Redefine Properties Limited (RDF.JO) Earnings Call Transcript & Summary

Good afternoon, everybody. Welcome to Redefine's annual results for the year ended 31 August 2025. As per usual, we're going to follow the same format. I'll talk about the strategic overview. Leon Kok, our Chief Operating Officer, will talk investing strategically from a group as well as from a local perspective. I will then talk about the Polish perspective. And Ntobeko Nyawo, our Chief Financial Officer, he will talk about optimizing capital, operating efficiently. And then I'll take over and finish off with engaging talent, growing reputation and the wrap-up. Okay. So just moving straight into the presentation itself. I think most of you are very familiar with our purpose, our vision, our mission and our primary goal, which, as you know, is to grow and improve cash flow, to create sustained value for all our stakeholders. And as you can see, our property asset platform is focused on 2 geographies being South Africa, 65-odd percent and 35-odd percent invested in the Polish region, and we'll unpack all of that with you this afternoon. In terms of some key financial outcomes, we are very, very pleased with these results. It indicates that the property cycle is on its upward trajectory, and I'm sure you'll agree with me as we go through the presentation that, that is a very appropriate subheading. But just in terms of some highlights, you'll see the property assets now just over ZAR 103 billion. Our loan-to-value ratio is back within our range of between 39% to 41% at 40.6%. Our distributable income per share came out at ZAR 0.524 per share, which is at the upper end of our market guidance. And you'll note that our dividend per share is ZAR 0.4584, growing 7.8%. It's in line with our distributable income growth in Rand terms at the same percentage at 7.8%. In terms of our NAV, you'll see that we've got pleasing growth there, driven principally by the local portfolios, asset values lifting, and we're coming out at ZAR 8.16 per share. Our interest cover ratio, very comfortable at 2.2x, given that interest rates have eased and we had some pretty steep interest rates during the course of financial year 2025, as you know. South African occupancy improving to 93.5% and our EPP core portfolio's occupancy at 99.4%, similarly improving on its prior year position, and we're very pleased with that outcome. So just in terms of some strategic outcomes, there are lots more, but the key ones for us are, as you can see, total assets have grown by ZAR 4.4 billion to ZAR 106.3 billion. Our property values in South Africa are up ZAR 1.9 billion. Poland, the values are steady, slight increase at ZAR 49.4 million. We've recycled capital totaling ZAR 1.1 billion in South Africa. And we sold one asset, Power Park Olsztyn in Poland for a net proceeds of ZAR 163 million. Our loan-to-value ratio has been lowered by 1.7% to 40.6%. Debt renewal facilities have been renewed for 2025, totaling ZAR 7.9 billion. And you'll note from Ntobeko's presentation that good work has been done for the coming year as well. And we find ourselves in a very strong liquidity position with access to committed undrawn facilities and cash of just under ZAR 7 billion at ZAR 6.7 billion. If you're looking at operating efficiently, distributable income growth of 7.8% to ZAR 3.6 billion. We're happy with our net operating profit margin having lifted by 1.1% to 76.2%. And you'll note that, that is coming principally from a strong performance from EPP this year. Our rental reversions coming off a negative, still negative in South Africa, but improving, as you can see, to minus 5.2% overall for the group in South Africa and in Poland, positive plus 4%, both trending positively. From a staffing perspective, we have a healthy staff engagement. If you have a look at our learnership program now in its 12th year, we will have had 518 learners complete the program by the end of this year. And we have a very stable employee retention rate, both in South Africa and in Poland. Looking at growing reputation, we are very proud of the fact that for the ninth consecutive year, we have been in the top 3 positions in EY's excellence in integrated reporting. Redefine as well as EPP achieved an 81 score from GRESB this year with EPP improving significantly from the prior year's 70 score. And then lastly, but also very importantly, we now have 9 net zero carbon Level 2 certifications. This year, we added 3 to the previous year's 6. So with that, I'm now going to hand over to Leon.

