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

Excellent. Good. So good afternoon, everyone. A very warm welcome to those in the auditorium, to those online. And really, it is my absolute pleasure to be able to present the Vukile results to the year ending 31 March 2025. And we really are very excited, very happy to present such strong results in what has been a truly transformative year for Vukile. And I think it's important as a starting point to really focus on what has changed and what have we done in this year. So when we're talking about it being a transformative year, what does that really mean? Well, we have been exceptionally active in rotating assets. And number one, we sold our listed investments. We sold our stake in Fairvest, that money has been redeployed into a very, very successful PV projects, and that will come at accretion as well. But very importantly, we sold our stake in Lar España, and that was for a capital profit of EUR 82 million. And that, together with the proceeds of capital raises that we did in February last year and then in September, of this current financial year, we have redeployed into buying not only the iconic Bonaire Shopping Center in Valencia was EUR 305 million. But also, we invested in 4 shopping centers in Portugal during the financial year and then 1 closed a month into the new year. So really, we've now bought 5 shopping centers in Portugal for EUR 323 million across those assets. And collectively, that has driven the direct asset base growth of -- I'm going to use a figure of 70%. The 60% is for the financial year. But when you take into account Forum Madeira, we've grown that now to EUR 1.73 billion. What you also see is that they've come at very attractive yields. So we bought the Portuguese assets at a blended yield of around 9%. Bonaire at 7.2%, and I'll show you a bit later, the cost of funding on that. So really, it's been a tremendous transformation from that point of view. All of these acquisitions have been fully funded, there is no need for further funding and it's now really about bedding down and integrating these assets and Alfonso will talk through that. We also bought the Mall of Mthatha, that was formerly BT Ngebs, that was in April of this current financial year, and Itu has done tremendous work in turning that around. And then as I said, really a standout year for our solar, increasing our capacity by some 67%. When you take all of that together, you can see how we really have evolved our business into a much larger, more international business. We're now sitting with gross assets of just over ZAR 50 billion, 65% of those are based in Iberia and Spain and Portugal, 35% in South Africa. And you'll notice that for the financial year '25, the split of income is still roughly 50-50 between the 2, but that's because these Portuguese assets came into the business quite late in the year. So going forward, we would expect around 60% of our property NOI to come from the offshore markets. So you can really see how this year has not only brought us scale, but has also brought us a much change focus in terms of where the assets are sitting and now sort of more offshore. So with that as context, I think let me jump into the results for the year, and this really has been another standout year for the team. Itu has delivered another fantastic set of results in South Africa with growing positive momentum that he'll talk you through. Alfonso once again with the Castellana team has delivered a market-leading performance in Spain. We're starting to see similar trends emerging in Portugal and very excited about the prospects there. The balance sheet remains very strong, very strong liquidity, ZAR 2.1 billion of cash, ZAR 2.5 billion of undrawn debt facilities, and I think that really gives us a very solid platform as we move forward. Now I've already spoken about the transformative nature of all the deals that have been done. But really the exciting part of the deals is what it does for the business going forward, and that really sets a very strong foundation for future growth. And I'll expand on that later. But what you'll find is not only have all the deals been very accretive, but it gives us a very good pipeline of value-added projects going forward, which is always a good source of future growth. And then once again, delighted to have delivered on guidance with a 3% growth in FFO, 6% growth in dividend per share, and that extends our track record in terms of paying dividends in every 1 of our 21 years since we've been listed. With that, I'm going to hand over to Itu to talk you through the SA business in a lot more detail.

