Dipula Properties Limited (DIB) Earnings Call Transcript & Summary

Good morning. We decided to bring the good weather to Cape Town and so on and make our colleagues up in Joburg a bit jealous about actually having good weather in Cape Town. Thank you very much for attending our year-end results. I just want to give you some insights, and we will take questions at the end of the session. And I've got my CFO, Sudesh, here with me for those difficult IFRS questions. And I'll take most of the questions around the business and so on. So we've got a 3-part presentation, just a business update. I'll go quite deep in depth on basically exactly what's going on around our portfolio and the markets and so on. And then we unpack the numbers a bit in Section 2, and then we have a very brief way forward. All right. Just briefly on the slide here. I think the big -- no, no, that's fine. I'm not going to speak to those. Don't worry about it. I think the big thing for us here is that there's definitely a very positive shift in fundamentals. And I think fundamentals reflect people's views on the future and the present, but also the future. I mean property obviously tends to lag some of that. But I mean, we get a sense of what's going on in the market through, how positive our tenants are and how hard they push in getting space and what they're doing in their businesses. I think most importantly, inflation is starting to sort of come down a bit. And you would have seen in our numbers that we were affected quite a bit by increasing costs. But that was mainly on basically the municipal costs. I mean that risk kind of still remains there. But I think everything else that you can negotiate on an arm's length basis and sort of use inflation as a proxy, I think that's becoming -- that sort of indicates that maybe there we've peaked a bit and that should actually assist in pushing performance going forward. I think the graph there on top there kind of just shows the inflation picture, which you guys probably know better than ourselves in terms of what's going on there. But also this rand strength has been sustained little bit of a hiccup during the U.S. elections. I mean, 2024 was also a year of many elections, including our own. And I think with that -- this one. Okay. Is it better? Yes. 2024 is also a year of many elections and including our own. So that's come and gone. And the GNU as it's -- there are people that are criticizing it for whatever reasons it might be. But it has stabilized things. I mean we're getting a sense that people are a lot more confident. But the key thing is, I mean, how does this actually flow down to where it matters most to us as property owners, which is some of those big metros in places like Gauteng and many other places. But I always say to people that in some of the markets that we operate in, service delivery hasn't been amazing for as long as I can remember. Water shortages or sort of pattern of not getting consistent supply of water, electricity grids not being stable and things like that, that's -- we've seen that in places like Bochum forever. So you kind of learn to adapt your business and you trade on. I think part of the reason why for a long time, no one was touching the townships or the rural areas was because people thought there's no services there until everybody started saying, we'll put the septic tank in, we'll make a plan, and then you uncover the whole big market that's to a large degree been driving retail in a country when your superregionals and urban centers were actually going backward. So retailers are still looking for opportunities in those markets. And as much as we're concerned about the news around water in Joburg and everything else that's going on there, we think that the private sector will make a plan. And I think just judging from what we saw happen with electricity, appointment of the new minister and how quickly that turned, I kind of think that, that situation up in Gauteng around water has also been taken very serious and that things will probably happen very quickly, right? You might not like the portals as you see them, but that's not stopping people from getting to the shopping centers. It might slow them down a bit. And so -- but that's better than basically not having electricity and all that. So things are definitely looking better. And economically, just very broadly, you can see that these sectors at the bottom here being construction, personal services, mining, transportation, a bit of a Transnet thing in there as well that those are mass employing sectors for the lower LSMs. And we need those to start trending upward to support this economic upturn even more. So I think we look at that and we look at the fact that there's a bit of liquidity being introduced by this 2-part system. No one knows where the money is going to go, but it sounds like a little bit of debt repayment, which means that the banks will give you back that facility again and you go spend. So even if it is for debt repayment, it should make its way into retail in some form, shape or the other. And it should keep people's children in school, which means that they'll go to Sportsman's Warehouse, they'll buy the uniforms. So we think it's going to be great for retail, particularly our sector because it's not a big amount, but it's actually quite a big amount that if you think about it relative to the lower earners, you guys are probably not going to tap into your pensions now, but I think the lower earners will. And I think they'll have a little bit of money to spend every year, a bit of a Christmas bonus, because they'll probably draw into it on an ongoing basis. So we -- yes, so we're looking forward to that coming into the system. And then, of course, as I said, interest rates is quite a big driver of our business, both from a point of view of our tenants and our own business. So there's a direct impact and an indirect impact that will actually affect our portfolio across the sectors, not just retail. And so it speaks to disposable income, more income, more money in people's pockets. Let me just maybe spend a bit of time on that graph right on top there, that 5-year growth trend for Dipula. You'll see from that graph there that the top line shows our GLA. So we haven't bought any property for the past 5 years or so. It is impossible to buy a property. But I mean, our GLA has gone from 924,000 square meters to about 880,000. So GLA is dropping because we're selling assets. And the value of our properties has actually gone up ZAR 1 billion from ZAR 9.1 billion to ZAR 10.2 billion. So that means that preserving NAV, spending a bit of money on those properties and increasing rentals because if you think about it, discount rates have actually been going up. Bond rates were very high until just recently. The risks