Hammerson Plc (HMSO) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for dialing in. Welcome to Hammerson's 20'23 Half Year Results. I now hand over to the webcast to begin.

Good morning, everyone, and thank you for joining our ‘23 half year results presentation. What you see coming through in these results is the strength and attractiveness of the core portfolio. Adjusted earnings are up 15% year-on-year, driven by last year's positive operational momentum that has continued into the first half of ‘23. After 2 years of portfolio simplification, generating EUR 843 million in disposal proceeds, we have repositioned the business for growth. We now have a portfolio that is focused on our prime city center states in high-growth cities in Europe. Our estates are striving, attractive and they are in demand by occupiers and communities. Since full year ‘20, we have also undertaken a transformation of our operating model. In doing so, we are further reducing our cost base and are in line to deliver our full year ‘24 cost reduction target of 20%. This will result in a cumulative reduction of 30% since full year ‘20. We are not done, and we are working to exceed this. As a result of the streamlining and simplification of our portfolio and our operational improvement, our financial position is significantly strengthened. After 2 years of strategic delivery, I am pleased to announce that we are returning to a cash dividend. We have a robust outlook on earnings and cash flow for the second half. We have a broad opportunity set ahead, which I will run through. Before that, over to Himanshu for the numbers.

Thank you, Rita-Rose, and good morning, everyone. Our half year results continue to build on the strong momentum from ‘22. Let's jump right into the highlights. Adjusted earnings were GBP 56 million, up 15% year-on-year, benefiting from like-for-like net rental income growth, lower administration costs and a reduction in finance costs. Our total portfolio value is GBP 4.7 billion with our managed portfolio at GBP 2.8 billion. Our managed portfolio is down a net 13% during the 6 months, which is largely a function of disposals. Valuations for the 6 months of 2023 have remained relatively stable. Our total return was a positive 2.5%, driven by an income return that was up 2.8% and offset by a capital return of only minus 0.3%. Our NTA per share has reduced one during the last 6 months to 52p. Net debt stands at GBP 1.3 billion, down 24% since the year-end, and our resulting headline LTV is 33%, a reduction of 6 points since the year-end, whilst net debt-to-EBITDA stands at 7.7x, and that's a good number in the current economic climate. LTV on a fully proportional basis is 43%. And this half, we returned to a cash dividend of GBP 36 million or 0.72 per share. Now let's look at the rest of the numbers in a bit more detail. Turning first to the adjusted earnings walk. Starting with the GBP 51.1 million reported earnings for half year 2022, consistent with the treatment we had at year-end, we see a GBP 2.7 million reduction in the opening balance due to the IASB change in accounting in relation to concessions on which we provided more information in our release on the 5th of July. Our starting point for restated earnings was, therefore, GBP 48.4 million. NRI grew by GBP 5.8 million, excluding disposals. And of this, as we show in the callout box, GBP 1.5 million was from like-for-like NRI growth from the flow-through of the strong leasing performance in 2022 and in the first half of 2023. Our development and non-like-for-like NRI increased GBP 4.3 million, largely due to the opening of the surge extension in March 2022. Moving across the page, net finance costs reduced by GBP 3.9 million, benefiting from the 24% reduction in net debt from the active management of cash balances to take advantage of higher interest rates. Gross administration costs were down GBP 3.4 million or 12% as we continue to reset our platform. And FY ‘22, we're committed to reduce our operating costs by a further 20% by FY ‘24, and we remain very much on track to deliver this and indeed, we are working to exceed it. Value Retail saw strong top line and operational performance in the first half. I'll come back to unpeel the GBP 0.3 million movement year-on-year in VR very shortly. To conclude the adjusted earnings walk, there was a loss of NRI and associated property income of GBP 4.5 million and GBP 1.1 million respectively, from disposals in the period, and that brings home the earnings to GBP 55.9 million and the growth of 15% year-on-year. Now looking at Value Retail in more detail. Value Retail continues to perform well. Footfall was up 13% year-on-year and brand sales up 14% year-on-year, and spend per visit was up 8% on 2019 levels. Occupier demand for space remains high with 156 leases signed in the half occupancy is unchanged at 94%. The result in GRI and NRI at our share were up 13% and up 16% respectively. And looking at the earnings walk, you will see the strong growth in gross rental income of GBP 8.7 million. This was offset by higher costs of GBP 6.4 million, reflecting operating cost investment in the period and higher refinancing costs. To close on Value Retail, yields