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

Welcome to Hyprop's Interim Results presentation for the 6 months ended 31 December 2023. Thank you to all the shareholders for your continued support, and then I want to use the opportunity to also say thank you for the teams in South Africa, Africa as well as Europe for the dedication and the hard work. We are going to touch on the following points. If I look at the agenda, I will handle the headlines and the key metrics. Rubecca Khan, one of our portfolio executives, will give us an update on South Africa. Rabia Shihab, one of the executive directors in Eastern Europe, will give us an update on Eastern Europe. And Sub-Sahara Africa will be handled by Wilhelm Nauta, our Chief Investment Officer. And Brett will handle the financial results. I will come in on the closing at the end of the presentation, and then we will be opening the floor for some Q&A. Our distributable income has decreased by 8.3% to a total of ZAR 668 million for the 6 months. If you look at it per share, it has reduced by 13.4%. The SA and the European malls had very good operational performance, but the higher interest rates, as we expected, but unfortunately, that had an impact as well as the unprecedented devaluation of the Naira had a further negative impact on our distributable income. 68.5% of our shareholders has supported a DRIP, and that was reduced in line with our cap of ZAR 500 million. There was a slight increase in our LTV to 37.4%. We currently have a healthy liquidity position with ZAR 1.6 billion of cash available as well as available bank facilities of around ZAR 1.7 billion. Obviously, that is before the implementation of the Table Bay transaction. We received unconditional tribunal competition approval to proceed with the transaction that we received a few weeks ago, and implementation will be there for the end of the month. In terms of our operational performance in South Africa, we have shown positive progress on all our key performance areas and it shows that our repositioning strategies are paying off. On a very good note, the tenant turnover at Canal Walk for December was ZAR 1.1 billion in tenant turnover. We have positive rent reversions of 3%, where before, we always had negative rent reversions, so it is really positive to see that. Our tenant turnover has increased by 5.6%, and we have well maintained our vacancies at 1.3%. At Woodlands, we completed 2 projects, the drive-through projects, which is a Chicken Lickens, Steers, and a Burger King. We increased the Woolworths with the opening of a Woolworths Cafe as well as the W Cellar. At Somerset Mall, we have completed the Checkers FreshX as well as Cinema, Ster-Kinekor, and the Pick 'n Pay Hypermarket was upgraded to the latest CBP specification. In Europe, our independent valuations on our portfolio has increased by EUR 11 million, and our total portfolio value is now EUR 586 million. Tenant turnover has increased by 12.5%, and trading density has increased by 12.2%. Vacancy levels, well maintained at only 0.3% of the portfolio. We improved the tenant mix by opening H&M store at Skopje City Mall, and that store opened last week. One of our key priorities we haven't achieved as yet is the exiting of Africa, and this has a effect on the business. We have reduced our in-country debt in Ghana and Kumasi with $8 million. We also have agreed revised terms with the sale of Ikeja City Mall with Actis, and Wilhelm will unpack further details in terms of that. We have reduced the vacancy that has been led Game by 85%, and we have secured good tenants like Melcom, Ocado as well as Decathlon. The Nter platform at Somerset Mall, we ran a pilot that was very successful. And subsequently, we are starting to secure third-party users for that technology platform, made very good progress with Nika, and the intention is to pilot at some of our malls in the next few weeks. Our distributable income, as I mentioned before, is now ZAR 668.3 million for the last 6 months. This was a decrease of 8.3%. The impact of the higher interest rates, and additional interest cost was about ZAR 134 million. And then if you look at ForEx losses as well as, what do you call it, rental concessions, we had to give our tenants in Nigeria, the impact was ZAR 33 million, for our 75%, that's ZAR 24.9 million. If you kind of normalize the distributable income by adding back these exceptions, you could have seen a positive growth of 13.5% due to the fact that we had to issue further shares, the distributable income per share has reduced by 13.4% to ZAR 176.1 per share. Our NAV per share has also reduced by ZAR 3.51 and it's now ZAR 58.77 per share. Given the higher interest rates, our ICR has reduced from 2.8x to 2.3x. And if you look at our cash ICR, that is currently 2.2x. If you look at our fully consolidated LTV, that has increased to 37.4%, which is below our internal level of 40%. The main reason for the increase in the LTV, obviously, with the revised transaction with Ikeja, we have adapted that to the selling price. We had some reduction in the value of our Africa investments. And then obviously, the $8 million we fund -- used to settle some of the Kumasi in country debt was given from our SA balance sheet. I will hand over now to Rubecca to give us an update on our South African performance. Thank you.

