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

Hello, everyone, and welcome to Hyprop's interim results presentation. I want to use this opportunity to say welcome to all the Hyprop directors. That's also a part of the call. And then a big thank you to all the teams in South Africa, Africa as well as Europe for all your hard work and dedication. If we look at our agenda, we will -- I will cover the headlines in key metrics. I will give an update on the operational performance in South Africa. Rabia will give us an update on Eastern Europe, then we will hand over to Wilhelm to look at Sub-Saharan Africa. Brett will handle our overview of our financial results. And in closing, I will look at some of the ESG initiatives as well as what we see going forward. Our group's distributable income has increased by 36%. That was very well supported by the income from Eastern Europe, which was ZAR 243 million, that is actually about 15% higher than the forecast we have given when we actually put out the circular for the Hystead transaction. Our South Africa and European portfolios has done exceptionally well, and we actually outperformed pre-COVID performance in these results. 84% of our shareholders has participated in the DRIP. Obviously, we had a cap on the DRIP of ZAR 500 million, and that was reduced pro rata to participation. We've got a very strong liquidity position, and we've got about ZAR 2 billion of available banking facilities. Our loan-to-value has decreased slightly. It's currently increased slightly. It is now 37.2%. And the main reasons for this slight increase was, firstly, the weakening of the rand, impairment on our European portfolio as well as using some of our SA balance sheet to reduce debt with the refinancing of the Accra, Ghana in-country debt. In terms of our South African portfolio, all performance -- operational performance looks good. And it definitely shows that our repositioning strategy is starting to pay off. Our tenant turnover has increased by 15.5%, and we have successfully reduced our vacancy from about 2% to 1.5%. We have started Phase 1 of the redevelopment at Somerset Mall and are replanning to open a new Checkers FreshX in November 2023. Canal Walk had a excellent December and it had excess of ZAR 1 billion of turnover for December 2022. Looking at Europe, in line with our strategy, we have reduced the in-country debt with EUR 28 million. The independent valuation has reduced our value of our properties by about EUR 5 million. So the current total portfolio in Europe is worth EUR 569 million. We have got a good operational performance. Trading density increased -- tenant turnover increased by 14.1% and we had positive rent reversions of 7%. We have addressed the weaknesses at the Mall of Sofia. We have done a reconfiguring of the old hyper conversion that was just before COVID. We have upgraded the food court as well as the bathroom facilities and the last bathroom facility will be completed by April of this year. We successfully replaced the 2 Inditex brands in the Mall of Sofia. And that was Zara and Massimo Dutti and that was -- we replaced -- Intersport has taken the space of Massimo Dutti and Zara was replaced by Sinsay. Sinsay will be opening at the end of this month. We do believe these 2 anchors will perform much better than the outdated Inditex stores. And Sub-Saharan, the team has done very good work under very tough economic conditions. They successfully reduced the vacancies from about 10.1% to 7.8%, and they are making good progress to find replacement tenants for game on the Ghana portfolio. In terms of our non-tangible asset strategy, we've successfully split the business between the physical districts as well as the technology platform, the Rosebank Mall team has taken over the management of the physical district using the technology platform, and they have performed quite well, and the trading densities in that area has increased substantially. We are exploring additional revenue streams for the technology platform, and we're quite excited with the prospects we could have on that. Looking at our operational performance. As a group, our distributable income has increased in the last 6 months to ZAR 728 million, that is a 36% increase compared to December 2021. Due to the fact that we have issued new shares as part of the DRIP, our distributable income per share has increased by 30%, and that is now ZAR 0.203 per share. Due to the shares that we also issued that had also a negative impact on our net asset value per share and that has reduced by ZAR 2.82 and our current NAV per share is ZAR 59.47. Our ICR quite important to us, but it has reduced due to the increase in interest rates, and that has reduced to a cash ICR of 3.17x and then IFRS ICR of 2.88x. Loan-to-value is a slight increase. If you look at the fully consolidated versus SA REIT, they're very similar at about 37%. That is still well below our covenants, which varies from 50% to 55%. South Africa is still the bulk of our business. 