are in the range of 5.25% to 6.5% and in 2023, the valuation of our share of the VR portfolio increased by GBP 26 million. We see GBP 43 million in the first half, which reflected some catch-up for 2022. Turning now to valuations on our flagship portfolio. The chart shows the recent changes in yields and rental income. Let me first cover yields in the top chart. Yields for prime shopping centers in the U.K. have been stable for the first 6 months of the year. French yields also remained stable, and there's been very little outward movement in France in the past 18 months. Of course, we had the Italy Dart transaction in France as a reference point to support French yields. Ireland has seen a modest outward deal shift of 20 bps in the half. ERVs have remained stable with like-for-like ERV up 0.1% across the destinations with France and Ireland rising slightly and the UK remaining flat. And lastly, to remind you our peak to trough. In the UK, we've seen a 330 bps outward movement in net equivalent yields to around 8%, with valuations down 64% from their peak and ERVs rebased 34%. In France, we've seen outward yield shift of 80 bps to net equivalent yields of 5%. And since the peak, values are down 29% and ERV is down 4%. In Ireland, the outward deal shift from peak is 130 bps to net equivalents of 5.6% and capital values down 33% and ERVs down 14%. When comparing the yields across the territories, you will know that we are still seeing some of the greater spreads to the 5-year swap in the UK that we've seen for some time with the spreads in France and Ireland being much narrower. Before I talk to net debt, let me cover off disposals. When we set out on our strategy, the aim was to simplify the portfolio and strengthen the balance sheet at the same time. Since the beginning of 2021, we have generated GBP 843 million in disposal proceeds. At the beginning of 2022, we guided to an additional GBP 500 million of disposals to be completed by the end of 2023. We did GBP 195 million in 2022, disposing of Italy down earlier this year and have delivered GBP 410 million of our GBP 500 million target. We remain confident on achieving the balance. The disposals naturally served to reduce net debt, which decreased by 24% or GBP 414 million since the year-end to GBP 1.3 billion. Proceeds from the sale of Italy Dart and Croydon generated GBP 215 million. And in the half, after a prolonged period of working constructively with the lenders to find a way forward on the secured debt on both Highcross and O'Parinor, the lenders enforce their security and took control of the JVs, resulting in the derecognition of joint venture secured debt, reducing net debt by a further GBP 125 million. Cash generated from operations reduced net debt by a further GBP 60 million, with operating profit of GBP 65 million. Distributions from Value Retail were GBP 43 million, and we expect to receive further distributions in the second half of the year of around GBP 15 million. We saw gains on FX, partially offset the net interest cost of GBP 39 million and GBP 16 million of capital expenditure in the period. bringing home the closing debt of GBP 1.318 billion. Now moving on to the obligatory NTA per share walk. In the first half of 2023, we saw 1p per share growth to the increase in adjusted earnings, offset by 1p reduction relating to the valuation and disposal losses. The additional 1p reduction is due to the derecognition of O'Parinor and Highcross. Overall, these movements resulted in NTA reducing from 53 p to 52 p per share. Let's now look at our liquidity and debt profile in more detail. This chart shows the group's debt maturity profile. Our debt is 24% lower since the year end at GBP 1.3 billion. We have no group refinancing until 2025 with our 2024 and 2025 unsecured debt maturities more than covered by the available cash. That leaves only the secured debt on Dundrum, which we expect to refinance in the ordinary course in 2024. LTV up 33% and net debt-to-EBITDA at 7.7x are good numbers. The FPC LTV at 43%, of course reflects the effect of the VR debt. VR's overall leverage is 37%, and of course, it is nonrecourse to the group. We have ample liquidity in undrawn and committed facilities of over GBP 1.2 billion. We also maintained our IG credit rating, and we're only 1 of 4 issuers not to receive negative movement of the 41 rating actions in the sector since May 2022. Let me now move to my closing slide, which sets out our dividend policy. The Board recognizes the importance of cash dividends for shareholders. Our commitment is to pay a sustainable dividend in the range of 60% to 70% of adjusted earnings. This policy is based on a disciplined approach to capital allocation, balancing returns to shareholders while continuing to invest in our core assets as well as considering the impact of disposals, acquisitions, loan-to-value and changes in financing operating conditions. Finally, I can confirm that the Hammerson board has declared an interim dividend of GBP 36 million or 0.72 per share. The Board will continue to keep the policy under review over the coming years as the group continues to execute its strategy. Rita Rose will talk further on our dividend policy in her section.