Good morning, everyone, and thank you, Morne. With 62% of the value of our investment property, South Africa remains the bulk of our business. SA contributes to 67% of our distributable income, making up 71% of our GLA. The center repositioning strategies continue to improve performance, and we see that realized in our positive results. Rental growth and driving tenant turnover remain a key focus for us. The tenant turnovers have increased by 5.6% for the 6 months ending December 2023. All 8 of our malls have shown great growth, with Rosebank Mall increasing by 9.7%, CapeGate by 9.4%, and Canal Walk by 6.6%. The top right graph indicates the effort ratio measuring the total cost of occupancy versus the tenant turnover. For the period under review, the effort ratio is 8.2%, which has improved compared to the period prior of 8.4%. This is a good indication that the rental growth will follow and maintain as we grow the tenant turnover. Although rental growth has started improving, the growth is lower than the rate of growth on the turnovers, but this is as a result of some reversions that we are still experiencing. This is a positive sign that our strategies implemented in the last financial year have started seeing the upturn. Trading density on the bottom left graph shows a growth of 4.9% for the period under review, with CapeGate, Rosebank Mall and Somerset showing the highest growth on the portfolio. In terms of category growth, we see a 13.4% growth in the Other category, which includes travel, luggage, convenience services and car sales, and we're pleased to see this recovery. Sports and Outdoor performed at a 10.8% growth, and Health and Beauty at a 9.9% growth. The footfall shown is positive and has a 5.8% increase for the period resulting in a marginal shift downwards in our spend per head. Our driven focus to attract shoppers through our marketing initiatives have certainly shown success on both positive footfall and turnover performance. The 2 graphs on the top of the page show our tenants' turnover and rental income over the last 5 years, reflecting the rolling 12 months ending December 23. As we had reported previously, our repositioning strategies commenced on the SA portfolio in 2019, and we made good progress until COVID. We continued with the repositioning, and we had an accelerated recovery in tenant turnover performance since 2021 with good double-digit growth for the last 2 years, which shows an above inflationary growth, indicative of a growth in the market share, and we see this trend continuing into the current period of review. Looking at the rental income, we see a positive growth of 3% for the 12 months ending December. As previously indicated, turnovers will ultimately drive income growth. And although there was a lag reported in November '23 from the graph shown, we have moved into positive territory. The average portfolio escalation has reduced to 6.6%, which should protect us from being over rented in the future. So when negotiating with tenants, our rental reductions, we look at using the turnover rental percentage as a mechanism to claw back on the negative effect of the lower escalation. And although from a low base, we have seen good growth in our turnover rental, which can be seen at the bottom right graph, showing an 18.8% growth for the period ending December 2023. Now looking at the top graph, we can see a positive shift on the reversion rate. Rental reversions are at a positive 3% for the last 12 months. The strategic decisions in terms of consolidating spaces to improve our tenant mix and to bring new flagship offerings which results in a downward rental growth on consolidated spaces when you compare it with relating to independent stores at a higher rental, but this has had a very positive impact on our turnover growth. The retail vacancy sits at a healthy 1.2%, whilst our offices, which only comprise 6.8% of the portfolio, has decreased to 32.8%. There remains demand for our offices as many businesses consider the negative impact of load shedding and they return to the office setup. We have upgraded our mall offices before with an improved sense of arrival that has positively impacted the appeal for new tenants. We continue with our upgrading of office projects to enable us to present a better value proposition. We have now also concluded the letting of Hyde Park North Office Block to Workshop 17, which will commence shortly. And once that whole transaction has been completed, we will be reducing our vacancies by a further 10%. The leasing workload for the year commenced at just under 189,000 square meters, and we've successfully concluded 34,000 square meters to date. The teams are currently busy with just over 75,000, which is under negotiation. At Canal Walk, we opened the following new stores: Calvin Klein Underwear, EcoFlow, FreeBird, Booba Beautea, FUTURELIFE, Studio 88, FITZ Jewellery, GelatoMania, EA7, Adidas, Mantelli’s Direct, HEYDUDE, Nukta and Burnt. Some of the store relocations included Freedom of Movement, The North Face, Tumi, RVCA, Fossil. And takealot pickup point has now been introduced into the mall. Freedom Adventure Park that took over the vacated space that New Metro left behind opened in December. The vacancy at Canal Walk sits at 0.5%. The vacancy at Rosebank Mall increased slightly to 2.9% compared to the previous reported period. And in this period, we have now opened the new Bubble tea, Boba tea, Chekich, UNIQ, Toys "R" Us, The Crazy Store, and recently opened Wimpy in December. Specsavers has relocated and upgraded in August, and the management of the SOKO district was internalized in December. As mentioned, the mall office foyer has been upgraded and the solar project has been completed. The team are currently busy with the e-hailing and wayfinding projects. CapeGate's vacancy remains at a low of 0.6%, and we secured new tenants -- for new stores for Nando's, BagWorld and Krispy Kreme. And Suzuki commencing trade in its new dealership in September last year. Hyde Park remains in high demand and opened Flight Center and Dora, Alchemy and Absolute Pets relocated and opened bigger new look stores, with Porter & Craft, Levingers and Nedbank completing revamps. Somerset Mall remains fully let, and we launched the new Checkers FreshX, which opened in November as well as the successful relaunch of the new Pick 'n Pay hypermarkets. Vida e and Booba Beautea beauty were also new tenants added to the tenant mix. At Woodlands Boulevard, we see a vacancy of 1%, and they have added Krispy Kreme, Yuppiechef and Ackermans women to the tenant mix. The completion and the trading of the drive-thru projects was achieved in December with the introduction of Burger King, Chicken Licken and Steers. Woolworths have completed their upgrade and expansion, and the center now bodes both a new Woolworths Cafe and a first W Celler in Pretoria. Mugg & Bean relocated and upgraded to a New Look store. The fund company is currently busy and the anticipated opening is later this month to enhance the entertainment node. The final phase of the solar project was completed in September. The restaurants in the newly upgraded food court at Clearwater Mall are trading exceptionally well. New stores include Espresso, Nomination, Sleepmasters, Vaperite, Jeep, Zorora, Nando's, Keedo, Porter & Craft and Steve Madden. The installation of our new escalators linking the ground and first floors were completed late last year, and the solar project was also completed in this period. Samsung, Catherin Walk, The Crazy Store, Absa, Standard Bank, Rochester, Sissy Boy, Capitec completed their upgrades and relocations into new stores, whilst H&M, Burger King, [indiscernible] and Wimpy also completed upgrades. At The Glen, we opened a new G-Star and Cosmic Comics, Arthur Ford, Nail Game beauty and UNIQ with, Absa, The Cross Trainer and Chateau Gateaux upgrading their stores. The South African portfolio has produced pleasing results, which again, reinforces the positive effects of our repositioning strategy. I would like to hand over to Rabia, who will take us through the Eastern European portfolio. Thank you.

