Vukile Property Fund Limited (VKE) Earnings Call Transcript & Summary

Good afternoon and welcome to the Vukile interim results for financial '24 and thank you all for making the time to join us. I'd like to start off this morning before getting into the detail of the results just to sort of paint a bit of picture in terms of context of the group structure. I think very important just to go through that to highlight a few things: number one, the structure of the business in terms of offshore versus local. So we're sitting today with ZAR 39 billion worth of assets, 59% of which is sitting in Spain, 41% in South Africa. The business, as you all know, is fully retail focused, so Spain is sitting at 100% retail; South Africa, marginally below 96%, but those are some legacy assets that will be sold in due course. Just to have a look at our strategic investments, Lar España, as at reporting date, we own 25.7%. Post period end, we have increased that slightly. Today, we own 26.3% of the company. Our stake in Fairvest, as we've mentioned before, is not a long-term strategic stake. At some point, we will look to recycle that. What is interesting for the first time in presenting results is that the net income for the first time has crept over in terms of being the majority euro-based. So you can see that 52% of our NOI is coming from Spain, and that is really a combination of both a very strong performance in Spain but also the rand hedge element of the business coming through and therefore, slightly more than half the earnings now coming from Spain. Looking at our debt, 56% of the debt is based in Spain, and that has no recourse to Vukile. So just with that as a bit of context in terms of the results that are due to follow, I'd like to just turn to the highlights for the first 6 months and really delighted to present what we feel is an exceptional set of results, very strong operational focus in both and delivery in the South African and Spanish businesses. I'm going to leave it to Itu and Alfonso to talk you through the detail there but really fantastic performances and then from a Spanish point of view, further enhanced by the rand hedge element coming through. The balance sheet remains very strong. I think the focus at this stage is on liquidity. We're sitting with a ZAR 3.1 billion worth of liquidity in terms of cash and undrawn facilities. And obviously, with our long-term credit rating, always good to have that in terms of quality of credit, lower margins on debt that we take on. But I think the real highlight of the first 6 months has been the increase in both FFO and dividends, FFO per share growing by 5.2%, dividends up by 10%, both of those constituting a beat on the guidance that we had previously put out and off the back of that, very excited to be able to now upgrade our guidance for the year in terms of growth in FFO to 4% to 6% and growth in dividend per share to 8% to 10%. I'll talk more about that in detail at the end of the presentation. But with that, off the back of a very strong first 6 months, I'd like to now hand over to Itu to take you through the South African portfolio in more detail. Itu, thank you.

