Good morning, everyone, and thank you for joining us today. A summary of key highlights for the six months to 30 June is provided on page seven of the presentation. Distributable EPS for the half was up 0.4% in the corresponding period last year, with the primary driver of this being lower weighted average securities on issue as a result of the AUD 50 million buyback that commenced in April and is now approximately two-thirds complete. NTA per security increased AUD 0.13, or 4.7%, during the period, underpinned by a valuation gain of AUD 96 million due to six basis points of cap rate compression and contractive rent reviews for approximately 94% of the portfolio. As at 30 June, Waypoint REIT's portfolio was valued at AUD 2.89 billion, with a weighted average cap rate of 5.66%.
We made good progress on sale of non-core assets during the half, with five assets sold for a net 1% discount to December book value, and the aggregate value of these sales exceeded the AUD 15 million that we included in guidance at the start of the year. Pro forma gearing, after adjusting for completion of the buyback and contracted asset sales, remains at the low end of our target range, and our weighted average debt maturity remains largely unchanged at 3.9 years as a result of AUD 200 million of debt facility extensions during the half. Today, Viva Energy has sought consent from Waypoint for the lodgement of DAs related to OTR conversions on 29 sites across our portfolio, with 10 conversions completed, all of which have been funded by Viva. Viva reported its interim result earlier in the week, with a summary included as an appendix to the presentation.
EBITDA was down 33% on the first half of last year, with challenging trading conditions for refining and retail offset by continued strength in commercial. Within the convenience and mobility business, fuel volumes were down 0.5% for the half, which compares favorably with the broader industry, where fuel volumes were down 2.4% over the same period. Viva's convenience sales were down approximately 10% for the half, mostly due to a 27% drop in tobacco sales as the shift to illicit tobacco continues to impact the industry. Excluding tobacco, convenience sales were down circa 2%. Although EBITDA for the convenience and mobility division was down 39% half on half to AUD 74.4 million, it was encouraging to see a significant pickup in earnings in the second quarter as a result of improved trading conditions, effective for fuel and early delivery of synergies and cost reductions.
I'll now hand over to Aditya to take you through our financials and capital management in a bit more detail.
Thanks, Hadyn, and good morning. Turning to slide nine, which sets out the half-year result, distributable earnings for the half were AUD 55.6 million, which was in line with the prior period. D EPS was up slightly, primarily due to the impact of the on-market security buyback, which has lowered the number of securities on issue. At a line item level, rental income grew by 2.6%, with like-for-like growth of 3% offset by lower income following the sales of Emerald in late 2024 and Toowoomba in early 2025. Operating expenses increased due to higher property costs on our double net sites. Corporate costs were flat, reflecting our continued disciplined approach to controllable expenses, and the MER reduced to 30 basis points. We expect operating expenses for the second half to be in line with the first half.
Interest expense was also higher, in line with our guidance for an increase in the cost of debt. Finally, statutory profit for the half rose to AUD 137.1 million, primarily driven by valuation movements on the investment portfolio. A full reconciliation between operating and statutory earnings is provided in the appendix. Turning to the balance sheet on slide 10, the key highlight here is the increase to NTA, which was 4.7% higher at AUD 2.89 per security. The largest driver of NTA is the property portfolio, which is now carried at AUD 2.9 billion. Valuation gains were primarily driven by rental growth and a six basis point firming in the portfolio's cap rate. The portfolio's valuation appears to have passed an inflection point, with valuation gains recognized across full year 2024 and now in the first half of 2025.
This aligns with a more supportive interest rate outlook and improving transaction activity across the fuel and convenience sector. As Hadyn mentioned, we took advantage of these market conditions and sold a further five non-core assets for AUD 34.5 million, which are recognized as assets held for sale at 30 June 2025. Four of these assets have settled post-balance date, with Charlestown due to settle in September. The other key driver of the balance sheet during the half was the announcement of the AUD 50 million on-market security buyback. At period end, around two-thirds of the buyback was complete, with AUD 32.9 million deployed at an average price approximately 10% below NTA. This compares favorably to the non-core asset sales, which were executed at a 1% discount to book value. Our balance sheet and capital position remain strong, and we have set out the key metrics illustrating this on slide 11.