Thank you, Laurence. Good day, everyone. It really does give me a great pleasure to present the South African results for the period ended 31st of March 2025. The portfolio continues to deliver exceptional results, I think, really showing the defensive nature of the composition as well as our continued focused creative asset management interventions and initiatives throughout the year. Looking at the slide, just focusing on the key facts. The portfolio is now valued at ZAR 16.7 billion with the addition of Mall of Mthatha in April. Our asset base has now increased to 33. Significant highlight of this reporting period has been the further aggressive execution of our PV strategy. We have, over the year, increased our PV capacity by 14.4 megawatt peak or 67%. This has resulted in the PV contribution as a percentage of our total electricity consumption increasing from 18% to 27%. Moving to the valuations tab. Our valuations are up by 8.5% on a like-for-like basis. I think key to this is that 6.6% of that came purely from organic net operating income growth. The result in yield of the portfolio based on the valuation remains at a conservative 8.6%. So we're very comfortable with where the valuations have landed. With regards to the performance overview, I'm going to spend a bit of time on this one, our like-for-like net operating income growth has seen a 6.4% increase, increasing further from a high base that we have set at this point in the previous financial year of 5.4%. And the key drivers to this have really been steady top line growth. We've seen further absorption of space within the portfolio. And we've seen significant savings in water, electricity, soft services, diesel consumption. And then we've also had some additional PV margin coming through in our income statement. With regards to vacancies, our vacancies have decreased from 1.9% to 1.7%, this is the lowest that we've ever had, 19 of our malls, circa 60% of our malls are now fully let with 8 malls with vacancies below 1,000 square meters. So really, we see an environment of robust leasing activity and continued strong demand. Our rental reversions continue to be positive, now at 2.4% up. I think more importantly for me, 85% of all of the renewals that we've done are either positive or flat. Moving on to the efficiency tab. The 2 key areas that I'd like to highlight here. The first being trading densities. Our trading densities have increased from 2.4% as at financial year '24 and they're now at 5.2%, particularly pleasing is the continued growth that we're seeing in the township and the rural portfolio up at 6.7%. We've seen trading density improvement in growth across all of the segments within the portfolio. And the second point is I'm really pleased to present the lowest cost-to-income ratio that we've presented at our full year results, down from 16.8% to 15.3%. I'll explore the key drivers and the levers to the lower cost-to-income ratio later on in the presentation. So overall, we're very pleased with the continuously solid performance delivered by the team and the portfolio and we remain well geared for sustained growth looking forward. Moving on to our portfolio composition. The portfolio continues to be well positioned, diversified and defensive across 8 of the 9 provinces. Our larger segments in terms of GLA and also valuation being the township and the rural portfolio continue to trade well, effectively fully let with low rent to sales, really signifying the scope for strong reversions and continued growth into the future. The Western Cape, the Northwest and KZN have been the best-performing provinces in the past 12 months. In terms of footfall, demand for space and also for rental uplift. We continue to see steady increase in our base rentals across all of our segments. With regards to our key value drivers, the interplay of all these key graphs that I'm going to talk you through really point to a story of sustained growth, in terms of how we build in the performance throughout the portfolio. So how do we drive this value across the portfolio. So we focus on the following key issues. We carefully curate our tenant mix, and this is starting on the top right-hand side of the slide, which curate our tenant mix in the defensive but growing categories of groceries, food, lower end fashion pharmacies. This results in strong growth in turnovers from the key tenants, which then drives moving on to the second graph, significant growth in the portfolio in terms of trading densities. The growth in the trade intensity drives key affordability in asking rentals with low rental sales. When the rental sales are low, tenants generally want to occupy space in that portfolio, which then drives the vacancies down moving to the bottom right-hand side of the slide. When the vacancies are down, you see increase in reversions for the tenants that are currently in occupation. And all of this combined effectively drives your gross income and your top line into how your portfolio is performing. So if I were to look at one key slide in the presentation, this really just speaks to the quality of our portfolio and also the sustainability of our earnings looking forward. Looking at our retail category performance. Growth momentum was achieved across all of our major categories and tenants with the top 10 tenants growing by 5.9%. The grocery category, which accounts for 21% of our GLA saw a significant increase from 0.9% in financial year '24, up by 7.1% in this financial year. Fashion, which is our biggest category, is up from 0.9% to 0.3% -- up 3%. Interesting to note on this slide, from a consumer behavior perspective, how fast foods, which account for 6% of all of our GLA has shown a 10% growth, while restaurants have grown by relatively flat and they account about 2% of our portfolio. So really, the consumer in terms of food still favoring fast foods. And then 13 out of our 14 categories have shown improvement in both turnover and trading densities. When you compare that with this point last year, we had 11 of the 14 categories positive. In our portfolio, nondiscretionary categories outperform discretionary ones with regards to trading density and also turnover growth. Majority of our top 10 tenants exposure in our portfolio is to the nondiscretionary essential brands. So if you look at our top 10 tenants, they represent 53% of our GLA at the bottom left-hand side there. The biggest part of that 34% is to the nondiscretionary categories. The main categories in terms of our tenant exposure is to groceries, pharmacies and low end basic fashion. We have increased our exposure to these nondiscretionary categories by 9,100 square meters in financial year '25. If one then focuses on the table at the top and turn on the right-hand side, the trading density of our top 10 tenants grew by 5.7%, that's -- if you want to dissect that into discretionary and nondiscretionary, you'll see that the nondiscretionary categories grew by 6.7%, whereas the discretionary ones grew at 4%. So the higher trading density really suggests stronger, more consistent performance from our nondiscretionary tenants. And this is a message that we passed on to our leasing team as we look to relet expiring tenants, this is a consideration that is top of mind in terms of what we then look to execute. With regards to our trading environment, all of our segments have shown trading density growth, Township portfolio growing at 9%, that's the strongest. Rural portfolio up by 4.3% and the commuter portfolio up by 4.5%. The township and rural centers continue to outperform, both in terms of sales and footfall. Overall, in the portfolio, we saw an increase in footfall of 1%. The township portfolio grew by 2.1%. We continue to see an environment of higher spend per head across the portfolio. So consumers are coming to the mall less frequently, but when they're there, they're spending a lot more per visit. Moving on to our leasing activity. Leasing activity continues to be vibrant strong across all of our segments. 