Thank you, Laurence. Good day, everyone. It really does give me a great pleasure to present these South African results for the period ended 30th of September 2023, period in which we've seen consistent and sound, strong performance coming through from the portfolio, notwithstanding the incredibly tough prevailing operating environment. To me, this is a performance that really underscores the defensive nature of our assets. So without any further ado, let me get into some of the key highlights. So with regards to our portfolio metrics, focusing on the valuation tab, our valuations have increased by 3.9%. Our value density is still at a very conservative sub ZAR 20,000 per square meter. Our average discount rate is exactly the same as where it was at year-end, with the resultant yield on the portfolio sitting at 8.5%, which fairly represents the assets, which we hold within the portfolio. These valuations have been underpinned by strong sustained operating metrics, which one can see if you look at the performance overview tab. With regards to the performance overview, our like-for-like net income growth is at 5.1%. Last year, this time, we were at 4% growth, so an improvement in our NOI growth. And this has been driven mainly by strong focus leasing activity as well as containment -- cost containment strategies. With regards to our vacancies, our vacancies are at 2%. This is in line with March. But if 1 excludes some vacant offices that we have at Randburg and Mbombela, so 2 assets, and focuses purely on retail within the portfolio, then these vacancies dropped to 1.3%, which is the lowest that we've had since 2004. Our rental reversions have remained positive at positive 2.4%. I think a key point of these results is we've seen the highest percentage of positive reversions since 2018. So a very strong quality reversion print that has come through in this set of results. If we then turn our attention to efficiency, trade and the health of our tenants, our trading densities continue to grow. They've grown at 3.5%, notwithstanding the negative print on national retail sales throughout the calendar year of 2023. We, on the other hand, continue to see strong trading densities and growing trading densities across all segments. The health of our tenants continue to be strong within our portfolio. Our tenant retention has increased from 93% to 95%. Collections are still at 100% of all of our billings. Our weighted average lease expiry on new deals has increased from 3.2 years that we currently have to 4 years, which also indicates the positive sentiment that we're seeing from our retailers. And lastly, I think quite importantly on this slide is our cost-to-income ratio. Our cost-to-income ratio has improved from 16.9% to 16.3%, and it's also significantly below our long-term average of 17.6%, which really supports the growth of our underlying NOI within the portfolio. So in summary, on this first slide, really a strong and sustained performance coming through by the portfolio, which really speaks to our continuous search for operational efficiencies that we drive within the business, innovative asset management strategies and a clear focus on our primary strategy of delighting our consumers and communities. The following couple of slides will just unpack some of these results in a bit more detail. So with regards to our portfolio composition, key to the strong performance has been our well-positioned defensive portfolio composition. Circa 70% of our portfolio remains in the township, rural and value centers, also with a well-diversified representation in 8 of the 9 provinces. Our above-average market average trading densities and low rent to sales have led to low vacancies, and we still think that there's significant room to grow in our base rentals, which we consider to be under rented in the context of the broader market. Our vacancies in the township segment as well as the commuter segment, in my view, have got a potential to decrease further. We're currently working on 3 specific assets: Atlantis, Renbro and KwaMashu in terms of a strategic repositioning. And once this is complete, we think that those vacancies should decrease even further. With regards to our sound portfolio metrics over time, our vacancies are the lowest that they've been in 6 years. We've seen a steady increase in our base rentals. And then also on reversions, a key point that I've mentioned in the previous slide is an improvement in our reversions to 2.4%, with 75% of all reversions have been positive. This positive reversion is probably the highest that we've had in about 6 years, also the lowest number of negative reversions that we've seen since 2018. Also on the escalation front, our escalations on new leases and renewals has improved from the 6.3% to 6.4%. So overall, in my view, if you look at our performance not only in this financial year and these sets of results but over time, it really emphasizes how defensive this portfolio is throughout cycles and also in the face of significant headwinds, some of which are ahead of us. With regards to our performance, retail performance and trading environment, the portfolio has seen an increase in both footfall and sales over the period. Our sales have increased by 3.3% and trading density is up by 3.5%. All 4 segments within our portfolio have shown a growth in trading density. There has, however, been a notable slowing in the rate of growth of trading density over the period. So at financial year '23, our growth in trading densities were at 6.2%. They're now at 3.5%. And I think the 2 key causes of this could be this continued challenge around electricity supply and the constraints there and also the macro challenges and the pressure on consumer coming through, particularly in the fashion category. Our fashion category, which represents 23% of our GLA only showed an increase over this period of 0.8%. However, over the months of August, September and now recently October and anecdotally, over the past weekend in terms of Black Friday trade, it seems like our fashion is starting to pick up again. Our township centers continue to be the best performing in terms of both feet and sales. And we've seen strong turnover coming through from the regions of Ekurhuleni and Western Cape. With regards to our category performance, we measure 11 of our 14 categories have shown growth over the period. Health and beauty as well as restaurants are showing the biggest amount of growth. An important category is groceries, which represents about 23% of all of our tenant base. That's shown a steady growth of 4%. Similar comment, I think, on this slide, as I did in the previous one around fashion, you'll see that women's wear and children's wear were the most challenged, but we've seen a significant strong rebound on travel as the trading densities are now ahead of where we were pre-COVID, growing at 15% and 69%, respectively. We continue to track our home furnishings and home decor category, which was the best performing category during COVID. There's been significant competition in that space, leading to a lot more discernment in how we select winners and losers in that context. A key highlight of the period has been the strong leasing activity with support from national tenants across all segments. We've seen strong support from nationals, top 10 retailers, mid-tiers, regional players on both new deals and renewals. The township and rural portfolio, once again, was the most supported in terms of dealmaking. Fashion contributed the most in terms of the deals that we closed in the first 6 months of this financial year. If one looks at the key highlights on the right-hand side of this slide, 347 leases were concluded. The value of just under ZAR 760 million worth of deals were done. And in terms of concluding our deals, we concluded them both renewals and new deals with a