Hyprop Investments Limited (HYP.JO) Earnings Call Transcript & Summary

Hello, everyone, and welcome to Hyprop's Annual Results Presentation for 2022. Welcome to all the Hyprop directors that are joining us this morning. And then a special word of welcome and saying a big thanks to all the teams in South Africa, Europe as well as Africa for your hard work and dedication, especially for the last few years, which was very difficult. If we go on to the agenda, I will handle the headlines and the key metrics. I'll give an update on the operational performance of South Africa. Rabia will give us an update on the performance in Eastern Europe, [indiscernible] Africa, Brett will give us an update on the financial results. And in closing, I will focus on what is our priorities for the next financial year. It's actually been 3 years now. We took over the management in 2019. That was just a year before COVID, to make things a little bit more exciting. And as a team, we set ourselves a number of key objectives or priorities we wanted to achieve. We have made very good progress and completed most of these priorities, notably the strengthening of our balance sheet as well as implementing the Hystead liquidity event. In terms of strengthening our balance sheet, we have successfully reduced our fully consolidated LTV from about 52% to 36.4%. We increased our unencumbered assets to ZAR 5 billion. We settled all our dollar equity debt, and we've reduced our euro equity debt to EUR 111 million from a peak of EUR 403 million. We review our portfolio on an annual basis. We look at The Mall's performance, the demographics, what is potential CapEx going to be in the future and what is the growth opportunities we see, and does the asset align with our strategy. Based on that, we will decide whether the asset is non-core to our portfolio, and then we will sell those assets. The ones we have sold up to date was Atterbury Value Mart, the 2 Delta City malls in Europe, which was based in Serbia and Puerto Rica. All those proceeds we have used to settle debt. In South Africa, we've been focusing on our repositioning strategies in line with our Golden Thread principles. And those has been paying off and that will be -- I will show you that in our operational performance of our South African portfolio. In terms of Europe, we have improved our dominance. Specifically, if I look one of the assets, we worked on hard was Skopje City Mall. We had a 2-year redevelopment project there. And during that project, we have rightsized the number of tenants. We've improved our tenant mix. We've upgraded the food court and the bathroom facilities. We have also looked at improving the internal flow within the mall. We've done outside seating area with 2 restaurants and a fantastic play area that's becoming quite an attraction at Skopje. Then we look at the Mall of Sofia. What we have done there is we've converted to hyper and we've increased the mall to about 61,000 square meters. We also have renovated the food court, and we are busy with upgrading of the toilet facilities, and that will be completed before the end of the next calendar year. Our in-country debt -- Rabia and the team has done excellent work. The only outstanding in-country debt that need to be resolved is the in-country debt in Croatia. They have finalized term sheet with the new -- with the bank, and that will be implemented by the end of this calendar year, well in advance of the expiry that's happening next year. In terms of our headlines, the highest debt liquidity event, what we have decided to do with that liquidity event is used the method of disposing the assets. We sold 2 of the assets to outside parties and then Hyprop acquired the 4 remaining assets, which we felt was key and key to our strategy going forward in terms of our diversification. When we've acquired these assets, obviously, it was subject to shareholder approval. 80% of the shareholders has voted and 99.92% of the shareholders has voted in favor of the transaction. In terms of our distributable income for the group, we have grown our distributable income by 7.4%. There was 2 factors that has negatively impacted our distributable income. The one was, obviously, less -- loss of revenue from those assets we've sold. And the other benefit we had is obviously the European portfolio, but then the effective date of that transaction only being 31st of March 2022, that was only included for 3 months into our revenue into the business. With the Hystead transaction, all our assets and liabilities are now fully consolidated onto our balance sheet. Our LTV has reduced to 36.4% and our gross assets has increased to 59% to a total ZAR 37 billion. Our BEE rating, we achieved, we achieved a Level 4. And in 2019, we were actually noncompliant. So the team has done excellent work in terms of improving our BEE rating. Our South African portfolio is trading well. All the operating performance are looking great. If you look at our like-for-like growth in our distributable income, that has increased by 9%. Something that is key for us is to see that our tenant turnover is increasing that we have increased by 13.6%. And what we have done is also reduce our vacancies to 2%. We successfully completed the revamp of our Clearwater Mall's food court. In Europe, the external valuations on the portfolio at year-end was EUR 573 million, and that is very much in line with the purchase price, which was based on a valuation of EUR 575 million. In terms of the malls, they're performing well. Our tenant turnover has increased to 14.5%, and we had positive rent reversions of 6.5%. In Sub-Sahara Africa, we drove the valuation after value creation on the portfolio. We successfully reduced vacancies to 10.1%. Ikeja City Mall is still rating exceptionally well. We've opened a new flagship Nike store at Ikeja. And what is also positive we have signed a term sheet on the disposal of the Ghana portfolio. On non-tangible assets, we are going to split the SOKO business. We are splitting it between the technology platform and the physical districts. The physical districts will be taken over for Hyprop to manage, and we're going to drive that as a differentiator on our portfolio. And then we also made quite good progress with Nike, the electronic gift cards, and we are starting a pilot bank One of the key things we need to ensure as a business is that we retain a healthy balance sheet. We must look to ensure that we create sustainable growth in distributable income, focus on the total return, optimal capital allocation. And then a key thing is also not repeating mistakes of the past. If we look at our distributable income, that has increased to ZAR 1.17 billion. That's a 7.4% increase in the distributable income compared to 2021. Our distributable income per share has reduced by 3.4% to [ ZAR 0.343 ] per share, and that was mainly driven by 3 factors, namely the new issue of shares that was part of the 2021 DRIP and then only 3 months of income from Europe and then the less -- loss of income from the assets we have sold. Our net asset value per share has reduced to [ ZAR 60.88 ] and the factors that has impacted that was part of the '21 DRIP that shares was issued at a discount to NAV, and the other effect was the impairment of the goodwill of the acquisition of the 4 -- that was created with the acquisition of the 4 assets in Europe. Interest cover ratio is something very important. That is how many times does your income cover your interest expense. We've made very good progress on all those covers. Our IFRS ICR has increased to 3.23x cover, and our cash ICR is 3.8x, which is, well, at a good position at this point in time. Our LTV, I've touched on quite