that people take into account in deciding what they kept these properties at, those were present. But I think management intervention and how we run our portfolio when there was a lot of writing down of assets, our assets were either stable or giving some modest growth and that sort of thing, which is what you see in that pattern there. At the same time, I think the market has been -- the market started realizing and actually rewarding us for that. Obviously, 2020 was a bit of an outlier with everything else that was going on, COVID, and then I think we probably received the best of the riots, but that was all insured. I don't think the market reacted to that in any way, but through sentiment and things like that. But there wasn't really a specific reaction to Dipula at the time. But I mean, you can see our market cap has also been growing from about ZAR 2 billion to more than double that now. So I think if you are a Dipula shareholder, even the guys that came into the stock at listing and participated in that A and B thing, I think the B guys got hurt a little bit, but not from a cash flow of -- not from a point of view of sort of just the all-in return because we paid dividends throughout, but for obviously, during COVID that we withhold that one dividend. So I think it's a positive story all in all. And if you look at the bottom graph, that now speaks to what the portfolio looks like that's increasing in average size at the same time. Right. So just looking at our portfolio broadly now. Now on the portfolio overview, a bit here. So basically we showed about a 5% increase in the value of our assets year-on-year. And disposals, unfortunately, this year, we didn't dispose of a lot of properties. I mean we've got a few properties now that are held for sale. It's important for us to actually keep selling because we're recycling into the portfolio. So I think we'll do a bit better last year. Last year, we -- or next year. Last year, we were almost at about ZAR 200 million of sales. This year, we're sitting about ZAR 37 million. As I said, it's probably about -- at the moment, as I stand here, about another 60 or 70 awaiting transfer, but I mean, we're pushing that a bit and maybe for next year, we'll do even better. And then vacancy at year-end had gone up slightly. And basically, tenant retention across the sectors that gone to about 87% from 84%. I'll unpack that a bit later. And our WALE in the portfolio is actually increasing. We've gone from 2.5% to about 2.7%. And escalations, we've actually maintained at just under 7%. So things are looking, according to me, actually quite good. This thing is very small on my side. I don't know if I can make it bigger. All right. So just quickly on the numbers. This is Sudesh's stuff. So he'll tell you more about it. But I mean, top line, 7% up. No one really cares about that. But what it really means for us is our recovery rate is still very efficient for municipals. But it also means that there was definitely a rental growth in spite of the negative reversions in the office portfolio and so on and so. But that in-build escalation also comes through there because you've got -- unfortunately, you measure vacancy at the point in time. So what you're seeing there is not the average vacancy throughout the year. It was a vacancy at the point in time. And basically, portfolio, I already said, has gone up 4%. But if you look at it, increased on a like-for-like basis, actually 5%, but that's an IFRS contaminated number. So I'll speak to my number a bit later. NAV up 5%, SA REIT NAV. And basically, our debt stayed stable. So the sales, the increase in valuation led to basically a position where debt stayed stable at about that ZAR 3.6 billion -- ZAR 3.7 billion mark. The big thing for us this year was how much leasing we did. If you combine renewals and new leases that we did, that number in terms of value amounts to about ZAR 1.4 billion. That's 240,000 square meters. That's probably 2 malls of Africa. So it's a lot of work that was undertaken in that area. And -- but for that government office side of things, you'll see that the retail was still showing plus 2% or so positive renewal rate. And as I said earlier on, our retention was sitting at about 87% for the period. A lot of time going into talking to the teams around retaining the tenants, cheaper to have the guys than to attract new guys in all respects really. So it's a big KPI in our lives. And you can see a modest increase in net property income here to about ZAR 920 million, again, saying that there's definitely a keen eye being kept on costs whilst trying to drive rentals. The cost-to-income ratio was up a bit to about 42.3%. We think that that will stabilize going forward. I mean we're targeting about 40% for next year. So there's about a 2% in there for us to play with. And that was on last year's roughly 39.5%. So just looking at the full portfolio. I mean, I think I've spoken to the leasing in the previous slide. The key thing here is we've got another 173,000 square meters coming up next year. I think there's good and bad that goes with that. But I mean, if that comes up into a positive market, we're hoping that, obviously, we'll pick up on the rentals there. We've still been very conservative on our assumptions about where people will renew. But I mean, we're obviously going to be pushing that number quite hard and so on. So that's for 2025. But other than that, into 2026, you can see that number comes down quite a bit. And then from '27, we've got quite a bit coming up again. So we're going to try and like take that 173,000 more towards that 2028 mark and that sort of thing. So that's our aim for next year. And if you look at that table on top there, a lot of it is fairly easy to read, but maybe just to focus on rentals achieved relative to tenants moving out of the buildings. So if a tenant moves out and does not renew, and then we re-let or re-lease that space, what did we achieve. So we aggregated even the ones that were long outstanding or long vacant, such as mainly on the office side and said where we've put in a tenant there this year, what does that look like compared to what that vacating rental was. So over a 12-month period, if it was vacant for more than 12 months, that was a minus 3%. And if we take the deals that we did in the past 12 months that related to space that was vacated in the past 12 months, that number is about 12.5%. So that, I think, shows an interesting story about potential opportunity in vacancy in terms of how fundamentals are sticking out now. This table here just basically speaks to that like-for-like. So in other words, it's an uncontaminated number by IFRS. So it's the entire portfolio, and then we look at the average discount rates. And then we also look at the average cap rates across the portfolio