Thank you, Himanshu. Now let me jump straight into the strong operational trends behind the numbers. Our core portfolio continues to benefit from polarization and a flight to quality. Occupancy is up year-on-year at 95%. Footfall is up 4% year-on-year and is closing the gap on full year 2019, and sales are growing, reflective of our proactive asset management as we create exceptional destinations and more relevant mix. Our largest city center states have benefited significantly from the continued return of visitors for work and leisure with Birmingham up 6%, Marseille up 8% and Central Dublin up 13%. July footfall is also up year-on-year. Indeed, over the summer, many of our destinations are seeing footfall in excess of 1 million visitors a month with Boring welcoming around 2.5 million visitors in July. Despite the uncertain macroeconomic background, consumer spending continues to be resilient with like-for-like sales up year-on-year, 3% in the UK, 2% up in Ireland and 7% up in France. Dwell time is also up 5% as consumers do spend more time in our assets. All this is driven by our leasing momentum. And now turning to leasing. Following full year ‘22's best performance since 2018, our leasing momentum has continued. We signed 134 leases in the first half. This represents EUR 18 million of headline rent, up 13% year-on-year on a like-for-like basis, 70% of volume were principal deals and more than 90% of value. For principal deals, headline rent was 20% ahead of previous passing rent. On a net effective basis, principal deals were 8% ahead our VRV. This compares with ERVs up 1% a year ago and 2% for the full year 2022. So there is progress there. The trend of long leases has continued with a WALT of 7.1 years and a WALT of 9.4 years. So in terms of leasing mix, just under half of the principal leases were best-in-class occupiers and new fashion concepts with the balance being to nonfashion services, leisure, food and workspace. Whilst demand continued through the period, June was particularly strong with 46 leases signed. That momentum has continued into July with a further 12 leases signed through last Friday, all above ERV and above previous passing. Looking ahead, we have a strong pipeline with $15 million in solicitor's hands at around 35% ahead of previous passing and 15% ahead of ERV. So what underpins the strong operational performance. Today, we are focused on a core portfolio of high-quality assets with unique exposure to some of the fastest-growing cities in Europe. On the left-hand side of this slide, you can see our current geographic footprint and on the right, the data points that illustrate their strength. 11 city center estates with significant complementary opportunities and 2 stand-alone development sites. We welcome over 175 million visitors each year from large affluent catchments. We support almost EUR 4 billion of sales per year and over 23,000 jobs. So there is a clear demand from occupiers and customers who are attracted to our destinations. After all, we operate in cities as they are the engines of economic growth with young growing populations, strong infrastructure and evolving communities. Consumers are increasingly evolving their lifestyles where they want to do everything in one quality place. Our locations and spaces are well suited to meet that demand for the best living spaces. That is the opportunity. Let's now turn to our current strategic framework. We are a city's business. We are investing in our portfolio of core assets. We combine targeted leasing and place-making with integral and complementary repurposing and redevelopment opportunities. We are evolving the mix to create exceptional destinations, attracting new customers, concepts, best-in-class occupiers and partners and ultimately new income streams. This asset focus and customer journey is underpinned by the continuing transformation of our platform. We are committed to maintaining a sustainable and resilient capital structure and an IG rating. And of course, more and more, we put ESG at the heart of everything we do with clear net 0 asset plans for each and every state of our portfolio and a culture committed to making a difference for all our stakeholders, but in particularly for the communities in which we operate. So let's talk about the first of those strategic elements, which is investing in our assets. In the last 2 years, we made significant progress on repurposing obsolete, low-yielding and underutilized department store space. We have now completed the conversion of House of Fraser and Dundrum to Brown Thomas, that's Selfridges in Ireland and to pennies, which is Primark in the UK, both upsizing and now operating with really exciting and new concepts. I'll come back to this particular project as part of the overall Dundrum Estate in a moment. In the former Debenhams unit at Bullring, we have completed our physical works to transform and revitalize this space. M&S are on-site, fitting out around half the space to consolidate in Birmingham. This is for their latest concept store, including a premium food hall, which will open by the end of the year. A further level of the space will shortly be handed over to TOCA Social, a football led social and entertainment operation. This is another example of what we call a truly