Good afternoon, everyone. On our property asset platform, as Andrew indicated, our property assets under management is now at ZAR 103 billion, roughly 64%, 65% in South Africa at ZAR 66.8 billion. It's been a fairly busy year on the capital allocation front. As you can see in South Africa, we spent ZAR 1.2 billion on keeping our properties relevant and well sought after. And as you can see, it's quite nicely split between the 3 sectors. Incidentally, that ZAR 1.1 billion was roughly funded by disposal activity in South Africa during the year. On the South African front, our properties at ZAR 65.5 billion. As you can see over the period, we've been fairly active in terms of recycling and reinvesting in the portfolio. So you can see the number of properties now at ZAR 228 million -- 228 properties, an average value of ZAR 17,500. Now that's a consequence of 2 things. Obviously, the increase in actual valuation metrics, but more importantly, it indicates that we are selling our secondary and lower quality properties, which drives that rate per square meter upwards. The portfolio saw retail buyers at 45% invested in our retail assets. And we're very pleased with our tenants profile in terms of 75% of our tenants is what we classify as A grade. Similarly, our lease expiry profile, as you can see, particularly in '26, fairly undemanding kind of challenge. And you'll see in all 3 sectors, it's roughly at that 15%. In fact, in our industrial sector, it's as low as 8% for next year. In terms of the outcomes, very happy that all our operating metrics turned out to be positive for this year, and that certainly has given us that boost in order to produce the growth that we reported on earlier. Similarly, it positions us well for a growing 2026. As you can see, our occupancy at 93.5%, an improvement there, particularly on the back of very good letting in our industrial portfolio. On the right-hand side, we're giving you an analysis of where our vacancy sits in the 3 sectors, and we try to also give you an indication of what it's worth. As you can see, with the vacancy by GMR substantially lower than by GLA indicates that, that is our secondary kind of assets that is vacant. And particularly, if you can see in the retail sector, where the GMR potential is only 2.4% relative to the 5.9% from a GLA point of view. Our tenant retention and renewal success rates also very healthy and at the high end of where we'd like it to be. Our weighted average unexpired lease term still at 3 years, which in our view is very healthy. And then the developments in the back of the booklet, you'll see the detail around which properties we are busy developing and where that development spend is going. And our noncore disposals of ZAR 1.1 billion. The other aspect that we're very happy about, as you can see on the right-hand side, all 3 sectors produced positive valuation growth of our external valuations for the full year, obviously driven by our retail and industrial portfolio. The other aspect that we're quite pleased about is that solar PV installed capacity at 58.4 megawatt peaks. So since last year, we managed to increase that by 35%. And if we manage to install that 8.4 megawatt peaks, which is in progress, our total installed capacity will go to 64 megawatt peaks, which is roughly a 50% increase on FY '24, which will certainly stand us in good stead from a renewable energy point of view, but more importantly, assist us with margin management. On our Retail front, portfolio, which is still biased towards regional convenience centers. So we quite like the composition of the portfolio. And as you can see, similarly, the valuation metrics panning out on that front, and in particular, our regional convenience centers performing exceptionally well. The one new asset, obviously, that was added during the period is Pan Africa in [ Alex ]. From an outcome point of view, our active vacancy at 94.1%. That slight blip in occupancy is as a consequence of mainly [indiscernible] coming into the mix. The positive of that, though, is that whatever letting we are able to do with in that space is going to be revenue enhancing given that most of our [indiscernible] leases was on a turnover lease and a very low average rate rental rate. So that certainly will assist us to grow revenue. The renewal reversions at 1%, I think we are being punitive to ourselves because included in that number is our Park Meadows, which is currently subject to redevelopment. If I exclude Park Meadows, our