and then we've got a comparative table for last year. You'll see that discount rates didn't really move much this year because I mean that -- the valuers are still not sold on it. But again, I mean, I think you've got a year where things have stabilized or maybe 2 years or maybe by next year, things might change in terms of how they look at the portfolio. So the big driver of growth in our portfolio on the retail side was rental assumptions. So the valuers are now saying, actually, the guys will pay up. And I think if you combine that with our -- which number we show a little bit later on, if you combine that with our rent to turnover ratio, I think they got it right. There's definitely sort of underlying or ingrained growth in the portfolio to push those rentals some more. And basically, we took a knock on the offices about 2% with those government reversions. Going forward, we've locked in 6% escalations on those leases, and there isn't much more coming up for renewal in the following year. So that situation will stabilize. And then this 0.8% on the industrial side, that was also government related to our hangar and a little bit of riot claim that we've written down a bit -- or not us, our valuers. So just quickly looking at the retail portfolio. Decrease in vacancies to 6.4% and weighted average rentals, they are sitting at about 158 across the portfolio. And as already mentioned, I think this drove our year-on-year valuation growth. I suppose the big news has been some of the retailers that gone through a tough time. What I wanted to mention in that first slide also is like in our conversations with various market participants, it would seem that there were some fundraising activity in the listed markets, but a lot of that money hasn't yet gone for growth initiatives. It was all sort of plugging holes and fixing things. So we're kind of awaiting that time that people actually start raising money for expansion. But I mean, if you look at the big capital raises -- and I'm not talking about property now, I'm talking about across sectors. So it was all fixing balance sheet and things like that. But I mean, when the market goes to the market or when participants go to the market or companies go to the market for expansion, that's when things will explode for a better type of thing. But balance sheets are looking decent. I mean, I think if our own balance sheet is looking like this, it means that we've got room to do things. So going back to some of the scares in -- on the retail side around some of the retailers, I mean, there's been some mid-tier guys that have gone out of business or are going on business rescue, West Pack. We didn't have much exposure to those. It does seem to be quite a few of the guys in the more discretionary side of things rather than the guys selling the basics, which is the majority of our tenants. And then, of course, issues that have built up over many years around the supermarket grouping that we -- that's facing difficulties now. We have very regular discussions with a particular group. And I mean, we're fairly positive that it's going to be fine for most of it and so on. So I mean, the management team there have really picked up and they're running that with a lot of energy and momentum to try and maybe close some sites down that aren't that profitable. I don't necessarily agree with everything that's happening because some of the sites are amazing sites. It's just on the management side that things are not great. So they might actually lose some amazing locations. But I mean, having handed over some of those locations to other sister company, has been really good because, I mean, that sister company is showing very nice growth because they tend to push those turnovers where the parent company wasn't able to much better. But they've just got amazing locations. So I think that business will be fine. We haven't been affected at all. And we've made 1 or 2 attempts to maybe try and get them out and get a competitor in and they're fighting for those sites and so on. And that gives us the opportunity to then put pressure on them to upgrade the ones that they don't want to give up. And that's -- I think that's what you'll see next year in our portfolio because we got some commitment out of them from there to do that. So retail-wise, focus is on leasing, focus is on spending money as we've been doing on redevelopments. And there's still quite a big solar opportunity in this portfolio. That's the best portfolio to do solar on because you've got diversification of tenants, you've got continuous trading, and they trade when solar is working. Not always that clear for resi and -- because people are at work when solar is working type of thing, unless you've got an opportunity to actually sell back into the grid or something. All right. Retail-wise, again, I think let me just focus on that number that I was explaining earlier on in that other slide. So that's the bottom 2 lines of the lease activity, top table. So for the same thing on the retail side, we actually were leasing at longer than 12 months, 8.5% better than where the leases expired when the guys move out and then 12.5% for the 12 months. So I think this portfolio is looking very strong fundamentally. This year gives you a sense of trading in the centers. It's aggregated numbers across the portfolio. Key numbers are at the bottom, basically year-on-year movement in turnover, 4% up. And again, I just want to draw your attention to the fact that this portfolio actually outperformed during COVID. So turnovers were going up. So we're not making up for lost time here. This is like a compound consistent growth. So a compound 4% is better than a rapid 10% in 1 year because you're recovering from lost ground. And then basically, the cost of occupancy is still sitting at about 5%. So these are just some of the revamps that we're busy with. Maybe I just want to talk to The Atrium. So we're taking the site back from a contractor end of this month. And some of the key leases there should kick in from March next year. It won't be for the whole property. I think we are about 40% pre-let, and we'll start pushing the rest of the space from there. I mean those others are just putting a second anchor. And basically, at Proteapoint, we're actually doing quite a big facelift and adding another 2,500 square meters, upsizing the anchor and adding a few more exciting tenants, the Clicks, a Pep and a few other tenants there, just strengthening that center, but -- and then also doing some renewable energy on that. So looking at our offices, I think there's nothing new here. I think we told you everything during interim, now derisked, government sitting on 5-year leases, going to start benefiting from that escalations in there, not much in the form of leases coming up, but I mean, we