integral opportunity to the transformation of our destinations, not only to fill vacant space but to create an entirely new proposition, which in turn attracts additional brands. You will see a raft of new openings in Boring in the autumn. We will have invested over $25 million in this repositioning and are on course to exceed our own underwrite of around 18% IRR. That does not take into account the positive impact to the surrounding asset and wider burning estate. In the former John Lewis space above Birmingham Street, we have planning consent for drum and amenity-rich workspace led proposal with strip out works nearly complete. In reading, we are working closely with the local council to transform the Oracle. We are awaiting planning permission for a 450-unit residential scheme in place of the former Debenhams. We are also in discussions with occupiers for the other department store space at the Oracle. Overall, since full year '20, we have exited around 1/3 of the partner store space. We have repurposed and have in train around a further side, and we are actively considering options for the remainder. These are excellent capital allocation opportunities, income producing for our assets drive further interest and vibrancy and will deliver attractive returns for shareholders. We also have plans to invest in ongoing upgrades and enhancements to the common areas of our assets to attract the right occupiers and enhance the customer experience. This drives in turn new revenue and commercialization opportunities. Finally, we are investing in new technologies to increase our data capabilities and understanding of our catchments and customer behavior. For example, we are rolling out AI CCTV in 3 core assets and have reshaped our digital team and capability. Alongside the investments in our assets, we are growing our focus on placemaking, advertising and commercialization. There's lots of examples on this slide, so let me highlight a few. Of course, alongside the new, we continue to secure deals with and renewals with key best-in-class brands such as [indiscernible] and Bershka and Poland Beer coming into boring directly due to the revitalization of the former Debenhams unit. In terms of new concepts and uses, Nike Live opened in Dundrum, the first life concept in Ireland. And Nike Rise is due to open and boring in the second half. This is an example where we have worked closely with a key brand partner as they plan their physical expansion programs. In Birmingham, we let underutilized space to Lane 7 to create a new bowling and entertainment destination. This has critical mass alongside the new Toca Social and the Sandbox virtual reality experience, which opened earlier this month. In France, we welcomed Olympic [indiscernible] opening their largest flagship store in the region. Last week in Serge, we signed Smile World to bring in a new 3,000 square meter leisure concept. With this, our like-for-like commercialization income was also up 15%. Some key highlights included further success in bringing digitally native brands to our physical space, most notably Shen to Birmingham and [indiscernible]. Charity supermarket, the UK's first multi-charity retail store launched at Brand Cross. Following this success, it has come to the Oracle and is now at Cabot Circus. This new concept increased footfall and created significant media coverage. It has now raised over 600,000 for the charities and has attracted significant new customer footfall. In France, we introduced a boutique pop-up for Marsa born Rapper Jewel to [indiscernible], which saw footfall increased by 5% year-on-year over the period. We continue to exploit underutilized car parking space with new uses, occupiers and events. This includes a Tesla collection point and [indiscernible] Garden Center Head brand Cross and a pop-up state park with Red Bull at Cabot Circus. And we are doing more engagement, increasing our social media presence and partnerships with local influencers, contributing to increased visibility and customer engagement with our destinations. A great example would be the buzz created around late night out, our first out-of-hour ticketed event at Boeing. We also have opportunities that are integral to our core assets. At the moment, we have one committed project, which is the iron works at Dundrum, a 122-unit residential project, which includes affordable housing. This remains on schedule. On completion, this will become the largest income contributor than any other single tenant at the Tandem Estate. We also have opportunities that are complementary to our core estates and 2 stand-alone projects. Our focus is to continue to undertake enabling works and site preparedness in order to derisk the projects and create value and optionality. We are committed to working closely with local authorities and key stakeholders through the planning processes. At certain projects, we have started discussions with potential end users. We also took opportunity in the half to exit our stand-alone development interest in Cordon to our JV partner, further focusing the portfolio and creating liquidity for value-enhancing recycling into other shorter-term projects. Let me try and bring this all together holistically by way of an example at one of our core states of Dundrum. Dundrum is