a bit. If you just look at the way the SA REIT is calculate, your LTV -- our LTV is very much in line but fully consolidated LTV and SA REIT practice is at 36.9% LTV. Our currency equity debt was a big risk on our balance sheet. We successfully settled all the U.S. equity debt. And we've made good progress reducing our euro equity debt, and we've reduced that to EUR 109 million. In terms of our LTV, our covenant is 55% from the banks. So we've got quite a bit of headroom in terms of our LTV. Looking at South Africa, still the bulk of the operations, 65% of our investment properties is located in South Africa. It's 73% of our total GLA and it is currently 86% of the distributable income. Obviously, that will reduce as and when the year of income is accounted for from Europe. I do think the repositioning strategies are paying off. The growth in tenant turnover, which I think is quite a key indicator for mall health is looking better, and that will ultimately drive your growth in your rental. Tenant turnover has increased to 13.6%. And if you look at it, the actual amount of tenant turnover is even better than what we've achieved in June 2019. This positive trend is continuing in the new financial year, as can be seen in July and August. All our malls has shown double-digit growth in terms of tenant turnover and the 3 malls that has performed exceptionally well was Rosebank Mall -- Rosebank Mall, the tenant turnover increased by 24.6%, Canal Walk with 18.5% and Hyde Park Corner with 18.4%. The top right-hand graph is our effort ratio that is taking the cost of occupancy divided by the turnover of the tenants. That has peaked at one stage at about 11%, and that has come down quite nicely to 9.6%. And that has even improved even further for July and August. Trading density is the bottom left-hand side. That has also shown very good growth of 10.9%, and the performance is still improving in the new calendar year, our coming financial year. Specific categories that has performed very well. Entertainment, obviously, that comes from a very low base. That has shown a year-on-year growth of 129%. The other category, it's called Other, includes travel, luggage, convenience services as well as car sales. That has increased by 46.7%. And then our food services and takeaways has grown by 22%. Rent ratio, very similar than effort ratio only difference is it only takes into account the rental, the tenant is paying divided by the turnover. And we also see a positive trend there where it's currently at 8.4x. One of the things we haven't got back to our initial numbers is our monthly foot count. Unfortunately, the foot count in June 2019 was 7.2 million visitors per month. That is now currently around 6.2 million, but the trend is at least positive. If you look at our spend per head, our spend per head has shown positive growth since 2019, and that is continuing. And we currently had ZAR 289 a basket size per visit. So as we can increase our footfall, we will be able to even increase that tenant turnover even further. Retail vacancy has reduced successfully to 2%. Somerset Mall remains fully let, and we've got below 1% vacancy at CapeGate as well as Canal Walk. Our offices, which is only 6.8% of our GLA, to put it in context, we had an increase in our vacancy. It's currently 30.3%. And we are going to focus, going forward, specifically on this area. I do think we need to repurpose maybe some of that office space into new users. And one of the things I do think these offices are lacking is a sense of arrival. So we will be working on that. Our weighted average lease expiry is still healthy at 2.7 years. And then one of the things that has been quite negative on our portfolio is our negative rent reversions. We have had negative rent reversions for the last 4 years. What is at least positive to see is, the negative reversions was 13.4% in 2022 versus a negative reversion of 23.6% in 2021. I do believe these very negative reversions is something that's coming to an end. And that's mainly due to the fact that our effort ratio has improved so much. And I do think we have the right base now. And even the independent valuers has confirmed that our rentals is market related and had a more sustainable base at this point in time. The average duration on new leases was 4.2 years and on renewals was 3.4 years. The average escalation we have achieved on these new leases as well as renewals was 6.4%. This is quite a good slide to show our leasing workload. And we started the year with 148,000 square meters that we had to address. That was 77,000 square meters of leases expiring, 26,000 square meters of vacancies, and there was about 44,000 that came from the previous year that was under negotiation. The team has done excellent work of doing 85,000 square of renewals. We've done new lettings of 38,000 squares ending the year with a workload of 61,000 squares. That's less than half with what we started with the previous year. In terms of new tenants, I'm going to take it center for center. We're going to start at Canal Walk. We've opened the first Zara as well as Tech Baker within the Hyprop portfolio. Both these stores are trading exceptionally well. We have relocated and upgraded a few stores. They are Pringle, Clicks Baby, Nicci Boutique as well as Birkenstock. We secured new stores for at-home Total Sports, Yuppiechef as well as Pick n Pay Clothing. Currently, the new Metro cinemas at Canal Walk is consisting of a west wing and a east wing. What we have negotiated with New Metro is we took back the west wing. We will be redeveloping that west wing into an adventure park. And that will definitely improve our family entertainment offering at Canal Walk. The east wing, which New Metro will retain, they signed a new lease on that section, and they will be upgrading the cinemas. So that's quite exciting from that perspective. At Rosebank Mall, we have reduced our vacancies from 4.8% to 2.4%. We have improved the tenant mix. We've included a new product, iStore. We've got currently a pre-owned one. So we've got the full complement of iStores there. We have secured HiFi Corporation with the concept store that opened at Rosebank Mall. We relocated Exclusive Books, which is situated right next to a new Vida e Caffe shop and the Vida e Caffe shop is actually overlooking the pedestrian area of the Rosebank precinct. CapeGate, the vacancy is below 1%, as mentioned before. We secured PEP HOME as well as [ Tulio88 ] as new tenants within the mall. A number of stores was upgraded at CapeGate. One of the ones that has had a big impact is the upgrading of Checkers to the new fresh [indiscernible], and that store is trading very well. Demand at Hyde Park has picked up quite nicely. One of the key things we have done at Hyde Park is to make a entrance from the parking area at Clicks. That parking -- that entrance is working very well, and it activated a part of the Hyde Park Corner that wasn't trading very well. We have secured a few tenants. We've secured Georgia's Grill, it's a meat offering that will improve our meat offering from our restaurants; Skins Cosmetic; as well as Calvin Klein. Somerset is still remaining fully let and trading very well. We've secured a new concept, Totalsports, Krispy Kreme, Big Blue and Starbucks. At The Glen, one of the sections that hasn't been trading very well is the third floor. And what the team has done is they've actually rightsized the HiFi Corporation, they upgraded the store new specification. And then they bought in some further value offering in a form of Crazy Plastics and Crazy Pet, and that area is definitely trading much better. I will hand over now to Rabia to give us an update on Eastern Europe.

