Good afternoon, everybody. Welcome to Redefine's annual results for the year ended 31 August 2025. As per usual, we're gonna follow the same format. I'll talk about the strategic overview. Leon Kok, Chief Operating Officer, will talk investing strategically from a group as well as from a local perspective. I will then talk about the Polish perspective. Ntobeko Nyawo, our Chief Financial Officer, he'll talk about optimizing capital, operating efficiently, and then I'll take over and finish off with engaging talent, growing reputation and the wrap-up. Okay, so just moving straight into the presentation itself. I think most of you are very familiar with our purpose, our vision, our mission and our primary goal, which as you know is to grow and improve cash flow, to create sustained value for all our stakeholders.
As you can see, our property asset platform is focused on two geographies, being South Africa, 65 odd% and 35 odd% invested in the Polish region. We'll unpack all of that with you this afternoon. In terms of some key financial outcomes, we are very, very pleased with these results. It indicates that the property cycle is on its upward trajectory, and I'm sure you'll agree with me as we go through the presentation that that is a very appropriate subheading. Just in terms of some highlights, you'll see that property assets now just over ZAR 103 billion. Our loan-to-value ratio is back within our range of between 39%-41%, at 40.6%. Our distributable income per share came out at 52.4 cents per share, which is at the upper end of our market guidance.
You'll note that our dividend per share is ZAR 0.4584, growing 7.8%. That's in line with our distributable income growth in rand terms at the same percentage, at 7.8%. In terms of our NAV, you'll see that we've got pleasing growth rate, driven principally by the local portfolios asset values lifting, and we're coming out at ZAR 8.16 per share. Our interest cover ratio, very comfortable at 2.2 times, given that interest rates have eased, and we had some pretty steep interest rates during the course of financial year 2025, as you know. South African occupancy improving to 93.5%, and our EPP core portfolio's occupancy at 99.4%, similarly improving on its prior year position, and we're very pleased with that outcome.
Just in terms of some strategic outcomes, there are lots more, but the key ones for us are, as you can see, total assets have grown by ZAR 4.4 billion to ZAR 106.3 billion. Our property values here in South Africa are up ZAR 1.9 billion. Poland, the values are steady, slight increase at ZAR 49.4 million. We've recycled capital totaling ZAR 1.1 billion here in South Africa, and we sold one asset, Power Park Ostrów in Poland for a net proceeds of ZAR 163 million. Our loan-to-value ratio has been lowered by 1.7% to 40.6%. Debt renewal facilities have been renewed for 2025, totaling ZAR 7.9 billion. You'll note from Ntobeko's presentation that good work has been done for the coming year as well.
We find ourselves in a very strong liquidity position with access to committed undrawn facilities and cash of just under ZAR 7 billion at ZAR 6.7 billion. If you're looking at operating efficiently, distributable income growth of 7.8% to ZAR 3.6 billion. We're happy with our net operating profit margin having lifted by 1.1% to 76.2%, and you'll note that that is coming principally from a strong performance from EPP this year. Our rental reversions coming off a negative, still negative in South Africa, but improving, as you can see, to -5.2% year-over-year overall for the group in South Africa and in Poland, +4%, both trending positively. From a staffing perspective, we have a healthy staff engagement.
If you have a look at our learnership program now, in its twelfth year, we will have had 518 learners complete the program by the end of this year. We have a very stable employee retention rate, both in South Africa and in Poland. Looking at growing reputation, we are very proud of the fact that for the ninth consecutive year, we have been in the top three positions in EY's Excellence in Integrated Reporting. Redefine, as well as EPP, achieved an 81 score from GRESB this year, with EPP improving significantly from their prior year's 70 score. Lastly, but also very importantly, we now have 9 Net Zero Carbon Level 2 certifications. This year, we added 3 to the previous year's 6. With that, I'm now gonna hand over to Leon Kok.
Good afternoon, everyone. On our property asset platform, as Andrew indicated, our property assets under management is now at ZAR 103 billion, roughly 64%-65% in South Africa at the ZAR 66.8 billion. It's been a fairly busy year on the capital allocation front. As you can see, in South Africa, we spent ZAR 1.2 billion on keeping our properties relevant and well sought after. As you can see, it's quite nicely split between the three sectors. Incidentally, that ZAR 1.1 billion was roughly funded by disposal activity in South Africa during the year. On the South African front, our properties at ZAR 65.5 billion. As you can see, over the period, we've been fairly active in terms of recycling and reinvesting in the portfolio.
You can see the number of properties now at 228, or two hundred and twenty-eight properties, at an average value of 17,500. Now, that's a consequence of two things. Obviously, the increase in actual valuation metrics, but more importantly, it indicates that we are selling our secondary and lower quality properties, which drives that rate per square meter upwards. The portfolio has a retail bias at 45% invested in our retail assets, and we're very pleased with our tenants profile in terms of 75% of our tenants is what we classify as A grade. Similarly, our lease expiry profile, as you can see, particularly in 2026, fairly undemanding kind of challenge. You'll see in all three sectors, it's roughly at that 15%.