Thanks, Rubecca, and good morning, everybody. Despite the ongoing global challenges which led to high inflation and subsequently to margins cut, the macroeconomic metrics is slowly returning to normal levels in most of the countries in Europe. . Europe in general continues to be resilient with a stable GDP growth, which will be greater with the expected June interest rate cut by the [ STP ] happens. Inflation in the Eurozone is expected to decline below 2.5% in '24, and stabilize at 2% from '25 onwards. The positive expected outlook is associated with local and regional trends across the continent. Most relevant ones are, first, the war in Ukraine drives further cooperation between the interstates. A positive development worth mentioning here is that Bulgaria and Romania will be joining the Schengen zone starting 31st of March this year, lifting their air and sea country borders with other Schengen members. Bulgaria is also expected to join the Eurozone starting 1st of January '25. The immediate effect would be an improvement of the country's rating and better integration within the European Union financial trade system. Second, supply chain remediation implemented by the member states led to construction costs decreased by the end of 2023. Third, the energy situation is under control. The fear of uncontrolled increase of energy cost did not materialize. On the other hand, renewables are on the rise. Fourth, commercial banks remain very profitable and well capitalized. New loans continue to grow with variance lending policies. First, ESG becomes more of standard rather than nice to have for the landlords as well as for the tenants. And sixth, strong consumption and expansion appetite, incremental drivers of the retail growth along its diversified segments, whether it's development of large shopping center or retail parks or remodeling of existing bonds. Now I'll start with the slides. Macroeconomic and retail environment. The real GDP growth in Bulgaria was 1.7% in '23 compared to the previous period. Expectations are for steady economic growth revolving around 3% from '24 onwards. Similar to the trend in the Eurozone, inflation in Bulgaria has started to decrease, but remains among the highest in the region, reaching 8.5% in '23 as opposed to 16% in '22, and is projected to further slow down to reach 3% in '24 and to even reach the [ SCB ] target of 2% in '25. Unemployment rate in Bulgaria remains one of the lowest at 4%, which is lower than the European average. The total average shopping density in Sofia is 300 square meters per 1,000 inhabitants. Croatia exhibits similar trends to Bulgaria, relatively stable GDP growth of 2.7% in '23, and expected to have a moderate growth of 2.8% from '24 onwards. The inflation pattern resembles the one observed in Bulgaria as well. However, with less fluctuation. Unemployment is forecasted to remain healthy at 5.8%. The shopping density in Zagreb is the highest within the portfolio with 570 square meters per 1,000 inhabitants. North Macedonia has stable GDP growth in the range of 2.5% to 3.5%. Unlike other economies, inflation peaked in '22, reaching 14%, declined to 10% in '23, and is expected to further decline to 4.3% in '24, approaching the targeted rate of 2% from '25 onwards. Unemployment trade remains high at 14%, and the shopping density in Skopje increased following the new opening of East Gate Mall and Diamond Mall from 79 to 309 square meters per 1,000 inhibitors. Next slide. An improvement can be observed when comparing the current period with the previous 6 months, the turnover improved by 12.5% compared to the previous period. The trend continued into January with an increase of 11.9%. Due to the improved turnover, the effort ratio improved by 0.3%, decreasing from 9.2% to 8.9% in December '23, and the trend continues into January '24. The trading density increased by 12.2% compared to the previous period. This is also due to an improved turnover in every month of the current year compared to the previous period. In January '24, the trend is similar with an improvement of 11.3%. Next slide. The footwall recorded a 2.1% increase during the current period compared to the same period last year. The overall positive trend continues into January '24. A spend per head is higher by 10.2% on average for the 6 months period compared to the same period last year. This is also due to an increase in turnover, while the footfall remains relatively stable. For the 6 months up to end of January '24, the spend per head further improved by 10.7%. Next slide, operations. For the 12 months ending December, the turnover gradually improved during the last couple of years, reaching 14.9% increase in '23 compared to the prior year. The trend in rental income in the last 5 years is similar with a 14% increase in '22, followed by 10.5% improvement in '23 on a year-on-year basis. The indexation movement follows the inflation curve, a significant increase during last years, reaching an average of 6.2% annual indexation in '22 and '23. Major upside of 13% and 46% is observed in the turnover rental income after the COVID period for the years '22 and '23, respectively. Next slide, leasing activity. During the financial period, renewal reversions were 0.6%, which relates to 10.6% of the total GLA. The new deals reversions was 2.9%, which relates to 2.8% of the total GLA. And the total average reversions of new deals and renewals is 1.1%, which relates to 13.4% of the total GLA. During the period, the renewal retention rate by a number of tenants was 68%. Further breakdown of the reversions includes flat reversions of 50% followed by positive reversions of 26% and negative reversions of 24%. The total occupancy is 99.7%, leaving 0.3% vacant coming from the mall in Sofia. The lease expiry workload over the next 5 years is evenly spread with the highest expiry in '27 at 20%. The last 2 slides combined. The lease work close at the beginning of the period was 27,925 square meters, out of which, 557 square meters were vacant. By the end of December '23, the workload was reduced to 4,075 square meters with vacancy of 511 square meters. In City Center one East in Zagreb, we have the new openings such as Catch, sneakers wear fresh up retailer and [indiscernible] other tenants such as KFC and Office Shoes were fully refurbished, while others were relocated to maximize the tenant mix potential. In City Center one West, also in Zagreb, we are busy preparing the food court extension, which aims to maintain its appeal and attractiveness, but also will add a new 5 food operators occupying an additional 360 square meters to the food court to be open to public in June this year. While the relocation of the nonfood-related tenants has been completed. In the mall in Sofia, the German value retailer, TEDi opens its flagship store in July '23, which is their top performing store in Bulgaria. H8S, the new brand of the former Bulgarian football player, Hristo Stoichkov, opened in October '23. Furthermore, new leases, relocations and refurbishments were executed during the period. This includes H&M, a new concept store with the first home concept introduced in Bulgaria. The Playground, the international supermarket, Billa, and the Kidz Corner, Guess and Terbodore all completed major upgrades in line with their new design concept. In Skopje City Mall, the center has shown strong performance and has maintained its leading position despite the increased market competition with the opening of Diamond Mall and East Gate Mall, but achieving significant gross in turnover rent of 30% compared to last year. A mall introduced a new fashion and called Sinsay, which started trading in December as well as [ Scout Outdoor Sport ], Nabi and Smart Living Home Decor. The successful relocation of -- and the expansion of the fashion in-house store was carried out as well, which was essential to accommodate the opening of 2 new tenants. Geox has completed its store renovation. And finally, the H&M store opened its door to the public on March 7 with a strong marketing campaign. These strategic moves are made to enhance our tenant mix and increase our appeal to customers. I will hand you over to Wilhelm now for his part of the presentation. Thank you.