renewal reversion would have been a plus 2% for the period, which certainly is a key focus area within our retail portfolio for us. Trading density growth of 4.7% puts us in a position where the rent to turnover of 7.4% in our view, is very sustainable and does indicate that we have the ability to be more aggressive in our renewal reversion negotiation. Very good letting activity during the period, 291,000 square meters, of which 34% were new deals. Tenant retention renewal success rate similarly very positive. And you can look at our renewal activity, 80% of our leases is flat or positive, which again speaks to the strength of our malls as well as that affordable rent to turnover ratio. And the leasing maturity profile, as I indicated, a fairly undemanding challenge for '26 at only 16% of GLA coming up for renewal. On the office front, one aspect in my view that is quite pleasing for us in this is that 96% of our portfolio is invested in A and premium grade. So we're not denying that demand is somewhat limited in the office sector. However, what we have seen is that flight to quality. Now our portfolio has the ability to get more than our fair share of that demand that is floating given that our -- most of our assets in the premium and A-grade category. As you can see also from a valuation performance point of view, the premium and A grade is where the performance came through. In terms of the outcomes, slight dip in occupancy at 87%. We set ourselves a challenge this year of hopefully reducing that occupancy or increasing the occupancy to above 90%, in other words, reducing the vacancy to a sub-10%. It's going to be a challenge, but we certainly believe that we have the ability to get that further down. Renewal reversions at minus 13%, still fairly negative, and that's a consequence of principally one lease during the period that skewed that number at 115 West. If we were to exclude that, that would have been a negative 3%. So our view for going forward is probably going to -- our renewal reversion negative -- we're still going to be negative this year, but possibly close to a 10% or even sub-10% if we are successful in some of our renewals. Leasing activity, 262,000, which again indicates that the leasing market is busy. Of that, 44% were new deals. Weighted average lease escalation still at 6.9%, which is kind of average where we would like it to end, but our leases we negotiate between 6.5% to 7.5%. Tenant retention renewal success rate also very positive. And again, our lease expiry profile at 16%, which indicates that '26, there's not -- what we'd like to see is that there's no spikes in that lease expiry profile. And again, just to give you some indication of where our renewal reversions sit, even though by GLA, the bulk of it was a negative, but there certainly are positive reversions coming through and then particularly in our well-performing notes, obviously, Western Cape as well as up here in Rosebank and Bryanston and certain areas of Sandton. On the industrial front, another very strong performance by our industrial portfolio. And as you can see across the board in all our types of assets, valuation performance coming through. The industrial portfolio benefited greatly from very decent letting activity at an occupancy of 97.3% and our renewal reversions at 0.8%. I was slightly disappointed by that number, if it wasn't for one lease in particular, that number would have been closer to a plus 4%, which again speaks to the very decent demand that we are seeing, particularly for logistics and well-located warehouses. Our weighted average unexpired lease term at 4.6 years, still very healthy. Letting activity at 220,000 square meters, similarly good and our lease -- average lease escalation at 6.5%, certainly positions this portfolio for growth. The one area, though, unfortunately, that we weren't able to do was to relet at Cato Ridge, the short-term Toyota lease. So that for us is a key focus area for FY '26. And as you can see on the lease expiry front, only 8% coming up for renewal this year. And then lastly, just on our alternative income, very chucked with this performance that we managed to break that ZAR 100 million barrier, and we've grown our revenue by 15.6% year-on-year. So that certainly for us sets a nice base from which we can hopefully grow even further. But as you can see, the main thrust of that coming through and exterior media, kiosks and exhibitions. And with that, I'm going to hand over to Andrew for Poland.