do have the 22% vacancy that we need to keep our eye on. And we are seeing a lot more inquiries and the guys are working on things, and I think we'll make a dent to that in the first half of next year by the time we report. All right. So again, lease activity, top table, that's where the pain has been for us. We are taking a view on rentals here. We have taken a view on rentals. You can see the guys that moved out have been replaced at lower rentals. It's very consistent with what's going on in the market. But I don't think those rentals can go any lower now. It really does seem like there are pockets where occupancies are actually higher now and people are demanding space. So who do you incentivize? Yes, the tenant. I think the tenants are already incentivized. I think the key thing is maybe to incentivize the broker to bring the tenant to you because there isn't much more you can do for the tenant here. I mean office rentals are very competitive now. Okay. This is fairly stable. We're sitting at high-90s occupancy. And we took a knock as a result of Sterkolite, that hangar. And basically, the WALE is still sitting at about 2.5 years here. We've got the midsized boxes and not the large boxes where you get the long 12-year, 15-year lease here. There's 1 or 2 that are on long leases, but mostly speaking, we do 3- to 5-year, 7-year deals. Average rentals are still very healthy in this portfolio at about ZAR 40. So I think we can push those rentals a bit more, especially in the better market. So that was -- that's an industrial picture there for -- that stat I was giving you about replacing tenants. And that was driven by one specific property in the industrial that was completely out of market when that tenant moved out. So that was written back quite a bit when we put a replacement tenant in it and so on. So that's -- it's not a big amount of GLA that drives that number because the vacancy is actually quite low in this portfolio. But I mean that particular tenant actually affected that quite negatively. Residential average vacancy for the year was at about 6%. That had trended up a little bit by year-end to about 8%, but yes, churn is not necessarily a bad thing. The guys come; they go. And we -- I think we'll drive this, and we are driving this quite hard now. And the other properties, the urban villages, high-90s and that sort of thing. But I mean, I think the one in Cosmo has not been an easy asset for us, but those rents are low. I think we'll move that property. If you look at the average rental there were 2 bed in Palm Springs, it's about [ ZAR 5,700 and 1 bed is at about ZAR 4,800 ]. So I think if we get our management, I mean, this is one portfolio that's outsourced to an external manager. And I think we've put very tough targets for them in place. Otherwise, we're going to have to chop them and move to someone else. But yes, other than that, the other properties are fairly stable in that portfolio. Just looking at our sustainability. We are done with about 9 out of 10 of the sites that we're rolling out that 5-megawatt peak on solar. We hit a bit of a snag in PE. I think the construction mafia there is probably much, much stronger than any other part of South Africa. So it's been very difficult for us to move that product. I think we did about 40% of the work and they stopped us. So we're still busy negotiating with them. And it happens to be the same property where we're doing this upgrade. It looks like we'll get them over the line, but the others have gone really smooth. So there's about 5. So we're going to do another 5 next year. So that 5-megawatt peak takes us to about 7 and with the 5 next year, we get to about 12-megawatt peak. And I think we'll do another 5 in the following year. So we've still got quite a bit of capacity here. And water, as I said earlier on, that's something that we've been focused on in any case in terms of getting storage, having backup water, harvesting water. And we also managed to bring our rating down to a 4 from a 6 last year. The target is 2 for the following year. I think we're well on route to doing that. I think it's -- yes, I think it's more about organizing your business in a certain way because it's not on the shareholding, it's not on the management. It's sort of more on the other elements, procurement, supply development. So Sudesh came over with very bright ideas from where he came from. So he's helping us with that. And then, yes, a lot of CSI on the portfolio. I mean, I shared almost a 200-page report with our Board the other day. And I mean, they couldn't believe the amount of things we're doing in the communities. A lot of focus on drug awareness. I mean, these things are killing our people there. We look at quite a lot of our petty crime around our centers is as a result of guys smoking nyaope, toke and these other things. So if we don't deal with these children, we're actually going to be left with no one. So I suppose as shareholders, when we do allocate a bit more money into these areas, you've got to understand those are your shoppers and your customers going forward. So if we don't preserve them, there will be no one buying at these centers and so on, and crime will just climb and climb and climb. I don't think the better parts of the country as such are spared from this phenomenon, but we do tend to ignore it. So -- but we know it, we come from those communities that's killing our people here. So what I said to the guys is, see, we need to pull all stuffs to actually just try and assist there. Other things are fine. I mean we also -- we do the sports. But if you're drugged, you can't play sport. So it's quite a big one and that's -- yes, we are putting a lot of effort into that. And we've got a very good internship for those ones that survive that environment and actually get to university and get amazing marks. I mean, we started this about 5 years ago, and we've been producing at least 4 candidates per annum, and these guys end up getting great jobs because it's really a question of, I mean, can you hold your own in a Board meeting in a setting? Can you build the confidence that support the academic achievement? Because I mean, we don't accept anyone into the program we achieve -- we accept good achievers and top performers. But when they get there, they're raw, they don't really know much. And by the time they leave there, the confidence levels are skyrocketed. And then I suppose when they get to wherever they're going after that because a lot of them ended up being analyst in on a buy side and some of the guys have ended up in other property companies, but it's -- they come up with honors and master's degrees, A aggregates. South Africa is not short of telling people. I mean don't ever think that for a second. So we're very chuffed about that program. Sudesh?