Thanks Morné, and good morning, everybody. We start with a few general updates before going to the slides. First point, transaction [indiscernible]. As it was communicated to the market and just mentioned by Morné, following the completion of the 2 disposals in Serbia and Montenegro, Hyprop has completed the transaction with Hystead and has acquired its 4 premium shopping centers in Eastern Europe, namely Skopje City Mall in North Macedonia, City Center One East and West in Croatia, and The Mall in Bulgaria. The deal became effective as of 31st of March 2022, and currently Hyprop holds the assets through a newly established Dutch entity called Hyprop Europe. Second point is the Russia-Ukraine conflict and its impact on our business. The war between Russia and Ukraine continues since Russia invaded Ukraine in February earlier this year, and had impacted many sectors such as energy and other commodities and logistics, which have already suffered due to the pandemic worldwide. The direct impact to the commercial real estate market in the region we operate in is the inflation, namely constant sharp price increase in electricity, fuel and gas, which leads to an increase in the shopping centers' operational cost and tenants' profitability, and also affects the spending power of customers on nonessential products and services. Now moving to the slides, macroeconomic and retail environment. It was reported that the COVID pandemic affected all countries Hyprop Europe operates in. However, starting 2021, we noticed the first signs of recovery when the trading performance improved significantly across the portfolio, and basing this trend throughout 2022, during which the restrictions were much less severe, next to nonexistent. However, the recent negative general sentiment in Europe, followed by the Russian-Ukrainian war slows down the recovery with the inflation causing an increase in operational and finance costs and adds more pressure on yields and values. It affects both tenants and landlords. [ Real ] GDP growth in Bulgaria improved from negative during the pandemic to a reported growth of 4% in 2021. Expectations for 2022 onwards are for a steady but slower real economic growth, revolving around 2% to 3%. Still, it must be noted that Bulgaria, as most of the European countries, are facing the fears of the potential recession due to energy shortage and sustained elevated inflation, with the later reaching 13% in 2022. The unemployment rate remains 1 of the lowest in the portfolio at close to 5% and lower than the European average. The total shopping density remains unchanged at 112 square meters per thousand inhabitant. Croatia shows similar trend as Bulgaria with negative GDP in 2020, followed by a significant growth of 9.8% in 2021, which is projected to remain with a positive range of 2% to 4% going forward. And inflation pattern is the same as observed in Bulgaria, however, with less fluctuation due to the adoption of the euro as the official currency from first of January 2023. The unemployment is forecasted to remain within the healthy level of around 6%. And the shopping entity is the highest within the portfolio with 258 square meters per 1,000 [ inhabitants ]. North Macedonia has stable macroeconomic indicators with a GDP growth of around 3% to 4% over the projected period. Similar to other economies, the inflation is projected to peak in 2022 at 5% and steadily decrease to a targeted 2% rate from 2023 onwards. The employment rate was relatively high historically and is projected to remain unchanged at around 16% to 17%. The shopping density, on the other hand, is 68 square meters per 1,000 inhabitants, which is the lowest in the portfolio. Next slide, trading overview. When we compare 12 months trading overview with the previous 12 months, we can observe a significant improvement. If we look at turnovers, considering that what -- there was no [ lockdown ] and no restrictions apart from few months of which we had the Green Certificate restriction in price, the income stream improved by 14.5% to June '22 compared to the same period prior year. While the rolling 12 months, July and August 2022, marks an increase of 13.4% and 12.9%, respectively. Our effort ratio has improved by 0.3%, decreasing from 10.8% in June 2021 to 10.5% in June 2022. The same trend remains for July and August 2022 as well with 0.3% movement. As for the trading density, there is an increase of 7.4% between the 2 periods. This is mainly due to improved turnover in most months of 2021 and 2022. And the rolling 12 months to July and August also shows positive increase of 6.4% and 6%, respectively. Next slide. The footfall recorded 11.8% increase during the period from July 2021 to June 2022 compared to the same period prior year. The overall positive trend continues during the period observed on a monthly basis. Similar improvement would be traced in July and August 2022 and as well with 10.6% and 10.8%, respectively. The spend per head increased by 2.5% on average for the full 12-months period compared to the same period last year. Also here, a similar increase of 2.6% and 1.9% is observed during the rolling 12 months to July and August 2022. Moving to the next 2 slides, combined leasing activity. During the 12 months ending June 2022, we managed to secure new international and local brands entering our portfolio with the majority being in the fashion and the fast food category, such as Acacia Food in Sofia, Eco Milano Fashion also in Sofia, End Fashion in Skopje and [indiscernible] Playground in Skopje, and [indiscernible] Electronics in Zagreb. In total, we have concluded 86 in new lettings and renewals at the weighted average overall rental increase of 6.5%. New lettings were secured on almost 3,738 square meters and renewals over 13,900 square meters were concluded from July to June. In the next financial year, we have 13.7% of the leases up for renewal while in 2024, 17.1% of the leases are up for renewals. The average contractual escalation achieved was 4.5%, and the vacancy at the end of June stood at 0.7%. I will hand it now to Wilhelm. Thank you.