Thanks, Leon. Okay. So just moving on to Poland. As you can see, not much has changed over the past year or so from an asset allocation perspective. It is worth noting that the self-storage exposure has basically doubled from ZAR 0.5 billion to ZAR 1 billion this year, principally due to development activity. And ELI, as you know, is equity accounted. So the see-through value of the assets invested in ELI or logistics in Poland is just on ZAR 10 billion. Okay. Just moving on to some salient outcomes for the Polish region. A standout outcome would be the cost reduction plan that was implemented during the course of FY '25, significantly improving EPP's operating profit margin, and Ntobeko will be touching on that as well in his presentation. And I just want to go back and say there is a slide on it that the focus on reducing complexity and high leverage in the joint ventures remains a significant focus. Unfortunately, for us, the institutional investment activity in that region is subdued, and it's principally driven by geopolitical concerns in the region. There is a process underway to sell an office in Poznan called Malta, and we'll give feedback on that as we journey along. Renewable energy is strong feature in EPP's case where roughly 25% of their future consumption will be from renewable energy sources. We've made good progress to eliminate EPP's core debt amortization. Once again, and Ntobeko will touch on that. And then just ELI, this year had a good year. They've doubled their contribution to the group coming off a base of ZAR 100 million, delivering just over ZAR 200 million in this period. And then there are 7 self-storage developments that are in advanced stages of going to ground. That over the next 3 to 5 years or so, maybe sooner, will effectively double the net lettable area of our self-storage exposure, which will take that platform to institutional grade, which is very important to attract an institutional investor to further grow that segment. Just in terms of the joint ventures, I've already mentioned that there's been a significant focus, and they will continue in 2026 to be one. The Horse Group or the M1 portfolio, as I prefer to call it, we are doing very well in terms of selling surplus land to residential developers, all subject to rezoning. So there are different phases to the implementation of that disposal process. And then the 2 power parks remain on the market. In terms of the Henderson JV, that's an office JV -- there are 3 properties in this joint venture, and Malta will be the first office park where we are looking to sell that off first. If we can and we're successful, the other 2 will follow suit. And then just on ELI, as you can see, there's a big focus on improving the equity yield that is resulting in extra contribution to the overall distributable income. But at this point in time, given that we have now split the portfolio into 2 with Madison, we have now optionality with this portfolio. So whilst we wait for the existing stock in the market to be sold off, there was about 10% of the market up for sale. I think it might have come down a bit through some portfolios that have been withdrawn. But whilst we wait for that market to come alive from a transactional perspective, it gives us the opportunity to improve the earnings profile of that. And there is already, I see a question from someone on that, and we will deal with it there. In terms of EPP's core portfolio, as you can see, it's pretty stable and nothing really has changed over the period. But in terms of outcomes, you'll see a very pleasing set of metrics here, where everything is trending positive. Occupancy, as we said earlier, at 99.4%, virtually fully let. The indexation is a function of the Eurozone inflation rate at 2.1%. Renewal reversions moving positively. Weighted average lease term stable. Tenant retention, very healthy at 95%. Yes, annual footfall is slightly down, but I just want to mention that overall tenant sales have been unaffected by the lower footfall. And you'll see a strong renewal success rate by GLA at 77-odd percent and very pleasing that the rent-to-sales ratio is at 9%, well below the 10% level. If you're above 10%, then you need to be concerned. In terms of the joint ventures, you'll note here that there is a lot of activity here. But on the retail ones, particularly the Horse Group as well as Galeria M?ociny, you'll note there's negative reversions there of 3.9% and 9.1%, respectively. This is a consequence of significant leasing activity during the period. For example, in the M1 case, we had 13-odd percent of the GLA that was renewed and a further just under 8% were new lets. That did drive occupancy slightly upwards to 98.3%, which was about a positive 1% improvement. And then if you look at Galeria M?ociny that in this financial period celebrated their fifth year of being open, there was a lot of activity there similarly, where they had about 10% of the GLA renewed and a further 11-odd percent, which were new lets. Those new lets were effectively to reposition and refocus the tenant mix which has driven a very pleasing rent-to-sales outcome ratio, which you'll see that 9.8% previously, it was well over 10%. So I think we've got a far better and more sustainable tenant base in Galeria M?ociny, although we've had these negative reversions in this period. And as you can see, most of the other -- from a retail perspective, metrics, largely positive or stable. Henderson being an office-focused joint venture, you'll note that there's pressure on occupancy there. They have had almost 5% lower occupancy from the prior year from 82-odd percent down to the 77% level. But Henderson does operate in very difficult office nodes being Krakow, Lodz and Pozna?. Okay. Just moving on to the ELI portfolio. Once again, as I said earlier, ZAR 10-odd billion invested from an asset perspective. If you have a look at the metrics here, largely in line with last year because there has been no development activity in this period. If you just look at the outcomes here for ELI, very happy that occupancy has been lifted from 91-odd percent to 97-odd percent in this period. That has contributed quite significantly to the improved uplift in contribution to the distributable income from a group perspective. Renewal success, very healthy at 62%. Renewal growth just under 7%. Market rentals for logistics in Poland are growing, and this is mainly because development activity has slowed down. Unfortunately, for us, and this is the time in your career when you want a very low weighted average unexpired lease term at 5 years, unfortunately, we don't have the full benefit of that renewal growth. But what is very encouraging is that our portfolio is under-rented. So it bodes well for future valuations and future income growth as those leases mature and we're able to renew them at better market rentals. Tenant retention, very healthy at 67%. It's positive year-on-year. Indexation once again applies from a Eurozone inflation point of view. And as you will see there, almost 89% of the GLA is let to national and international tenants. And we've been very successful with the relets and renewals of roughly 2,800 square meters of office space -- sorry, industrial space at an average rental of just under EUR 5 per square meter. In terms of self-storage, as I said, this is an expansion of a very low base. The carrying value, as you can see there is almost doubled in the period, principally because we had a development that was completed. And then you'll also see there that we are growing our asset base, and that is leading to, unfortunately, a bit of a pressure on the occupancy levels, but that is because of the new development that came on stream at 66%. Four developments are in progress. In 2026, they will add 18,800 of that 33,000-odd square meters of developments pipeline that I spoke about earlier in 2026. So moving on to what we are going to be focusing on in 2026 from an investing strategically perspective. We will continue to exercise discipline when allocating capital. Restructuring the offshore joint ventures to simplify the asset base will remain a focus. Unfortunately, for us, we do have an element of restraint in that we need institutional investment activity to return to Poland. And the reason for that simply is that you can do single asset transactions, but currently at very opportunistic yields, which is value destructive and doesn't make sense to us. We want to do portfolio transactions that are sensible. And then very importantly, fostering tenant engagement to understand the evolving needs. We need to provide space to people that is relevant to their needs and is proactive. And the only way to do the adjustments proactively is to understand their needs, and this is where communication is so important. So with that, I'm now going to hand over to Ntobeko.