Our weighted average cost of debt increased to 4.7%, primarily due to a 45 basis point increase in our hedge rates, as favorable interest rate swaps mature and are replaced with new swaps at prevailing market rates. As an example, we had almost AUD 200 million of swaps at a base rate of approximately 0.8% expire during the half, which compares to current BBSW at circa 3.5%. Gearing at June 30 was 32.7% and is expected to settle at 32.5% on a pro forma basis following the settlement of the contracted asset sales and the completion of the buyback. Our liquidity position is also strong, and this positions the balance sheet well to further consider value accretive opportunities to grow earnings. Turning to slide 12 to look a little more closely at our debt and hedging profile.
On the debt front, we took the opportunity to extend the term on AUD 200 million of bank debt into the 2028 financial year. Our next debt maturity is AUD 109 million of USPP notes due for repayment in October 2027, and these are covered by available liquidity. These notes are not typically repaid before their maturity date, given associated prepayment and swap closeout costs, so we will look at our refinancing options for this maturity in the first half of 2026. On the hedging front, we have a high level of near-term hedging to support our overall resilience against interest rate volatility. We continued our approach to progressively add hedging over time with new interest rate swaps and blend and extends of existing hedges conducted during the half to take advantage of the lower forward curve.
As noted on the chart, average rates on the hedge book, including forward starts, sit at circa 3% through to FY 2028, which is well positioned relative to the forward curve. I'll now hand back to Hadyn to provide a market and portfolio update and our outlook for the remainder of 2025.
As outlined on page 14 of the presentation, year-to-date transaction volumes are tracking in line with last year, with around AUD 250 million of fuel and convenience assets trading in the first half. Headline transaction yields tightened during the half, reflecting an improved outlook for interest rates, as well as a greater proportion of transactions in the key metropolitan markets of Sydney and Melbourne, where yields are typically tighter. We expect similar market conditions in the second half of the year, with ongoing appetite from private investors and syndicators, as well as interest from owner-operators for properties with short remaining lease terms. We've already touched on valuations and Non-core Asset Sales, as outlined on pages 15 and 16 in the presentation.
If I could direct you to page 17, we would provide an update on Viva 's OTR plans across its really express network, as well as an update on the process as it relates to our portfolio. As part of its half-year results update earlier this week, Viva confirmed that 15 new OTR stores have been opened year to date, with an updated target of 45 new stores for the full year. 10 of the 15 new stores year to date were really express conversions, which were completed at an average cost of AUD 1.5 million per store. Viva is aiming to deliver 25 new stores in the fourth quarter, with a run rate of 20- 25 conversions per quarter thereafter, targeting conversion of approximately 50% of the express network to OTR by the end of 2028.
Across our portfolio, which makes up around 50% of the really express network, conversions have been completed on 10 sites to date, including the four that were completed at the end of last year. In total, landlord consent for the lodgement of DAs has been requested on 29 of our properties to date, with the proposed works focusing on basic conversion and remodeling works within the existing building envelope. The nature of these works did not really lend itself to landlord funding, with a significant proportion of the spend relating to fit out and equipment replacement, which are the tenant's responsibility under the majority of our leases. To that end, all conversions completed to date on Waypoint sites have been funded by Viva , with no request for funding from Waypoint.
Turning to the outlook and priorities for the second half of the year on page 19, and staying on the topic of OTR conversions, as I just mentioned, the initial phase of the OTR rollout has been focused on basic conversions that are more appropriately funded by the tenant, given the nature of the works. As Viva's conversion program evolves to include larger scale OTR projects, we would expect to be having discussions with them about potentially contributing to the funding of such developments. At this point, we still don't have any information regarding how many larger scale developments that Viva is proposing to undertake across our portfolio, nor any indication on scope, costings, or timing.