64% of our investment property value lies in South Africa. Our total GLA is about 73% of the group, and what is positive and in line with the diversification strategy is at June, we have delivered distributable income from South Africa of about 86%, and that has reduced to 63%. It's positive to see that our repositioning strategies are working. If you look at our tenant turnover, it has increased by 15.5% compared to 2019 pre-COVID, that has an increase of 13%. Effort ratio quite important as well. It actually is the cost of occupancy compared to tenant turnover. That has reduced to 8.5% compared to pre-COVID at 10.4%. That is quite a good indicator of where you would see some rental growth coming through due to the fact it cost a tenant cheaper, and therefore, you have scope to increase rentals. Trading densities has also done very well, increased by 14.4%. If you compare that, pre-COVID, that was an increase of around 12% compared to pre-COVID numbers. Just to come back on tenant turnover some of the outperforming shopping centers, although all have shown very good growth. Rosebank Mall has increased its tenant turnover by 26.4%; Canal Walk by 24.3%; and CapeGate by 15.5%. In terms of specific categories, in terms of trading densities that has done very well, we -- although some of them coming from a very low base, Entertainment has increased by 67%. Our other bracket, which consists of travel luggage as well as convenience services, has increased by 64% and then food services and takeaways by 27.8%. Our average footfall is not back to pre-COVID numbers, although we have seen a nice growth of 5.9% and then looking at our spend per head, that has increased quite substantially. That means people are spending more money per visit. And therefore, you could see there is a nice growth of about 9.1%. This is quite an interesting slide, and it indicates where we believe our repositioning and we're making our malls more relevant will ensure that our tenant turnover grows. And as tenant turnover grows, although it lags a little bit, your rental income will grow. Now on this slide, just to confirm, it's a 12-month rolling number from January to December. So it's not -- most of our results are based on 6 months. But if you look at this slide, since 2015 to 2019, specifically tenant turnover has only grown by 5.2%. In 2019, we started with the repositioning of our malls in South Africa. Obviously, we got good traction, but unfortunately, COVID happened and we had a big reduction of about 18.7% during that period. As COVID dissipated, obviously, we have seen quite nice growth of about 16% for 2 years, and that is good indication of what we have achieved on our portfolio. Now if you look at the graph on the right top side, you actually see our rental income. During that same period from 2015 to 2019, our income has grew -- has grown by 23%. Now compared to the growth of 5.2% in tenant turnover, it meant the net effect is our portfolio was over traded. And therefore, you actually started seeing negative reversions at the beginning of 2019, and that was further accelerated with the impact of COVID. In 2021, you have -- you can see some recovery, and that just shows, if we keep on growing our tenant turnover, we should grow our rental income. And as clear on these slides, there is about a 1-year gap between the growth in tenant turnover versus the growth in rental income. Now if we look at the graph on the bottom, you could see our negative reversions are reducing for the last period, and it's been 12.8% compared to 13.4% for June 2022. Looking at a period from August to January that has even reduced further to about 10%. So we are seeing a positive trend in terms of reducing, all the negative reversions improving. One thing we must also remember, whenever we are repositioning our malls, sometimes you want to bring in some flagship stores, for example, Pick n Pay clothing at Canal Walk when we consolidated about 4 to 5 stores to actually accommodate them. You are making smaller stores into a bigger store. Obviously, the rental you're getting on the bigger space is lower. But we do believe getting the right tenant mix in the flagship stores in we will actually attract the shoppers and our tenant turnover will grow. In terms of renewals, average duration of new leases was about 4.3 years, and our lease renewals was 3.2 years and average escalation was 6.4%. One of the key things is our teams are mandated to ultimately retain functional malls. Now on the next slide, we see the average portfolio escalation given what has happened historically with inflation that has reduced over the period. It's currently average escalation is 6.7%, but whilst we were negotiating with tenants specifically during COVID and with the negative reversions, our key thing was to increase our percentage of turnover to participate when the market turns. And that's very evident on the slide on the top right, where we show tenant turnover growth, our rental -- tenant rent growth. And as you can see there, we had good growth of about 21.4% in '21 and 57.8% in 2022. That is coming off a low