Thanks, Rabia, and good morning, everybody. At our first half results presentation in March, we cited improved trading conditions post COVID. Since then, a lot has changed in the world and specifically in the countries that we operate in. The COVID impact has been replaced by concerns about rising energy costs and more specific to our portfolio, the Ghana economy. So what are trading conditions like in the Rest of Africa portfolio? Firstly, in Nigeria, trading conditions are tough, but stable. In Ghana, trading conditions are challenging due to sovereign credit downgrades that has caused a downgrade in the currency relative to the U.S. dollar. For this reason, you will see quite a marked difference between Ghana's resulting dollar and local currency. Despite this, Hyprop's share of all of Africa's net income after tax increased by 24% in U.S. dollars, which is a very good result. Let's look at some trading metrics. As alluded to earlier, growth in trading density, turnover and spend per head in Ghana was much better in local currency than in dollars. That's due to the significant depreciation of the CD against the dollar. Turnover in CD grew by 10.7%, but declined by 3.1% in U.S. dollars. Similarly, trading density growth was more or less flat in CD, but down 12.7% in U.S. dollars. Growth in spend per head increased by 3.4% in CD and declined by 9.5% in U.S. dollars. Foot count, on the other hand, increased by 3.5% compared with the previous year, but remains 9% down on pre-COVID levels. So there's evidence that foot count is slowly returning back to normalized levels. Despite COVID and the challenging economic climate, vacancies reduced from 12.2% to 10.1%, which is a 17% reduction in vacant GLA. All the Ghanaian malls reduced their vacancy levels and Ikeja City Mall remains fully let. I'd like to thank the Africa team for producing a very good result under the circumstances it really takes a team effort. Allow me to unpack some of the key aspects of a nontrading nature. With rent being referenced to U.S. dollars, the CD devaluation in Ghana places strain on tenants' ability to pay their rent. So far, we haven't seen much disruption to collections and vacancies but we are putting contingency plans in place regardless. Despite the tough Ghanan economy, all bank covenants have been met during the past financial year. Subsequent to year-end, we've refinanced the senior debt in Nigeria for a further 2 years, and we're in process of also refinancing the senior debt in Ghana. More than a year ago, Massmart has stated its intention to exit its Ghana operations. Massmart is not a tenant in Nigeria. Although nothing has been agreed in Writing, we've made very good progress in managing games exit and a lot of focus and attention is placed on securing replacement tenants. Unfortunately, the liquidity constraints in Nigeria persists. Hence, no U.S. dollars could be repatriated to South Africa. Accordingly, Acacia's income was excluded from distributable income. Turning to the sales process. In November 2020, we announced an agreement to sell our 75% stake in Ikeja City Mall to an Actis fund. Both parties remain committed to the transaction, but the lack of U.S. dollar liquidity in Nigeria is delaying the closing of the transaction. We've previously communicated that we are also in negotiations to sell our Ghana portfolio. And after year-end, we signed a term sheet with a potential buyer, and we will update you on progress in due course. In conclusion, the Rest of Africa portfolio has delivered a very pleasing result given the economic situation, and we've put measures in place to manage the challenges. Thank you, and I'll hand you over to Brett for the financial report.