Thanks, Rabia, and good morning, everybody. Starting with the macroeconomic environment. Currency devaluations created quite a challenging environment and dominated an otherwise very good operating performance. Nigeria relaxed exchange control in June last year. Whilst this is very positive for the country in the long term, it has created massive currency devaluation in the short term. As you can see from the graph, the Naira exchange rate tripled since June last year from 470 to 1,500 to the U.S. dollar. With rent being referenced to U.S. dollars, tenant's ability to pay their rent becomes strained, and we are managing collections and providing financial assistance to tenants to transition them through this difficult period, very similar to the a COVID period in South Africa 2 or 3 years ago. The Ghana City was slightly weaker in 2023 than in 2022. Hence, you will still see a difference between Ghana's results in dollars and in local currency. Fortunately, the currency depreciation in Ghana has slowed to a pace where you don't see the massive discrepancies of a year ago between the dollar and the Cedi results. As alluded to earlier, trading metrics in Ghana were slightly better in local currency than in dollars due to the depreciation of the Cedi. Turnover showed modest growth in local currency, despite the loss of Game in the current period. Shoprite's turnover benefited from the exit of Game and Shoprite is trading very well. Trading density growth was strong in local currency and in U.S. dollars. The major driver of that was the exit of Game, whose low trading density is no longer in the numbers. Foot count was down 2% as a result of the loss of Game as an anchor tenant in Ghana, coupled with lower disposable income. Despite the challenging economic climate, vacancies in the whole portfolio remained fairly constant at 17%. Subsequent to the period end, the vacancy has dropped to 11%, following the opening of Melcom last month at West Hills Mall in the ex-Game space. Excluding the remaining ex-Game space at Kumasi, the core vacancy is 7.2%. Significant progress has been made in securing replacement tenants for the 13,600 square meters previously occupied by Game in Ghana. Replacement tenants have commenced trading on 63% of the ex-Game space and leases for a further 11% have been signed. Negotiations are ongoing to fill the remaining 26% at Kumasi City Mall. Ikeja City Mall in Nigeria remains virtually fully lit. The liquidity constraints in Nigeria have eased following the exchange control reforms, but it is very far from what could be described as normal. We've managed to convert $7.5 million worth of Naira during this financial period, which we used to reduce in-country bank debt. As commented in November last year, we've worked with Actis on restructuring the original sale agreement. We've recently agreed revised nonbinding terms with Actis, and the parties are now redrafting binding legal agreements, which are subject to approval from both parties. The revised terms are mainly the following. The sale will be for a stake of 50% as opposed to 100% previously. We will use the sales proceeds to settle in-country bank debt as opposed to repatriating the sales proceeds to South Africa to settle South African bank debt. And thirdly, the sales price was lowered as a result of the currency devaluation and the currency volatility. All parties remain committed to the transaction, but currency volatility and visibility of procuring U.S. dollars in Nigeria are delaying closing of the transaction. We remain in discussions about the sale of the Ghana portfolio, but at the moment, there's nothing concrete to report. In conclusion, the rest of Africa portfolio has delivered a solid result given the economic difficulties in country, of which there are many, and we've put measures in place to manage those challenges. Thank you, and I'll hand over to Brett now for the financial report.