base. So that is why we're also seeing there's huge growth in terms of that. Our vacancies, we successfully reduced our vacancies to 1.5%. If we look at our office, which is only 6.8% of our portfolio, there has been an increase to about 31%. But we have seen there's a bigger demand, again, for offices, given specifically the impact of load shedding and complications with working from home. And therefore, we are planning to upgrade our offices and offer a better value proposition in terms of these. Tenants at Canal Walk, we opened stores for Yuppiechef, Ted Baker as well as Superfine. We opened 2 new restaurants, namely Bossa and Cape Malay House. We have opened 2 new flagship stores, one for Pick n Pay Clothing, as mentioned before, as well as Nike and the vacancies at Canal Walk is currently 0.9%. Vacancies at Rosebank Mall is 4.7%, and we've opened new stores for Footgear, HiFi Corporation as well as Volpes. Totalsports is currently busy increasing the size of their store. CapeGate's vacancy is only 0.3%. We've secured new stores for [ MRP Connect ], RocoMamas as well as Factorie. A good thing that has happened at Canal Walk -- I mean, CapeGate is Pick n Pay have upgraded their store due to a new CVP spec. Mugg & Bean has gone through a complete revamp. At Hyde Park Corner, we still have very good demand, and we've opened George's Grill House, Scapegoat Gallery, Versailles Luxury as well as Skins Cosmetics. Somerset Mall remains fully let and we've opened stores for Puma, Salomon as well as Xpresso Cafe. The value offering at Woodlands we've improved with opening of Westpack, Pet Zone as well as a Volpes and a newly upgraded food court at Clearwater, all the restaurants are trading exceptionally well. At The Glen, we've opened a new KFC drive-thru as well as a Hyper Paint. Now with the higher load shedding, there has been an impact on our business I think the big benefit we sit with is that currently, 7 of our 8 stores do have full backup generator capacity. The only one that hasn't got full backup is Canal Walk. At Canal Walk, we're part of the curtailment program with the city of Cape Town. And what that means is if we keep our load below a lower certain level, we don't get load shedded, and that is how it works at the moment. We are investigating to actually increase our generator capacity at Canal Walk as well. The average cost of diesel is about ZAR 8.83 per kilowatt hour and normal electricity will cost you about ZAR 2.44. So it's substantially more expensive. If we look at the 6 months, we have had a total cost of diesel was ZAR 41 million. We have recovered 55% of that and the net cost to us was ZAR 18.7 million. Looking at January and February, obviously, the stages of load shedding was higher. Therefore, the costs associated with diesel was ZAR 23.4 million, of which we had 81% recovery, meaning the cost to us was ZAR 4.5 million. We have established a dedicated team, a dedicated team to focus on the following things and what we want to ensure is that we have sufficient diesel backup on site to cater for about 7 days of load shedding for Stages 6 and above. We want to ensure that our IT and offices back up. So we want to make sure if there is a complete blackout that we can communicate between our sites. We want to make sure we do the data backup sufficiently, and we have power at our property management's [ team ] upsides as well as our head office. We want to resolve, as mentioned before, the shortage of the generator capacity at Canal Walk, and we are in the process of tendering for those generators. We want to create backup mobile generators for Karting as well as West Cape -- Western Cape, specifically if you've got some failure on your generators, given a lot of the generators wasn't developed to run for such long hours. We are looking to replace some of the older generators with prime rated generators and those prime rated generators can actually run for 24 hours. We are working hard to make some changes on the business continuity plan, specifically to cater for complete blackouts as well as to cater for a situation where you've got load shedding of stages above 6% to 8%. Parallel with that, we are also looking at water backup solutions as well as boreholes, where we have got access to gas lines for [indiscernible] gas. We are considering gas generators, specifically Rosebank Mall and Hyde Park Corner. We are investigating further solar rollouts as well as integrating our existing solar with our generators. Some of the sites, we are looking at total energy solutions. So what does that entail? It will be a generator farm plus battery backup plus solar and as well as using the grid and optimally use the power and bring the cost of your electricity down. Some inverter solutions for our tenants and then we're also investigating energy wheeling. Energy wheeling at the moment, the complications is you can do it from an Eskom to a Eskom side. Unfortunately, the only mall we have got Eskom power is at Somerset Mall. I will now hand over to Rabia to give us an update on Eastern Europe.