Thank you, Andrew. Good afternoon, everyone. I think if we just look on the optimizing capital, we've been very focused on balance sheet strength. That is for us just to drive the growth and some of the growth that we started to deliver as we talk through the FY '25 results. Just on some of the key outcomes on the funding, I think really for us, the credit metrics that are improving, that's really what we believe is going to enable long-term value creation. So just some of the significant outcomes, the LTV, which last year was at 42.3%, it's very pleasing that is fairly now within our range at 40.6%. Another key metric that we watch quite closely is our ICR, which has improved to 2.2x compared to the 2.1x that we recorded last year. And quite healthy, as Andrew has touched on, the ZAR 6.7 billion of liquidity, which ZAR 5.1 billion of that is the facilities that are committed and undrawn and then the ZAR 1.6 billion was cash on hand. Also pleasing on the debt margins, we've seen on the group weighted average cost of debt coming down by 50 basis points to 7%. If you break that up on our rand-denominated cost of debt, we've also seen a corresponding margin improvement to 8.9% from the 9.2% that we printed last year. And then on the FX debt, we also saw a bit of an improvement from 5.1% to 4.5%. Given that the interest rate levels are in their long-term averages, we've also now started to take opportunity of widening tenor. If you look at our total percentage debt hedged, we've increased that from 78.9% to 83.2%. On the group weighted average term of debt, that is quite healthy at just above 3 years at 3.2 years. And we're also pleased that our rating, we maintain our credit rating of Moody's of Ba2 with a stable outlook. Then if we just go to the loan-to-value ratio, firmly within our medium target range of 38% to 41%. I think if you look at the bridge, really the key issues there because the cash that we generate and the DV that over time should fairly match is really the valuation impact, the ZAR 1.9 billion uplift giving us that ZAR 0.8 and also the cash, which is ZAR [indiscernible] that we retained by issuing 150 million shares in the DRIP. That's also nicely contributing to the reduction of our loan-to-value ratio. We do give you the sensitivities on the bottom left in terms of the property values, which is one of the drivers over time is that a 1% movement, which is ZAR 700 million equates to 0.3% in the South African portfolio. In the EPP is the property values moved by 1%, which is ZAR 0.2 billion. That will have a 0.1% impact on the LTV. And we're pleased to report that there were no covenant breaches, maintain all the covenants quite healthy with the ICR still in this FY '25 reporting period being relaxed to 1.75x. And then in FY '26 in August, it will then revert to 2x. But we're quite comfortable as we're building and we've seen with this ICR of 2.2x is getting quite healthy, and we expect that to improve. Our see-through gearing from its peak, it has been coming down, and that has been gradually. And we're now seeing that in FY '25, that is at 46.7%. And really, that will be through debt amortization and all the other things on a gradual basis. To Andrew's point, we will need a transaction in one of the joint ventures to actually meaningfully bring that to the levels that are much more closer to our comfort levels. On the funding profile, I think quite proactively, now we really have dealt with most of our maturities in the near term. We're now proactively just working on FY '27 and FY '28, where we've got early refinancing opportunities. In this year, we've got -- if we look at '26, the ZAR 3.1 billion, which is 7% of our group debt that is coming up in FY '26. Out of that, there is in SA, there's term funding of ZAR 1.2 billion, and there's an EPP term facility of 0.9, which is the M?ociny asset. And then we also got some DCM that are coming up in the bond market of ZAR 1 billion. In SA, I think we're pleased that out of that 3.1% that is -- that has the 1.2% of SA has been refinanced at 4 years at a 3 months EURIBOR at plus a margin of 2%. And if you compare that to the previous -- to the maturing margin, we achieved a margin compression at 65 basis points in that transaction, which is very, very pleasing for us. And then subsequently as well to year-end, we also took some proactive opportunities where we refinanced in SA ZAR 4.1 billion of secured debt between 3.8 and 5.5 year tenures. And that also resulted in a margin compression from the 150 basis average to 134 basis points. And then we're actively now working on our FY '28 maturities, which are largely in the EPP core portfolio, about 5.3% of that is really where in that '28 bucket, we've got opportunities that we're proactively working on. Overall, very, very pleasing for us is that our margin in SA reduced by 20 basis points to 1.6% in FY '25. Last year, it was 1.8%. But I think the longer-term trend tells really the proactive strategy here that we've taken on board. In FY 2022, that margin was 2.1%, and now it's coming at 1.6%. Then if we look at some of our -- on our hedging, I think really here for us is that the low inflation and where the long-term averages are is giving us the opportunity to really start extending tenor. So we had ZAR 9.4 billion of interest swaps that matured with an average fixed of 7.1%. We entered new ones at ZAR 9.5 billion at a fixed of 7.1%, but we upped the tenor to 1.8 years. And then post the reporting period, we also had -- we took out ZAR 2 billion of interest swaps, which were at a fixed rate of 6.7%. And there also equally, we also extended the tenor to 2 years. So you can see that is proactively what we'll do as the hedging becomes attractive. On the cross-currency side, we also had EUR 299 million of expiries, which we refinanced at a fixed rate of 3.9%, and that was just a replacement as we roll and we kept that on a 1-year roll going forward. The point I was making, ELI, if you just look at the bottom left on your screen, we have our group margin split between SA and EPP. The group margin at 1.8% in SA, it's 1.7%. And then if you cast your mind back into '23, that margin in SA, which is now 1.7% was 2.1%. And at a group level, that was 2.2%, and that has come down now to the 1.8%. We continue here, I think, to diversify our funding base is one of our key focus. But I think just to show you that some of the opportunities that we're starting to see now are largely in our DCM program, just given the liquidity there and the margin compression that we believe with our credit metrics improving, we can actually achieve here. Our focus areas in terms of this strategic priority for us is to really expand our sources of capital. It is the focus that Andrew touched on, on reducing our see-through LTV. And I think also our hedging has to be an active strategy given where we are in the interest rate cycle and given some of the anticipated benefits of lower -- further lower interest rates if as a family then goes to lower inflation with the revised target of 3%. The outcomes that we expect out of that is the lower cost of capital that is effectively managed through market cycles. We also really -- that if we address our see-through LTV, that will improve the pricing of our equity, and then we could really start doing exciting things in the business. And then I think in terms of the hedging for us, it's really to manage the predictability of our funding cost in relation to our earnings volatility over time and give you certainty in terms of that. Then if we touch on operating