Good morning, everybody, and thanks Wilhelm. Before I start, just a word of thanks to all of the finance team members across the whole group for the effort that's gone into preparing the results this time again. So thank you very much. In today's presentation, I'm going to focus on the distributable income for the period under review as well as our treasury strategy and some of the treasury metrics. I will also touch on the updated guidance we've given for 2024. Distributable income increased by -- sorry, decreased by 8% from ZAR 728 million in December 2022 to ZAR 668 million. The main reason for the reduction is the anticipated increase in interest costs highlighted in the 2024 guidance that we gave in September 2023. Distributable income per share reduced by 13% from ZAR 0.203 to ZAR 0.176. Apart from the decrease in distributable income itself, an additional 20 million shares were issued with the 2023 DRIP. The 13% reduction is in line with the 2024 guidance of a 10% to 15% reduction in distributable income per share. If we look at distributable income before interest costs, this has increased by 6.5% despite the ZAR 33 million of exchange losses in Nigeria. Looking only at the South Africa and Eastern European portfolios, distributable income before interest increased 9.4% year-on-year. For the South Africa portfolio, total income was ZAR 63 million or 4.5% higher than in 2022. Contractual rental income was 3.6% higher, turnover rent 19% higher, and recoveries income 6% higher. All of these are positive compared to the changes we've seen in prior years and are supported by the positive rent reversions of 3% in the current period. Property expenses increased by 3.5% or ZAR 23 million. Doubtful debts increased by ZAR 12.5 million due to net recoveries actually in 2022, and overheads increased by ZAR 7 million, mainly due to adjustments on [ full ] features of long-term incentives. These are lower increases in expenses than we've also seen for some time. Net interest costs increased by ZAR 30 million as the all-in cost of funding increased from 8.4% to 8.9% in the current period. For the European portfolio, the numbers presented on the screen are in rand, so they include the effect of the 15% devaluation of the rand against the euro. This should not detract, however, from the strong performance in Europe, which I'll describe now. Rental and other lease revenue increased by 9%. This was boosted by a 50% increase in turnover rent. Recoveries income reduced by 22%, mainly due to the end of the electricity subsidies in Bulgaria following the spike in energy costs during 2022. Utility costs were 18% down. However, the depreciation charge increased as more items of plant and machinery were depreciated in line with group policies. And other costs increased by approximately 4%, which is below or at the low end of the current inflation rate. Net interest costs increased by EUR 5.5 million -- sorry, they increased from EUR 5.5 million to EUR 9 million as the cost of borrowings increased from 3.2% to 5%, following the increase in Euribor and the expiry of the historic interest rate hedges in July and June 2023. For Sub-Saharan Africa, distributable income reduced ZAR 30 million -- from a profit of ZAR 30 million to a loss of ZAR 9 million in the current period. The results are a function of the naira weakening against the dollar by approximately 30%, and the rand weakening against the dollar by approximately 8% in the period. Revenue reduced mainly due to a decrease in recovery income as most of the costs, which are recovered, are naira-denominated. Shoprite also started using its own generator, which further impacted our recovery income. The result is a ZAR 3 million decrease in net property income. Net interest costs increased ZAR 11 million, partly due to the devaluation of the rand against the dollar as well as the increase in interest rates prior to these costs being hedged in December 2022. The big item affecting the performance of the portfolio and of the group is the ZAR 33 million of realized foreign exchange losses. ZAR 18 million or roughly $1 million was realized on converting naira to dollars, as explained by Wilhelm. ZAR 13 million or $800,000 relates to concessions granted to tenants when we convert the dollar index rentals to naira on payment by the tenant. The concessions are only given when the tenants actually pay the rent. And without the concession, they simply don't pay and we would run out of cash pretty quickly. The ZAR 23 million -- sorry, the ZAR 25 million number that you see on the slide represents the increase in foreign exchange losses from 2022 to 2023, and is not the actual loss of ZAR 33 million incurred in the current period. We've allowed for tax in both the South Africa and the European portfolios as well as the minority interest in Ikeja. In summary, the strong performance of the South African and European portfolios has been dampened by the anticipated increase in interest costs across the group and the foreign exchange losses incurred in Ikeja, which were greater than had been contemplated. Turning then to the treasury. Total borrowings on the slide increased from ZAR 15.2 billion to ZAR 15.8 billion. This total includes a ZAR 522 million shareholders loan from Attacq to Ikeja. We have a similar pro rata loan, but it's not reflected on the balance sheet as it eliminates some consolidation. The loan from Attacq attack is included in our LTV calculation, which is why we've included it on this slide, but we're hoping to change this position with the lenders going forward. Bank borrowings, therefore, increased from ZAR 14.7 billion to ZAR 15.2 billion. The increase is only in South Africa as the European borrowings were reduced by EUR 5 million through amortization of the in-country debt. In South Africa, we concluded a new ZAR 500 million term facility and have drawn ZAR 200 million of our revolving credit facilities, mainly to fund capital expenditure. We refinanced the loan of ZAR 925 million that would have matured in January 2024 in 2 tranches: ZAR 500 million for 4 years, and ZAR 425 million for 4.5 years. The euro equity loan of ZAR 109 million that matured in July was refinanced in 4 tranches, ranging from 12 to 36 months. The first [ ZAR 20 million ] of this loan -- of these new loans mature in July 2024. EUR 10 million will be settled in surplus -- from surplus cash in Europe, and [ EUR 10 million ] will be refinanced with the new Europe -- euro-denominated revolving credit facility that will improve our flexibility in managing euro cash and interest costs going forward. The dollar debt in Nigeria remains unchanged from June 2023. Other than that, the interest will be fully paid up by the end of March 2024. We've broadened our spread of lenders in South Africa, and we continue to receive excellent support from all lenders in South Africa, Europe and Africa. The loan-to-value ratio increased from 36.3% in June '23 to 37.4% in December. As can be seen from the top left-hand graph, many factors contribute to this change, but the single largest is the reduction in the carrying value of Ikeja City Mall from $128 million to $700 -- sorry, to $85 million, and this accounted for [ 0.7 ] or [ 3 quarters ] nearly of the 1.7 -- sorry, 1.1% decrease -- increase in the LTV. Our accounting policy is to record investment property that is held for sale at the lower of the independent value or the agreed sales price. The adjustment down to ZAR 85 million is in line with the revised terms agreed with Actis as explained by Wilhelm. Looking forward, the top right-hand graph on the slide shows that the acquisition of Table Bay Mall will increase the LTV by 2.7% up to just over 40%. The acquisition is going to be funded with ZAR 500 million of the surplus cash we have, drawing ZAR 250 million of one of our revolving credit facilities and a new ZAR 900 million facility from a bank by issuing 2 bonds under the bond program. The resultant LTV of just over 40% is in line with our target range of 35% to 40%. The sale of the Ikeja City Mall in the manner contemplated and explained by Wilhelm will see it deconsolidated for accounting purposes and will reduce the LTV by up to 2.6% to below 38% once again. Also just to note that Table Bay Mall will remain unencumbered and the unencumbered assets of the group therefore increased to ZAR 5.3 billion. The portfolio LTV shown on the bottom left have changed slightly from June 2023. South Africa is up as a result of the increase in borrowings. Eastern Europe is down due to the reduction in borrowings and the increase in property valuations. The sub-Saharan Africa LTV that you see here is based on the independent valuation of Ikeja City Mall of $117 million, and excludes the Attacq shareholders' loan that I referred to earlier. We are continually looking at new ways to manage our treasury and where we would like to get to in terms of our borrowing and hedging maturity profiles. One of the changes we are making is to reduce the capital value of individual loans and spread maturities more evenly. You can see how this is unfolding when you look at the maturity profile of the rand borrowings, where we're targeting a loan value of approximately ZAR 500 million per tranche, and the more regular maturities that are falling within the periods during 2027 and 2028. This reduces the refinance risk and also creates the flexibility for us to settle loans more frequently in future. This principle will be applied in the other portfolios as we approach maturity dates and the refinancing of existing loans. As can be seen from the maturity profile, there are only 2 maturity windows in the 2024 calendar year. 2 bonds mature this week. They will be settled using revolving credit facilities with a view to refinancing these through a public auction or private placement in April 2024. I've already spoken about the EUR 20 million equity debt that matures in July. And that takes us to quarter 1 of 2025, when the bank loan to Ikeja City Mall matures. So just back to quarter 1 of 2025. When the bank loan to mature -- or the bank loan to Ikeja matures, we've already discussed refinancing this loan with the incumbent lender and those discussions are ongoing at the moment. A second tranche of the European equity debt also matures in January 2025. Depending on the available free cash in Europe, we may follow the same refinancing strategy as we're doing with the July 2024 maturity. In mid-2023, the Board approved a new interest rate hedging policy. We are progressing well with the implementation of this policy. However, it's still going to take some time to get to our ultimate goal, mainly because we don't want to unnecessarily increase our overall cost of funding during this relatively high point in the interest rate cycle by entering into too many long-dated hedges. We have continued hedging our interest rate exposure during the period as we still feel global and local risks are elevated, particularly in South Africa, ahead of the elections in May, and the uncertainty of their outcome. Our strategy currently favors interest rate -- sorry, interest rate caps at present, given the anticipated decrease or interest rate cuts later in the year, but we still aim to achieve a balance between caps and swaps by balance and to balance the premiums that we pay for swaps -- sorry, for caps against the more permanent and possibly more expensive, higher cost of swaps. We are also using more forward starting hedges, as can be seen with the 2 hedges, which mature in quarters 1 and 2 of 2024, where we have entered into forward starting swaps during the last 2 months -- sorry, the last 6 months to replace these. Our focus is to flatten the maturity profile of the interest rate hedges with a target of not more than 30% of total hedges maturing in a year, and not more than 10% in a quarter. The maturity profile of the rand hedges is moving in this direction, but there's still a bit of work to do with the euro and dollar-denominated portfolios. At the end of December 2023, approximately 85% of borrowing costs were hedged. The average duration of the South Africa hedges is distorted by the large maturity in quarter 1 of 2024. Once this expires, the average duration will increase to 2 years. Our interest cover ratio for the period was 2.3x. This reduced from 2.8x in the prior year as expected. And following the increase in interest rates, our banking covenant remains at 2x cover. To finish, we have updated our guidance for 2024 to a reduction in distributable income of 15% to 20% from 2023. Sorry, that's distributable income per share. This is 5% wider than the previous guidance given in September 2023. Corporate transactions were excluded from the previous guidance. And given the strong performance of the South African and Eastern European portfolios, the inclusion of the results of Table Bay Mall from 1 April, and the associated funding costs of the acquisition did not require a revision of the guidance. However, because of the actual foreign exchange losses incurred by Ikeja City Mall in the 6 months to December and the first quarter of 2024, the guidance has been revised. What happens in the last quarter of 2024 is currently difficult to predict, given the volatility in the naira dollar exchange rate. The revised guidance assumes no significant change in exchange rates from those in March 2024, no new corporate transactions other than implementation of the Table Bay Mall acquisition, and no major corporate or tenant failures. On that note, I hand you back to Morné.

