centers are actually battling if their turnover ratio sitting at 4%. There's typically supermarkets to pay you turnover at about 1.85%, 2% and we signed turnover leases with fashion guys of up to 5%. So 4.4% has still got a room for [indiscernible]. And this is just a select number of properties that we normally report our turnovers on. And you can see even there basically, we've got -- we still got growth going through rental properties. Because we took a bit of a knock this year because we budget a revamp there. So that fewer people actually go into the center, hopefully, that project will be completed soon, and we have the people back there. And we filed a bit of pain at a [indiscernible] because there was a competing center that added to the GLA, I think will stabilize again next year. So we're looking at adding a third anchor in that particular property in a form of Boxer. Once that's done, we'll have a [Spa], Shoprite and Boxer, the same thing and hoping that they will bring the property back competing with rest of the property there. But other than those 2 properties, you can see there -- that there was actually very healthy growth in turnover and trading density. These are just some of the revamps. Atrium, Pick n Pay signed, we've -- we've got 1 floor fully left now. We got another floor half left. And we're pushing the go button for early next year, Pick n Pay should be trading in about June next year. We are handing over the property to them, anticipating to hand over the property to them in April next year. And basically, Chilli Lane is almost done. We're relaunching in -- at the end of November, just before Black Friday. Kroonstad Circle, we are done there, there is a Phase 2, putting a small little co-anchor into the center called the [indiscernible] co-trade with Pick n Pay and Gillwell, we've completed all the work there. Our footfall number for Gillwell has gone from an average of about 450 to about 550 after the revamp and after punching in the new entrants there and replacing game basically with the Boxer. Dobsonpoint was basically just -- we completed that during the course of the year. This is a property that's worst effected by the riots in 2021. And it looks like new now. On the office side, we've made some adjustments here. Our vacancy is sitting at 15%. So if I do a like-for-like for the prior year, that vacancy would have been at -- on a similar basis, it would have been at 19%. So we dropped vacancies by about 4% in office vacancy. What we did remove from this is that these properties, we've actually completely taken out to the market about is 40,000 square meters here, 40,000 square meters at -- that's all of our redevelopment properties, but we're not marketing the space. We're basically in time planning phase. The idea here is we're either going to convert that into residential ourselves or we're going to sell the residential bulk. And when we look at the average rentals we can achieve on those properties. We're probably looking at like anywhere between ZAR 60 to ZAR 80 a square meter as they are if you lease the property that we converted to residential, you're looking at about ZAR 140, ZAR 150 a square meter. So there is definitely an incremental rental that you realize on conversion but you could also just sell it on and repay interest and you'll still be doing better than trying to lease that, but of costs have been about ZAR 50 or ZAR 40. The weighted average rentals that we are achieving in this portfolio has gone down from about ZAR 160 in the prior year to about ZAR 156 our big work here is basically trying to renew government. They're about 50,000 square meters for the government that we are negotiating on. We've received draft leases from government to the moment. They're not signed yet. And Yes. I mean that's been going on forever. But I mean, we've got to get in there. The guys are in the property store. So luckily, they haven't moved out anything like that. But I mean, I think we're very confident that those leases are getting renewed and we're looking at 5 