Thanks, Morne, and good morning, everybody. Following 2 years of pandemic, 2022 turned out to be another turbulent year with macroeconomic and business challenges, driven mainly by the Russian invasion to Ukraine, resulting in further supply chain disruption and energy crisis. Inflation has exceeded double-digit levels. And since then, we have been witnessing a significant increase in the cost of living, cost of funds, energy cost, construction material cost and transport cost. However, if we look back through 2022, it is worth mentioning that despite the overall market sentiment, the commercial real estate performance in the region we operate in remained relatively stable, but also recorded a nice recovery compared to previous years. Footfall and turnovers numbers in our shopping centers are almost back to pre-COVID levels. Looking forward to the future, the uncertainty is still high. I think a reasonable forecast is a challenge. While expected to decrease, the inflation will remain a major issue for Europe and expected to remain well above what should be regarded as a normal level. Higher cost of capital slows down the economy. In our industry, this would mean less retail transactions, and we would expect yields to continue to move north. We can start with the slides, macroeconomic and retail environment. The real GDP growth in Bulgaria improved by 4% in 2022 compared to previous period. And yet, expectation for '23 are for the negative growth and from '24 onwards for a steady economic growth, revolving around 2%. So far, the feel for recession did not materialize, but the inflation proved to be persistent and among the highest in the region at around 16%. Following the GDP contraction, inflation is also expected to slow down after 2023. The unemployment rate remains one of the lowest among all the other countries in our portfolio and close to 5%, lower than the European average. The total shopping density also remains unchanged compared to June 2020 at 112 square meters per 1,000 inhabitants. Croatia exhibits the same trend as Bulgaria, with negative GDP growth during the last 2 years, followed by noticeable growth in '22, close to 13%, which is projected to decrease to almost no growth state in '23. And thereafter, remains positive in the range of the 2%. The inflation pattern is also similar to Bulgaria. However, with less fluctuation due to the euro currency adoption from January 1, '23. Unemployment is forecasted to remain within the healthy level of around 6% to 6.5%. The shopping density is the highest in the portfolio with 272 square meters per 1,000 inhabitants. North Macedonia has relatively stable macroeconomic indicators, with the GDP growth in the range of 2% to 4%. Like the other economies, inflation peaked in '22 with expectations to decline to the targeted rate of 2% from '24 onwards. Unemployment rate was relatively high historically at around 16% to 17%, and is projected to remain as such. The shopping density, on the other hand, is 76 square meters per 1,000 inhabitants, which is the lowest in the portfolio. Next slide, operations. An improvement can be observed when we compare the 6 months to December trading overview with the previous 6 months. The turnover improved by 14.1% compared to the same period in 2021. The trend continues to January '23, with 17.3% increase. Our effort ratio has improved by 0.8%, decreasing from 10% in December '21 to 9.2% in December '22. A similar increase is observed in January '23. The trading density has increased by 15% between the 2 periods. This is due to improved turnovers in every month of '22 compared to '21. January '23 also marks an improvement of 18.7%. Next slide. The footfall recorded a 16.1% increase during the period from July to December compared to the same period of the prior year. The overall positive trend continues during the period observed on a monthly basis, January '23 is no exception, reaching 20% increase compared to the prior period. The spend per head slightly decreased by 1.7% on average for the 6 months period to December '22 compared to the same period last year. During the COVID period, the trend of increasing spend per head was set based on less frequent visits by customers with significantly higher basket spend. However, with the stabilization during last year, the spend per head revenues are normalizing. During the first months of '23, the spend per head slightly improved was 2.3%. Next slide, leasing activity. For the financial year, we have, in total, 106 leases up for renewal, of which we have concluded 61 leases up to December at a weighted average overall rental increase of 4.5%. The remaining 45 leases are to be concluded during the financial year. New lettings were secured on over 4,200 square meters and renewals over 8,300 square meters were concluded from July to December. The average contractual escalation achieved was 4.4% and the vacancy rate in the European portfolio was 0.6% on December '22. Next slide. During these 6 months, ending December '22, we managed to secure additional new international and local brands entering our portfolio, with the majority being in the fashion and the food category, such as Kiko Milano, Ted Baker, Tudors in Scopje City Mall, which also had a new food offering to enhance the recently upgraded food court. In City Center one East, H&M undergone a complete refurbishment according to the latest H&M International specification. And we also welcomed the new tenants, such as iStyle, Sizeer and Submarine Burger. The Mall in Sofia also welcomed the new tenants, such as JACK & JONES, Calliope and Brilliant Furniture. The Inditex brand were successfully replaced with Intersport and Sinsay. I will now hand you over to Abraham for the Sub-Saharan African portfolio. Thank you.