Thank you very much, Brett, for that update. In closing, I will be handling the ESG. If we look at the environmental side of the business, our sustainability framework is built around 3 goals, namely creating spaces and connecting people, partnering with climate resilience, inclusivity across all our value chains. We have completed the solar projects at Woodlands, Rosebank and Clearwater, new solar projects at the Glen and CapeGate. At the Glen project, we will have the added benefit. It's happening on the top roof parking area, so it could actually provide some shade for the customers, and the course on the top deck, which is beneficial to that. In terms of CapeGate, there has been some delays getting the necessary approvals from the city of Cape Town. And as soon as that's been approved, we will proceed with the project. The zero waste program is doing very good work. We have reached the milestone of diverting 1,000 tons of organic waste from landfills. Water remained a big focus, and we have achieved big wins with savings we've got from the Propelair toilets so far. We are busy investigating water treatment plants at the different sites. On the social side, the Hyprop Foundation focused on 3 key things: education and skills development, community upliftment, and enterprise development. Our bursary students has all passed the academic year 2023, and we're excited to actually support them for 2024. In terms of our support, it's not just the financial support, the Hyprop Foundation also provide personal development programs as well as coaching. With our partner, Avocado Vision Training, we have successfully equipped 435 people in [indiscernible] with practical financial skills as well as budgeting. We also assisted the victims due to the fires in the inner city of Johannesburg with some donations. We are very excited about our new acquisition of Table Bay Mall. We expect transfer, as I mentioned before, to be happening at the end of March. And what I've just thought -- let's us show the numbers, and I just looked at specifically the December trading numbers compared to 2022, our total turnover has increased by 16.15% in Table Bay Mall. To put it in perspective, if you look at our existing portfolio, our existing portfolio increased by 8.1%. So that's double what we've done on the rest of the portfolio. Trading density up 12.6%. Vehicle count and footfall up. The vacancies remain the same more or less, but that value give us opportunity as we want to enhance the tenant mix to move tenants around. The big thing you need to look at is, specifically, the rent ratio, that is the 6 months average up until December. That is 5.43% compared to our portfolio again is at 7%.. So there you can actually see there is nice opportunities for growth in rental income. In terms of the implementation plan,Wayne Abegglen and his team has got a detailed implementation plan. But the key thing for us is going to be to focus on the quick wins. And what are those? It is to install full backup power, which the center doesn't have at this moment. And what it will mean is that tenants can trade during load shedding. Tenant turnover will increase and that will have a positive impact on your rental income. A lot of the leases that was completed on this property is pure turnover deals. We also want to complete the solar project which is currently underway. Obviously, the deal we've done when we bought this property, that is bought at cost. So there is a potential upside on that as well. We will be revising the trading hours as well as parking tariffs, and that is to attract shoppers for longer. We could get better savings and efficiencies by implementing our national contracts as and if required. Our focus will also be on non-GLA revenue. There's a lot of digital screens within the mall which is not being used to generate revenue at this point in time. In the longer term, it will be the focus to optimize the tenant mix and to rightsize the tenants offering. In our outlook, we have identified some headwinds, the one is the devaluation of the naira. Obviously, that has an impact on our tenants and the net operating income on Ikeja City Mall. And ultimately, it could have an impact on our in-country debt. There's a heightened political risk in terms of the election that's coming up in May 2024. I do believe or we believe, interest rates will remain higher for longer. And then given South Africa's challenges, I think SA retailers are facing some challenges. And obviously, there was a recent announcement by Pick 'n Pay. The way we want to mitigate the risk in Nigeria is, effectively, if we can conclude or implement the sale of Ikeja City Mall before June '24, we could mitigate that risk. Another plan we're also working on is to revisit, if we can get naira debt for the in-country debt, which will also mitigate some of the currency devaluation risk. In terms of the South African company, the only way we can mitigate that risk is with our diversification strategy, and we are working hard on that the whole time. Interest rates, I think Brett has touched quite a bit of detail in terms of the interest rates. What we have been doing actively on our portfolio is to ensure that we have got the right anchors. We've opened Checkers at most of our retail centers, except for Clearwater and Hyde Park Corner. When we look at a combination of all these risks, and I mean it's like warning signs. So we looked at those, and we thought to ourselves, what is the prudent thing to do? And therefore, we've decided to retain the dividend for the time being until we have mitigated these risks. The one, obviously, most importantly, is the reduction of the in-country debt in Nigeria. After these risk has been mitigated or subside, the interim dividend may be paid with part of the final dividend for FY '23 -- '24. Recycling of assets is also important for us, specifically Africa, and then we are looking to sell some of our local assets. Nothing to report at this point in time. Brett has touched on our revised guidance. In terms of projects in South Africa, we want to bake down the Table Bay Mall acquisition. At Somerset Mall, we went through a number of iterations to look at the extension we want to do there and rightsize of Edgars and Game. We do believe we have the right plan now. We're busy with the feasibility studies. Thereafter, it will be presented to our investment committee, and we hope to get into the ground quite soon on that project. The bathroom upgrade will commence at Somerset Mall. And as mentioned by Rubecca, we have secured Workshop-17 on the North Tower, and we will be upgrading that North Tower. Rabia has given quite a bit of updates in terms of what's happening in Bulgaria. Another positive thing about the Mall of Sofia and Bulgaria is the fact that we -- it's got the new metro station, that's going to be right next to the mall. Construction on that has started and that will be completed in 2026. They predict about 26 million customers will use that line on an annual basis. So that will be a big benefit for the mall in time to come. We need to apply for further rights in Croatia. That is a process what you call GUP. The GUP is quite a formal process that only opens in September, and then we can apply for further extension rights in Croatia. We want to complete the food court expansion and upgrade at City Center one West in Croatia by June of this year. In terms of Africa, we want to implement the sale of Ikeja City Mall, secure leases on the remaining 15% of the ex-Game space. And then obviously, we want secure deals on the Ghana properties. Nontangible assets, securing further clients for the inter-technology as well as roll out the pilot of the Nika gift cards on our portfolio. Thank you very much. And with that, I will -- we can open for our Q&A session.