Ireland's only super-prime retail-led destination with a broad and affluent catchment and well-connected transport links. We have invested EUR 31 million over the 2 years to repurpose the former House of Fraser broadens the mix of uses by bringing in best-in-class operators with new concepts, Brown Thomas, Pennies, Dun stores, NIKE while also enhancing the environment and increasing income streams. The overall IRR for the project was around 19%, with an incremental yield on cost of around 15%. We are also bringing new users and income streams with the introduction of residential at the Ironworks, new workspace with Weston Union and food and leisure around Pembroke Square. All this is driving incremental footfall spend and diversifying income. We also have a significant opportunity for another 900 or so residential units on Brownfield land adjacent to the estate. For now, we are awaiting the outcome of planning submissions before considering our options. In the meantime, it provides a yield from the existing assets on the site. Dundrum effectively serves as a microcosm for the potential we see across our core city center estates. To date, we have a transformed platform with an investor mindset. Over the last 2 years, we have reshaped our organization to put more emphasis on strategic capital allocation, portfolio and asset management, placemaking and repositioning of our assets. Launched earlier this year, property management and associated accounting are currently being consolidated to quality providers of scale with specialist expertise in the UK and France. We are building a high-performance, high engagement culture with an emphasis on career development. These changes result in headcount being down 57% since full year '20 and 30% since full year '22 as the organizational portfolio has been reshaped. This is a net number, which includes additional hires as we continue to invest in and promote key talent to be fit for future. We also maintain a relentless focus on hard costs, for example, including further reducing office space, both in the UK and France and working to reduce our insurance premiums, professional fees and IT costs. Overall, we have reduced our growth administration costs by 12% year-on-year. We are in line with our target of a further 20% reduction of the full year '22 base by full year '24. This will, therefore, be a cumulative 30% reduction since full year '20. There is more to do, however, and we are working hard to exceed our target. Our capital allocation is based upon a disciplined approach, balancing returns to shareholders while continuing to invest in our core assets. we will continue to deliver and maintain our IG credit rating. At the same time, we will continue to invest in our destinations to maintain and enhance their attractiveness for occupiers and customers and consider selective consolidation, all within our IG guide rails. Indeed, we have invested over GBP 100 million in our destinations, excluding development in the last 2.5 years, while making material improvements to our balance sheet and putting ourselves in a position to return to a cash dividend. In returning to a cash dividend, the Board has set a sustainable policy where we are able to invest in the business for growth and attractive returns, but also pay a dividend, which is covered by free cash to equity. The Board will keep the dividend policy under review over the coming years as the group continues to execute its strategy. In summary, it's been a strong half year for Hammerson. We are well positioned to deliver another year of robust underlying earnings growth and cash flow. We will deliver our cost guidance. We are confident in concluding our GBP 500 million disposal program by the end of the year. Today, we have reported further strategic progress growth in earnings and a return to cash dividend. We look to the future with confidence. So let me finish by talking about the Hammerson investment proposition at the end of this. We see Hammerson as a value-generating platform with more opportunities ahead. A platform that is lean and simple with optionality to source and deploy capital and drive further value through disciplined investment. We see a future platform that consists of core city center estates with more consolidation of ownership. With integral redevelopment opportunities being delivered that enhance the proposition and asset quality of the wider estate and complementary stand-alone developments progressed, underwritten and derisk for value and optionality. As for value retail, it is not part of our core long-term proposition. We will look to realize value from our investment at the right time. To close, our investment proposition is a platform with attractive growing financial metrics. -- resilient earnings and cash flow supporting a sustainable cash dividend with a balance sheet maintaining our IG credit rating and capacity for investment. This is all underpinned by a lean, more agile organization with an investor mindset. Ultimately, we are focused on further growth by recycling capital from the noncore to our city center states, more consolidation and selective complementary development over time. Think of us as a cities business with living spaces at the heart of large communities. Thank you, and over to you.