Thanks, Rabia, and good morning, everyone. At our results presentation in September, we commented on Ghana sovereign downgrade that precipitated a massive currency devaluation This, together with 2 worldwide macroeconomic issues, namely rising interest rates and rising energy costs created quite a challenging environment. However, I'm pleased to say that the Africa portfolio performed well under difficult circumstances. Hyprop share of all of Africa's net income after tax decreased by only 8% in U.S. dollars and this is largely due to macroeconomic factors, namely foreign exchange losses and higher interest rates. Trading conditions in Nigeria are stable, although not great. The country held a relatively peaceful presidential election recently. Trading conditions in Ghana remain challenging, but it should be noted that the local currency has recovered to a large extent, from the massive devaluation seen in 2022 as there seems to be progress on an IMF deal. You will still see quite a marked difference between Ghana's results in dollars and in local currency, as the local currency results are converted at average exchange rates and not the period-end exchange rate. Let's look at some of the trading metrics. As alluded to earlier, growth in trading density, turnover and spend per head in Ghana was much higher in local currency than in U.S. dollars due to the significant depreciation of the local currency during 2022. So you'll see these large increases in local currency and then also large decreases in U.S. dollars. Let's start with turnover, which grew in Cedi by 30%, but declined by 28% in U.S. dollars. Similarly, trading density growth was up 15% in Cedi, but down 36% in dollars. Growth in spend per head increased by 35% in Cedi and declined 25% in dollars. Despite the challenging economic climate, vacancies in the whole portfolio reduced from 10.1% at 30 June to 7.8% at 31 December, which is a 23% reduction in vacant GLA when measured in square meters. Game's exit from Ghana at the end of the period will increase vacancies to 23% for the whole portfolio, all other things being equal. I'd like to thank the Africa team for producing a good result under the circumstances. It really takes a team effort. Allow me to unpack some key aspects of a nontrading nature. With rent being referenced to U.S. dollars, the Cedi devaluation placed a strain on tenant's ability to pay their rent. We put contingency measures in place a year ago, which has allowed our collections and vacancies to hold up relatively well. Both the Ghanian and Nigerian senior debt were refinanced and all bank covenants are being met. We have managed Game's exit and a lot of focus is placed on securing a replacement anchor tenant. The liquidity constraints in Nigeria persists, however, we have managed to source a couple of hundred thousand U.S. dollars. This is unfortunately insufficient to move the dial, but we are investigating several other options to get U.S. dollars out of Nigeria. Turning to the sales process. Hyprop and Attacq are still working with Actis on the proposed sale of Ikeja. All parties remain committed to the transaction, but the lack of U.S. dollar liquidity in Nigeria is delaying closing of the transaction. We are in discussions about the sale of the Ghana portfolio, but there is nothing concrete to report. The country's economic woes are making it difficult, as you can imagine. In conclusion, the Rest of Africa portfolio has delivered a very solid result given the economic situation globally and in country. And we've put measures in place to manage the challenges. Thank you, and I'll hand you over to Brett now for the financial report.