Sure. Thanks, Izak. I want to test this first. Is it fine? This is fine. Brilliant. Thanks, Izak. I'm going to start off by giving everyone that's here a quick refresh on IFRS. So it's just going to need 1 hour. And then if it's fine, I'll start the presentation. Okay. Maybe I'll pardon you from that. I'll touch on some of the key financial highlights. And you're right, Izak, it's quite smaller. Starting off with revenue. We've seen our revenue grow by just close to 4% to ZAR 1.5 billion, and that's on the back of the strength of our retail portfolio as well as growth in our municipal recoveries, and that's as a result of above inflation increases in our municipal expenses. Our total net property income was ZAR 920 million, and that represented a 2% growth. However, included in net property income was an amount of ZAR 34 million, and that related to a straight income -- straight -- our straight rental income. And that was as a result of us concluding quite a few longer-dated leases in the current period. That resulted in us achieving a distributable earnings of ZAR 496 million, and that translated to a distributable earnings per share of ZAR 0.54. The decline in distributable earnings of 3.5% is made up of a few factors. One, Izak touched on related to the impact of the government reversions that had a negative impact on our office portfolio. The second was a component of our properties that were sold and transferred in 2023 and did not form part of the revenue base in the current year. And lastly, I think Izak touched on it as well, we didn't have any acquisitions in the current year. So these factors contributed to the decrease you see in front of you. Our balance sheet has seen growth with our property portfolio growing just over 4%, and that's on the back of the strength of our retail portfolio with valuations growing in excess of 8%. We have taken out additional debt, and it was utilized for a combination of yield-enhancing CapEx as well as defensive CapEx during the period. And you'll find our net asset value has increased to ZAR 6.4 billion, and that's close to or actually 5% up, and that's on the back of the strong revaluations I just touched on. The Dipula Board has considered and approved a final dividend of ZAR 0.24, and that basically translates to a 90% payout ratio. If we move on to the detail of our distribution statement, we find that revenue has grown by close to 4% with our rental income flat from the prior year. This is despite the negative reversions of ZAR 28 million as well as properties that were disposed of and no longer in the base of ZAR 15 million. These were negative contributors to net property income. Our recoveries has increased to 18%, and that's on the back of higher inflationary increases. But another point to note is during the latter part of 2023, we reduced a fair amount of our vacancies and that contributed in an increase in municipal expenses that contributed to higher recoveries. That takes me to the property expenses. You find there has been a surge of close to 15% in our expenses. And this is made up of a number of different reasons. The first being the improved letting that I mentioned in 2023 that resulted in higher municipal expenses. It also resulted in higher tenant associated incentives as well in the current period. The higher inflationary increases in municipal expenses also contributed to the increase. And lastly, you would find that in 2023, we effectively had once-off municipal credits that we received on the portfolio, which weren't repeated in 2024. This takes us to administrative and corporate costs, where you see there is a saving of close to ZAR 12 million, and this is due to once-off costs that incurred in '23 that were not repeated in the current year. Our net finance cost has seen an increase of close to 3%, and this was on the back of higher interest rates within the reportable periods. Lastly, it takes us to a distributable earnings of ZAR 496 million. The impact of the higher property costs that I mentioned basically has driven our cost-to-income ratio to 42% and the savings you have seen in our administrative cost line has resulted in our admin cost-to-income ratios dropping to around 3%. Moving on to the distribution per share. It's quite interesting to understand that there has been a ZAR 0.025 decline. And in understanding the makeup of the movement, you understand that there's been a -- at a net property income level, there has been a close to ZAR 0.025 decline. And if you analyze that further, it's made up of a positive impact on our held portfolio, that's just over ZAR 0.02, and that was offset by the negative impact of the government reversions of ZAR 28 million and sold properties of ZAR 15 million that all combined has created a negative ZAR 0.025 impact. The other positive impact has been the savings on administrative costs of ZAR 12 million. And the other significant contributor in moving our distribution per share was our net finance cost of ZAR 9 million movement. These have all contributed in achieving a distribution per share of ZAR 0.54 for the current period. The sectorial graph is quite interesting in the sense that there has been certain shifts between sectors, and this is as a result of -- it actually talks to the performance of our property portfolio in 2024. Izak touched on the strength of our retail portfolio. Growth in the retail portfolio has resulted in improved margins, and that has resulted in a shift of retail from 63% to 66%. We also find that the challenges in the office portfolio with