efficiently, I think really for us, it's very pleasing that the business is well positioned for organic growth that will lift the operating margins on a gradual basis going forward. Let's look at some of the key outcomes. I think it's -- the margin improvement for us is really what is driving the quality of our earnings. If we look at the group distributable income, it grew by 7.8% to ZAR 3.6 billion. That is very pleasing in this environment to achieve that growth. And I think also corresponding to that is the -- in euro terms, the improving contribution from our business in EPP that when we restructured, we are very clear that EPP will meet -- will generate more than EUR 50 million of earnings. We're pleased that this year, it broke through that and delivered EUR 52.2 million in distributable income. If you take that outcome and just look the corresponding margin improvement of 1.1% to the net operating profit margin of 76.2% and you break it down in SA, very stable margins at 78.4% and then with a big uplift that Andrew touched on coming from EPP, moving it to 71.3%. And then from a group level, then achieving that 76.2%. I think our focus on the things that are -- also other than just growing revenue, we do pay a lot of attention to efficiencies. And I think one of those is our solar that this year contributed ZAR 156.6 million in savings. That's also part of our margin. Also in our digital ratio where we're really trying to leverage technology to serve our tenants better, that ratio that we measure has improved to 33.7%. And I think also managing on the demand side in EPP is very pleasing to see the decreasing consumption by 1.8%. Then if we look at the healthiness of our cash collection in the business, I think it's very pleasing both in South Africa and in Poland that our cash collection ratio is above 99% in South Africa being 99.3% and then in EPP in the directly held assets being 99.8%. Then if we just break down our group distributable income, that grew from ZAR 3.378 million to ZAR 3.640 million, largely, I think for us, the expansions, which was the acquisition there, that ZAR 140 million include our 2 key marquee acquisitions in Mall of the South and in Pan. And those are contributing quite significantly to that number. And also the EPP uptick, which I will just deal with it in the next slide. And then also the pleasing contribution in the improved contribution from Redefine Europe. I think when we last spoke, we did indicate that the portfolio split will result in ELI having about EUR 2.7 million of additional distributable income. But I think also -- that is a large number that contributed to ELI, but also ELI leasing activity lifting its occupancies into the deep 90s was also very pleasing and supporting that positive outcome. Then from the debt -- bad debt point of view, I think if you look at last year, that number was at 60 and now this year is at 30. So that's why you've got an uplift of 30%. That's really just the quality and getting of the tenants that we continue to focus on the quality of the tenants. And then there's a little bit of -- in terms of the cost of debt, as we have spoken to the margins and some of the lower rates also that coming through. And then we also have the antecedent because of the trip shares, that 150 million trip shares that we issued. I think on the headwinds, just to deal with some key numbers there. On the FECs, -- it's really the notionals. We took EUR 25 million that we settled this year compared to the EUR 52 million last year. That's largely because in the prior year, we had turnover proceeds that we had to hedge for. And then that's what if you put all of that really pleasing performance from the business from positive operational metrics that are driving our profitable growth. If we just unpack EPP, I think the administration cost is one number that really contributed EUR 4 million. And I think that was driven by a number of initiatives. One key initiative that we did there is that we in-source the accounting function so that we could standardize group reporting and all the things that we want to achieve in that part of our business, and that really delivered efficiencies of about EUR 1 million. Then the net fee income is the charge that we charge to the joint ventures that also improved that was renegotiated. And then the NOI at EUR 2 million, that's really driven by some of the positive operational aspects that Andrew was talking about. In terms of the headwinds, I think there's really one call out here is the once-off that related to the M1 metro claim, EUR 5 million of cash that we had ring-fenced that was released in the prior year and it's not in these numbers. Therefore, it will have the impact in terms of the numbers that we achieved from Horse. But EPP breaking through EUR 52 million, very pleasing for us. Then just to touch on the NAV. I think also here to see our NAV growing by EUR 0.282 to EUR 8.165, very pleasing. Largely is the valuation. If you look at the ZAR 1.9 that translates to ZAR 0.268 in the valuation because the profit that we generate and you knock off the dividend, those 2 should be fairly stable over time. And we really -- then you will see the currency factor on the asset side with the 26 -- on our offshore business on the 26.9% and then the 10.9% on the liability side coming through. And then those are the numbers that drive our NAV per share. In terms of the final dividend for the year ended 31 August, I think really, you can see the high quality of our earnings, the healthy liquidity that we've continued to demonstrate and the encouraging prospects that will then support this improved payout ratio to 87.5%, which was 85% in the prior period. But I think that is very consistent for us with our 80% to 90% payout ratio that we've always articulated. And I think it factors all the other -- the usual factors in terms of the CapEx requirements, managing liquidity and also, we're pleased that at this payout ratio level, there is no tax leakage and also maintaining our loan-to-value ratio as well as also being proactive in terms of the direction where the ICR is heading. If we then look at the priorities and the focus areas in operating efficiently, I think very clearly, we've set ourselves an internal target of lifting our margins in the medium term to about 80%. And you can see that 76.2% is heading in the right direction, and we're going to focus on that. It's going to be a combination of what happens in the engine of our business from a leasing point of view as well as being very cautious in terms of the cost and the value that we could derive out of the money we spend. And then in terms of restoring the earnings base, I think it's pleasing for us to grow our earnings this year by 7.8%. We will focus and maintain that going forward. Accelerating technology is really at the heart of that. It's really how about -- in our digital transformation strategy at the center of it is how we could improve doing business with our tenants. Some of the anticipated outcomes if we focus on those areas, it's really to drive -- to continue driving our organic distributed income growth. And then also improve our earnings to deliver an exciting total return target. And then also, I think lastly, just also to improve efficiencies and strengthen processes by leveraging technology. And I think with that, I would like to share with you some of -- in the AV format, just some of the initiatives that we've achieved in terms of our digital transformation journey, and then Andrew will come back to conclude. [Presentation]