Our first question comes from [indiscernible]. Assets held for resale at ZAR 1.7 billion matches liability associated of the ZAR1.66 billion at 31 December. Has the subsequent depreciation of the naira worsened disposition?

[indiscernible] Asset has been reduced to $85 million compared to its independent valuation of [ ZAR 117 million ]. The valuation of ZAR 85 million contemplates the ZAR 25 million capital injection, and that the bank debt would then be reduced as a consequence of that. Also included in the liabilities, you've got the ZAR 500 million shareholder loan from Attacq, which is effectively the equity. So it's not really a liability for purpose of comparing the assets and liabilities there. I think the third point to just note is in the [ ZAR 117 million ] valuation, the value were put on Ikeja, they have taken into account the discounts that are currently being given to tenants, and also that those would continue for an extended period of time. That's why the valuation came down from the [ $128 million ] last year, down to [ $117 million ] this year.

Then we have Francois from Anchor Stockbrokers ICR reduced to 2.3x. If the Table Bay acquisition is debt funded, the ICR would reduce to 2.0x, all things being equal? Are there any ICR covenants at risk for being breached?

Francois, the short answer is, we don't anticipate a breach of ICR covenants. On our calculations, after the acquisition of Table Bay Mall, the ICR will reduce to 2.1x cover. Obviously, selling in Ikeja improves that ICR quite substantially, particularly given the foreign exchange losses that are taken into account in calculating the ICR in the current period. We've also discussed where we see the ICR going with our lenders, so they are appraised of where we think it is, but we don't anticipate a breach of the ICR covenants.

We have here, [indiscernible], he's got 2 questions. The first is, can you confirm your intended dividend policy for FY '24? Is the intention still to distribute 75% of SA and EE distributable income?

Yes. The dividend policy hasn't changed. I think we want to keep to that dividend policy. So we will remain at 75% of the distributable income from South Africa as well as Europe. So that hasn't changed. I think the big thing is we have retained the interim dividend and the intention is if -- as and when these risks are mitigated, the intention is to pay it out and we can -- may pay it out at the final dividend.

Then your second question is, if the disposal of Ikeja does not materialize, will Hyprop be required to inject more equity? If so, how much?