82% of the leases that we've renewed were concluded with nationals and mid-tier tenants, so really strong support from our key tenants. The key observation is the weighted average lease expiry on new deals that we've recently done is longer than the portfolio WALE, 3.7 years as opposed to 3.4 years, and this really highlights the support for longer tenure from tenants, particularly for the portfolio that we hold. We've also done an assessment of optimizing space through relocations, resizing and renovations that have brought upon to the portfolio at 20.5% uplift across the affected pockets. This was driven mostly by subdividing premises into multiple suites across the portfolio. Focusing on the bottom left-hand side, we saw an overall 2.7% rental growth on deals, 2.4% on reversions. And on new deals relative to our budget, we closed deals up by 4.4%. Overall, we've done north of ZAR 1 billion worth of deal in the past year, 665 deals, and we're tracking slightly ahead of where we were at this point last year. So the leasing environment is really robust. Understanding customer needs with the drive, more targeted and relevant promotion is important to us. This drives footfall, which in turn drives increased spend. So what we've done on this slide, we really highlighted the number of promotions that we executed this year relative to last year, impact on footfall and also impact on turnover. We focused on 3 specific promotions that we ran, and we compared what the footfall was on that specific day relative to the previous year. And as you can see, there's significant uplift in terms of footfall, but also very strong improvement in turnover. So really when you drive promotional activity that is targeted, that is relevant, that speaks to the consumer, you get the outcomes in terms of improved footfall but also improved spend. More on the customer behavior observation side, our month end and first week visits still account for the majority of our footfall being 65%. 43% of all of our visits continue to happen on weekends and Saturdays are the busiest days for our portfolio. This has changed coming out of COVID, we had found that midweek was the busiest. It's now come back to what we saw pre-COVID with people coming to the mall on weekends. Focusing on our cost-to-income ratio. We continue to drive strategies to decrease our cost in a sustainable manner within the portfolio. Whenever we look at this slide, we like to contrast on the left-hand side there, the difference between our cost-to-income ratio in financial year '13, which was 27.1%, and we contrasted with where we are at this point, which is 15.3%. The top 3 cost items receiving significant strategic interventions, are electricity, municipals, as well as our self services in terms of security and cleaning. Biggest contributors to savings in the past year have been our solar PV, which have -- with the 14.4-megawatt execution that we've done, we've seen a 70% increase in savings. We've also drilled additional boreholes within the portfolio. Approximately 17% of all of our water consumption in the portfolio is now from boreholes, with 95% backup storage within the malls. Overall, we've also seen some savings on diesel. We've renegotiated our self services, and we've had a 6% saving there. This focus has resulted in the portfolio cost-to-income ratio really decreasing from 16.8% to 15.3%, with all the interventions that we continue to execute within the portfolio, we anticipate that in the year ahead, that cost-to-income ratio should decrease further to settle at around 13%. So some key highlights on our energy and sustainability strategy. We've got the 36-megawatt peak that's installed. This year was particularly momentous. The most aggressive installed capacity rolled out within the portfolio increasing by 67%. On this slide, we're highlighting 3 specific issues. One is the contribution to revenue from PV which contributes 5%. We've also seen a 5.9% uplift in valuations due to the energy strategy and also a significant decrease in our cost to income ratio has really been driven by the PV interventions. The current capacity covers approximately 80% of our identified solar potential within the current portfolio, the balance which we should look to complete in the next 24 months. In the year ahead, we will look to execute an additional 10.6 megawatt peak of solar projects, yielding 17.2%. The next frontier with regards to our energy strategy will be to finalize our wheeling strategy and approach. We're also looking at our best systems with battery capacity within the portfolio. Our battery costs over the past 12 months has decreased by about 2/3. So that strategy now becomes a lot more viable in terms of rolling it out across the broader portfolio. I want to touch on some value-add projects that we've executed within the portfolio in the past year, the 2 of them. I'll start with Bedworth Center. Bedworth Center was a project that really consisted of remodeling, subdividing and repositioning a very big pick-and-pay hypermarket on 14,300 squares. We took that 1 big box. We subdivided it into 20 smaller stores, including a boxer and Shoprite and including a new mall to give our consumers variety. The branding of the mall is now as convenience, but also it still has the value outlet identity and element to it. This, to me, was customer centricity in action because what we saw in the -- from the build context is the demographic changed from families more to students. We've got 2 big universities in and around the area. And a lot of the shortfall township, which is about a kilometer away for the mall needed variety in shopping. So what we did is we changed the tenant mix. We introduced 80% national representation. We've relaunched the mall. It's been trading for 2 months, and we've received very strong feedback from the community. From a yield perspective, the anticipated first year yield on the redevelopment is 11% on the ZAR 141 million spend. An exciting project has been the Mall of Mthatha, which transferred in April. We have been busy with 113 million redevelopment for our 50% of the mall, 75% of the budgeted CapEx has already been spent. I mean the primary objective of what we're trying to achieve here was to fix the look and feel, to make it a welcoming environment, there was one area of the mall that required an anchor. We've introduced an anchor to that side of the mall. We've subdivided a lot of boxes where we felt that you could add new categories and you could also increase through rentals, and we've managed to decrease the vacancy from 16.9% to 2%. So by all intents and purposes, it's been a very successful redevelopment already. We will relaunch the mall in October. What's pleasing to me, if you look at the comments that we received from social media on the right-hand side from shoppers, there's a comment there that reads, thank you, you have changed our shopping experience in Mthatha, and that was one of our key objectives when we undertook to do the development. And then just focusing on our valuations. The valuations really are an outcome of the key operating message, which I've communicated in this presentation. 6.6% of the growth in our valuation is organic growth, 1.1% is due to income profile adjustments. All of this comes as a combination of strong trade, increasing base rental, value-add activity, low cost-to-income ratio and it drives the result in value. So we're very comfortable with where the valuation has landed. When you look at reasonability checks of yield versus disposals and disposals versus book value. We're happy that our portfolio is conservatively valued. So to conclude, the portfolio has continued its market-leading performance in the past 12 months, increasing occupancy, growing through rentals and really tightly managing costs. We further expect improvement in net operating income in the year ahead. And with that said, I'd really like to thank you for your attention, and I would like to invite Alfonso to provide an update on a very exciting year at Castellana.