years, those are the property terms there. Leasing about 27 leases we did here. We had about 7,500 square meters of new leases concluded here. And the largest lease we did year was the rent Midrand, Waterfall Park, about 5,000 square meters of EOH consolidated all of their divisions into our property. And that -- those deals were done that's roughly about ZAR 115 a square meter. You can clearly see that the office rentals are still under a fair amount of pressure here. I think these properties maybe 2, 3 years ago were probably leasing at about ZAR 150 -- ZAR 150 a square meters. I mean those rentals are coming down -- are still coming down a bit, still a tenant market. And basically, on the renewal side, we have renewed about 17,000 square meters. So that's everything about government that actually renewed and still sitting on a month-to-month basis, not at the moment. If you look at is 54 years for 2024, that's mostly government. Industrial, really boring year for us. Portfolio is holding up quite nicely. And on the side there, I've just got a split of what it looks like. We like industrial is about 2% vacant at 60% of our exposure and many units are 5% vacant. That's about 10% of our exposure and 50% of warehousing and logistics, which has a 1% vacancy. We really run at issues here and valuations are actually reflective of the fact that sentiment is a bit better in the subject of our portfolio. Just briefly on residential. I was speaking about this number earlier and we can see if you build more 1 bed than 2 beds, they're very popular and they actually attract better rents. I mean if you look at [ Norwood ], we're achieving about ZAR 176 per square meter for 38 square meter unit on average achieving ZAR 120 for 78 square meter unit. Palm Springs, the number is ZAR 165 and ZAR 127 for 2 beds. And Midrand around ZAR 160 really for a 1 bed and the studio is sitting about ZAR 200 per square meter. So when we do redevelop these properties, we need to skew towards a 1 bed because that's where the value sits. And that's the thinking around taking those 14,000 square meters out of the portfolio and earmarking them for redevelopment. More color on that portfolio. There are been important number here is our vacancy are sitting at about 7% at the end of the year. We had 3 units in a small development so that was sitting at a 25% vacancy and Palm Spring were sitting at 10%. I think what we need to do here is maybe report these numbers on a month-to-month basis because when you take a snapshot, you don't really get a true sense of what's been going on in the residential probably sign shorter leases with our term line at the end of May, I might be sitting at 0% vacancy, but [indiscernible]. So I think going forward, what we'll do, we'll show you the monthly vacancy state that you can go a proper field for what our average occupancy was for the year rather than just the snapshot. But I mean, we've seen very good occupancies here. Just update on our ESG. We -- obviously, an internally managed fund. So lots of effort going into keeping our people happy. We're about 85 staff members now at a moment. And we've introduced some flexibility in our working arrangements. But I mean our preference is [indiscernible] So yes, so as I was saying, I think what we find is, I mean, there's definitely a hardship keeping in, guys unemployed, lots of petty crime, lots of desperation around people just looking for something to do. So I mean, we're taking it upon ourselves to actually train up some of these guys, try and utilize local and particularly on the security side, we just find that if you use local guys, they've got insights about what's going on in the townships, and that's a big point of emphasis from an ESG point of view, as for sustainability in those areas. And we've also been spending a fair chunk of money in CSR initiatives, with a particular emphasis on sports and basically early childhood development and drug awareness that's -- those are big areas of emphasis for us now. I will hand over to Sudesh on the numbers.