So moving on to our human capital, just some key outcomes. As you will see there, our employee retention rate, very stable, both in South Africa as well as in Poland, both in the 93-odd percent region. I mentioned our learnership program earlier, but it is just to note in its 12th year. And this year, we've had 12,000 applications for the 2025-'26 intake. Just in terms of our Net Promoter Score that we do on a regular basis, you'll note there that South Africa has moved a little bit backwards. We understand there are reasons for it, mostly driven by our insistence that there is a return to work, no longer flexible working policy in place. And then EPP has transformed their relationship with their staff, improving by 11 from minus 5 to 6, which is positive. And then as you can see in Poland, we were recognized with an HR quality award. In South Africa, certified for the 10th consecutive year as a top employer. Just from a -- this is a group-wide -- this is South Africa and Poland, group-wide, our employees bring a combined 5,375 years of experience. So we're highly experienced and highly educated, as you can see, with 510 tertiary qualifications amongst 700-odd members of staff. Just in terms of focus areas for the coming year, we're going to continue to refine skills and capabilities. This is really necessary to ensure that we have the right people doing the right work and having the right skills to do so. And our structures need to be aligned to ensure that our strategy is capable of execution, and that's an ongoing process as our strategy adapts so do responsibility allocations and so forth as well. And then having a very flat structure, we need to create growth opportunities for staff so that they do believe that they have a future growth from a career development perspective in the company as well. Moving on to Growing Reputation. Here in South Africa, you'll see our trophy cabinet is very full. I am not going to go through these with you. But as you can see, we are very proud of every one of these outcomes. A number of them being ESG ones, both environmental, social as well as governance orientated and even in Poland, similarly. And this will continue. This is just demonstration that we're getting external recognition for our endeavors to operationalize ESG. It's no longer a tick box for us. It is an operational imperative for everybody across the organization. From a focus point of view, we invited you some time back to be part of living the upside. We want to now extend this movement to the upside of us to all stakeholders. And as part of building that redefined brand, but very importantly, encouraging everybody to be mindfully optimistic. There's so much to be negative about. We all need to inspire one another to be more optimistic so that we can deliver what you expect of us. Leveraging market-leading ESG position is a continuous process, and that requires deepening relationship with stakeholders from a collaborative perspective, but also ensuring that ESG becomes a leasing tool. It becomes an efficiency tool. It becomes a sustainability tool. And that permeates, as I said, not only redefine structures, but every stakeholder out there similarly. And then lastly, embracing technology disruptors. We are looking to become more efficient. We're looking to become more centric in terms of our engagements with our various stakeholders and technology enables us to do so. In terms of wrapping up, some time back, I started off with a clock that I copied from [indiscernible] morphed into a flywheel, and now we've refined our flywheel. And as you can see, stability builds momentum and momentum builds value. Lower inflation targeting is definitely a positive momentum driver. Exiting the greylist, there was already bond market movement in anticipation thereof. And then there's such a good prospect next year for a sovereign credit rating uplift. We believe that this is driving the flywheel to build on that rising optimism. It's translating into stable property fundamentals that you would have heard from Leon domestically and I spoke about in Poland. Our interest rates are now at the long-term average, and hopefully, there will be some rate reduction in due course as we journey along this path of moderated inflation. And as you all know, lower REIT and bond yields bodes well for potential capital raises going forward, which will drive inorganic growth. But the stable property fundamentals will drive that organic growth. So we believe we are firmly now in the upward property cycle. In terms of 2026, you would have heard focus areas across the strategic priorities. But yes, just to pull it all together, we will continue to build a quality diversified portfolio that is capable of delivering sustainable risk-adjusted returns. Our focus on conservative balance sheet will continue to drive sustainable growth. Accelerating new data and digital platforms is necessary to lift the operating profit margin. We know that we need rental growth, quite difficult in constrained markets such as offices in South Africa, particularly, but we also need to drive efficiencies, and that's where technology plays its part. In terms of our team and culture, we will continue to invest in and transform our human capital to empower creativity and to stimulate innovation. And then from a stakeholder experience point of view, as I said earlier on, embedding ESG as an operational imperative is absolutely important, but it requires collaboration. So in summation for us, a quality platform and a focus on conservative balance sheet management is very important to anchor growth going forward for us. So lastly, if we just look at our outlook, as I said, portfolio quality is important, balance sheet strength is important. These are the primary drivers of outperformance. We are guiding the market to deliver distributable income share growth of 4% to 6%. To put that into numbers, it is ZAR 0.545 per share to ZAR 0.555 per share. And we will maintain a dividend payout ratio between 80% to 90%, as Ntobeko outlined earlier. It depends on certain considerations and is done on a case-by-case basis. So with that, I want to thank you for your time with us this afternoon. We will now move on to questions. We have a screen over here that has been very busy already. And I just want to say at every results presentation, there's always one individual who seems to dominate the questions. And today, the prize goes to [ Fayaz ]. For someone who's been very quiet for most of my career, he has gone into the opposite direction this afternoon. So Fayaz, we will endeavor to answer all your questions. And if we miss some, please reach out to us, so that we can answer them properly for you. But let's go.