Thank you, Itu and congratulations on a great work on the South African business. [Foreign Language] now that we speak Portuguese as well, everyone. So happy to be here again, presenting Castellana results, but not only happy, but proud to show a great performance in the business. So Laurence advanced it in his intro. And yes, this has been a transformational year, marking an important turning point for Castellana properties, taking the company to another dimension from which we -- there is a lot of potential coming next. So before going into the details of the period, let's give some context on both the Spanish and the Portuguese markets from a macro perspective. So Spain's economy is doing great for the last years. And so we noticed on the streets. I always say that it's not only on the metrics, but it's also what you feel on the ground. And Leisure -- so restaurants and leisure venues fully booked, roads on weakened, pack with people moving around to hotels and apartments with the highest occupancy rates is what gives us very much the feeling that the economy is going very well. But now moving into the metrics, GDP grew by 3.2% in 2024 with forecasts of 2.3% for this 2025 and 1.6% in 2026, driven by a strong household consumption service exports and public spending. With inflation and interest rates stabilized a very strong labor market with the lowest unemployment rate in the last decade, having rates -- savings -- sorry, high saving rates and historic low debt of the families, together with the outstanding performance of tourism, Spain is dominating growth in Europe, becoming one of the most popular destinations for investing in real estate. Actually, Madrid ranked second at the PwC emerging trends report of Europe. In the case of Portugal, its economy is performing well, too. Portugal GDP grew by 1.9% in 2024, surpassing government forecasts. Growth is projected at 2.3% in 2025 and 2.1% in 2026. And in a similar case, as explained, Portuguese economy drivers are being mainly private consumption and tourism with employment also at historic highs, real wages growing steadily. When adding stabilizing inflation and interest rates, private consumption rose 3.2% in 2024, with a strong 10.5% increase in disposable income. Tourism as the other main driver had a record 2024 with over 80 million overnight stays and 31.6 million guests, mostly foreigners. So as we can see, Castellana is now operating in the 2 hottest economies in Western Europe. To give you a quick overview of Castellana figures in FY '25, here, we see our key metrics, which, while keeping best-in-class operating metrics, our size has grown and improved significantly. Property portfolio GAV grew 3.6% on a like-for-like basis. And that's with our values is still very conservative on their approach with average discount rates of 9.2% and exit yields average of 6.8%. A strong operational performance with like-for-like 5% growth in GRI and 6.4% in NOI. And all that with almost full occupancy and collections that reflect our know-how, our strong relationships with tenants and our portfolio quality. We remain confident to keep up the growth given these good metrics, especially looking at our average OCR standing at 9.6%, which is well below the benchmarks, showing growth capacity in rents and NOI going forward. Looking into more detail of performance, both shopping centers and retail parks have closed the year with excellent performance in the key operational metrics such as footfall and tenant sales. In total, our shopping centers in the portfolio have received in the year more than 90 million visits. And this with Bonaire partially closed, as you know, due to the floodings in October. Footfall across the total portfolio increased by 2.4% and sales by 4.3%. It is worth highlighting that the Spanish portfolio continues to break footfall records year after year. And for example, by Bahía Sur closed 2024 with almost 8.4 million visits and El Faro with 8.3 million visits despite having 18,000 square meters closed for 11 months due to renovation works that we are implementing there. These 2 centers are expected to continue growing with the latest improvements and value-added projects that we are under performance now -- under works now. I would like to reinforce the message about the importance of the value-added projects already completed in the shopping centers. In this regard, special mention goes to Vallsur, which -- with the repositioning project we have carried out, not yet completed, has experienced an 8.6% decrease in footfall already. From a sales point of view, still beating records period after period. And in this last period, our retail parks increased by sales by 6.5% compared to shopping centers which also accelerated 3.7%. As said before, a very positive year in all metrics. When looking into leasing, we have kept a very hectic activity over the last year. And we have completed a total of 286 lease agreements, which amounts to nearly 62,000 square meters. These contracts represent approximately EUR 17 million of refreshed cash flow with an average reversion of 17% compared to the previous leases of those same spaces. And that's excluding inflation, which will be updated accordingly to CBR in due course. Regarding occupancy and rent collection, as I said before, this is the beauty of having an internalized teams. We are market leaders in these metrics with 98.4% on both. These are excellent figures, highlighting the strong relationship and positive engagement we maintain with our tenants. Moving on to GRI bridge. The reported GRI for FY '25 rose to EUR 82 million with a like-for-like growth of 5%. Now if we include 50% of Alegro Sintra, the figure overpasses the EUR 84 million. So with the existing portfolio, the potential GRI can be achieved -- that we can achieve would amount to a total of EUR 137 million. Most probably that will be coming on FY '27, with 84% coming from shopping centers and 60% -- 16% from retail parks. On the GAV bridge, moving on to gross asset value, we began the fiscal year with a GAV of EUR 1.2 billion and closed it at EUR 1.66 billion, representing a 38% growth. The direct property portfolio value grew 3.6% on a like-for-like basis. And if we take GAV as of today, it rises to EUR 1.734 billion with the acquisition of Forum Madeira. The strategic reinvestment of the proceeds from Lar España has driven landmark acquisitions in Portugal and Spain to take us to another dimension in terms of value. So as you know, at Castellana properties, we are active managers and experts at identifying ways to improve our asset performance in every aspect. So over recent years, we have proved that active management of our centers have ensured a steady growth in the portfolio's value despite the yield and capitalization rates expansions that we've seen in recent years. What we wanted to show in this slide is how active management and clever and continuous investment in the assets lead to income