Okay. Thanks, Izak. So Izak has done in the exciting part of the presentation, it's my job to try to keep you awake, but it's equally as important as the business update. Let's see, I'm going to start off by taking you through some of the financial highlights. If we look at revenue, we managed to grow revenue to ZAR 1.4 billion. In doing so we achieved a 3.2% growth. We've also seen our property income growing to ZAR 901 million. That basically takes us to 1.6% growth from 2022. Once we see property income and revenue growth through the period, we've seen distributable earnings for the period at ZAR 514 million. That's been 6.9% down and I think Izak covered it earlier, the main reason for that is the significant increase in rates over the last 12, actually more than 12 months. And what this has done is it basically assisted us in achieve a total distribution per ordinary B share of ZAR 56.96. You see that the current distribution per B ordinary share is not really comparable to the prior year. This is largely due to the unbundling of our A&B share structure, which was done in 2022. The Dipula Board has declared a dividend per share for the last 6 months of ZAR 25.42, which basically incorporates a 90% payout ratio. What you've seen and Izak again touched on, our property portfolio has grown by ZAR 9.2 billion and ZAR 9.8 billion, and this represents a 1.7% growth and our interest-bearing liabilities is pretty much constant and stable at 3.6%, marginally up by 1.1%. The -- Our shares as of 31 October 2023, I think at a price of ZAR 3.87 traded at a discount to NAV of 42%. It basically shows good value in our shares. To move forward to our distribution statement. Again, revenue has grown by 3.2%. And the key factors for this would be largely on the improved retention rate we have on our portfolio in the current year, as Izak mentioned. We've also seen at a portfolio level, positive rental reversions on renewals, I think at a portfolio level it was at 1%. These are contributed to the 3% revenue growth. Looking at property expenses, you see that the increase is at 4.6%. I think it's a good achievement. We're quite fortunate enough to have a strong internally managed property management team. The key understanding of the property portfolio assists us to manage that growth lower than that of inflation. This has assisted us in achieving a property net income growth of 1.8%. What you see, the administrative and corporate costs has increased by 38%. We've touched on this at the previous presentation. And I think the main reason for the increase is twofold. One was the once-off management incentive that was provided for the successful unbundling of the A and B share structure. The second was the -- in order to maintain continuity at a Board level, a decision was taken to keep on the 3 retiring nonexecs for an additional period of 2 quarters to enable good continuity, which it did. And that obviously has contributed in the cost increasing in the comparative period. All in all, our net operating profit has remained flat even with the increased cost in that to ZAR 846 million. We touched on earlier, the net finance costs increased significantly, 14% increase contributed to the main reason why our distribution for the period being 6.9% down. The ZAR 514 million achievement basically represents the 14% adverse variance on our cost of borrowings through the period. And what this has done for us at a cost-to-income ratio and admin cost-to-income ratio, we've seen a 39.5% and 4.4% achieved, respectively. The increase from year-on-year is largely due to those unusual transactions that I touched on a while ago. From a sectorial performance, I think there hasn't been a significant shift between the sectors through the comparative period. Dipula continues to be a largely retail-focused REIT with a particular bias towards rural convenience and township retail. And as such, you see the 65% allocation to retail with 16% allocation to offices and 15% to industrial with a little allocation of 4% for residential. As you can see, between the different aspects of rental income, property expenses and property income, there hasn't been any material shift. It's pretty much consistent year-on-year. Reviewing our statement of financial position. Again, to pull our balance sheet is, in essence, quite vanilla, I think it's pretty simple to understand. I'm not going to spend a lot of time on this slide, but what I will do is touch on some of the material balances and movements for the year. Starting off with investment property, the growth of 1.7% is made up of a combination of a few items. The first being capitalized expenses incurred through the period. The second would be a revaluation of the portfolio around 2.9% and lastly, this would be offset by those properties that were disposed of and transferred through the period, giving you the 1.7% growth. The other material amount of -- interest in amount is the derivative financial instruments. What this relates to is our mark-to-market revaluation on our swap positions. It's important to review this balance in the liability aspect as well. The net financial asset position at year-end was ZAR 47 million, marginally below the ZAR 52 million achieved in the prior year. The movement is largely due to movements in the swap rates through the period. Moving on to interest-bearing liabilities. We basically are pretty stable at ZAR 3.5 billion. But what's interesting to note that the ZAR 3.5 billion [indiscernible] taken up through the period. But what we managed to do was redirect about ZAR 173 million of our surplus cash into our RCF facility, reducing that balance to ZAR 3.5 billion and pretty much been stable with the prior year balance. The noncontrolling interest line item, what this relates to is Dipula owns a small portion of our portfolio via a separate SPV. And in this SPV, we basically co-own worth an external party, and this represents the minority shareholders' stake in the net assets of this entity. From an IFRS requirement, we need to include 100% of