longer WALE in the first 6 months of this financial year. My general sense and sentiment at the moment is that we are one of the landlords of choice. We've got very strong relationships with our retailers. We recently spent some time with our top 20 retailers in 1 room, and the sentiment is extremely positive. We will continue to nurture this. Strong cost management strategies per line item are the hallmark of effectively managing our cost base, which has constantly come under pressure in recent years. We deployed these strategies, and it's resulted in a significant decrease of our cost-to-income ratio. So if one looks at the graph on the right-hand side of net expenses, you'll see that in 2014, our cost-to-income ratio was 26.6%. This year, it's now sitting at 16.3%, and we run different strategies across all of our cost categories to ensure that we manage our cost-to-income ratio tightly. In these sets of results, we bring your attention and focus to our approach to the topical issue of rates and taxes, which account for about 18% of our total cost base and have increased annually by 14% since 2014. We recover 10% less now than we did in 2014 due to the changed nature of national leases. In the past, we used to recover pro rata rates and taxes. Now we only recover, in most cases, mostly with the national's increases in rates and taxes. So the key lever that we have to manage our rates and taxes has been to object to municipal valuations. Over the past 4 years, we've objected to ZAR 7.6 billion value in terms of municipal valuations. We've accrued, I mean, ZAR 392 million benefit in terms of objections that we've received favorable outcomes out of. And all of this has resulted in a saving of ZAR 7.4 million annual savings in rates and taxes within the portfolio. And again, each and every cost category that we have within the portfolio, we have a specific strategy for, and that's how we've managed to decrease our cost-to-income ratio over time. On the flip side of the cost discussion is how do we grow our alternative income. We're seeing strong increase in demand from motor dealerships, new fashion entrants, SMMEs to exhibit in our court spaces. So a defined strategy around court spaces is crucial to increase your alternative income. Currently, we're 24.6% ahead of our H1 budget. Targeted and sustained more promotional activity leads to stronger performing exhibition spaces. On this slide, we've put up a few pictures of the exhibitions that we've run within the portfolio that have really increased the top line, opening the delta in the jaws between income and expenses. So we often speak about this ethos to delight our shoppers at every touch point within the mall, to put our shoppers at the center of every decision that we make, and we call it customer centricity. We've never really had a way of managing the impact of customer centricity. This -- although this ethos is now well entrenched within the business, we've developed a tool that helps us monitor the progress of customer centricity within the business. So we've developed a scorecard with 12 elements that manages and measures over time the movements in those elements. And these elements are improvements in customer engagements, dwell time, spend per head, visits, promotions and also how consumers see the environment within the mall. And this is just East Rand Mall that shows that there's been an improvement in the past 6 months in terms of our customer centricity scorecard. And we've deployed this in our top 6 malls. And I think the interesting observation in this slide is if one looks at Phoenix Plaza, you'll notice that our customer centricity scorecard result has decreased from 82% to 80%. This is because at Phoenix, we had Bridge City, which is the dominant mall within the broader context that recently opened following the looting in July 2021. And we've seen our footfall and our spend per head in that context decrease slightly. So we've now put pressure on our team to look at how can -- what can we do in terms of running campaigns at a CSI level, at a community support level, tenant support level to turn around this customer centricity scorecard. And we would like to then track this by March next year and hopefully would see an improved customer centricity scorecard result. The idea behind this is really to manage after measuring what customer centricity looks like and improve over time. With regards to our energy and sustainability, we have 4 key pillars of our sustainability strategy. One is optimum electricity supply. Other one is water supply efficiency focus as well as managing and monitoring our utilities. With regards to the electricity supply, we've added 3.7 megawatt peak of further installed capacity in terms of PV plants. We're currently busy with the projects to the tune of 7.1 megawatt peak. With regards to water, 100% of our rural and commuter malls have backup water. When you look at it across the broader portfolio, we're sitting at 86%. We've also, in terms of our efficiency focus, installed 840 Propelair toilets, which will, when complete, save our water per annum by about 32%. And we'll continue looking at better ways of managing our utilities. We've increased our percentage of smart metering within the portfolio, which should result in better management and monitoring of our utilities. Just an update on our PV and BESS projects. We've completed 4 PV projects over this period. We've got 6 under construction. We've got 2 that have been contracted. We've tendered an additional 4, and we've got 6 that are currently in planning stage. The movement from tenders to construction really depends on council approvals. On average, in SSEG, which is a small-scale embedded generation application, to council, Ekurhuleni and Cape Town takes about a month to 3 months. In eThekwini, it could take up to 6 months. At Eskom, it could take anywhere between 3 months and 2 years, as we've seen in the case of Dobsonville. So the point that we're trying to make around deploying these strategies is they take time, but we're very committed to continuing down this journey. Not only does it bring value from a yield perspective but also to our shoppers and tenants. So by the end of financial year '25, we would like to have approximately 25-megawatt peak within the portfolio, which will increase what we currently have now at 18.6% to make sure that we get closer to the 20% of energy generated via renewables. It will probably land at about 16%. With regards to valuations, we currently have 33 properties valued at ZAR 14.9 billion with a 3.9% increase in value. When one compares the organic growth on this slide of 2.9% with the portfolio NOI growth of 5.1%, you can clearly see the correlation. We've had minimal movements in income profile adjustments and discount rates, but I think the key point that we like making around valuations is that we run key reasonability checks around forward yields, disposals versus book, correlations of our valuation growth and NOI growth, value densities versus replacement costs. And all of these measures point to a consistently conservatively valued portfolio. So to conclude, the portfolio continues to outperform. We're seeing consistent growth in the top line. We're seeing strong support from our retailers, and we're seeing continued strong trading metrics. We will continue to focus on managing our costs tightly. We'll continue driving our desire to be the partner of choice with well-managed, well-positioned and well-tenanted malls. And our key focus areas into the short to medium term will be around customer insights, tenant relationships, driving operational excellence and really getting closer to the people and the communities which we serve. So I'd like to thank you for your attention and without further ado, invite Alfonso to give us an update on Castellana's first 6 months. Thank you.