Good morning, everybody. Thanks, [indiscernible]. Before I start with the numbers, I must just thank the finance teams across the 3 portfolios and in our head office for the hard work which has been put into preparing these results. It's been a great team effort guys, and thanks for the effort, which is really appreciated. At the outset, I want to explain how we measure our performance for 2022 and will do going forward. This is important as it's slightly different to what we did in previous years and underpins our dividend policy. Above all, our approach is to be cautious and conservative in how we operate and manage the group, including how we manage our balance sheet and what income we distribute to shareholders. The current economic environment remains risky, and the risks are changing. We must not forget the lessons that COVID taught us about the historic REIT model of distributing 100% of distributable income. Our primary performance measure is distributable income. That is consolidated accounting income adjusted in terms of the REIT BPR guidelines for revaluations, impairments of investments, taxation, et cetera, to calculate distributable income. Previously, we deducted the income we did not receive from subsidiaries in calculating this distributable income. This was mainly for our Sub-Saharan Africa portfolio, where profits could not be remitted from Nigeria due to the dollar liquidity. These amounts are now included in distributable income, which is the measure of our overall performance. To populate the funds that we have available for distribution to shareholders, we use consolidated distributable income and deduct distributable income that cannot be remitted to South Africa. This will include the income from Nigeria as before. We also deduct distributable income that is retained to further group objectives. For example, to reduce debt and fund capital expenditure on repositioning our portfolios. The result in funds available for distribution forms the basis for calculating the dividend to be paid to shareholders. Reducing debt remains a key priority for the group. The LTV of our European portfolio is the highest at 38.5%. Our intention is to use the income generated from the European portfolio to reduce the euro debt. In so doing, we create capacity to borrow funds in South Africa where the need to fund capital expenditure is higher than in the other portfolios. This without increasing the group's overall LTV ratio. We believe that this will achieve a good balance between our own objectives and the conservative approach while still meeting shareholder expectations and satisfying the minimum distribution requirements for REITs. Assuming distributable income from the Eastern European and Sub-Saharan African portfolio is retained, our distribution should comprise distributable income from the South Africa portfolio, amounting to an overall payout ratio of approximately 75% of consolidated distributable income once the European portfolio is consolidated for a full year. For the financial year, the effective payout ratio is 85.7%. Turning now to our performance for the '22 financial year. Distributable income for the year was ZAR 1.17 billion compared to ZAR 1.09 billion in 2021, an increase of 7.4%. The ZAR 1.09 billion for 2021 includes the income from Ikeja. The main drivers of the change in distributable income are the sale of Atterbury Value Mart, which contributed ZAR 123 million of distributable income in 2021; the consolidation of profits from the Eastern European portfolio of ZAR 105 million for the 3-month period, less the difference in dividends and management received of -- sorry, of ZAR 53 million; savings in interest of ZAR 73 million in South Africa and Sub-Saharan Africa from reductions in debt and lower interest rates; and an increase in ZAR 89 million in operating profit from higher income and costs and reductions in COVID-19 discounts and predominantly -- on primarily bad debts. This slide gives a brief overview of changes in the expenses in the South African property portfolio. Total expenses increased by ZAR 50 million year-on-year. In total expenses, we've included property expenses, expected credit losses and other operating expenses or the head office costs. Comparable expenses, however, reduced by ZAR 33 million or 7%. The main driver of the increase in costs remains utility costs, which increased 11% in 2022. Corporate transaction costs include the costs of the Hyprop Europe transaction of ZAR 13 million in the current year and other legal and professional fees. The marketing expense adjustment of ZAR 17 million relates to a change in the way we record marketing income and expenses and is matched by an increase in marketing revenue. If we exclude the reduction in bad debt, the other controllable expenses have increased 4%, which is below the inflation rate of 6% in June 2022. In terms of cash flow, managing our cash flow remains a key focus area for the group. Cash generated from operations for the year was ZAR 1.8 billion, and net operating cash generated after the payment of interest was ZAR 1.3 billion. The net cash interest cover ratio is 3.7x covered compared to our maximum interest cover ratio with major lenders of 2x cover. Apart from the noncash expenses, which impact cash generated by operations, working capital contributed 18 -- sorry, [ ZAR 80 million ], mainly as a result of reductions in trade and other receivables and collection of arrears. Turning to the group's debt. Following consolidation of Hyprop Europe and Hystead at 30 June 2022, all of the group's debt and cash is reflected on the balance sheet. The graph on the left shows the changes in the group's total debt, which reduced from ZAR 19.9 billion in 2021 to ZAR 14.5 billion in 2022. The difference between the ZAR 19.9 billion in this graphic and the debt shown on the LTV calculation for Europe is the cash in Europe which was set off against the debt in the 2021 financial year. During the year, rand debt increased by ZAR 1 billion as cash and new facilities were used to settle the purchase price of the Hyprop Europe transaction of ZAR 176 million. These proceeds, along with other cash in the European portfolio, were used to settle euro debt or equity debt. As a result of the sale of Delta City Belgrade and Delta City Podgorica, further amounts of euro debt and in-country debt was settled on the transfer of these assets to the buyers. The total outstanding equity debt at the end of the year was ZAR 110 million. And there is also a guarantee facility of -- sorry, it was EUR 110 million. And there's also a guarantee facility of EUR 1.2 million, which has been provided on behalf of Balkan Retail. These -- both of these facilities are guaranteed by Hyprop in South Africa, and it is why we sometimes refer to the guaranteed facilities as EUR 110 million or EUR 11 million. The foreign exchange and other movements of the euro debt include the amortization of in-country debt of EUR 11 million during the period. When you look at the balance of June 2022, the outstanding debt is split evenly between euros and rands, with $1.4 billion -- or ZAR 1.4 billion worth of dollar debt in Sub-Saharan Africa. The dollar debt includes the $60 million bank loan in Ikeja as well as a $26 million shareholder loan payable to [indiscernible] is effectively their equity interest in Ikeja. And this could arguably be excluded from the LTV calculation. Our equivalent loan eliminates on consolidation. The graph on the right shows the group's debt at a constant exchange rate over several years. The debt peaked in 2020 at ZAR 23 billion, at which time the fully consolidated LTV was 51% compared to where we are today with ZAR 14 billion of debt and an LTV of 36.4%. If we look at the changes in LTV between June 2021 and 2022, we started an LTV of 45.8% and reduced this to 36.4%. If you adjust the -- for the full dividend that will be paid for 2022 of ZAR 1 billion, the LTV increases to 39.2%. The reduction in LTV is mainly due to the asset disposals, Atterbury Value Mart, Delta City Belgrade and Delta City Podgorica. Hyprop Europe transaction and use of the purchase price to reduce euro debt was marginally positive for the group's LTV. The LTV covenant and the DCM program is 55%. And the LTV with our major lender banks was increased to 55% for June 2022 in anticipation of more euro debt being consolidated after the Hyprop Europe transaction. The lenders LTV covenant will reduce back to the historic 50% by June 2023. On the bottom of the slide, you'll see the analysis of the sensitivity of the LTV to changes in exchange rates and property valuations. This has also reduced due to the reduction in debt, the change in the composition of the debt between currencies and the EUR 180 million of equity we created through the Hyprop Europe transaction. At today's exchange rates, which are 4% for euros and 10% for dollars worse than in June 2022, the LTV increases to 37.7%. This slide shows the group's debt maturity profile as at 30 June 2022. The first observation is how we've managed to flatten this profile over the last few years to a more manageable workload each year. There's still some work to do in 2023. We have -- if you look on the bottom left-hand side, you can see we have ZAR 6 billion worth of debt maturing before June 2023. And just next to that, we have ZAR 8 billion of facilities or solutions to cover this. Firstly, we have signed a term sheet to refinance the EUR 167 million debt, which matures in June 2023 with the encumbered lender. The $60 million bank loan in Nigeria, as Wilhelm mentioned, has been refinanced until February 2025. Our intention is to refinance all maturing bonds via our DCM program between now and March 2023, and we will be seeing bond investors over the next 2 weeks. We have ZAR 2.6 billion of facilities to cover any shortfalls should the need arise. As a result of the reduction in secured borrowings lenders have released some of the security they held and the value of our unencumbered assets has increased to ZAR 5 billion. Before we -- maybe just some final comments on the debt. The composition of our debt has been spread equally amongst lenders across different -- or different lenders and the DCM program across the group. There is a slide in the back of the presentation in the annexes, which illustrates this. We would like to increase the free float of our DCM bonds, which we will be addressing in the upcoming refinancings. The LTV of the SA portfolio on a stand-alone basis is 26%, and the European portfolio's LTV is 58.5%, mainly as a result of the outstanding EUR 110 million of equity debt. We will work to narrow this gap by implementing our dividend policy and when the euro equity debt matures in June and July 2022. Our interest cover ratio is 3x covered compared to the maximum bank covenant of 2. Conservative balance sheet management and reducing debt remain key objectives for the group. Further reductions in debt and the LTV can be achieved through the sale of the African portfolio and implementation of our dividend policy. Thank you, and back to you, Morné.