growth and therefore value increase. To clarify, the NOI shown in the left-hand side chart is not really the accounting NOI but those figures are the coming from our valuations. In fact, it is the average of the projected NOI for years 3, 4 and 5 as provided by our independent valuers in their cash flows. The value contribution from expected -- from that expected growth in NOI is clearly visible and will materialize even further when yields start turning down. So at Castellana, we strive to lead the sector and best practices across the board. So we continue to consolidate our position with the best digital tools in the retail sector in Iberia, enabling us to attract and retain visitors and strengthen our assets to the -- as their go-to shopping center. Following the new versions launched in early 2024, metrics have improved even further, including 89% active users and more than 4.7 million interactions within the app. That means 72.3% more than last year. We don't just lead through digital channels and loyalty programs, but also through the events that we host at our centers. In the last year alone, we have carried out 320 activities in our shopping centers, which have resulted in an average 11% increase in footfall. Moving on to ESG. We continue upholding the highest standards, reviewing renewing certifications, while incorporating new ratings, labels and certifications. We are proud to have received top-tier certifications that confirm our strong approach towards ESG and best reporting practices, including EPRA Gold Award, 5 stars in GRESB and Great Place to Work. We have launched our extended ESG strategy, 2025, 2027. This year, as all our goals in the previous one were already accomplished ahead of schedule. Something appreciated by the Spanish Shopping Center Association, who awarded Castellana with the best ESG Strategy Award last year. Our ESG memo will be released in the following days. So as you know, at Castellana, we are expert in getting the best out of the assets we own through active management, which includes value-added projects requiring investment. We are currently undertaking several of them. Collectively, all of them are value accretive projects in terms of earnings and total return. Let me share with you the 3 main ones currently in progress. Firstly, El Faro, where we have transformed a former hypermarket into a standout retail space, elevating its position in a consolidating El Faro as the shopping and leisure destination in the region. This project is clear -- as a clear example of how we listen to our customer demands and adapt the centers, the offer -- in the center they offer accordingly. 49% of our customers told us through various surveys that they wanted the Mango and Lefties in the shopping center, and we delivered. This project has brought the largest Lefties in Europe and 2 Mango stores, Mango women and Mango teens. We also have opened the largest Alvaro Moreno store in Spain, which has been a huge success since its opening in December, along with the fitness park gym expanding the center's leisure offer. The project will generate an additional EUR 2.6 million in NOI, but it will also enhance the rest of the center, increasing footfall and sales across all other business. At Vallsur, the project involves a complete renovation and reconfiguration of the first floor which we divided into phases, one focus more on food and leisure and the second more on fashion. Phase 1, with the opening of La Chismería and the new bowling alley involved over 4,300 square meters. And since its opening in December 2023, has already achieved an 8.6% increase in footfall, major success. Phase 2 is still underway, affecting 6,400 square meters, and it has already reached key milestones such as the opening of Fifty, the largest brand of tenant group, and the largest Alvaro Moreno outlet store in Spain. Finally, the project will conclude with the launch of children's entertainment structure never seen before in the world as it has been specifically designed and built for this space. The project will be completed in Q3 this year. And lastly, Los Arcos. Here, we are implementing a combination of an extension refurbishment and repositioning project, which will redefine the visitor experience and the long-term positioning of the center. After acquiring the office building next to the center, it is being integrated within the shopping centers. So the retail offer will be expanding with a new leisure and dining area, something the center was lacking until now, which will allow us to redefine and improve customer experience. This project is expected to be completed in Q2 of 2026. And once again, all these value-added projects are fully funded and are accretive earnings or on total return basis as they are not only bringing higher NOIs. But they improve -- the improvement in metrics and hence, the asset quality should drive in better valuation yields and hence, higher values. So as advanced as well, this year has marked the international expansion of Castellana properties with our entry into Portugal. We have acquired 5 assets, including Forum Madeira in April 2025 for around EUR 323 million. We are currently in a phase of adaptation and integration of the teams, bedding down the new assets. However, during the months that we have the chance to manage the centers. We are very happy and confident that all assets are operating in line with or even above the expectations and forecasts. We've seen above how these assets are performing already increasing footfall by 2%. And what is more important, sales by 5.5%. With the integration of the teams and our proof processes, we are sure these assets will thrive further for many years. And also during this year, we acquired one of the best shopping centers in Spain, Bonaire for EUR 305 million. We recycled their outstanding gains from our exit from Lar España into a top-tier shopping center in Valencia. And as you know, following the floodings and thanks to our solid relationship with the vendor, we were able to complete Bonaire -- this transaction with repair works already finalized and guaranteed by the seller as well as a guaranteed NOI for the first 18 months post acquisition. We acquired a virtually brand-new center with all ground floor stores renovated, showing casing the last -- latest concept and brand images. Moreover, the center includes 10,000 square meters of additional buildability, which we are assessing to explore best way to materialize through another value-added project opportunities. So as you can see, this has been a transformational year for Castellana properties. We are very proud of the team that made these results possible, and of the growth that we have achieved together, including our tenants and shopping center teams over this past year. So this is on my side. Thank you very much for your attention. And I now hand it to Lizelle for an update on financial debt and treasury performance. Thank you.