Thank you, Itu. Congratulations once again for such great results in the South African portfolio. [Foreign Language] Good morning or good afternoon, everybody. So happy to be back in South Africa again and having the opportunity to meet everybody before you go on your summer holidays. So let me go through the, once again, very solid and positive results. I want to highlight the tremendous effort of our team to keep these figures growing and maintain a leading place in our industry. So jumping into the presentation as an economic update, I would want -- I wanted to highlight some points quickly. I think the word is instability. That is what is marking the real estate markets today. However, despite that gloom and doom of inflationary pressures, high interest rates for longer and geopolitical conflicts all over the world, Spain has been capable of showing better growth than most European countries. It is all driven by the labor market that remains pretty strong with the job occupancy figures growing and unemployment being kept at levels of 11.6%, the lowest since 2008. And let me remind you that in 2007, the lowest ever, that was full employment rate that sit at 8%. The consequence of a stable labor market and higher salaries and pensions is that the disposable income of families has increased again, rising the savings rates to level above the -- those in 2019. On top, this excess of savings is being used to pay down debt. And now Spanish private debt, those of families and companies, is the lowest since the GFC and is still decreasing. If we add tourism to the equation and the new expected record for this year being one of the largest drivers of consumption in our country, we can justify that while other countries in Europe are falling, Spain keeps very healthy consumption growth rates, which pushes GDP to grow above most of the other countries in Europe. If interest rates are to stabilize or even decrease from now on, it should bring a lot of opportunity in our market that we are prepared to take advantage of. Now moving on to the key portfolio metrics. Here, I want to highlight the astonishing recurrent net operating income growth of 13% versus H1 last year. This income growth and value-added projects remain to be the main driver to keep a rather small growth in gross asset value as valuers have kept increasing discount rates and exit yields. We'll see that later in a specific slide on valuations. We keep a very defensive and healthy tenant profile with 94% of our tenant base being national and international best-in-class brands with a very solid WALE of 12.9 years and still low OCRs and low average base rentals. Occupancy at 99% and collection rate almost 99%, both ratios way above the sector benchmarks show great performance and demand from tenants. So as you can see, outstandingly positive growth indicators, which allow us to keep signing leases and increase reversions. Now focusing on the fundamental indicators of our business, footfall and sales. These indicators also show a fantastic performance. Main driver being the work displayed in our shopping centers on improvements and promotions, bringing more people and increasing dwelling times. As advance, we now show our index compared to last year's figures. What we see in the graph is that year-to-date footfall until September grew by 7.3%, with double-digit growth in Los Arcos and Habaneras. We do anticipate a new record of footfall in the portfolio for this FY '24. Accumulated sales up to September grew by 9.1%, being shopping center sales, the large number of the average, with all shopping centers growing at double digit. Retail parks pulled the average down, however, still a very healthy 4% growth coming from very high rates in previous years. So strong growth rates in sales, always above inflation, which means people still have healthy spending power. As I stated before, a great deal of our great performance in footfall and consequently in sales is our customer-centric approach, by which we focus on what our communities demand and desire for them not only to come but to repeat visit, stay longer, spend more and become fans of our shopping centers. On top, we continue to strengthen our shopping centers as social engines with design events and campaigns always having the goal of making a positive impact in the areas where we operate. In the pictures in the presentation, you can see some of these initiatives such as the Zumba master class in El Faro in which money is raised for the children's cancer hospital of Badajoz or the collaboration with the Down Syndrome Association in Los Arcos and also the collection of sea waste from the bay in Bahia Sur. But in addition to those -- to these local initiatives, we develop other transversal ones at portfolio level where we address national problems, such as pet abandonment. Since the pandemic, we have seen the significant growth in the pet industry and the importance of animals in our society. Thus, this year, we have launched a campaign with the help of Pulguitas, translation will be little fleas, in which we have developed with the help of our renowned illustrator, our own mascot and a sad story. And we have been able to raise awareness in a fun and enjoyable way to all families about the responsibility that involves having a pet and the care it requires. In addition, these initiatives allow to continue boosting visits and sales of the center's operators through collaborations and actions for the whole family. Back to sales now that we understand better the drivers, if we look at it by sectors, we see all categories growing substantially. On year-to-date from April to September compared to FY '23 figures, sales grew 7.1%. On retail parks, pet, sports and DIY still growing very nicely despite they are coming from very high growth rates in the previous years. On shopping centers, our key categories by weight -- by rent weight had the best performance with double-digit growth such as fashion, groceries, F&B, leisure or health and beauty, an outstanding result that reflects the efforts on active asset management activities across the portfolio to the completed and ongoing value-added projects. At leasing activity level, between the 1st of April and September 30 of this year, 81 rental transactions have been agreed, 40 new contracts and 40 new -- 41 renewals involving an area of more than 15,500 square meters, which have led to a new rent signed of -- for value of EUR 4.5 million per year and which results in an 8.29% increase in the average rent per square meter per month in the portfolio. Please note, as mentioned in past occasions that, that figure does not include indexation, which will add in the coming months. We keep an enviable portfolio occupancy of 99%, leading the market as well as leading rent collection ratio close to 99%, well above the industry average. Moving on, here, we can see the gross rental income bridge. On a like-for-like basis of same portfolio and same period of time, gross rentals have grown 13% in comparative terms. This gross income translates to an NOI growth of also 13% versus last financial year's first semester. At fully let capacity and the work in progress value-added projects completed, the portfolio should generate gross rental income of EUR 75 million annually, and we expect this to come real in FY '26. As for the GAAP bridge here, the total growth for the period of 2.1% made by 1.1% coming from the Lar España investment value increase and 1% growth in direct portfolio despite another 25 bps increase in discount rates and more than 30 bps in exit yields. As you all know, Castellana is externally valued by Colliers, a prestigious and renowned European valuation firm. They conduct valuation cycles every 6 months. Despite the increase of 1% in the portfolio for the period, the fact is that all the value the team has been creating is not giving justice into the valuations as the investment in retail real estate market has deteriorated since the pandemic and hence, yields, which are the largest driver for value, at the end, have expanded dramatically to cater for interest rate hikes and lack of transactions in the market. So as shown in the graphs in this slide, one can see the increments of IRRs or cap rates and exit yields since 2019. Worth to note that our work in the assets during this period, adding value and quality is already embedded in those yields that would have expanded much more in case we left those assets unattended with no CapEx or no value-added repositioning projects. Hence, the current positive valuation results are a combination of increasing income and increasing quality of assets that still translate in almost flat values that are set to increase when the market is back to normality and IRRs reduce. That is what we expect not far from now. So as you know, by now, we are always busy with projects in the portfolio, and we very much like them. Our star project now is in El Faro. As we did in Los Arcos and Bahia Sur in the past, we have bought from El Corte Inglés an extra space attached to El Faro showing -- to El Faro shopping center that used to have an owner-occupier low-performing hypermarket. This large unit is being closed now, and it is under works to reconfigure the space and give home to new 5 or 6 highly demanded brands in the region. With an investment of just above EUR 23 million, we create a new space of 16,500 square meters, which will be generating EUR 2.2 million of additional NOI and reinforce El Faro with a more optimal tenant mix. On top, with this purchase, we become owners of 100% of the property, which should also have an impact in valuation yields. Already licensed and under works, we estimate to have it completed by end of next year. On the other hand, we are close to finalize Vallsur's first floor reconfiguration to reinforce the experiential leisure and F&B offering, which will differentiate Vallsur from its competition in town. The project will generate extra annual NOI of EUR 1 million per year by investing EUR 16.7 million. Phase 1, the food and leisure court with 2 new brands, it's being named La Chismeria as a wink to the local community. All is ready for it to open next Friday, 1st of December, with almost all units trading. Phase 2 is still in progress and as it required first phase to be open and trading for the rest of units to start the reconfiguration. Full project will be completed and trading by last quarter of 2024. As per our investment in Lar España, no one can object as it is proving every day to be a great deal and a very accretive investment with a dividend yield for this period of 12%. In this period, Lar has sold 2 retail parks, Rivas Futura and Vistahermosa, for some EUR 129 million at a net yield of 6.3%, proving there is still good demand for retail parks in the market. With a strong balance sheet, reduced LTV and cash on hand, Lar is well positioned for future growth opportunities. Management gave guidance on dividends being better than last year's, which will improve our yield going forward definitely. We continue to be long-term investors in Lar España, expecting an attractive income yield and potential for capital growth through the narrowing of the discount to NAV once market stabilizes. As the retail landscape evolves, our innovation team is pioneering new models to shape our business future. Food delivery is one of the fast-growing trends in our industry. So we have strategically partnered with one of the leading dark kitchens companies in Spain, named Booh!, being the first to develop this new model in shopping malls. This is an investment in a vision blending the convenience of food delivery with the unique experience of mall shopping. Los Arcos in Seville will host the first dark kitchen concept in a shopping mall, adding 12 more choices of food to our customers that can order for delivery, takeaway and even eat in at the mall if they feel like. Moving on to ESG. I'd like to highlight the work already done in such a small period of time that has already put Castellana on the ESG leaders list. We have renewed gold awards in EPRA BPR and sBPR sustainability. We improved the results in GRESB, achieving the fourth star out of 5 and reissued Great Place to Work certificate, improving our last mark by 1 point. All assets are BREEAM certificate with excellent grades in the portfolio. So where are we focusing our efforts in the following months? Operationally, we will continue to excel in our operations, keep focus on increasing income while keep focus on our customers, maintain our already strong relationship with our tenants to give the partnership mindset. On the funding part, we have a stable funding position with no refinancing until FY '26, continue to work on the diversification of fund sources; on investment, continue to secure deals on the direct market and continue to unlock value on our large Spanish shareholding. ESG and innovation, we will continue developing and implementing our ESG strategy with our long term -- to comply with our long-term objectives and keep developing our innovation strategy levered by technology. And on people side, keep up the marvelous climate and company culture already existing in our teams and implementing the Castellana Talent Programme to keep evolving and improving processes and skills. So with this, I end the Spanish part. Many thanks for your attention. And now I pass it over to Laurence Cohen on treasury and finances. Thank you.