[Operator Instructions] Our first question today is coming from Colm Lauder, Colm is from Goodbody.

I guess, straight to the point really on what I think is the main sort of news item from our perspective with Hammerson results, and that's the return to the cash dividend. And it's perhaps something you could perhaps lay out a bit better for me to understand what to expect for the full year. So obviously, 0.72 declared today for the interim dividend cash with a guide of 60% to 70% of underlying earnings to be paid out over the full year. Could you perhaps sort of give me a bit more understanding of how that aligns with the UK REIT rules in terms of the 90% property income distributions. And again, just assuming broadly steady underlying earnings for the second half, what does that get us to in terms of expectations around the dividend for the full year? That's my first question.

Great, Colm, and thank you for the question. So as you just mentioned, this is the big item news amongst and standing on a very solid, strong and robust performance in H1 this year, but that was sort of the result of a constant progress over the last 2 years. So the Board recognizes the importance of cash dividends for shareholders. First of all, our policy, as you say, is indeed a payout of 60% to 70% of annual adjusted earnings. And as I said in my presentation, we see opportunities to invest in our assets that deliver attractive returns. And it's about taking a balanced approach and an approach that is about a disciplined capital allocation to give us the flexibility to continue to invest in our assets for growth while taking a prudent approach to the balance sheet and returning value to the shareholders. So these were the main consideration that tie up with the REIT rules. And importantly, we believe this is a sustainable dividend, and it's covered by free cash flow to equity.

And then just maybe just moving on then to developments or sort of general CapEx. And the one I really sort of wanted to sort of pick up on is the goods yard. Obviously, there have been some value changes on those assets and those noncore land deals. And I just want to sort of pick you up on a comment as well on the tax, which is sort of you'd be taking capital light steps to continue to create value and opportunity and optionality at sites like the goods yard and also then thinking about what happened in the codon partnership. What are your thoughts in terms of sort of the more land bank approach for schemes like the good CR of this something you want to progress towards planning and obviously then value enhancement works are these are sites you're looking to dispose of as well?

Yes, so a few elements in your question there, Colm so just to remind everybody, and I just touched on that in the presentation. When we look at what we call development and land bank at the moment, it's really separated in buckets. So you have the integral opportunities are the redevelopment and repositioning in the assets, and we give examples of that in Dundrum and in the Bullring. And then you have the complementary sites, which are surrounding the assets and have a potential to densify the estate and then you have the stand-alone of which good drive is. Our approach to that, obviously, the integral opportunities are faster and efficient as you can see and do deliver value and attractive returns. In terms of the complementary and even ultimately, the stand-alone, these are all sites that we are progressing at the moment, obviously, they're not all progressing at the same pace and they'll not come to be ready at the same time. What we're doing at the moment is like capital investments to do enabling work and site preparedness and that continues to create more value on those sites and bring them to a point of decision and optionality for Hammerson. Now when you look at what we call the stand-alone developments, which are the Goodsyard and which were the [indiscernible] development opportunities, those are really long term. So in the case of [indiscernible], you saw us dispose of that. It was just too long term for Hammerson. And for the Goods Yards, we continue to do the planning, the light capital work and progress to a value point to enable us to take the best value-enhancing decision. So it's really about keeping key properties and making sure we're maximizing value and keeping the potential for Hammerson all at the same time.

Our next question is coming from Maxwell Nimmo.

Well done the operational turnaround of the business. It seems to be moving in the right direction. One question I did have, however, is on the disposals. Clearly, a lot has changed since you set that disposal target. Do you think a further EUR 90 million by the end of the year is enough for the market to be comfortable with where your leverage will be assuming that value retail stays in the portfolio and we're looking at this SPC LTV. And that's obviously notwithstanding any further moods in valuation. I just wanted to pick up one thing. You mentioned that the UK obviously, the spreads versus 5 year swaps have blown out a lot more than they have on the continent. It sounds like from what you're seeing, you feel that UK has oversold rather than the likes of France who's only moved out 80 bps versus risk free rate moving out 300 basis points. You feel that the UK is oversold rather than sort of France and Ireland needing to reset more. Just interested to get your thoughts on that.