However, based on the plans that we've seen to date, we think it's unlikely that any such projects will commence this year and expect that any discussions will be focused on 2026 and beyond, which is consistent with Viva's public statements regarding potential landlord funding. We're conscious that there's been minimal progress on this front for some time now in terms of our potential involvement as a funding partner for Viva, but we'll remind people that the conversion is a tenant-led initiative and our ability to control or influence timing is limited. We'd also remind people just once again that there's no obligation on Viva to request funding from Waypoint and no obligation for us to provide funding. Any agreement will be subject to agreeing mutually acceptable terms.
As mentioned earlier, the non-core portfolio currently stands at seven assets with a book value of AUD 30 million and will continue to explore opportunities for selective disposals in the second half of the year. Our balance sheet remains in good shape with pro forma gearing of 32.5% and pro forma liquidity of approximately AUD 140 million after adjusting for the completion of the buyback and post-balance date settlements. We note that this level of liquidity is higher than we would typically hold, with potential deployment options including acquisitions, funding of OTR conversions if terms can be agreed, or further capital management initiatives. Finally, we're pleased to confirm a 1% increase to our FY 2025 guidance from AUD 0.1648 -AUD 0.1664, driven primarily by the buyback.
Given the payment of two quarterly distributions of AUD 0.0412 during the first half of the year, this will see our quarterly distributions increase to AUD 0.042 during the second half of the year. I'll hand back to the operator to coordinate Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Your first question comes from Simon Chen at Morgan Stanley.
Please go ahead.
Hey, good morning, guys. Just wanted to confirm that the 1% upgrade is pretty much due to you guys factoring in the full AUD 50 million buyback being executed by the end of this calendar year.
Yeah, that's correct, Simon. We didn't have the buyback in our initial guidance. That was obviously announced later in the year. We're about two-thirds of the way through it, and we'd expect to finish that in the coming months. That's incorporated into the guidance that we've announced today.
Fair enough. Hey, just on your undrawn debt facility, I think it was like a year and a half ago or something like that where you guys got additional capacity, right, undrawn. I think part of the reason, not to put words in your mouth, was in preparation of in case there's funding opportunities with OTR. Now, with that opportunity seemingly not imminent, have you given any thought of just borrowing some of that drawn capacity? I think you're like AUD 100 million, AUD 130 million right now. Do you really need that much given you've been pretty, you know, well disciplined with how you recycle your capital anyway?
Yeah, Simon, that's a good question. Obviously, we've, you know, to your point, we've been waiting for some time on how this OTR opportunity develops for us. It's probably fair to say for a number of periods now, it's probably gone a little bit slower than originally anticipated. I think Hadyn touched on a pretty good update as to where we're at in that. I agree with your observation that the near-term funding requirement seems limited, but you know, we'll be focusing on that a bit more in 2026. When you look historically at this vehicle, we have typically held around AUD 100 million of liquidity at any given time. We're sitting a little bit above that at the moment, and that's really driven by the fact that we've sort of outperformed the sale expectations that we had at the start of the year.
We guided to AUD 15 million of asset sales, and we've sort of achieved AUD 35 million in this half. We'll continue to review the liquidity situation. It's probably not significantly above where we'd like to keep it long-term, but that's sort of something that we continually review as we go through the year.
That's very clear. Thanks, mate.
No worries.
The next question comes from Richard Jones, JP Morgan. Please go ahead.
Good morning. I was just wondering if you have any intention of expanding the on-market security buyback.
That's a good question, Richard. We've obviously still got a bit to go in the current buyback. We're two-thirds of the way through, as I mentioned before. There's no decision been made at this point around expanding the buyback. We've called out the fact that we're holding slightly high liquidity. We'll assess that relative to all the options that we have in front of us, including acquisitions, potentially trimming that liquidity. Capital management initiatives are always on the table, right? It's something we've actively sort of considered in the past, and we're in the process of it. Let's get through the current buyback, and then we'll think about that a little bit more after that.