Thank you, Alfonso. Good afternoon, everyone. With positive results across the board, both in trading metrics and in financial metrics, it certainly makes my job as CFO a lot easier. In this income statement, we have included only those numbers that are included in FFO. All IFRS fair value adjustments have been excluded. Total revenue and net income growth was 16.4% and 17.7%, respectively, driven by particularly strong growth in Castellana. Income growth was -- income growth also benefited from a weaker rand with the average FX rate against the euro in the interim period last year being ZAR 16.87 compared to ZAR 20.30 this year. Like-for-like growth in the South African retail portfolio was 5.1%, while normalized growth in net operating income in Castellana was 13%. Total corporate costs in South Africa were largely in line with the same period last year, while corporate costs in Castellana increased mainly due to increased spend on ESG and innovation costs, new staff development initiatives and due to a weaker rand exchange rate. Income from listed investments includes dividends received from Fairvest. Income from Fairvest was down slightly compared to the same period last year due to a marginal reduction in our interest in Fairvest to 6%. It should be noted, though, that based on Fairvest's positive guidance released earlier today, we should expect our income from Fairvest to be up by about ZAR 1 million for Vukile's full financial year for FY '24. Although there is a top-up payment of ZAR 33 million to MEREV, this amount is included in the IFRS numbers only. For the calculation of FFO, we eliminate this amount with a non-IFRS adjustment since the last MEREV top-up payment was included in FFO in FY '23. Net interest costs were higher during the period, mainly due to a higher rand and euro base rates, higher South African euro debt due to the MEREV takeout and a weaker rand exchange rate. The reduction in the noncontrolling interest is due to Vukile purchasing roughly 10% of Castellana's issued shares from MEREV, increasing our stake in Castellana to 99.5%. The non-IFRS adjustment of ZAR 174 million relates mainly to the accrual of the Lar España dividend. Given that Lar España will only declare their dividend for this period next year, Castellana cannot yet raise the Lar dividend in their Spanish GAAP or in their IFRS accounts. Therefore, Castellana accrues for the dividend as a non-IFRS adjustment. This year, Castellana is accruing for the Lar dividend at a rate of ZAR 0.05 per month, equating to a full year dividend of ZAR 0.60 per share, equal to the Lar dividend that was declared for the Lar España financial year ended December 2022. Lar has recently published a very positive third quarter business update. We expect Lar to announce their dividend for FY '23 in February next year. As per our policy for the recognition of income from Lar España, if the LAR dividend exceeds our expectations, then that benefit will accrue to Vukile and Castellana mainly in FY '25. The antecedent dividend included in FFO for the period is immaterial since we received settlement for the new Vukile shares that were issued in the first week of April, very close to the beginning of the financial period. Total FFO for the period was up 11.4%. After taking into account the new issue of shares, FFO per share was up 5.2% and dividend per share was up 10%. Total cash on hand at the end of the period was ZAR 993 million. That amount is made up of cash in South Africa of ZAR 217 million and cash in Castellana of ZAR 776 million. In South Africa, we have a greater capacity to temporarily reduce debt with excess cash by placing cash into revolving credit facilities. The cash on hand in Castellana was utilized post period end in part for Castellana's interim dividend and for CapEx mainly in El Faro and Vallsur. The NAV per share increased over the period by 3.3% to ZAR 21.16. An increase in the fair value of investment property and listed shares, mainly in Lar España, added a combined ZAR 0.61 to the NAV per share. A 4% weakening of the rand to the euro over the period added ZAR 0.39 to the NAV per share. All of our FY '24 debt maturities have been repaid or refinanced. Castellana's next bank debt maturity is in FY '26 with Castellana's debt maturity profile being an average of 3.3 years. The fixed interest rate on EUR 256 million of Castellana's bank debt matured in September. We have chosen not to hedge this amount at this stage, preferring to delay the hedging in order to benefit from a turn in the interest rate cycle. As a consequence, the overall group hedge percentage reduced to 55% at the end of September. We view this as a temporary reduction in the hedge ratio pending the hedging of the debt in Castellana. We continue to monitor interest rates to ensure an optimal time for the hedging of this debt. 97% of South African rand debt is hedged, and 70% of total South African debt is hedged. Dividends forecast to be received from Castellana for FY '24 are fully hedged. South African euro debt increased to EUR 106 million during the period following the purchase of MEREV's shares in Castellana. Vukile's long-term corporate credit rating was confirmed as AA earlier this year with a stable outlook. The rating allows Vukile to access lower debt margins as our bank funders are able to give our debt HQLA or high-quality liquid asset status. Unencumbered assets at year-end were ZAR 14.4 billion with an unsecured debt to unencumbered assets ratio of 14%. The group interest cover ratio is slightly down, still comfortably ahead of the group covenant level of 2x. Stress testing of the group interest cover ratio indicates that the portfolio would need to undergo a 32% reduction in group EBITDA before reaching the group ICR covenant level. The aggregate group cost of funding was unchanged at 5.3%, this despite increases in interest rates in South Africa and Europe. Existing interest rate hedges, lower bank debt margins in South Africa and a higher proportion of South African euro debt mitigated the impact of high interest rates. Stress testing of Castellana's valuations indicates that the Spanish portfolio has a 38% or a EUR 430 million headroom in property valuation relative to Castellana's LTV covenant level of 65%. Castellana's debt is nonrecourse to Vukile. There was a marginal increase in LTV over the period to 42.9%. The acquisition of the additional shares in Castellana from MEREV was offset by an increase in the valuation of the direct property portfolio and an increase in the valuation of the investment in Lar España, which limited the net impact on LTV such that the LTV only increased by a net 30 basis points. Vukile's balance sheet structure provides a meaningful rand hedge. A 10% weakening of the rand exchange rate to the euro would increase net asset value by ZAR 1.1 billion but would increase LTV by only 38 basis points. A detailed sensitivity of the LTV to property valuations and foreign exchange rate movements has been included in the appendices to the presentation. In August this year, we issued 2 corporate bonds totaling ZAR 526 million in an auction that was more than 4x oversubscribed. The bonds were issued in 3- and 5-year tenors, both at spreads better than guidance. Only 11% of total group debt is in the SA debt capital market, so we do still have some capacity to increase our exposure in the unsecured corporate debt market. At 30 September, our total cash and undrawn committed facilities were ZAR 3.1 billion, exceeding all debt expiring over the next 12 months by 2.2x. Apart from the Castellana bank debt maturity in FY '26, the group loan expiry profile is relatively evenly spread. We are in the process of refinancing FY '25 bank debt maturities and expect that by year-end, all FY '25 bank debt maturities will have been refinanced. This will leave only South African DCM debt and Castellana debt amortization, which will mature in FY '25, amounting to less than ZAR 1 billion in total. Effective debt, treasury and balance sheet management continues to be a key focus area. Maintaining and nurturing strong relationships with our bank funders, both in South Africa and in Spain, is a key component of our approach to debt and treasury management. We continue to maintain a healthy balance between cash and undrawn committed facilities to ensure that at any given time, we have more than adequate liquidity to fund any short-term debt maturities. Being cognizant of the need to limit exposure to interest rate risk and interest rate volatility, we will continue to monitor interest rates and the interest rate cycle to ensure that any maturing hedges or fixed rate loans are hedged at the most optimal time. We have adopted a layered approach to hedging Castellana's dividends, targeting an average hedge ratio of at least 60% over a 5-year period. Given that Castellana's FFO is not hedged, total group FFO is positively exposed to a weaker rand over time while still providing predictable dividends over the short to medium term. We remain committed to the debt capital market and we'll continue to have regular bond issuances in line with existing maturities and cash flow requirements. ESG remains a key focus area, and we are committed to increasing our exposure to green funding in an authentic manner. We are in the process of formulating a sustainability-linked bond and loan framework, and we'll continue to access green use of proceeds loans to fund qualifying projects. This concludes the financial section of the presentation. As previously announced, Lizelle Pottas, who has served as our Group Head of Finance for the last few years, will be appointed to the Board as Financial Director from January next year. Lizelle will assume responsibility for financial reporting. So although I will be retaining the position of Group CFO, this will be the last time that I will present the numbers for Vukile. I'd like to take this opportunity to thank you, our shareholders, investors, fund managers and analysts for your ongoing support and for their positive engagement over the last few years. I look forward to our continued interaction going forward. I will now ask Laurence to conclude with an ESG strategy and transaction update.