Thanks, Max. There's sort of 2 questions in here. So first of all, the disposal program and how we're thinking about where the leverage is? And then secondly, you're asking me about what I think basically where are the value is going in our different geographies, so for the first question, with regards to the disposal target of EUR 500 million, we are indeed guiding with confidence that we will reach that this year. That's a $90 million that's there, and that does have the possibility of getting our leverage even to a better place. But when you look at the leverage at the moment, I mean, we're really committed and we will stay committed to a resilient and stable balance sheet and to maintain our IG rating. So the LTV, the headline LTV at the moment at 33% will improve further, as I just said. And our net debt-to-EBITDA at 7.7x is a really good number and a prudent number to be at this stage of the cycle. So if you look at values, as you point out, we do think that the values are stable with yields broadly flat. And we are leasing positive to ERV. So we're right about there, but again, a bit of progress due to us finishing our disposal program. So as far as LTV is concerned, that's the view. And then if you look at valuations, the overall valuations were stable. What we're starting to see in the portfolio is some positive movement on the ERVs. If you look at the UK, yes, we think that the yields have stabilized now, and they've been stable for some time. Actually, since last year, since H1 2021, it's just last year, Q4, that there was a change of shift in yield related to the political instability. So I think as you say, it's a very wide spread, and we are seeing liquidity come back to the market. So we believe that, that's no crystal ball, but that's pretty buttoned. Again, peak to swap, we're at 65% lower values and 34% ERVs. I mean when you think about the ERVs, our leasing activity is showing that we're leasing in the UK in a significantly way and more and more over ERVs. So the ERVs at one point will have to catch up. So we think there's an opportunity to the upside. In terms of the French yields remaining stable at the moment, we've had a positive shift in income. As you saw in all the KPIs in France in terms of footfall sales, leasing, it's very positive. And we've had a transaction in H1, as you know, on the Italy do transaction with a very attractive net equivalent yield of 5%, which was supporting our values, and it's a quality asset. So we don't see any reason considering the dynamic in France, the ERVs have shifted very little and different dynamics in that market. We think that we've rebased the portfolio 30% down since peak, we think again there is no reason why there would be material shifts there as we see it. And then in Ireland, you did see a modest outward deal shift related to the investment environment. Again, in Ireland, the capital values are down 33%. So that's a significant drop there. So we think there's no material movements there. And when you can pair the yields across all territories, you do see attractive spreads to the 5-year swap. And so that's why we're starting to see now investors in an environment where they ultimately have some visibility on underwriting. You saw investors, you see investors coming back to the sectors considering those attractive yields and considering in the best property, again, we can't paint one picture for everything, but for the best properties, as attractive demand, occupier demand. And so I think this will support pretty stable values.

That's great. Just one quick follow-up. Would you be willing to commit to an LTV target on a fully proportionate basis at this point? Or is it more just we want to get it down? Do you have a number in your mind?

Again, our reference is the investment grade. So that's the reference point. And I think I gave you a pretty specific view on how we view ourselves now and with our disposal progress. So I think that's the view.

Our next question is coming from [indiscernible] from Barclays.

This is Niraj on behalf of [indiscernible]. Apologies if this has been asked already, there are some technical issues with my line. So we would like to get a bit more information on how you're tackling your near term?

When you look at, there're 3 points to remember. At the moment, we're still in the business of retiring debt. So there's nothing due for the rest of 2023. There's maturities in '24 and '25 that are well covered by existing cash. And with further asset disposals to come to complete our $500 million target, so we continue to monitor markets and we'll be prepared and ready to access whenever we feel acceptable. Eventually, we do have to refinance the longer-dated maturities, but remember that the 26 and the 28 sterling legacy bonds are at rates of 6.25% and 7% coupons, respectively. The 27% is at 1.785, so we think we should be able to do better than that. But there's likely going to be some overall impact, but it's hard to quantify now. So swap rates are moving at 20 basis points a day. So let's see where interest rates settle, say, by late [indiscernible].

Now more the case or [indiscernible] taken over on that retailer profitability, thank you.

Well, the way we look at retailer profitability, as you say, the environment at the moment, there's a lot of things converging towards the physical space and the omnichannel in the physical space. So the OCRs, although not perfect because at the moment, the way the sector is shifting towards more omnichannel in physical space, it's not only about the sales per square foot and rent, it's really about what a physical given location gives to the overall profitability of the companies and the overall sales. So I think the profitability at the moment went for the retailers that are going towards the best properties is looking good and better. And it's ultimately the rent if we look at the cost of doing business in the physical space that's actually quite low.

Okay. Just a follow up. I suppose to take 2 examples. If a retailer was occupying space in [indiscernible] and the same retailers occupied in space interactor pool, would they be likely more profitable in the [indiscernible] I think in the past, it would have been the burring I just wanted to check whether that's still the case.

It's still broadly burring. Again, yes, it's burring, I just make the caveat that it's more and more about the overall profitability than the specific, so the physical cost in a given location is benefiting not only profitability in that set of location but in the overall brand of the retailers. But short answer, I think burring still is in the right better spot.

Perfect. And my second question, I think the returns that you're guiding to or talking about on capital investment to look very attractive, and I think getting closer to being able to be executed given the planning of various things as we move through, what point does it make sense to raise capital and I think that capital probably not attractive probably equity capital to fund this [indiscernible].

[indiscernible] that's where we want our capital to be recycled where you never say no to equity eventually if the circumstances are right. But our goal here is to recycle, grow the company, reduce NTA gap and eventually, as I say, never say no. But for the time being, we're able to recycle our capital with our current capabilities.