Thank you very much, Brett. Just in closing, I think it's 2 things we need to cover still. It's really what are we going to focus on going forward as well as our impact on ESG. If I can start off with that -- I think before we go into the detail, it's actually amazing to look at a photo on the left-hand side, which is the chiller plant room at Canal Walk. If you take -- that center is currently 22 years, you can literally eat off the floor there. So I must commend the Canal Walk team, specifically -- as we call him [indiscernible], for maintaining that in such good condition. We successfully -- in terms of environment, we successfully completed our energy and waste audits. We are implementing those initiatives at this point in time. Obviously, that will bring some savings about. We have started the Phase 2 of our solar project, that is the rollout solar at -- further solar Clearwater as well as Woodlands and Rosebank Mall. One of the things we have been doing is installing what we call propelair toilets. A propelair toilet uses about 30% of the water being used by a normal toilet, and we have successfully installed them already at Clearwater, the Rosebank precinct as well as Hyde Park Corner. We have committed to reduce our waste to 0 by 2027, and we're making quite good progress with that. IoT.next is a pilot we're currently running at Clearwater Mall. It's an Internet-based smart building management system. And what you can achieve with this system is actually managing your preventative maintenance and improving your operational efficiencies. And as you're doing that, obviously, the benefits will be passed on to your tenants and reduce their cost of occupancy. After the pilot has been successful, we will definitely be able to roll those out onto the rest of the portfolio. On the social front, we have appointed a dedicated person to look after the Hyprop foundation because I think you need to drive that with dedication and focus. The focus areas is basically education and skills development, community element, health and wellness environmental upliftment and enterprise development. Our new long-term incentive plan has been approved by shareholders. We are driving the corporate culture because that is key in any business. And then from a governance point of view, we have appointed 3 new independent nonexecutive directors. That's to give a bit of more depth to the Board. We have internalized our company secretarial function, and we've appointed [indiscernible]. And then on a bit of a sad site or sad news is, unfortunately, Stewart Shaw-Taylor has indicated that he will not be up for reelection. So he will be retiring at our next AGM. And Stewart, I want to say thank you for all their hard work and dedication over the last 22 years, and we will definitely miss you a lot. As a group, we are starting to focus on new growth opportunities in line with our strategy. I think as we recycle assets, you need to invest them into new opportunities. Obviously, as mentioned by Brett, I think a key thing for us is actually to ensure we retain a healthy balance sheet. We will be driving initiatives in the environmental side to reduce our cost of occupants -- cost of occupancy. And then on our SA portfolio, we will be driving the Golden -- the repositioning strategies in line with the Golden Threat principles. We have agreed with Pick n Pay that they will be upgrading 4 of their stores within our portfolio to the new customer value proposition, and the stores that will be upgraded is The Glen, it is Canal CapeGate as well as Somerset Mall. One of our redevelopment projects we have started with is at dm. That redevelopment will be over a period of about 2 years. It's consisting of 3 phases. The first phase is we've secured a new anchor in the form of Checkers FreshX that we will do as first phase. Simultaneously with that, we will be upgrading the Pick n Pay store or Pick n Pay will be upgrading their store to the CDP. As a second phase, we will be consolidating 2 of the other anchors to optimize and rightsize those 2 anchors into one space. And then as a Phase 3, is to improve our food journey experience in the mall, and that will happen in one of the spaces that will be let one of the anchor stores. And the idea is actually to create something very unique at Somerset Mall. At CapeGate and Somerset Mall, we have a lot of unutilized bulk. And I -- we want to finalize our master development plan. How you really create these nodes is very good mixed-use precinct. So that is key for us going forward. In Europe, we are looking at new growth opportunities in line with the diversification strategy. The method we will do those investments is buying completed assets with a good trading record. And our intention is to use our asset management skills and redevelopments to actually enhance value and revenue from those investments. In Europe, same in Africa, I think a key thing for us is actually to drive the exit strategy. There's a lot of money tied up in Africa where I believe the returns we can get from that is not optimal at this point in time. So we will hope to get that finalized as soon as possible. Our nontangible asset strategy, we are currently revisiting the whole strategy. One of the things we have realized is a lot of these initiatives will be able to be used by our competitors. But given the association with Hyprop potentially, they will limit our growth potential in terms of that. So we are revisiting it and seeing how we can do that investment. For now, we will complete the split of the SOKO business and drive the [indiscernible] at this point in time. Thank you very much. We'll go into a Q&A session now.