Thanks, Alfonso, and good afternoon, everyone. It's a pleasure to speak with you today following a year that delivered outstanding results both from an operational perspective and also from a strategic point of view. For FY '25, Vukile achieved a 6% growth in dividend per share and a 3% growth in FFO per share, continuing our proven track record for consistently growing earnings and dividends for our shareholders. This slide illustrates the increase in FFO from our 3 primary geographical segments. As one can see from the first blue bar, a substantial component of the increase in FFO is attributable to the solid operating metrics in the South African portfolio, which translated into significant growth of net profit income. Our businesses in Spain and Portugal also performed exceptionally well. Net income from the Iberian Peninsula, including the impact of FECs, increased by 14% year-on-year. Our proactive approach to interest rate hedging and the early fixing of the Castellana syndicated loan resulted in a relative increase in Castellana's finance costs. For a more detailed breakdown of group FFO, one can refer to Slide 100 in the appendix. This graph illustrates the relevant movement in corporate costs. Starting with corporate costs from the prior year of ZAR 409 million, we added back an amount of ZAR 17 million relating to the clawback on the conditional share plan due to certain performance measures for FY '23 not being met. The normalized base for FY '24 is, therefore, ZAR 426 million. While the CSP does contribute to some level of variability in the corporate cost line, it nevertheless promotes significant alignment of interest between management and shareholders. In South Africa, we spent an additional ZAR 5.5 million on marketing and advertising during the year to build our corporate brand. Thus far, we're confident that it's been money well spent. On a normalized basis and excluding performance-related variances or other corporate costs in South Africa, including salaries and head office costs increased by 6.6%. In Castellana, 53% of the increase in corporate costs is attributable to the newly established entities in Portugal. Salaries and other corporate costs in Castellana increased by 9%, which is in line with the increase in the property asset management team on the ground. NAV per share increased to ZAR 22.39. The increase was primarily driven by an increase in the fair value of investment property as well as income from property assets. One of the key themes this year has been disciplined capital allocation. During the year, Vukile sold its investment in Fairvest in line with our strategy to dispose of noncore assets. The sale proceeds have been redeployed into PV projects in South Africa. The disposal of our investments in Lar España unlocked approximately ZAR 4 billion of capital. We accessed direct property debt of ZAR 3.8 billion and a further ZAR 2.3 billion was received from a capital raise together with the dividend reinvestment plans. Having deployed a net of ZAR 10.8 billion in new assets, we still ended the year with cash in excess of ZAR 2 billion, which was used in part to acquire Forum Madeira post year-end. Then to recap on our disposal of our investments in Lar España. Castellana accepted an offer to sell the 28.8% shareholding in Lar España, which generated an IRR in excess of 40%. Based on an offer price of EUR 8.30, Castellana received EUR 200 million for the sale of the shares. From an FFO perspective, we continued to recognize the normal dividend accrual up to the date of disposal amounting to EUR 12.6 million which was based on Lar's most recent dividend declaration of ZAR 0.70 per share. In addition, we also recognized an FFO in amount of EUR 5.3 million relating to the prior period under accrual. Therefore, EUR 17.9 million was included in FY '25 for FFO. In terms of Spanish GAAP, the sale resulted in a capital gain of EUR 82 million. In terms of Spanish, it's a semi tax law, Castellana must distribute 50% of the capital gain. As such, EUR 41 million was paid to Vukile as a dividend in March. If Vukile were to distribute the capital gain, it would be a permanent erosion of the company's capital base. The most beneficial outcome for shareholders was for Vukile to redeploy the proceeds into another accretive acquisition. As such, Vukile retain the capital gain while still remaining tax neutral and maintaining Vukile's overall payout ratio of between 80% and 85%. The EUR 41 million was therefore transferred back to Castellana by way of a shareholder loan, which we intend to convert to equity in FY '26. In March, Castellana used the proceeds from the sale of Lar together with in-country debt to acquire Bonaire shopping center for EUR 305 million, and we expect that the income from Bonaire would offset the previous earnings from Lar. Our debt and treasury metrics remain very strong. The current interest rate environment has been a key focus with group interest-bearing debt hedge ratio increasing from 59% to 84%. Post year-end, we took advantage of the fact that the forward curve is pricing in future interest rate cuts, and we increased the hedge ratio to 98%. We've, therefore, hedged out any potential volatility from interest rate movements in the short to the medium term. Group ICR, which is -- sorry, Group ICR, which is at 2.9x is beginning to reflect the benefits of hedging group debt. We also note the improved margins, that's reduced our ZAR cost of debt from 9.5% to 8.8%. During the year, we also continued to benefit from Vukile and Castellana's investment-grade credit rating and our very strong relationships with our funding providers who continue to be highly supportive, both locally and abroad. Over the year, Vukile increased its green and sustainability linked debt by 69% from ZAR 1.3 billion to ZAR 2.2 billion, aligning our funding strategy to our continued commitment to ESG goals. Looking at the first and the last gray bars, we can see that group LTV has remained largely unchanged at 40.95%. But I'd like to point out the movement in LTV during the first and the second half of the year. During the first half of the year, we made a core strategic decision to raise ZAR 1.5 billion in capital to bring the LTV down to preemptively create headroom for pipeline acquisitions that were due to close in the second half of the year. This put Vukile, in a very strong position to acquire property assets at the right time ahead of the rate cutting cycle and ahead of that being reflected in the valuations. Lower discount rates and exit yields together with NOI growth will result in property valuations continuing to rise supporting LTV reduction. One can already start seeing evidence of that over the past year, where growth in property valuations reduced our LTV by 1.9%. A detailed sensitivity of the LTV to property valuations and FX movements can be found in the appendix on Slide 112. The group debt maturity profile is at a healthy 3.9 years, with virtually no debt expiring in FY '26. In September 2024, Castellana syndicated loan related to Project West was extended and fixed. Castellana's debt maturity profile is now 4.7 years, with their next step maturity only in FY '29. Vukile has exceptionally strong liquidity and with cash and undrawn committed facilities at ZAR 4.6 billion, exceeding all debt expiring over the next 12 months by 12.8x. Vukile's intention with the dividend hedging strategy is to minimize adverse foreign exchange fluctuations to provide stable, predictable dividend streams to our investors through our active hedging. This has been done through a layered approach through hedging euro dividend exposures with FECs across a 5-year period. Historically, we've not hedged Castellana's FFO earnings but only hedged the dividends coming from Castellana. However, in April, there was a particularly volatile period with the rand weakening to levels as high as ZAR 22 to the euro. This presented a unique opportunity to reduce exchange rate risk by hedging EUR 25 million of Castellana's FY '26 FFO. Looking at the graph, one can see that the rand typically has periods of significant weakness followed by stabilizing range-bound periods, but at levels higher than the previous stable periods. This can be seen as steps amongst the currency volatility. We, therefore, decided to enter into a hedge that provides a minimum exchange rates of ZAR 21.25 to the euro, while still allowing shareholders to benefit should the rand weaken above ZAR 21.25. Given the euro-rand volatility post year-end, EUR 15.7 million of new FECs were entered into. When comparing the first and the second table on this slide, one can see that we subsequently increased the hedge percentages in each of the next 4 years and at better rates. In closing, I'm very pleased with the outstanding results that we've achieved this year, and I'm even more excited about what lies ahead. I'll now turn it over to Laurence for the strategic update.