the assets and liabilities. And as such, we strip out their share of the net asset value. Trade and other payables shown a 27% decrease. I think roughly it equates to around ZAR 70 million decrease. The reason for the decrease is basically as a result of 2 large accruals that I was raised in the prior year. The first one was for acquisition of the remaining shares of another company that holds the Palm Springs properties, residential property. That roughly was around ZAR 25 million. And the second being was the accrual for the appraisal rights clearly, we had on -- as a result of the unbundling of our A&B structure, it was linked to that. We had to reverse accrual in the current year and even involves us obviously, paying the settlement of around ZAR 34 million. So combined, it would be the reason why you'd see it dropping ZAR 70 million. This and all takes us to a net asset of ZAR 6 billion, sure the marginal growth of 2.1%. And basically what it means. I mean looking at a simplified balance sheet, the biggest constituents in the balance sheet is our property portfolio. It makes sense that the growth in that portfolio of 1.7% coupled with stable debt, it actually promotes what you do expect being the net assets being pretty much stable, if not a slight increase at 2.1%. And this also translates to a loan-to-value of 35.7%, marginally improved from the prior year. And it also takes us to a net asset value per B ordinary share of ZAR 6.64. Again, marginally better than the prior year in spite of us issuing further shares -- further shares value of the DRIPs issue where we issued 18 million shares on top of the 893 million shares in issue, that takes us to a total shares issued at year-end around 911 million. Moving on to the cash flow statement. Basically, the movements year-on-year, I'll touch on some of the significant movements, but it's pretty much easy to follow. The opening cash balance of ZAR 64 million basically resulted to adjustments. The major adjustments or unusual was, firstly, the significant increase in net finance cost, as can be expected with the repo rate increasing close to 3%, I think, over the comparable period. You do have an increase of ZAR 299 million for the current year compared to ZAR 265 million in the prior year. The next amount that's new would be the shares acquired in terms of the share-based payment of ZAR 16 million. The benefit of our dividend reinvestment program resulted in additional cash retained in the business of ZAR 64 million. As we touched on the sales process during the current year, we managed to have ZAR 154 million of cash, resulting on properties that did transfer through the period compared to ZAR 97 million in the prior year. The ZAR 34 million settlement of appraisal rights are touched on. And I think that's the last significant component. But again, I'll draw your attention to us [indiscernible] in our RCF. In the prior year, I think that amount was ZAR 80 million. Moving on to our debt facilities. Our total debt hedged currently sits at 65% versus 75% and what's interesting is that we are continuously engaging with the market to understand how we can improve our debt hedge position. But we're also mindful of a few considerations. The first being is the obvious is the cost of hedging at the moment. I think we all can appreciate it's quite expensive. Actually, I had a call with some of the bankers a few days ago. And if we had to lock in a hedge currently between 2 years or 3 years, we would -- probably cost us actually JIBAR minus 0.35 basis points. It's extremely expensive. And I think when you factor that in, and you consider the fact that most people are predicting a drop in interest rates over the next 15 months and the quantum of which could be anywhere between 75 basis points and 125 basis points. Okay. So it could be -- and in concluding on the debt hedge, it doesn't make sense based on the pricing for us to obviously lock into any hedges currently. So what we are currently doing is we continuously engaging with the market experts. And if we see an opportunity to hedge at the right price, we will increase our hedge position but at the current position, we are comfortable with 65%. The all-in weighted average cost of debt is 9.24% and this is 1% plus/minus worse off than the prior year. And in fact, it's a very good outcome. And what it tells us that while the repo rate has increased close to 3% over the period, it tells us that our swaps has been in the money to compensate for that, to limit that to basically around 1%. The weighted average debt expiry was 1.9 years at period end. The debt facilities renewed during the year was ZAR 1.1 billion. New debt facilities entered into was ZAR 200 million. But the rates that we negotiated is less relevant. And I say that less relevant because we managed to refinance the entire debt portfolio at year-end where we refinanced the ZAR 3.6 billion. We've also -- was able to add a further ZAR 200 million of additional facility, taking it to ZAR 3.8 billion and the terms of such was that we managed to secure a weighted average margin of 1.76% for 4 years. All of those facilities that we are negotiating in the current year, those terms will fall away, and they will automatically fall into the ZAR 3.6 billion or ZAR 3.8 billion facility on the terms mentioned just now. Lastly, Izak touched on the improved liquidity in our shares. I quite like this slide. Basically, our total shares issued is 911 million. The difference from prior year is due to the 18 million shares that have been issued as a result of the DRIP. The total volume of shares traded during the period was 198 million, the rand quantum of this trade was ZAR 745 million. And again, this translated to an above 200% growth regarding these trades. The ratio of volumes traded against the issued shares was 22% in the current year versus 7% in the prior year. And this also translates to the average daily volumes been 760,000 compared to 314% (sic) [ 314,000 ] in the prior year, given you a 142% increase. Izak back to you.