the reversions in the renewals has impacted the margins in the current year. Likewise, the disposals in our industrial portfolio has also resulted in a decline of that margins, and that contributed to a drop in these sectors between 1% to 2% regarding allocations. Whilst you find that the residential sectors has not moved from the prior period, it's important to note that there has been a decline in the margins in the residential sector, and that's on the back of higher vacancies we've seen at Palm Springs. Moving on to our statement of financial positions. There's been growth in our investment property portfolio as a result of the valuations, and that represents the 4% growth. We find that what's interesting is that we utilize the debt refinance as an opportunity to simplify our property holding structure within the group. So what we basically did is we've moved properties from multiple owning property entities and transferred these properties to almost a single larger owning entity for various reasons, include saving a lot of corporate costs. And what that resulted in is we had to prepay quite a few -- quite a bit of municipal costs, and that resulted in increasing our debtors and other receivables at year-end. One of the challenges of moving assets between legal entities was that we had challenges with our government portfolio in having them to change their details between legal entities. And that also resulted in an increase in debtors at year-end. A significant portion of the government debt has been repaid post year-end. It's important to touch on that our collections on our debtors has stayed stable, consistent with the previous year, which is around 99%. Moving on to our derivative financial instruments that needs to be looked at in conjunction with the assets and liabilities. And this effectively is just our swaps, the mark-to-market adjustments based on latest interest rates, the fair value adjustments on our swaps. Moving on to our noncontrolling interest. This actually relates to our minority partners' share of the net assets in the reclam portfolio. The movements you see in the current year actually relates to the fair value adjustments you've seen in the reclam portfolio in the current year. And this has taken us to a net asset position of ZAR 6.3 billion, which is a 5% growth. Our LTV has remained stable at 35.7%, and this is commendable considering that we've increased debt in the current year, but the significant improvement in the property valuations obviously assisted us to maintain this level. And lastly, the total number of shares, net of treasury shares, has dropped to 910 million, and this takes into account 1.5 million of Dipula shares that was acquired during the period. The net asset value per share basically starts off with the prior year net asset value per share of ZAR 6.64 and the significant movements on the graph relates to the positive movements on the revaluation of our property portfolio for around ZAR 334 million. This was impacted by a positive movement on the statutory profits of ZAR 450 million and a reduction in dividend paid through the period of ZAR 456 million. These all combined in achieving a net asset value per share of ZAR 6.98 at period end, which represented a 5% growth in NAV. Moving on to our cash flow. I'm actually going to touch on some of the significant movements period-to-period, starting off with a cash position of ZAR 62 million. Some of the significant movements between period related to an increase of finance costs to the tune of ZAR 53 million, and this is as a result of higher interest costs that we've seen through the period as well as 2023, including an interest accrual that was repaid in 2024. There was also certain once-off inflows and outflows that existed in 2023 that did not materialize in the current year. One pertained to an outflow for the settlement of the appraisal rights of ZAR 34 million. The second related to an inflow in the prior year regarding the success of our dividend reinvestment program of ZAR 64 million. Other significant movements in the current year related to the increase in our net debt position that was around ZAR 183 million. We've also seen a decline in net disposals, and Izak touched on that. We've seen a decline from a proceeds of minus ZAR 118 million, and this is due to lower market activity. I think it can be explained by higher interest rates through the year as well as most likely the uncertainty that was associated with us being in an election year. These all contributed to us achieving a closing cash position of ZAR 113 million. And just an overview of our debt facility. We basically renewed ZAR 3.6 billion of our existing debt, and we utilized that as an opportunity to take out a further facility of ZAR 200 million. That took our total debt syndication to an amount of ZAR 3.8 billion. We managed to secure this at a weighted average margin of 1.76% and a weighted average period of just over 4 years. Our total hedge position at period end was at 71%, up from the prior period of 65%. And the weighted average expiry for our hedges was just around 2 years. Our total weighted average interest cost for the year was 9.5%, and that increased from the prior year due to increases in interest rates. And we also had a few favorable swaps that actually rolled off in the current year. Finally, in regards to our liquidity position, we have -- at period end had access to a further ZAR 80 million of undrawn facilities and currently have in excess of ZAR 253 million of surplus cash. Back to you.