Thanks, Lizelle. So we've spoken quite a bit about the transformative year, all the deals that we've been through. In Spain, remember that was really driven by asset rotation out of Lar into Bonaire, the rest of the acquisitions in Portugal. What I'd now like to do is really try and dig into more the timing of what we've done and sort of what are the benefits going forward for that. So if you turn to this graph, and I think this is a really interesting one that tells us a fantastic story. Remember, when a deal is done, the market tends to see the deal. They haven't seen the 6 to 8 months prior to that of putting the deal together. So we really identified as we started seeing a rate cutting cycle coming through, that, a, that would be beneficial and, b, that hadn't yet come into the pricing of assets. So we sort of got out there quite early on in the cycle to start looking for assets. What you can see is that also the access to senior finance are starting to improve. Banks are becoming more bullish about the retail sector, not only in terms of quantum, but not having to syndicate. They were going to be there on their own. We thought that was a very positive environment. And then also, we knew that there were a number of willing or motivated sellers, largely private equity funds. They needed to recycle their assets, and we knew that we could approach them to try and secure deal flow going forward. Now if you have a look at the graph on the right, what it's showing is starting here at Islazul in January '24, that was sold at a yield of 8.5%. And you've seen that steady decrease in yields down to, Alcala Magna 7% a couple of months ago. The 2 dots on the right are deals that we expect to be closing in the Spanish market. They're not deals that we're involved in, but it's what we understand from market intelligence. And you can see now that yields are starting to dip below 7%. In other words, you can see the tightening of the market over the last, call it, 18 months or so. Importantly, if you have a look there, and you see the orange dots, those are all the Castellana deals that have been done in both Spain and Portugal. In all cases, we're buying at better yields than where the market is. And that I think is testament to the way in which we do deals. We try and make sure we're buying deals off market. We don't like to get into processes. I think we have a tremendous reputation as being the go-to REIT, the go-to buyer in the market. And therefore, really everything that is happening in the market does tend to cross our desks and we've been able to get better deals and better pricing overall as we build the portfolio. So you can see, I think, really here that we saw this tremendous opportunity to seize the moment. We saw it and we've done that. Now when you look at that and by proactively taking advantage of that window of opportunity, what have we done? Well, I think there are really 4 things that we have done. Number one is we've achieved greater scale in Iberia, making us the market leader and further securing our strong negotiating position with tenants. Now when we talk about scale being important, it's not scale per se. It's scaled to be able to drive good business outcomes. Now with 21 assets in the region, you can see that we have a very different negotiating stance with our key tenants and if you were to own 1 or 2 or 3 assets. And I think that is key. So by buying these assets, we really have cemented Castellana's position in Iberia. Number two, we have improved the overall weighted average yield on the portfolio. So we've grown the portfolio by 70% plus when you take Forum Madeira into account. Those have been acquired at a blended yield, in fact, slightly above 9% against a cost of funding of 4.5%. You can see how we open up the margin there. The cash-on-cash returns look tremendous. Equally in Bonaire 7.2% for a prime quality asset against a funding cost of 4.6% a very nice margin there, cash on cash in excess of 8%. So what you're seeing is that all the deals that we've done are accretive in and of themselves, okay? The third issue is that we've really brought ourselves future pipeline. And as Alfonso and Itu have both taken you through what really is a core competence in our business is adding value to the assets that we have. You've seen the projects we're busy with and have concluded in Castellana. And all the assets that we have bought have got value-add opportunities. expansion, buildability, relettings, retenantings, et cetera. So as we now walk through and work through as a team, those will start coming forward into driving real growth. So when you put those 3 things together, number one, greater scale to drive better negotiating outcomes of tenants, number two, accretion at the asset level; and number three, buying a very healthy pipeline of future value-added projects, you can see that what we've effectively done in FY '25 is build our next growth curve for Castellana and Vukile, and therefore, we are confident that we should be able to deliver real growth over the short, medium and long terms. So what does that mean for our strategy? Where do we go from here? I think our strategy is very well known to everybody. We're a consumer-led model, we're a consumer-led company. That's what creates value for all of our stakeholders. It's a model that is applicable in any market that we choose to operate in. And we talk about 4 pillars driving our strategy. First and most important is driving operational excellence. I think that is the bedrock on which Vukile has been built. You've seen year in and year out, the great results at Alfonso and Itu are able to deliver in their respective portfolios. And that remains what we do every morning when we wake up, how do we keep getting the most out of our assets and what we're doing. That also includes bedding down the new assets in Castellana. And I think you've heard from Alfonso, we're making tremendous progress in getting that done. So that is probably priority number one is to make sure we keep delivering great operational results and get those assets bedded down. In addition to that, it's about looking for value-add opportunities in the existing portfolio. Again, that applies in South Africa, Spain and Portugal. It's where we have a tremendous track record of adding value. And I'm very confident our team will continue to identify opportunities, most specifically in the 5 new assets -- the 6 new assets that we have just bought. Third pillar is around looking at the acquisition of, call it, bolt-on acquisitions of properties in our core markets of South Africa, Spain and Portugal. That is what we have done. It's what we continue to do. I want to be very clear, there are no deals that are currently at the stage of being of closing. So I've said previously, we're not looking for equity capital. I reiterate that point, but that is something that is constantly on the go. We are always looking at new deals, evaluating, make sure we have a pipeline of opportunities to look at. And what we always do there when we're looking at deals is to make sure that the yield that we're buying on is ideally accretive relative to our cost of capital in executing on that transaction. So we are looking for assets that are strategically and financially accretive. Ideally, we would want them to be accretive financially in year 1, but if an asset is going to be neutral in year 1 and see a good growth, we are very happy to commit money to those types of assets and extract the value over time. And then the fourth pillar of our strategy is to evaluate new markets and corporate opportunities. Now that is something that we always need to be doing. That is more longer-term thinking. And what I can say with 100% confidence is we are staying true to our retail model, okay? Don't expect us to buy logistics or offices or hotels. That's not our expertise. When we talk about new markets, it's retail. That's what we focus on, that's what we're good at. We are currently evaluating potential new geographies, but this is very much desktop research at the moment. Please don't think that means we're about to enter into a new country. That's not the case. We're making sure that we have got all the knowledge we need such that when the opportunity presents itself, we are ready to move, and we don't have to move from a standing start. But just to maybe expand on that, I think within Vukile and Castellana, we feel that we have a very strong track record in looking at corporate opportunities. Obviously, the most recent one everyone is familiar with is the Lar España trade. That delivered a 40% IRR for our shareholders. But if you think back, we were the people that really got behind Fairvest and look at that success story. We were the people that really drove the Fairvest Arrowhead merger, look at Atlantic Leaf, look at synergy. In other words, this is a team that is very comfortable looking at the corporate space to find opportunities, but as you've often heard me say, my team hears it all the time, you have to kiss a lot of frogs. It doesn't mean that you're going to do every deal that you start evaluating. In fact, we say no to significantly more than we say yes to. So we're always looking and always understanding. And that pillar of our strategy really is a synthesis between doing the long-term homework, taking your time to evaluate, but being agile enough that if and when the opportunity arises, you're ready to move. So when you put these 4 pillars together of driving operational excellence, value-add opportunities in the existing portfolio, evaluating new direct acquisitions and potential corporate activity, we believe that we are very well set to deliver sustainable real growth in earnings for our shareholders in the short, medium and long term. And turning to that, let's get to the all-important prospects and guidance, and we're very pleased to upgrade our guidance. You'll recall at pre-close, we spoke about growth of at least 6%. The business is in a very, very strong position. I think our strategy is very clear and understood by everybody, it's a consumer-focused retail business. We've got a proven operating platform that delivers results. We have a very healthy balance sheet, and we have an ability to find and execute transactions on an accretive basis as and when required. All of that put together has allowed us to deliver our growth in FFO and dividend per share against guidance for FY '25. Important for me just to stress that we are not offering a DRIP for the FY '25 dividend, so that's a cash-only dividend. When we put that all together for the year ending 31 March 2026, our upgraded expectation and guidance is to deliver growth in both FFO per share and dividend per share of at least 8% for the current financial year. I'll leave you with a message. Our business is in a very healthy position. Management is very upbeat. We're very excited about the prospects, and we look forward to ongoing growth for our shareholders in the year ahead. I would just like to end off with a very special thank you to all of my colleagues, both in the room in South Africa and in Madrid and the Castellana offices. Guys, very simply, I just hope that you feel as proud of what you have achieved as I am in terms of presenting these results to the market. I thank you all very much for your attention. Very happy to take questions from the auditorium here, and then we'll move to the online questions. If I can ask Itu, Alfonso and Lizelle to join me up here, please. Are there any questions in auditorium? Yes, please. Yes, Michail.