The one thing that we managed to do very well this year was to keep those costs -- limit those costs of a 3% growth. And that is quite a tough task that because although tenants pay municipal rates, you pass some of that on, you still need to like really box very hard with council when it comes to property revaluations. I mean we've got a utilities team within the cooler business, that spends days and night basically just looking at that area of our business. So I think we did that well in terms of just keeping those rates low. What we also did quite well was renegotiating and retendering certain of our contracts around security, especially because it was quite big and around cleaning. And going forward, obviously, we tried to lock in at a fairly low escalation base for those operators that are doing that for us. What we saw was that the larger companies were coming to the bargaining councils. I think settled for security and cleaning at about 9% this year. And so the guy said, okay, let's just give us a labor component at 9% because that's what the bargaining council was settled on. So we said no, you can take 60% of that, we'll take 40% of it. So I think that was one of the ways of us actually trying to keep those costs low. Obviously, I think we can't maintain their margins at the expense of our shareholders. I mean that could part of the reason why we kept those costs low. So between cleaning and security and our negotiating in that manner, and basically ensuring that we keep the municipal increases low by the reason we had a modest 3.4% increase in operating costs. I think otherwise, you've probably seen a very different pattern in terms of that. That's probably taken this into [indiscernible] maybe anywhere between 30 million or 40 million depending on how you look at interest rates, that's kind of just stuck there potential distributable income and if interest rates have come off, that sort of number would come back into the numbers. I mean we don't know. We don't have -- we don't know when that's going to happen. So -- but definitely, if you -- if you're looking a little bit beyond 6 months, 12 months and that sort of thing. I think when those interests do come back, that's not just for the pullout I think around the sector that should be positive. I think decreasing interest rates would probably also give valuers a bit of confidence in terms of how they value the portfolio. And hopefully, the risk on assay reduces and your bond rates come off because at the moment, we're also competing with that. So I mean our biggest unknown and almost uncontrollable at the moment is this interest rate. And I think as they just touching on there, what do you actually do on the hedging side. I mean I wish I had a balances there, it's very difficult to actually decide what to do because even the exotic structures are not really giving them much. So you're going to end up just doing things for the sake of doing it. So our Board is obviously, I mean, we need to now be given them almost monthly feedback in terms of that or whatever color we see in the market on an ongoing basis just to keep a close eye on it. Our focus will be made on tenant retention. I think it's cheaper to keep your tenants than to go look for new ones. I mean we do pay up quite a bit on the TIs. Every time we do a lease, the TIs and the letting agent fees where the dealer is coming from external agents that does cost us money. So I mean if we keep that tenant retention rate high, then it makes -- it makes our income a little bit more predictable and it's cheaper of us. And we'll continue to spend money on the portfolio. Hopefully, we can sell another ZAR 300 million worth of property, put that money back into -- recycle that back into the portfolio. And there's obviously also the possibility of doing renewables in a way that's enhancing. But we're not looking at renewables necessarily as a big profit driver because we understand what we need to be doing for our tenants also in the process. I think we need to be realistic about that number. I mean, our business is not profiting from renewables. Our business is actually making our space attractive and making sure that tenants actually trade in that space. And our teams are out in full numbers, trying to fill the vacancies basically the rolling out of this ESG strategy, hopefully, in [ around ] energy, and as I said, in a way that could actually drop something to the bottom line. But my sense in terms of the [indiscernible] now and the fact that kind of for maybe a period of 5 years, I haven't acquired anything meaningful. I think the sector all hasn't. Some shareholders might view that as a negative. I think our cost of capital is obviously not allowing us to do any of that. But it's a cyclical business. I think you need to have the right patience and our view around consolidation in the sector. We have tried a few things. Nothing has really come off now. But I mean, we'll see where this thing takes us. I mean, if a deal makes sense, we'll have to put it in front of shareholders. But what I tell my team is forget about all of that at the moment. We're running a decent business. We're running a good business. So keep running it so that even if you become a victim of a takeover, your shareholders actually receive a decent return from the investment and/or you become the preferred management team to actually be the consolidator. But I mean, we're not out there putting the business up for sale. We're not out there chasing businesses just for the sake of growing but it's going to put your mind at ease that we're not going to do deals for the sake of doing deals and then undo all of the hard work that we've done over the years. But that's -- it will be enough to actually realize some sort of growth in the business at the moment, but it's not -- our Board is not desperate to get there at all cost. So no dilutive transactions from our end, basically just get things the way there in a way for the next 12 months. Thank you.