Okay. I'm back to the fancy mic again. Thanks, Sudesh. So maybe just a point of clarity around the increase in interest rates. It's not JIBAR or anything like that increasing because that didn't happen during the year. It's just as our swaps roll off and we rehedge and then -- and obviously, we -- our base rates are a bit higher there. So I think when we took out those expiring swaps, I think some of them were sitting at like 5% or 5.5% and that sort of thing. So we kind of felt the pain. But I mean it was sort of like just a very short, interesting period in the swap market where the swaps are trading almost a percentage below JIBAR. So we took advantage of that in sort of hedging out. All right. So I think going forward, sort of just keep doing what works, look after that -- the portfolio, spend a lot of money on that. We're going to spend money on the solar. And I think wherever possible, if we can reduce sort of dependence on local municipalities -- look, we've got the tenants. The tenants are the ones that are paying for utilities. So I mean if we can supply them with what they need, we need to organize our business in that way. So if we can tap into nature to get that, that's what we're doing, both on the water and the electricity side of things. And I think our story has always been one of -- you can see, Sudesh was actually explaining there that your collections are actually quite high. So I mean, as we -- we've got a lot of -- we've got a small percentage of C-grade tenants, but there's a lot of them. So the plan is to sort of try and reduce that number of tenants because they actually occupy a lot of our time so that your quality goes up, number of tenants come down and you sort of rent out bigger pockets of space to better quality tenants. And on the office side of things, that's a question of not having single-tenant concentration risk because, I mean, we can see whether you become a price taker after that. So multi-tenant offices is quite key. I mean the reason why retail is so safe is because in 1 shopping center, you've got a multitude of tenants. I mean 1 office building, 20,000 square meters, 1 tenant, that does give you sleepless nights at time and that sort of thing. So we're moving to kind of just over time changing that. And obviously, being very managing in an attentive way in a way and kind of thinking about every specific asset about its own risks and not sort of just necessarily following what the market trend might be in terms of what we're reading in the papers. I mean, property fundamentals are very local. I mean you could have a situation where no one wants to be in a particular area because of a popular view around it, but you got one guy there that's getting the right type of thing. So we just need to make sure that we do what we are paid for, which is focus on what we have in front of us. So next year is looking interesting for us. I think we're turning the corner quite nicely. We've guided at least 5. We'd like to give you more. And so -- but I mean, yes, I think that's easily achievable for us. And that's basically our presentation. Thank you very much for coming, and we'll open up the floor for questions.