The first question is from Pranita at SBG Securities. Two questions. The first one, what LTV are you targeting for the EU portfolio considering the 58% that you mentioned is below your previous target of 60%? [indiscernible] a second.

Sorry, Pranita, we haven't set a specific target for the EU portfolio per se. We would rather look at the group portfolio I think to reduce the ZAR 100 million of equity debt in a year's time would be quite a big achievement, and that would depend on the risk appetite and the interest rates, I think, in 12 months' time.

Second question. Given the significant dilution to [indiscernible] and [indiscernible] financial year '21, as well as you previously indicated -- as well as your previous indications that you would not use the DRIP for the 2022 financial year's dividend, why have you decided to provide a DRIP option also given your strong LTV position?

I think the DRIP is twofold. I think talking about NAV, the share price, we're trading at the moment at ZAR 36, so there's quite a discount to NAV. So obviously, the market as our net asset value is not seeing that net asset value. So although there is a dilution. And when you do a DRIP, you're actually issuing the shares to your shareholders, and so they participate. So there's no dilution with them if they do participate. A big problem we're sitting with at the moment, as Brett has explained the dividend policy, we want to ultimately get to a payout ratio of 75%. We will be at a payout ratio of 85%. So obviously, we need to make that up. And there is a lot of capital expenditure we want to spend in our repositioning of our South African portfolio. And that is the reason why we would like to do a DRIP. We will limit the DRIP to about ZAR 500 million, and that will be communicated to the market as soon as we finalize our paperwork.