You are going to read the questions.

Yes.

[indiscernible] From Anchor Stock Brokers. I think you -- in relation to the debt, it suggests that all of the restructure -- all of your debt was restructured, but pretty much retrospectively, first of September. So none of the debt metrics that we've been given is valid anymore, right? It's all now based on this -- it's a 4-year arrangement or at the same funding cost and effective from 1st September onwards. If I'm not mistaken.

Yes, that's right. So that expiry profile is actually that was a picture at year-end. But going forward, it's looking very different. We should have actually just changed that. So I think what we'll do is maybe we go back, we reload that slide with the new debt expiry profile.

Okay. And is that -- and the new debt, the reason you haven't given us any guidance on earnings for this year. It should be quite easy to calculate given that you've only got that one piece of funding cost to consider.

I suppose the big thing is where do we hedge if we do hedge, we now got our debt stretching 4 years, and we have got quite a bit of swaps coming up in 2024, 2025. And I'm quite sure whether it's all going to end up on debt. That's our biggest uncertainty in terms of providing guidance.

Okay. So the swaps are still separately in place. So the funding cost won't be equal to JIBAR plus ZAR 1.7?

We could potentially break the swaps because we've got ZAR 50 million of money in the swaps, so we could potentially break those swaps and use that money is to buy more protection but it's something that we still need to work through and plan a figure out. But it is quite expensive at the moment.

Okay. If I can ask it then when you update the duration profile also you update the cost of funding and on the new arrangements taking the swaps into account at 1st of September rather than 31st of August?

Yes.

Okay. So you've mentioned capital and your cost of capital, obviously, the share price [indiscernible] anything to go by that's quite high. [indiscernible] many direct property acquisitions, would you consider share buybacks at this price, given your current level of loan-to-value as well?

From a capital allocation point of view, I think whatever excess liquidity we have at the moment is probably going to go for solar. And it's also probably going to go for revamps to rather try and keep our ability to renew leases higher in check rather than doing share buybacks. I don't think we've got the liquidity for share buybacks at the moment, unless we did quite a big strategic sale transaction or something. I don't know, maybe something a big saying, are we getting completely out of something like offices and we get ZAR 1 billion in or something. I mean if we did that, it would make a lot of sense to go buy back our shares at 15%, 16%, whatever that forward rate is.

Okay. In your corporate cost, second half of the year was about ZAR 20 million. First half is ZAR 35 million. We've gone through the reasons why the first half was elevated. Can we assume the second half is the base for us to forecast from to anyone repeating for a few half years and around.