Izak, do you have any update on the Midrand property?

Yes. We're almost -- we're in constant discussion with the insurers there. So it's all looking good so far on our end. And it's really a question of estimating replacement costs and starting the works on reinstating the property. We don't have a number yet. So we've got our own professional team. They've got their own professional team. So we're going through the same process that we did during the riots, which is try and get to a number.

[indiscernible]

We have a loss of income and obviously, assets. Yes. So that loss of income number, obviously, that's not what we're debating. We're debating replacement method and how much we should be spending on the property.

Izak, with 71% of your debt hedged, I'm not sure exactly what the nature of those hedges are. To what extent will you be able to benefit from potential further interest rate cuts?

We've got another ZAR 900 million coming up in 2025. So if you look at -- we've actually got quite a big mismatch between our debt and our hedges. We're sitting about just over 4 years, and our hedges are 2 years. So we'll definitely benefit from lower interest rates there.

Just on that tack, I'm sorry if I missed it and you mentioned it. For FY '25 and FY '26, what is the average rate for those hedges as they roll off? I know you mentioned what it was previously.

You're talking about the base rate?

Yes.

I don't have that number off hand. Do you?

The weighted average -- for the base rates, our swap rates at August 2024 was 6.9%. The ones that are rolling off, I don't have that off hand.

We can avail that number.

Some questions online from Trinity from Anchor Stockbrokers. In light of the Boxer listing and its plans to expand further across the country, are you getting inquiries for space in this regard?

Yes, we've got a very good relationship with Boxer. I mean we probably talk to them every week. So we're not getting additional inquiries because they're listing. But I mean, they've always been looking for more space. I think the past 2 years, they were kept busy by a lot of the Pick n Pay stores that they took over, but I think all of it -- I mean Pick n Pay is not giving them more. I mean their plan is to be a bit of a thorn in a flesh of the likes of Shoprite and open close to where Shoprite is or around about where Shoprite is. And we've got some opportunities in our portfolio for them, not a huge amount, but I think we're making plans. I mean if we think they have the right mix, I mean, it's -- we can't just get excited because Boxer's there. But I mean, if they complement the mix, then we make way for them, like we're doing at Ziyabuya, basically consolidating a whole lot of pockets of space. But there's a bit of a give and take there because they are going to pay a slightly lower rental and we are incurring costs, but we think they're good for the mix. So we'll push the other rentals in the center elsewhere. So if it makes strategic sense, we accommodate them. But I mean, I can't imagine that you list at the current base. You don't go out there and pull all stops to grow because they're going to feel what we're feeling. So we'll be there supporting them.

Izak, I'll jump to Chris' question from All Weather Capital because it's pretty much linked. His question is, can you comment on the recent performance of Pick n Pay stores in the portfolio? Are they going to be converted to Boxers? And what is the demand and capacity for more Boxer formats in the existing portfolio?

It sounds like Chris asked that question before. Chris, I think all of the conversions that we could have accommodated, that's from Pick n Pay to Boxer, that's happened. I think we had about 3 or 4 that went that way. There's nothing else that we think can go that way because I mean the other stores in our portfolio, Pick n Pays, but for 2 are owned by franchisees. And these guys are -- they're on steroids. I mean they do 10,000 trading densities and they eat and sleep their businesses. So I don't even think that Boxer can out-trade some of those franchisees. So we're quite happy to have them. If anything, we try and change between franchisees. I mean there's been 1 or 2 that weren't great, but I mean, then we've got another one in the same area. I mean, Protea is a case in point where we actually -- they're buying that franchise from another -- I mean that franchisee is not doing badly. I mean, they actually -- they earn quite a good trading density, but this franchisee that we're signing up there is better. So -- but I mean, we will take full advantage of the presence of Boxer because the modem area. I mean, you'd have seen, I mean, Choppies came into the market. I think they got carried out on a stretcher. They just couldn't trade against these guys here. But I think those Boxer boys know what they're doing. I mean they came out of okay. So they got a bit of Shoprite blood in themselves and so on, and we enjoy working with them. So we're looking forward to it.

A second question from Trinity. Could you kindly run us through how you're accounting for solar CapEx on your books?

We capitalize it into the properties at this stage. I don't know. At some stage, maybe it becomes a business within a business, but we haven't done that at this stage. And you wouldn't have seen a lot of it in this year because all of that CapEx happened post year-end for the ZAR 50 million that I was indicating. So the income is going to start flowing from November, the CapEx was into this year, that sort of thing. So it's not in the numbers yet.

A question from [ Marisso ] from SBGS. Have you worked out your distributable earnings sensitivity to repo rate changes?

Yes. But I can't give you a number now, but we do, do that number. I think we speak about it every quarter at Auditcom. So one of the first questions coming through from the floor type of thing, but we do that. But that's obviously all dependent on where we hedged out and at what level we hedged out. So it's quite a -- it can be quite a long and interesting sensitivity model depending on what you're trying to test and so on. But I think -- I don't know, maybe if you were trying to do a number now, I don't know, it's a difficult one. But I mean it's -- we've got a base. We're sitting at 70. And as I said, about ZAR 900 million is rolling off, and it depends on what we're going to do with that ZAR 900 million going forward. But I mean, if interest rates are trending lower, then that number could either be positive or negative depending on which hedge is actually rolling down and so on. But -- so...

Second question from Chris. Are you seeing potential to acquire assets from other funds and/or private sellers?

It depends on the price and whether we'll get the market to support capital raises for the right deal. But if there's opportunities that we think fall within our competence and our focus areas and they happened at the right price, and we've got the capital to fund them, I don't see why not.

I don't have any other questions online.

Thank you very much.