Fair enough. Thanks, Richard. Hadyn, just a second question. Just in, what are the convenience operators doing in your view just to offset the impact from the decline in tobacco sales?
Yeah, look, there's been a lot of noise around tobacco recently, right? Quite likely so. You know, it's clear a lot more needs to be done to sort of stamp out that criminal and malicious tobacco, and that is really impacting the operators. I think if you, and you know, to be frank, I think Viva has been more exposed to that than others, given the acquisition of the Smoke Mart business when they bought OTR. I think they picked up having 60, 180 or something stores like that at Smoke Mart business. I think if you step back from it, and we've included a couple of slides at the back there in our presentation, just given you know, there has been a lot of noise around this issue.
In 2024, tobacco made up the convenience store sector, but only about 10% of profit because it's a much lower margin product than a lot of the other product lines that the stores stock. If you actually look at it over a five-year period, you know, clearly the last 6 months- 12 months have been pretty dire, but if you look at it over a five-year period, the industry sales, so the industry's managed to grow sales across the entire industry by about AUD 1.5 billion, including the impact of tobacco, and have grown profits by AUD 1 billion. Sales have gone up at 3% per annum over the last five years. Gross profits have still gone up by a compound annual growth rate of about 6%.
The industry has done a pretty good job of offsetting that through, you know, to your point, other product lines, food services, packaged beverages, better take home, and ready-to-eat offerings in the stores. A lot of those new offerings or expanded offerings are a lot higher margin product than tobacco. You know, sales have been hit, but overall margins across the industry have improved significantly over the last five years as well. It's just shifting the offering away from its reliance on tobacco, which I think at one point, you know, it's 40% of sales, it's now down to 25%, but the industry's done a pretty good job of diversifying the offering in stores to those high margin products.
Thanks, Hadyn. That's good color and good data. Appreciate it. Cheers.
The next question comes from Murray Connolly at Morris Australia. Please go ahead.
Morning, Hadyn, Aditya. I was wondering whether you could just give a little bit more color on your appetite to deploy capital into acquisitions at the moment. There's obviously been a fair amount of discussion on the call regarding liquidity, and you guys have obviously been deploying into the buyback. At the same time, obviously keeping a little bit in reserve in anticipation of deployments into OTR. I don't know, it'd just be good to get your thoughts on what the direct market looks like at the moment, what the opportunity set looks like, and how you're thinking about that strategically.
Yeah, look, I think we're always looking at acquisitions, right? When we look at new assets to buy, they've got to be really high quality and improve the quality of our portfolio. The reality is those high quality assets are trading at sort of 4.5% sort of yield. It's pretty difficult for us, you know, when you layer on stamp duty and, you know, costs, et cetera, to actually make that work. Single assets don't really make a huge difference to our earnings, just given, you know, the relative size. When we compare it to alternative options for our capital, one being the OTR rollout and potentially funding that, albeit obviously still a lot of uncertainty around the timing and what that might look like, and other options such as the buyback, it just doesn't really make a lot of sense.
We are always looking, but you know, it's probably third on our ranking of capital deployment, one being OTR, two being capital management, and three being acquisitions. When you compare it to a buyback, you're effectively buying a, at the moment, you're buying an interest in a portfolio of 400 odd assets. We're trading at a 10% discount NTA, no stamp duty. It's difficult to sort of meet that bar when you're looking at single asset acquisitions. We're always looking, Murray, but we're not sort of expecting a significant amount of acquisitions moving forward.
Very clear. Thanks, Hadyn.
There are no further questions at this time. I'll now hand back to Mr. Stephens for closing remarks.
Thank you very much, everyone, for joining us today. Pretty short call, but we look forward to having discussions with many of you over the next few days. If there is anyone that's on the call that would like to chat to either Aditya or myself about the results, we're more than happy to do so, and our contact details are provided on the assets announcement that went out today. Thank you very much. Have a good day and have a good weekend.
That does conclude the conference for today. Thank you for participating. You may now disconnect.