So the first question, and this is the first of very many from Fayaz. But the first one from Fayaz is what like-for-like rental reversion rates and occupancy uplift are you assuming for FY '26 DPS guidance? Now I'm going to throw this question into the air because I think Mr. Kok should answer it, but maybe Mr. Nyawo must help you.

Glad to take that, Andrew. Fayaz, in terms -- look, it's quite difficult to answer that in total, deal by sector by sector on the retail front, definitely renewal reversions trending positive, plus 3% about. On the vacancy front, as I indicated, not much opportunity to reduce it. That said, though, we're looking to reduce it by about 2 percentage points. Office, more of the same. We set ourselves a target to get our occupancy below the 10%, which is going to be a challenge, but we certainly will try and achieve that. On the renewal reversion front, probably going to be a negative minus 10%. And industrial, more of the same as what we've done this year with a real focus of getting those reversions to trend far more positive than it is now. So little improvement in the renewal reversions overall and then a couple of basis points in terms of reduction in vacancy.

Great. Thanks, Leon. Okay. Just moving on, this is Fayaz’s second question. With FY '25 operating margin at 76%, how much inflation pass-through is achievable before margins compress? Now that took us a while to understand your question, but we think we know what it is. If we don't, please tell us and we can endeavor to answer better. Ntobeko will take this one.

Fayaz, I think we're not that really worried about inflation in South Africa. If it's at about between 3% and 4%, that's what we consider as a low inflation environment. But how we understand your question is probably in relation to the escalations that can be achieved. And in the SA portfolio, that's about 6.3%. And we fairly have been at about that 6% to 6.5% level, and we expect that to stay in that in relation to the lower inflation environment.

Thanks, Ntobeko. So Fayaz's third question is with SA REIT LTV at 40.6%, would you be comfortable with keeping the payout at 87.5%? What LTV levels would trigger higher payout? And what do you see your long-term payout ratio at? Ntobeko?

So Fayaz, our payout ratio, I think we have been very consistent that it will sit between 80% and 90%. And when we have been neutral-ish at the median of that at 85%, which is what we've done over the recent years. And now with the prospects and where the things are heading up, we're comfortable, but there are many factors that we have to consider. Yes, LTV is one of them. Our CapEx requirement is another factor. The tax consequences is also another impact. So we will look at all of those. But I think with where we are in the cycle, we're comfortable that it's going to probably sit between 85% and 90%, which is still within our product range of 80% to 90%.

Thank you, Ntobeko. Just moving on. Once again from Fayaz, 2025 ELI equity accounted earnings from JVs were volatile. What normalized distributable run rate should we use? So I think the short answer, Fayaz is that, this is it now. You can work off this ZAR 200 million as a base going forward. Moving on. Another question from Fayaz. On payouts again, is there a scenario where you will move to 80%. If, for example, LTV picks up above 42% or ICR is 2x. Give us a breakdown of the use of the retained earnings, i.e., non-yielding versus yielding. So I think we've kind of answered Fayaz, your first question. It's more about the breakdown of the use of the retained earnings yielding versus non-yielding. And that then speaks to our capital commitments that we have shown in our slides, which effectively is a combination of both. There will be some defensive CapEx in there as well as yielding. We can provide you with that breakdown. I don't believe Ntobeko, you've got…

Yes, let me take them. So in our committed capital of ZAR 1 billion, only ZAR 156 million is non-yielding, which goes into our defending. And if you look at that from a percentage point of view, it's about 15% of our committed capital. The rest is yielding in terms of expansion and improvements.

Ntobeko, okay. Another question from Fayaz. What is the debt sensitivity to further rate cuts? What can we expect for each 100 basis points rate cut? And Ntobeko, we've got a slide.

We've got a slide that gives the sensitivities, Andrew. So Fayaz, if you go to Slide -- I get it to you now, Slide 38 of our presentation, we give a breakdown. In terms of the -- let me just take you through it. In terms of the local euro rates, interest rates, if they move by 50 basis points, you will have a ZAR 0.2 impact on the DIPS. And then on the ZAR, if there were to be a 50 basis point change on the interest rates, you will have ZAR 0.3 change in the DIPS. It's on Slide 38.

Thank you, Ntobeko. Now a question from Mweishö from Standard Bank Securities. Please give us more detail on why the ELI income was so much higher. So Mweishö, I think Ntobeko did touch on it in his commentary. But Ntobeko, is there something there that you want to add to where that extra ZAR 100 million came from?

Andrew, I touched on it, but I think, Mweishö, it's really 2 things that drove that number, Mweishö. In euro terms, the ZAR 2.7 million was a benefit from the portfolio split, which I think we guided to and articulated when we last spoke with you. And then the rest was really the improvement of 6.1% if you look at the leasing activity in terms of occupancy, printing out at 96.8%. So basically, a vacancy reduction, which that portfolio had quite a bit vacancy. So that's where it came from.

Okay. Another question from Mweishö is, please explain why the offshore admin expenses fell so dramatically by circa ZAR 100 million? Ntobeko?