So just -- thank you, Wilhelm, and good morning, everybody. Distributable income for the period was ZAR 278 million, 36% up from December 2021. The main reason for the increase is the ZAR 243 million of distributable income from the Eastern European portfolio. This is before taking into account the related additional interest costs in South Africa. The first 4 bars on this graph relate to the South African and African portfolios. COVID-19 relief was done away with, and revenue in South Africa and Nigeria increased by ZAR 87 million, ZAR 30 million in Nigeria and ZAR 57 million in South Africa. These numbers exclude the straight-line rental revenue accrual. Contractual rental income in South Africa was in line with December 2021 and 2.5% up from the 6 months to June '22. Recoveries income was boosted by the increase in diesel and generator cost recoveries of ZAR 20 million. Income increased due to additional marketing expenditure -- sorry, marketing income of ZAR 12 million following the change in accounting methodology in June '22 and a ZAR 10 million insurance claim for COVID-19 losses in prior years. In addition to normal income growth and Rand dollar depreciation, Ikeja City Mall also experienced increases in diesel and electricity recoveries of ZAR 6.5 million. Operating costs in the 2 African portfolios increased by ZAR 97 million. These included diesel and generator costs in South Africa of ZAR 32 million; municipal and utility cost increases of ZAR 13 million; and marketing staff costs of ZAR 6 million, all as increases. Nigeria had a similar increase in diesel costs of about ZAR 15 million. The impact of the net increase in diesel and generator costs in South Africa was ZAR 19 million. Insurance costs also increased by about ZAR 5.5 million as we had to top up riot-related insurance covers previously provided by Sasria in South Africa and in Nigeria. Stripping all of these anomalies out, expenses in South Africa increased by 2%. On a more positive note, expected credit losses reduced by ZAR 20 million nearly as arrears were reduced. The net result is an increase of ZAR 58 million in the operating income from South Africa and Nigeria. The Hyprop Europe portfolio performed well and contributed ZAR 243 million to distributable income -- sorry, that's ZAR 240 million. This is about 15% ahead of the forecast in euros prepared for the Hyprop Europe transaction. Most categories of European income improved as trading metrics rebounded post COVID-19. The centers were shielded from high energy costs through fixed price contracts with suppliers and EUR 1 million was received in government subsidies for electricity costs in Bulgaria. Other costs were well managed despite the high inflation rates and the cost-to-income ratio was 39.9%. Interestingly, municipal costs in Europe equate to 19% of income compared to 28% in South Africa. Net interest costs, other than those in Europe, increased by ZAR 93 million, ZAR 24 million in Nigeria, where interest costs were not hedged until late in the period and about ZAR 73 million in South Africa due to the cash utilized and ZAR 1.4 billion of debt taken on when the Hyprop Europe transaction was implemented in March 2022. There were some savings from higher deposit rates and active cash management and utilization of our revolving credit facilities. The interest costs in Europe were in line with the expectations due to the high level of interest rate hedges we had in place. Distributable income per share increased from ZAR 0.157 to ZAR 0.203 That's a 30% increase notwithstanding the additional 16 million shares that were issued following the 2022 DRIP. No dividend has been declared for the period as our dividend policy envisages paying an annual dividend equal to the distributable income in South Africa, with distributable income from Europe and Sub-Saharan Africa being retained to strengthen the balance sheet. We believe that this conservative approach is appropriate given the current challenges we face. In terms of cash flow, cash generated from operations on the top line of the slide was ZAR 1.1 billion. All portfolios cash collections were strong, averaging over 100% of billings for the group. The negative change in working capital on the fourth line of ZAR 95 million is the result of increases in accrued municipal, diesel and generator cost recoveries and accrued turnover rentals in the European portfolio following the fest of season and calendar year-end. Prepayments also increased compared to June 2022 due to the increase in insurance premiums. On the payment side, creditors in Croatia were settled early ahead of the adoption of the euro on the 1st of January. Although not shown in this slide, you will notice a payment of ZAR 58 million in the cash flow statement relating to the acquisition of the PDI Free Carry Equity. This amount comprises the purchase price accrued in June 2022 of ZAR 27 million less an adjustment of ZAR 1 million in our favor. This was settled in the period and a reduction of the noncontrolling interest in Hystead when Hystead surplus cash was paid to its shareholders. Moving on to the borrowings. Total bank borrowings increased from ZAR 14.5 billion to ZAR 15 billion in December. Although ZAR 12 million of in-country debt in Europe was repaid in the period, the devaluation of the rand resulted in an increase in the rand values of the euro and dollar borrowings. An additional ZAR 17 million of in-country debt -- EUR 17 million of in-country debt was settled in January 2023. The rand debt, which matured in the period was refinanced through new bond issues and we thank the bond market investors for their support in our November bond auction. As shown on the pie charts on the right-hand