So you guys have mentioned that you are potentially going to maybe slow down on the book build activity, right? I'm just wondering if the share price is to maybe continue rising, would you maybe reconsider that position? Or are you guys still very secure?

Michail, I think we would only raise money when we need money. So we're not looking to raise preemptively because the share price gets high and then we'll build balance sheet. What I'd rather do is be in a position when we find the right deals, bring it to the market, explain why we think it's a good deal and look to raise then. That being said, the book build mechanism is very efficient and helps us to do the deals. Why? Because when you are talking to sellers, if you're able to say to a seller, here's my price, and I have the money. You're in a very different negotiating position. And historically, because we've always been able to do that, we've got better pricing because the seller as much as they're trying to drive maximum price, they're trying to drive deal certainty. So we've always focused on, can we provide deal certainty in where we are. So I think the answer is, at the moment, there is no need for capital. We don't have deals that need to close. We are always looking, if and when a deal were to materialize, we would then evaluate where the markets are at that point in time. But it's not something that you should be expecting immediately.

I mean you did mention a bit of sort of desktop research into different areas. Can you say which countries those maybe are?

I think that will be telling. It's in Western Europe. It's in Western Europe, I think that's our focal point at the moment. But just given the competitive nature, I think probably better not to go into too much detail there. Any more questions in the auditorium? Okay. Bryan, can you maybe give us some questions from the webcam, please?

Thanks, Laurence. First question from [ Unathi ]. And the question around, did the recent floods have any impact on the Mall of Mthatha?

Yes, thanks for that, Unathi. I think you are quite appropriate for us to send condolences. In the past 7 days, we've had 90 lives lost in Mthatha from flooding, and mostly around the Mthatha dam, which is approximately about 10 kilometers from the mall, so a significant impact on the community on the ground. Our center management team has been working closely with the counselors to assist where we can just in terms of making sure that people have shelter and food. With regards to impact on the mall, very limited impact that we had, we had a few stores that had leaks. And that was 7 days ago, so last Tuesday, but by lunchtime, the stores were trading, so very limited impact on the mall itself, I think a bigger concern around broader infrastructure in the town. And we've got close relationships with the counselors and the mayors, and we'll be working with them to try and assist where we can.

A couple more questions on the, call it, local portfolio from Francois of Anchor stockbrokers. I'll just pair these 2 questions together. The first one is trading density growth has been far higher in townships, 9% versus elsewhere at 4%. Vacancies and township malls are negligible and rental sales ratios are lowest there. Do the rental growth and reversions reflect this differentiated performance. And the other question is, is there increased rental tension given demand for space growth from Boxer?

Yes. I think on the first one, both, I'd say, the township segment, rural segment value segment, you probably see the same, something similar where the trading densities are strong, rent to sales are low, occupancy levels high. And that does bring up boggling power closer to our site, so we can increase rental significantly higher. And you are seeing that in terms of how we're renewing our deals. The reversions were up in the township segment, significantly higher than the other categories. And with the trading densities where there are now strong improvement, we expect that to be sustained into the next 12 months. So really anticipating that the reversion should be higher than the 2.4% that we printed in this financial year. And then the question around price tension because of the activity of Boxer. We've done quite a few deals with Boxer in the past year, very strong relationship with them. They're very nimble, lower TR requirements. Generally, we find that the trade is particularly strong when we introduce them into our shopping centers. So I'd answer the question by saying that we've got a strong relationship, and we've opened a few Boxer stores, whether from a competitor perspective, there's price tension and the other competitors are moving to try and preserve markets share. I wouldn't necessarily say that's the case. I think the other incumbents are still operating the way that they had prior to the rapid expansion of Boxer, but really happy to be opening Boxer stores in our portfolio.

Thank, Itu. One more question from Francois on local. Can you discuss the Mall of Mthatha's performance since acquisition? It appears to be classified as rural, was its performance since acquisition in line with the rural mall average?

Yes. So the Mall of Mthatha in the past year has grown by 7.9% in terms of turnover. The rural portfolio grew by 5.1%. So Mall of Mthatha was ahead of the broader portfolio. The rental growth in this current year has been up by 7%, and a lot of work has been done in terms of renewing what we had to do, but also subdividing and reducing new tenants. The expectation is that in the year ahead, the rental should increase by circa 25%. So you should really see an uptick as we start getting the new tenants trading as we have the new anchor trading, and we would have executed on the EUR 130 million in terms of capital spend.

Moving on to a couple of questions related to Castellana. A question from [ Miguel ] from Lighthouse. Do you have to carry out any legal or corporate restructuring internally to reflect any larger exposure to Portugal. It seems that in some cases, a Spanish sashimi is not the most efficient way to own real estate assets in other jurisdictions?

So it's rather curious to get a question from a competitor. And I'm not in the habit of giving free tax advice. I think our structures are a very efficient. I think they're doing exactly what we expected them to do. So no, we don't expect any internal restructuring to take place.

Another question from Francois from Anchor, just in terms of the -- what is the cost of debt and debt structure on the Portuguese portfolio? And do you expect this to change in the future?

So the cost of debt is 4.5%. It's fixed funding for 5 years, Deborah, is that correct? Fixed funding for 5 years. It's interest-only with the bullet payment thereafter. So no, we don't expect any changes on the Portuguese cost of debt from what we've disclosed now.

A couple of questions from Mahir from ABSA. Well done on a good set of results. How does the cost of euro funding on the South African balance sheet compared to Castellana's cost of euro debt of 4.95%. And then should we expect a step change in Castellana's corporate costs in FY '26, given the increased scale?

No, I don't think that we should expect a step cost there. I think, obviously, there are more people that we've had to take on. But I think you've also got to evaluate that relative to the assets that you've taken on as well. So I'd expect to see tighter efficiency ratios in the year ahead, even though there will be an increase in cost, that's natural. We have to hire people. Again, we'll make the mistake. Portugal is another country that speak another language. Okay, you've got to make sure you've got the team that can operate as locals in that market. But I think what you'll see in the FY '26 numbers is a greater efficiency in the portfolio because of the scale that's come through. We can amortize more costs through that. And then there was a question on the margin. So the margin in SA is lower than in Spain, but that's historical margins in South Africa. I think it's also a function of being able to use the HQLA status of the SA balance sheet in order to be able to get those rates, but also just remember the euro debt on the SA balance sheet is 3-year funding, whereas overseas, we're looking sort of 5-, 6-, 7-year type funding. So that also -- that does make a difference in the rates. Yes. I hope that answers the question. Maybe just to give you a data point. The margin on Bonaire, which is the latest funding we've done in Spain is 1.67%.

No further questions at this stage, if you want to give it a minute, perhaps?

Great. Anything else in the auditorium? Okay. Thank you very much. I'd like to thank everybody here for your attendance. On the webcam, thank you for joining us. And again, we appreciate the time. Have a good day further.