Great. Laurence, thank you very much. And before moving on to the actual update, just to thank you for your most phenomenal contribution as CFO and FD. Obviously, that role sort of splits now, and we look forward to continued tremendous contribution as CFO and part of the group, and equally to Lizelle, who takes over the role as FD from January. Lizelle, you take this role on with our full support, the Board's full support and every confidence you're going to do a phenomenal job. So really, it will be no missteps and business as usual in all respects. So moving on to ESG. We have made continued and very positive progress on our ESG strategy during the first 6 months of the year. Just to highlight a few issues. So we currently have got around 18 megawatts of capacity. That's providing around 12% of our current electricity usage, a further 7 megawatts currently under construction, and that should take us up to approximately 16% of our electricity. I think that figure probably tops out somewhere at about 30% over time, and we'll have to then adopt various other strategies thereafter to sort of have more green energy. But for the meantime, in the short to medium term, we have quite a bit of runway still within the Vukile portfolio. Obviously, a challenge we face in South Africa is around water security. Currently, 100% of our rural malls have got backup water and 98% have got borehole water supplies. On the Spanish side, all of the buildings are BREEAM certified at either very good or excellent levels. Turning to the social pillar, 2 things to highlight. One is our flagship Vukile Academy program really continues to deliver fantastic results for us. So all of the participants, 25 people, in fact, prior to the current '23 cohort who've been through our system have got full-time employment in the property industry, and we're delighted with that. Our current class, approximately half of them have got jobs. We continue working with them to find employment for the balance. And really, I'd like to reach out to all of you on the call, our stakeholders. We have the most fantastic talent here. Unfortunately, we're not able to keep everybody working with us. So please, if you have needs, please reach out to us. We would have no greater joy than seeing our interns placed in the industry. From a BEE point of view, very happy to say that our level has increased or improved from a Level 4 to Level 3. And then one of our other key focus areas is to ensure that Vukile remains an employer of choice. And to that end, wonderful to have the validation in terms of Castellana achieving Great Place to Work certification and Vukile once again having a platinum level rating in the Deloitte Best Company to Work For survey. From a governance point of view, we are currently underway with the Board refresh process. We've recently added 2 very experienced bankers, property experts onto our Board in Johannesburg: Jon Zehner, currently the Vice Chairman of LaSalle and James Formby, who've joined the Vukile Board. And then Lucy Lilly, who's got tremendous experience in retail real estate in Europe, joins the Castellana Board. Currently, the Vukile Board has got 55% Black Non-Executive Directors on the Board. From a GRESB certification point of view, good progress in both Vukile and Castellana, Castellana now at a 4 out of 5 star rating, which is superb. The main difference between the 2 is that the Spanish assets are BREEAM certified. The South African portfolio still needs to undergo green certification, which will be a large contributor to the GRESB certification overall. That process is now kicking off and will take time as we work through the portfolio being a much larger portfolio. Turning on to our strategy, and we've turned the slide strategy in action because I feel that if anything highlights our strategy in action, the results of what we're doing, it's the set of numbers that we've put forward. Itu and Alfonso have both highlighted our focus on the consumer and how we try and use that to drive our results overall. And permit me just to sketch how this has come out in these numbers. You've seen the focus on the consumer. Well, that comes through in very strong trading metrics for all of our tenants, as highlighted in both the South African and Spanish highlights. And that, I think, is crystallized in having very low vacancies with positive rental reversions. In other words, we can fill space because our centers are good. We can get higher rentals because the demand is there. We're not giving rentals away in order to fill space. On the contrary, there is excess demand in our centers, and therefore, we're seeing that rental growth. And that then translates obviously into growth in FFO, growth in dividends. So really, when you put this all together, I think this is giving very strong credence to our customer-led consumer model creating value for all stakeholders and firmly believe that our strategy in action is working. So how do we take that forward? If you have a look, I think this slide really captures what our view is. It's business as usual in our existing portfolio, continue to drive the best out of our assets in Spain and South Africa. If we look at the bottom row in terms of new opportunities and initiatives, the long-awaited BT Ngebs acquisition, we are hoping will close in the first quarter of next year. It looks as though the time planning issues that have held things up to date have been resolved and the process is now moving smoothly. So hopefully, that happens beginning of 2024. As Itu mentioned, we're currently evaluating certain expansion and upgrades to existing centers. That is always the best money we can spend on our existing assets. We've proven that time and again, and we're continuing to look for those opportunities. And then somewhat frustratingly, we are seeing tremendous opportunities in the SA market in terms of high-quality assets that we believe would be wonderful additions to the Vukile portfolio. The problem is with the expected yields on those deals, the current cost of equity, current cost of debt, those deals are not economically viable. And therefore, we're having to turn them down because they would be quite value destructive. So I think a lot of discipline on our side, making sure we're continually in the market, evaluating what opportunities are there, but if it doesn't meet our criteria, which are both financial and strategic accretion in what we're doing, we will then unfortunately have to walk away from deals. But if you look to the right of that on the Spanish side, we are currently evaluating some deals with very attractive yields. Now that is not to say these deals are currently in due diligence. It's still early on in the process. But we are seeing a couple of deals at very high single-digit, early double-digit yields. And those do start making sense because, obviously, the cost of equity is common between South Africa and Spain, but even though you've seen interest rates rise, your cost of debt is still well below the expected yield. So you do get a positive carry on the transaction, and that's using kinds of gearing below where we are currently. So no need to worry about LTV increasing. In fact, it would come down if we were to look at those kinds of transactions. But again, the challenge is cost of equity and availability of equity being very limited right at the point in the cycle when opportunities are there. And that is something that we need to look at. Obviously, the ability to use paper in this environment is interesting. But really from a group point of view, we talk about being transaction-ready. Now that doesn't mean that we are itching to do deals. It means that we have to constantly be in the market, evaluating opportunities, understanding pricing levels, understanding rental levels, costs to see where the opportunity is that if and when something opportunistic comes along, we are able to move. We've flexed our muscles. We're ready to look at those opportunities. So we continue to do that. At this stage, as I say, South Africa, for the first time in a number of years, there is deal flow but not economically viable for us to pursue it; on the Spanish side, some opportunities that may well be economically accretive and therefore, we'll continue to evaluate them and have a look at them. We have a very tight focus. We know what we need to keep doing. It's that focus on the consumer, making sure the consumer is always at the heart of what we do, recognizing that meeting and exceeding those needs is the starting point in value creation for all stakeholders. And I think this set of results proves that the strategy is correct and works. We'll continue our asset management focus. That's really how we create the value, the bottom up, making sure that we do that in the context of being a responsible corporate citizen. So you're seeing the ESG strategy really taking hold and becoming embedded in what we do. We talk a lot about our assets and the dominance of our portfolio. I think that's absolutely correct, but I also believe that our most valuable assets are the human capital in the company. And to that end, we need to ensure that we remain an employer of choice and ultimately, putting that all together is to deliver sustained earnings for all of our investors and I think, again, very upbeat with what we have just delivered. So turning then to the all-important prospects and guidance. As we've all been highlighting, really, we are delighted to present this very strong set of results. I think it shows the strength of the business and to have delivered these results in a difficult environment and to have done that consistently over a 5-, 6-year period with significant challenges shows the strength of the business, strength of the portfolio and what we are doing. I think in addition to the performance of the assets, you're seeing the benefit of the structure of the business coming through in terms of the rand hedge element that provided a little bit of a boost in terms of the Castellana earnings, but primarily, the beat came from the strong operational number. So overall, this set of results that we've put forward, the 5.2% growth in FFO, the 10% growth in dividends constitutes a beat over the initial guidance. Off the back of that, we are now very pleased to upgrade our guidance to 4% to 6% growth in FFO per share and 8% to 10% growth in dividend per share. And that will be a dividend in the range of ZAR 1.21 to, call it, ZAR 1.24 per share for the full year. So let me just say in conclusion, we are realistic about the headwinds in the market. It certainly is not easy from a capital markets point of view in terms of access to equity but at the same time, believe that, that provides a lot of opportunity, and we are consistently working to try and unearth those opportunities, both in South Africa and in Spain to grow our business. Vukile is very well positioned. We're very confident that our clear, unambiguous strategy provides very clear strategic direction. We've got a very strong and robust operating platform. Our balance sheet is strong, and our active ESG focus will ensure that we are confident in the fact that we will deliver on our upgraded guidance for the current financial year. So with that, I'd like to end the presentation simply by thanking all of you, our stakeholders. Most importantly, I want to thank my colleagues, my team in Johannesburg and Madrid who've joined us. Guys, as I always say, I'm fortunate to be your cheerleader and talk about the phenomenal results that you have delivered. I'm exceptionally proud of what you've done and hope the market and our investors certainly are. It is a tremendous set of results, and we look forward to providing a similar set for the full year. With that, I'd like to hand over to the floor for questions. And to ask for those questions, please be read out as they come through.