side, we have a good spread of lenders, including through the DCM and the rand and euro debt are still relatively evenly balanced. Our bond program has been updated, and we are awaiting approval from the JSE before this can be implemented. The group's LTV ratio increased from 36.4% in June, to 37.2% in December, mainly as a consequence of the dividend paid in November 2022 and the DRIP, these changes were anticipated. The higher Euro LTV and the weakening of the rand also contributed to the increase in LTV. The LTV of the European portfolio is the highest in the group at 57.5%. We still intend to reduce the euro debt over the medium term from profits generated in Europe and regular amortization of the loans. The SA portfolio remains relatively lowly geared with a 20% LTV. This low LTV must be balanced against the higher cost of debt in South Africa. Our LTV covenants with lenders range from 50% to 55% and there is comfortable headroom between the actual LTV and the covenant even in a stressed scenario. A 15% devaluation of the rand and 10% devaluation in our property portfolios would see the LTV increase to 42% as shown on the sensitivity table in the bottom right-hand corner. Interest rates and interest costs. The 3 graphs show the impact of the increase in interest rates over the last 12 months on the group's borrowing costs. The green line is the base rate in each currency, all increasing significantly over the period. The gray line is our variable cost of funding, and the dark blue line is our all-in cost of funding, taking interest rate hedges and fixed rate loans into account. The all-in cost of funding for the rand and euro debt increased by about [ 0,6% ] over these periods despite an increase in the base rates of over 2%. The dollar interest costs were only hedged towards the end of the period as can be seen from the escalating dollar interest costs we paid. At 31 December, 83% of our borrowing costs had been hedged, this includes Nigeria and Ghana. The average tenure of the interest rate hedges compared to the average loan term is shown in the middle graph. Maturity of the rand hedges is manageable given the maturity profile of the loans and the hedges and the relatively small incremental cost of rehedging at current levels, which is about 1%. The euro hedges present a greater risk and cost implications as a result of the EUR 270 million of borrowings and related hedges that mature in June and July '23. Interest costs in Europe will increase in the 2024 financial year. We are looking at ways to find commercially sensible hedging solutions with our lenders, taking into account their own hedging requirements and our policy and without us having to overcommit to expensive hedges at the current interest rate levels. Some compensation or benefit will be received from us having negotiated lower margins on some of the European debt as part of the refinancing of loans. The debt maturity profile. Apart from the quarter -- with 2023 quarter 2 and quarter 3 maturities, the debt maturity profile is relatively flat. We are looking at how we can flatten the longer-term euro debt maturity profile a bit more, particularly when you look out to 2020 -- 2030. Ten days ago, we announced that we will hold a bond auction on 31 March to raise ZAR 500 million with potential to upsize to ZAR 750 million. Proceeds will be used to redeem the bond maturing later this month and to fund capital expenditure. We have received proposals to refinance the ZAR 1.46 billion debt maturing in June 2023. The ZAR 500 million revolving credit facility, which matures, is currently undrawn, and we have available facilities to cover the balance of ZAR 960 million, if required. As previously mentioned, borrowings of ZAR 270 million mature in June and July, ZAR 180 million or ZAR 2.9 billion of this in-country debt has been refinanced for 7 years with the incumbent lender. The team is busy finalizing the conditions precedent to draw down, which will only happen on maturity of the current loan. EUR 50 million of the equity debt, which matures in July has been refinanced for 3 years. This will also be implemented on expiry of the current loan. We are investigating proposals to refinance the remaining EUR 60 million, which is just over ZAR 1 billion. A final decision on this, including the loan term and how we hedge the interest costs, will be made in conjunction with the refinancing of the rand facilities. On the bottom left, you can see the group's total liquidity at 31 December, which was ZAR 3.9 billion. This includes cash in Nigeria of ZAR 370 million, which is not readily available to the group. However, a portion has been pledged as security for the capitalized interest on the loan to Ikeja City Mall. [ EUR 17 million ] of the euro cash was utilized to repay in-country euro debt in January 2023. ZAR 465 million of our RCFs were drawn at the end of December, leaving ZAR 1.4 billion of undrawn RCFs and ZAR 670 million of term facilities available. We are grateful for the support from our existing and new lenders and their willingness to work with the group. The value of our unencumbered assets or unencumbered property assets is unchanged from September at ZAR 5 billion. In closing, I would just like to say thank you to all those who have been involved in preparing these results. This includes the site and operations teams who actually produce the results. The finance teams in each of our sites and head offices in Europe, Africa and South Africa, who tally up the numbers and then to our head office finance team that pulls it all together, so we can present it the way we do. Your hard work and contributions are greatly appreciated. Thanks very much, and back to you, Morne.