[indiscernible] from [indiscernible] asking a question on euro debt. What is the cash capital retention required by banks funding the European portfolio? And how has this changed, given the rising rate environment, if at all?

What we've had been doing in our European portfolio is most of those are amortizing loans. So we are reducing the capital outstanding balance on these loans. And there is some restrictions on cash. But as far as I know, that's not that much. Brett, you have...

There'll be no specific cash retention requirements other than in one of the loans where we have to keep a minimum cash balance of EUR 1.2 million. We currently hold EUR 3.6 million in that particular entity.

Okay. [indiscernible] from [indiscernible] is asking where do you see the negative reversions going? Given the current macro, is there a risk of this trend being prolonged? And what can you do to arrest it?

I think that's something that we have been focusing on quite a lot. And I think a lot of people ask also why while we're spending so much capital on our South African portfolio. I do think we actually haven't spent enough money on our malls to actually reposition them. That's something that we've been driving quite hard. When you get your malls in the right state, your tenant turnover goes up. When tenant turnover goes up, in time to come, your rental will increase. Historically, what we have seen is was a huge increase in our rental and your tenant turnover hasn't been increasing. So by doing that in such a pull where your tenant starts performing better, obviously, our rental will follow. So to answer your question, I do think -- there is -- in the new year, we have seen some negative reversions still happening, but I do believe going forward that could actually turn given the fact that our tenants are trading better, and therefore, you will start seeing some rental growth rather than reversions.

[indiscernible] from Money [indiscernible] asks 3 questions. I'm going to handle them one by one. The first one, can you provide more detail about the new growth opportunities that will be pursued, which appeared to strongly feature Eastern Europe despite the recent sale of some assets in this region, in terms of the diversification strategy and the time lines anticipated to achieve this?

Let's just start off with when we sell assets. I think we review our portfolio on an annual basis. We will make sure which assets fits the strategy which is noncore and those that's noncore, we will sell, whether it's in Europe or South Africa. That's a discipline we, as a team, has put in place. So that's quite a focus area. And then when we find opportunities in Europe, we are looking at some. Obviously, it must make sense from a return perspective and what we want to achieve and what is our availability on capital. So we will make those decisions as we find them. So effectively, we would like to focus on specific jurisdictions and maybe the countries we already invested in will make more sense to actually grow in those areas rather than in new jurisdictions.

His second question, what impact has there been and is anticipated in the future from the Russian-Ukraine war on the performance of the group's assets in Eastern Europe?

The impact of the Ukraine war is predominantly going to be on operational costs and mainly driven by the fact of your electricity costs as well as cost of gas. So that is going to lift your operational cost. And that is quite evident. I think Rabia has spoken about it in the presentation, which he has delivered. So that's a worry for us. Obviously, as the deals are structured, you could pass it on to your tenants, but it is also going to be a point where it's not sustainable for those tenants to actually take up all those costs. So obviously, we will share in those costs to actually make or retain functional malls. So I think in the short to medium term, that could be negative given the Ukraine war.

His last question. Is there a time line for the anticipated exit in sub-Saharan Africa?

Yes. There was a time line. We've wanted to do it the first year in 2019. Unfortunately, liquidity has been a problem in Nigeria. And hopefully, we can finalize that in the next 2 years.

Jonathan from [indiscernible] is asking, can you disclose the terms for the Croatia debt refi?

I can't exactly disclose all the terms. And just know the terms is actually quite favorable and the margins is actually lower than we are currently paying.

That's correct.

Okay. Ridwaan from Nedbank is asking, please, can you expand on Ghana dispersals and pricing? Who is the potential buyer? And what is the probability of completing given difficulties experienced with Ikeja?

There has been a term sheet signed. The price and -- and the final method of payment is being finally -- is still negotiated and that will be communicated to the market as we've got more finality around that.

I have a few questions from [indiscernible] of [indiscernible]. Are you returning to an interim dividend policy?

[indiscernible], we will be engaging with our shareholders. At this point in time, we haven't made a final decision on that. Our Board has asked us to get a feeling back from our shareholders, what is their view on that. And then potentially, given the feedback and a discussion with our Board, we will communicate whether we go back to an interim dividend.

He's asking what is the interest rate on the EUR 167 million being refinanced in the 2023 financial year, and what does that imply for the average cost of debt on the European portfolio.

I don't have the actual numbers, [indiscernible], but as I mentioned, the margins we're getting from that is a better margin. So obviously, it will reduce your cost of your euro debt in country.

I can just add to that. In the financial statements, there's a detailed breakdown of all the debt with the margins on the different loans. And as Morné did say that, that refinance has been done at a more favorable margin.

His last question. We've touched on reversions, but I'll do the first part. Do you have an indication of what the differential is between the rental level of 16.5% of leases expiring in the 2023 financial year versus the average for the portfolio?

Just repeat that.

Do you have an indication of what the differential is between the rental level of 16.5% of leases expiring in the 2023 financial year versus the average for the portfolio?

Is -- I don't know.

Any indication of what you expect the reversions for financial year 2023 will be?