The first question comes from Miguel Medina of Mirabaud. He has asked, you said that you explained in the presentation why the visitor score had come down at Phoenix Plaza, but there was another mall among the top 6 where the score had come down, too. Can you explain what happened at that mall?

Sure. Itu, that's Kolonnade. Can you perhaps pick that up, please?

Thanks, Miguel. That was Kolonnade, our retail park that we have out in Pretoria. I think there are 2 issues there. We had slowing in the anchor's performance, and that's something that we're actively looking to address. And then we had incidences of crime slightly increase in the first 6 months. But I think the key point of the scorecard is exactly that -- to highlight those key issues. And then as a team, we sit down and we put together strategies on how we would look to improve it in the 6 to 12 months ahead. So those 2 issues are things that we're looking at. We'll monitor, and we'll make sure that we resolve it in the next 6 months.

Thank you, Itu. The next question comes from Mweishö Nene of SBG Securities. He has asked what the long-term plan is around electricity generation. Will you ever be off the grid?

I think it's very difficult, Mweishö, to go completely off the grid. As I said, we probably have got the ability to generate around 30% of our consumption through our solar strategy, but that will take time to get there, but I think very difficult to go off the grid. There are going to be alternate strategies coming through in terms of buying power from independent power providers. So I think that is stuff that we will start evaluating in due course. But for the time being, there's a lot of low-hanging fruit in terms of our solar strategy, and that's where the focus will be in terms of rolling that out.

Thank you, Laurence. Next question comes from Francois Du Toit of Anchor Stockbrokers. He has said that SA funding costs rose steeply and cost of debt got to 10% on ZAR and [ 5% ] in the first half of '24. Assuming no changes in JIBAR and Euribor in future, does this represent peak funding costs on the SA balance sheet?

Thanks, Francois. I think from an SA balance sheet perspective, I think we are closer to the peak given that a fairly high proportion of the debt on the South African balance sheet is hedged. Obviously, on the Spanish balance sheet, that is not the case, and we will see an increase in debt funding costs coming through when we proceed to hedge the EUR 256 million that is currently floating. And to some extent, I guess, if you were to compare half year, in other words, H1 for FY '24 to H1 for FY '25, you may well also see a slight increase in funding costs even in the South African balance sheet, given that not all of the increase in base rates have been brought to account in these interim results. But I think you are correct. Certainly, the increase in interest costs in the SA balance sheet is closer to the peak than in the Spanish balance sheet.

Laurence, could I just add? I think just to say that the increased costs that are going to come through in the second half have already been factored into the forecast and the guidance that we've given. So that 8% to 10% growth in dividends and 4% to 6% in FFO is taking into account the higher interest costs and the ZAR 256 million for the 6 months that are coming forward now.

Thank you, Laurence. Just keeping with the financials, Mweishö Nene from SBG Securities has asked, given the choice not to fix the matured euro facility, when are you expecting rates to be cut? And where have you forecasted Euribor in 2025, a ballpark number?

Can somebody just bring my crystal ball, please. Mweishö, that's a great question. I wish we knew the answer to that. Really, it's difficult to forecast. I think we're not in the forecasting game. Certainly, our forecast going forward are anticipating a slower cutting cycle, but that's probably us being more on the conservative side of things. Certainly, whatever we're reading, and I'm sure many of you are closer to the detail, there seems to be a lot more people calling now for a quicker cutting cycle coming through in the U.S. next year. But we're certainly not factoring that into our numbers at this stage of the game. I think we're going to wait to sort of see that direction. So at the moment, our sort of forecast beyond this year have got a far more gradual cutting cycle built in than what people are perhaps now starting to anticipate.

Thank you, Laurence. We have a question from Miguel Medina of Mirabaud, a further one. He said apologies if he's missed something, but he's asked, if cost of debt is unchanged and LTV and GAV roughly unchanged, why have financial costs increased quite a bit?

I think one needs to view the increase in the cost of debt in the context of the composition of our total debt between euro funding and rand funding. And in this period, after the acquisition of the additional shares in Castellana from MEREV, we did increase our South African euro debt, and that would have reduced our overall average cost of debt. So that's what's really resulted in or put a lid on the total aggregate cost of debt. But if you drill down into the composition of debt, you will see that our total debt did increase slightly. And in addition to that, a large component of the increase in the cost of debt is the weakening of the rand against the euro, which will flow through to an increased cost of total debt.

Thank you, Laurence. The next question is from Miguel Medina or Mirabaud again. He's asked, why does 100% ownership of a mall impact valuation yields? What is the valuation yield gap between a majority-owned and a wholly owned mall?

Miguel, it's something that the valuers apply. And remember, when it comes to the IRR and the exit cap rate, that value is used. There is an element of subjectivity. So it's not an exact science as to where they get to. Generally, you'll find that they apply somewhere between a 10 to 15 basis point benefit on owning 100% of a mall versus a portion thereof, even if it's a majority portion, and that's on your exit cap rate. And I guess part of the reason for that is that you don't have to deal with that community of owners. Once you own 100%, your decision-making is easier, but the figure is probably around 10 to 15 basis points on your exit cap rate.

Thank you, Laurence. The next question also from Miguel Medina of Mirabaud. The high single-digit IRR you have mentioned in opportunities under consideration in Spain is with assets as it stands right now. Or are you including operational accretion from Castellana management of those assets?

That's a great question, Miguel. No. So those would be the assets as they stand, but for us to be interested in an asset, we're really looking at a few things. Number one, in this market, what is my purchase yield? We're looking for attractive deals at this stage, but we're also looking for assets that are dominant in their catchment areas and assets that we are able to add value to. I think something that you've seen Alfonso and his team do significantly over the last number of years is add value to the assets that we bought. So when we are looking at assets, it's what is the starting yield, and that's the high single-digit, early double-digit yield we're talking about. But then we would fully expect that there is opportunity to add value thereafter over and above those purchase yields.

Thank you, Laurence. The next question from Mweishö Nene of SBG Securities. Do you feel Vukile hamstrung on transactions by its current LTV level? And then what is the medium term in the next 24 months LTV target?