It's not a definite requirement. Obviously, the bank funding is coming up to expiry. And there is a possibility if this transaction doesn't happen, you need to sit down with the bank, and there's a potential of reduction of the loans. If we can use the example what we are intend doing, it would be $25 million, of which, we have to put in 75%, if that is a requirement. You could also guarantee it, maybe from a Hyprop balance sheet. And therefore, you didn't have to put in real cash, but that liability will still come on your balance sheet. So if we haven't got the Actis transaction implemented, there is a possibility to reduce that debt.

Francois from Anchor stockbrokers. He's asking more questions around the SSA portfolio. What distributable income loss are you including in your guidance for the second half of 2024 from SSA.

So included in that's obviously the ZAR 33 million that was lost in the first 6 months on the foreign exchange losses. We then added -- we've lost another $1.4 million during the first quarter of 2024. Beyond that, as I said, it's very difficult to sort of guess what the number might be.

Second question is, is there any of the USD 1.5 billion debt in SSA secured against South African properties?

No, that's not secured against any SSA properties. When we started with the business, one of our key things was to reduce what we call the dollar equity debt, that was [indiscernible] balance sheet. We settled all of that dollar debt. So we don't have any dollar debt that is on our balance sheet in terms -- or secured from assets from our balance sheet, that is only secured with the in-country mortgage bonds over the properties. And then as we explained, there is a $3 million guarantee that has been provided in terms of the Kumasi debt, and that is between us and Attacq where we have guaranteed that. But over and above that, there's no support from the SSA balance sheet at this point in time.

Sorry, Morné, if I could just add to that. Francois, in the $1.5 million of debt you talked about for Africa, that includes the [ $500 million ] that's owed to Attacq. So really, we should be looking at the $1 billion -- or ZAR 1 billion that's owed to the banks. In addition to what Morné said, the -- there's a capital guarantee that we've agreed to give the banks. It hasn't yet been signed, for $3 million relating to the AttAfrica debt. You'll see we've also raised a financial liability in the balance sheet this time around for an interest guarantee that we've given on behalf of the AttAfrica Group of Companies, that's capped at about $3.2 million, and that's our pro rata share of the interest from the AttAfrica facilities that are outstanding at the moment.

Okay. Then the last question is, was the SSA USD cost of debt at 11%? Why is the repayment of this debt not prioritized over acquisitions?

So I think, firstly, on the cost of debt, I think you're looking at the pre-hedged cost of debt. The actual final hedge cost of debt is about 9.8%. It's very much in line with the unhedged cost of debt in South Africa. If we had to swap that from a dollar-denominated loan back to a rand denominated loan, I think it would be much of a muchness in terms of the interest costs. And I think our priority, really, is to do the transaction with Actis to be able to reduce the bank debt in Nigeria that way. And as Morné said, we are also in discussions with the bank about refinancing that debt, and we'll have to see where those discussions go over the next quarter.

Then we have another question from Anchor Stockbrokers, this time from [indiscernible], which is Europe specific. He's asking, is it possible to get the [ EPRA ] numbers for the Europe portfolio, like the [ EPRA ] fully topped up net initial yield for the portfolio.

I think we will have to maybe put that request through and then we can put it out to all the investors. I don't have it off hand now.

Francois from Anchor Stockbrokers again. He's asking if we can comment on the timing and magnitude of the inflation indexed rental increases expected in 2024?

On Europe?

Yes, Europe.

Francois, I think we'll have to get back to you on that. I'm not sure the final numbers have come through yet, but we'll come back to you next week.

We are currently actually busy with our budgets on our whole portfolio. So that's why we don't have all those numbers at hand at this point in time.

We have Yesh from Anchor Stockbrokers as well. He's got a couple of questions on Pick 'n Pay. The first is, how has the revamped Pick 'n Pay hypermarket store performing?

The performance has been positive since the opening and the numbers has been -- there was an increase in the December numbers. I can't recall. I think the Jan numbers is more or less in line with the previous month. And then February was also very much in line.

Can you give more insights into the conversations you're having with Pick 'n Pay regarding turning around the store performance in your portfolio, i.e., how many stores are they planning to close or rightsize in your portfolio?

What I can maybe give a little bit of background in terms of that, I mean, we've met with Pick 'n Pay's senior executives for the last 5 years. We have been raising concerns about the performance of specifically supermarkets in our portfolio because it's a key anchor in our portfolio. I must say, when we met with Sean as the new management team, I was quite inspired with the changes and the things he wants to bring in, obviously, just started in and he has to make changes. And what I can say, all Pick 'n Pay's rent to date has been paid. There's no arrears on any of their rentals. They haven't given us any notice on any store closures at this point in time. And they have pre -- actually Sean starting, there has been some upgrades on some of our stores, for example, CapeGate upgraded the store, that upgraded Woodlands, Clearwater as well as the Somerset Mall store. So there haven't been communication on any closure of any malls on stores.

And then the last question is, how are franchise versus corporate stores performing in your portfolio regarding Pick 'n Pay?

We only got corporate stores at this point in time, so we don't have any franchise stores.

We have a question from Yousaf. Does the company have any obligations to put money into Nigeria or AttAfrica?

Contractually, it is nonrecourse debt, meaning, effectively, you don't have to put in money. Obviously, there is overarching group covenants and default provisions. And obviously, we have looked at those. But I think from a South African perspective, if you hand back keys, to put it that way, I think you do run the risk of what will happen with your funding going forward with that specific bank. So I think you do have a reputational risk. If you want to write a pure thing in terms of contractual, no, we don't have obligation. Except for those guarantees, obviously, we have given, as disclosed by Brett.

I think the -- I mean, that's right, Morné. The guarantees we've disclosed. We also disclosed in our integrated report last year that Hyprop Mauritius has given a guarantee for the interest on the loan to Ikeja City Mall above the [ $8 million ] capitalization facility. The prospect of that [ $8 million ] being exceeded with the remaining term of the loan is very low given that we're into the last year of the loan.