Yes. And I think Sudesh mentioned there, there was about probably ZAR 9 million of [indiscernible] in the first half number.

Okay. None of those expected soon.

No, we don't.

Okay. And last question. I don't think there was any notice given of a dividend reinvestment alternative. Is that something you're considering for the dividend?

No, no, we didn't really introduce that aspect to it this time around.

Okay.[indiscernible] It seems that the vacancy reduction came through in H2, should we expect to see a more substantial benefit of that this year?

Yes, most definitely. I think if you look at those numbers and you look at our first half, I think a lot of that leasing happened in the second half of the year. So I mean some of it should filter through in the numbers going forward.

[indiscernible] wants to know, you see the higher use of capital being recycled back into the portfolio. How do you justify capital being put back into the portfolio when your shares are yielding 16% on a distributable earnings basis?

[indiscernible] I think if your vacancies dropped to 20% because your properties are not well looked after or being kept relevant that will probably damage the share price more in actually buying back shares. That's just our logic at the moment. We're thinking that maintain your ability to generate cash rather than basically buying back shares at 16%. I mean we just -- I don't know how we'd actually fund our redevelopments if we bought shares back for money. It probably would mean that it's a balancing act, it means that we need to borrow a bit more and then you borrow into a high interest rate environment to buy back shares. I mean, I will no doubt, I mean, mathematically and theoretically, buying back makes a lot of sense. But if I utilize ZAR 200 million then to buy back shares, versus utilizing ZAR 200 million for renewable energy and keeping our properties operating during load shedding. I think the impact on the business is much better of thinking about energy and thinking about keeping the properties full from buying back shares at the moment. That's just our logic.

[indiscernible] , per your ESG slide [ B-BBEEE ] , what specific area of [ BE ] improvement will you be focusing on?

We're doing a lot of enterprise development, supply development and training, but obviously doing a credit of training , so we can get the points. We score very high on ownership, we score high on management control and all of those areas. So it's basically those 3 areas that we'll be focusing on.

And another one from Rafael. How much additional rental income do you expect from cap rate?

Our full year on [indiscernible] will probably give us between ZAR 20 million and ZAR 30 million for full trading year.

Okay. [indiscernible] says Dipula's properties are trading at 60% of their value. If Dipula was trading at 1.5x book, I would be asking you to swap ZAR 100 for ZAR 150 to buy properties. We're on the other side of this coin, where it makes sense to sell properties and buy back shares.

I also cannot foul that logic. But I think that if the market was high for property sales, all of our competitors will be selling a huge amount of property and be in the same trade, it is not that easy to start property into a market with no liquidity.

Okay. We have no further questions on chat.

Isaac, I'm just going to be a bit cheeky here. So there's no liquidity at current book values, but is there not liquidity a little bit the further south of book value?

Maybe Jeff can answer this because you'd be seeing -- let me maybe just reflect on the stress sale that took place in the sector, not too long ago. Those assets were actually discounted quite a bit. There wasn't crazy bidding for those assets. So and there was quite a chunky transaction, 4 billion or thereabouts, okay? I mean, obviously, we can argue about whether what those assets were worth, et cetera, et cetera. And I suppose if we were to go put our assets in the market for 20% discount to book and that sort of we're probably fine buyers there. Buy back the shares once off, we'd probably have to sell some good assets to raise the money, then you'd be looking at a different fund because, I mean, you'd actually sell some of your car and jewels to achieve the share buyback. Again, one can -- it's a strategy, but I mean one can fault it. And I suppose it's an area that we need to continuously think about and see what we do. So again, I mean, I can't foul that but I haven't seen a huge amount of activity. We would probably be the first guys going to market and saying we're drastically going to discount our assets and sell them to buy their shares. Because I'm not seeing anyone do it. We're not only read that's trading at, I suppose, quite attractive the forward deal. Thank you.