Sure. No, I don't think that, that has hamstrung or is hamstringing us at all for the following reasons. I think if an LTV is below 40%, everybody is going to be very comfortable at that level. So the amount of buying power, so to speak, between, call it, a 38% LTV and a 42% LTV is not sufficient to take advantage of the opportunity set that we believe is available at the moment. Now there's also the debate of saying, well, why does one want a low LTV, and very often, the answer is in order to take advantage of opportunities when you're going to use gearing and take your LTV up. Well, that's exactly what we've done. But we've done it maybe in a different order and a different cycle to what you might be expecting. So if you go back historically, the LTV moved up when we took advantage of buying opportunities to where we are, the most recent of which being the purchase of the MEREV stake, and that has added tremendous value in the business overall. So the idea, I think, Mweishö, that you're putting forward of saying can one use balance sheet capacity to grow, the answer is yes. That's exactly what one should do, but one shouldn't necessarily have to do that in lockstep with the whole market. We sort of have now, in a sense, done that already. That LTV will then unwind over the next few years as we hopefully get valuation growth. I think you're seeing that valuation growth in the SA portfolio, and I think the point that Alfonso made in his presentation is there is inherent value in the Spanish portfolio based on the fact that the NOI has grown so significantly. So whereas at the moment, that growth is being offset by the higher IRRs and exit cap rates, if and when the market does start turning, your NOI is now there. So that is, if you like, some level of embedded value in the portfolio overall. But the kind of opportunity set that we're seeing doesn't require small money that one might be able to get by sort of leveraging up the balance sheet to get to a level that the market is comfortable with. We need fresh capital to really look at the opportunities. And again, you've heard me say this before, this is the ideal time in the cycle to be buying. I think the sector globally remains out of favor because of high interest rates, but as soon as interest rates start turning, the sector will come back into favor. And I think at the moment, the question is not if they start turning. It's when they start turning. And we would ideally like to be ahead of that curve, finding the great deals and growing our business that way.

Thank you, Laurence. The next question from Zinhle Simelane of MSM Property Fund. Can you comment on this year's Black Friday turnout across the SA portfolio and maybe a comment of your expectation of how consumer health will be in the coming year?

Sure. Itu, would you like to take that?

Yes. Zinhle, I think on Black Friday, it's probably a bit too soon for us to get key insights around that. Anecdotally, I've spoken to a few center managers who shared that the malls were busy, right? But how we normally look at it is we look at it in composite. So we'll look at Black Friday and the festive trade to see how we traded over the festive period. So I'll only probably be able to have key insights for you early in the new year, but from chatting to some of the center managers, it seems like there are a lot more people on -- in the malls. And I think to your second question around consumer health, I mean, to Laurence's point, I think the interest rate cycle is going to be a big part. When it turns, is it going to be longer? Is it going to be higher for longer? That's going to be a big issue around disposable income in consumers' hands. But one key point that we always like raising is the fact that we've got this significant -- particularly in the township and rural areas, we've got this significant grant underpin in terms of how our malls perform and also a significant amount of the informal economy that supports our mall. So although when we talk consumer, we will talk headline figures, the macro figures that we see in the front pages of newspapers. The way that we look at it is more holistic around other segments of the economy that support our malls. So at this point, there are certain segments or categories that we're looking at closely. But on the whole, you were still seeing growing trading densities. Our malls are more defensive. The type of categories that we have within our malls speak to our market, and we're still comfortable at the moment.

Thank you, Itu. The next question comes from Jarred Houston of All Weather Capital. What are the cap rates on opportunities in Spain relative to where Castellana is trading -- sorry, relative to where Castellana is valued?

Great. Jarred, thanks. I mean I think there's a lot in that question to unpack. So let's start off by saying a difference between price and value is the most important starting point in that discussion. We certainly wouldn't be looking to buy assets today where we think they're valued. We want to buy them well below that value because that's the opportunity in this environment. What we're seeing at the moment is a very clear distinction between distressed assets and distressed sellers. Frankly, at the moment, we are not seeing any distressed assets on the market. What we are seeing is opportunities coming from forced sellers. And these generally are private equity funds that need to return capital to their shareholders. They therefore become, in a sense, forced sellers, and that is giving rise to the opportunity. So clearly, those yields are higher than where the Castellana portfolio is valued, but that's logical. We have to be looking for value, not buying at value but rather finding the opportunities by buying cheap assets. I would then also refer you to the 2 assets that Lar España sold, which are very interesting because, for us, that represents a willing buyer, willing seller kind of transaction. Now those yields were done, from what we understand, at around 6.3%. It was slightly above book value, as they've said. And those yields would be very similar to where the Castellana portfolio of similar quality would be valued. And that, for us, is a good indication of marking the market. What we are concerned about is transactions where there are sellers for reasons other than simply rotating assets, which people might then think mark the market. We don't believe that, that should be the case. We think there is an element of distress. There are very often other sort of broader financial strategies of pension funds that maybe have gone overweight property because of relative valuations, looking to lighten their exposure, et cetera. That's what's giving rise to the opportunity set at the moment. But I would say, if you wanted a broad figure, probably, I'm going to say, 200 to 250 basis points above where our valuations are sitting at the moment is where we are seeing some opportunities that we would want to pursue. There are opportunities at smaller gaps. We're choosing not to pursue those because of our overall cost of capital in where we are. It's a long answer. I hope that does deal with your question though.

Thank you, Laurence. The next question comes from Nathi at Peregrine Capital. There's a couple of them. How much of the Lar dividend was a catch-up from the prior period accrual? You mentioned that FY '25 should include this periods under accrual on Lar dividends. If there is such, would the under accrual get fully included in FY '25 first half? Or would you look to spread it out?

Yes. So included in this interim period is EUR 1.6 million of the EUR 3.3 million that we're bringing into FY '24 for the Lar dividend from FY '23. So you're 100% correct. We are spreading it, and we bought 50% in the interim period, and we're going to bring 50% in the second half. If the same thing happens next year and Lar España overshoots or exceeds what we're accruing as a non-IFRS adjustment, we will then be consistent and do exactly the same thing next year, and we will spread it evenly and bring in 50% of that outperformance in the first half of FY '25 and 50% in the second half of FY '25.

Thank you, Laurence. The last question for now is from Francois Du Toit of Anchor Stockbrokers. Castellana further increased its Lar stake post 30 September. Do you see your Lar investment as strategic? Or would you be prepared to sell Lar in order to fund some of the Spanish opportunities you referred to?

Francois, I think when we made the investment, we said, first and foremost, it was a great financial investment in a market that we know and understand intimately and have tremendous value. And I think that investment thesis has been proved in abundance as we sort of see the dividend flow coming through the share price starting to move, et cetera. So we feel we've made the right call. We also felt that there was a very important strategic benefit in the stake, and we continue to believe that. But as with all of our assets, Lar or individual assets, we have a very open mind to rotating assets. At this stage, though, you look at the yield we're getting on Lar, it will be very difficult to replace that. If one got an offer at a much higher share price, of course, one would be prepared to consider it. But we'd be prepared to consider selling any asset at the right price and redeploying into opportunities that maybe add more value. So I think what I'm getting to is that every asset has got a role in the portfolio strategically and operationally that is always evaluated. At the moment, Lar is certainly delivering for us financially. We believe the strategic optionality still stays there. So it's currently not on the sales list. We're not actively looking to rotate it. And in fact, we've been increasing that stake because we believe positively in the story. But we're always open to ideas, and where market conditions and opportunities present themselves, we're always going to take a position of evaluating things at a point in time and deciding what the next best step is.

Thank you, Laurence. There are no further questions.

Great. Thank you all for attending. We appreciate it.