Thank you, everyone. In closing, we will be looking at our ESG, what is our impact on the environment. Our sustainability framework is built around 3 goals, namely creating spaces and connecting people, partnering with climate resilience, inclusivity across our value chain. We started the next phase of our solar at Woodlands, Rosebank Mall and Clearwater Mall. The cost of the project is about ZAR 70 million, and that will be completed in June 2023. We have also started feasibility studies for a further solar installation at The Glen as well as new installations at CapeGate and Canal Walk. In terms of our wet waste program, we have set ourselves. We want to get to 0 wet waste before 2027. And we have implemented a number of initiatives at Somerset Mall, CapeGate, Woodlands to optimize the diversion of waste. We are outperforming the targets we have set in terms of waste, and we are quite excited about this prospect. Managing water is critical for South Africa, and we are busy with the following projects. We are busy installing propelair toilets at Woodlands as well as CapeGate, and we have linked up the last ablution facility at The Glen with our gray water system. Looking at the social impact the Hyprop Foundation has refocused its initiatives in 3 key areas, namely: Education, community upliftment, enterprise development, and we have partner with SAPOA to provide financial assistance support to students enrolled in property-related degrees. Unfortunately, Gavin Tipper had to retire due to the fact that he has been appointed as CEO of Arise, and we have the benefit that Spiros has been appointed as our new Chairman. Stewart Shaw-Taylor has retired at the AGM. And Nonyame has also retired from the Board due to personal reasons, and we want to use the opportunity to say a big thank you to all of them. Looking forward, there's a number of things we are still concerned of. Obviously, the one thing is the ongoing war in Ukraine. It seems inflation is busy stabilizing as we've seen on the slides presented by Rabia, and we hope interest rates in Europe will actually start -- the increases in interest rates will stop. Obviously, the opening of China economy will have a positive impact on Europe as well as South Africa. And big concerns for us at the moment is the electricity crisis as well as the infrastructure in South Africa and in-service delivery, and I would say specifically in Karting. The cost of food, electricity and fuel will increase, and this will put extra pressure on our shoppers and tenants. And therefore, we have to decide, we keep our dividend policy as is and we will focus on paying annual dividends. We set ourselves the following 7 strategic initiatives, namely finding and implementing sustainable solutions for the impact of load shedding, repositioning our South African portfolio, ensuring the dominance of our Eastern Europe portfolio reviewing our portfolios on an annual basis, and that is to ensure that we are keeping the right assets and recycle those that are mature and not part of the strategy, and we will reinvest the capital then into new growth opportunities. We want to protect the value of our Africa investments while we exit that position and to focus on non-tangible asset strategy. And whilst we're doing all of this, we want to ensure we have a healthy balance sheet that can manage the test of time. On the SA portfolio, we are busy with a number of exciting projects. We are looking to upgrade the Canal Walk Food Court. Looking at a second phase extension at Somerset Mall that will include additional GLA on the back of tenant demand as well as a new food court. We are planning to upgrade the offices at Hyde Park Corner as well as to improve the integration between the hotel, the offices as well as the retail section. On our Eastern Europe portfolio, we are excited about the new metro station that's under construction that will be completed in 2026. The new station is right on the doorstep of our mall and I believe it will be used by about 26 million commuters on an annual basis. So it definitely will have a huge benefit for our mall. At CCo East, in Croatia, we are planning to do an extension of about 17,000 square meters, and that is also on the back of further tenant demand. With that, I want to say a big thank you, and we can open now the floor for some questions.

We've got a question from Francois Du Toit at Anchor Stockbrokers. And the first one is Eastern European performance was well ahead of guidance in the circular. Net property income was 9.5% ahead of corporate costs, which is half of the guidance. Is the seasonality in the cost? Or can it stay as low as it was in the first half? Second question is, can we also get color about rent increases expected relative to the first half of 2023 base. And then lastly, in that section, he's asking that debt costs are rising fast. What -- at what cost is new debt in EE being refinanced? The unhedged debt cost in the EE is now at about 4.7%. Is it likely to increase further?

Okay. If I think, Brett, if you can help with the debt questions, I think that will be helpful.

So the EE debt has been refinanced at a margin of about 2.5%. We have renegotiated some of our margins downwards on some of the debt that is being refinanced and some that is not. On the Croatia debt, in particular, we've not put in place a hedge at the moment. We have until the drawdown date or the refinance date to agree that with the bank. And I think there's also some latitude beyond that date to fix a hedge rate with them.