In fact, in our industrial sector, it's as low as 8% for next year. In terms of the outcomes, very happy that all our operating metrics has turned out to be positive for this year, and that certainly has given us that boost in order to produce the growth that we reported on earlier. Similarly, it positions us well for a growing 2026. As you can see, our occupancy at 93.5%, an improvement there, particularly on the back of very good letting in our industrial portfolio. On the right-hand side, they'll be giving you an analysis of where our vacancy sits in the three sectors, and we try to also give you an indication of what it's worth.
As you can see, with the vacancy by GMR substantially lower than by GLA, it indicates that is our secondary kind of assets that is vacant. Particularly, if you can see in the retail sector, where the GMR potential is only 2.4% relative to the 5.9% from a GLA point of view. Our tenant retention and renewal success rates also very healthy and at the high end of where we'd like it to be. Our weighted average unexpired lease terms still at three years, which in our view is very healthy. The developments. In the back of the booklet, you'll see the detail around which properties we are busy developing and where that development spend is going, and our non-core disposals of ZAR 1.1 billion.
The other aspect that we're very happy about, as you can see on the right-hand side, all three sectors produce positive valuation growth of our external valuations for the full year, obviously driven by our retail and industrial portfolio. The other aspect that we're quite pleased about is that solar PV installed capacity at 58.4 MWp. Since last year, we managed to increase that by 35%. If we manage to install that 8.4 MWp, which is in progress, our total installed capacity will go to 64 MWp, which is roughly a 50% increase on FY 2024, which will certainly stand us in good stead from a renewable energy point of view, but more importantly, assist us with margin management.
On our retail front, portfolio which is still biased towards regional convenience centers, so we quite like the composition of the portfolio. As you can see, similarly, the valuation metrics panning out on that front. In particular, our regional convenience center is performing exceptionally well. The one new asset, obviously, that was added during the period is Pan Africa here in Alexandra. From an outcome point of view, our active occupancy at 94.1%. That slight blip in occupancy is as a consequence of mainly Ster-Kinekor coming into the mix. The positive of that, though, is that whatever letting we are able to do within that space is gonna be revenue enhancing, given that most of our Ster-Kinekor leases was on a turnover lease and a very low average rate rental rate.
That certainly will assist us to grow revenue. The new, renewal reversions at 1%, I think we are being a bit punitive to ourselves, because included in that number is our Park Meadows, which is currently subject to redevelopment. If I exclude Park Meadows, our renewal reversion would have been a +2% for the period, which certainly is a key focus area within our retail portfolio for us. Trading density growth of 4.7% puts us in a position where the rental turnover 7.4%, in our view, is very sustainable and thus indicates that we have the ability to be more, aggressive in our renewal reversion negotiation. Very good letting activity during the period, 291,000 sq m, of which 34% were new deals. Tenant retention renewal success rate similarly very positive.
When you can look at our renewal activity, 80% of our leases is flat or positive, which again speaks to the strength of our malls, as well as that affordable rental turnover ratio. The leasing and maturity profile, as I indicated, a fairly undemanding challenge for 2026 at only 16% of GLA coming up for renewal. On the office front, one aspect in my view that is quite pleasing for us in this is that 96% of our portfolio is invested in A and premium grade. So we're not denying that demand is somewhat limited in the office sector. However, what we have seen is that flight to quality. Now, our portfolio has the ability to get more than our fair share of that demand that is floating, given that most of our assets are in the premium and A grade category.
As you can see also from a valuation performance point of view, the premium and A grade is where the performance came through. In terms of the outcomes, slight dip in occupancy at 87%. We set ourselves a challenge this year of hopefully reducing that occupancy or increasing occupancy to above 90%. In other words, reducing the vacancy to a sub-10. It's gonna be a challenge, but we certainly believe that we have the ability to get that further down. Renewal reversions at -13%, still fairly negative, and that's a consequence of principally one lease during the period that skewed that number at 115 West. If we were to exclude that would have been a -3%. Our view for going forward is probably gonna our renewal reversion negative.
We're still gonna be -30% this year, but possibly closer to a 10% or even sub-10% if we are successful in some of our renewals. Letting activity, 262,000, which again indicates that the leasing market is busy. Of that, 44% were new deals. Weighted average lease escalation is still at a 6.9%, which is kind of average where we would like it to end, but our leases we negotiate between 6.5%-7.5%. Tenant retention and renewal success rate also very positive. Again, our lease expiry profile at a 16%, which indicates that, well, what we'd like to see is that there's none, no spikes in that lease expiry profile.
Again, just to give you some indication of where our renewal reversion sits, even though by GLA the bulk of it was a negative, but there certainly are positive reversions coming through, particularly in our well-performing nodes, obviously Western Cape, as well as Upia and Rosebank and Bryanston and certain areas of Sandton. On the industrial front, another very strong performance by our industrial portfolio, and as you can see across the board in all our types of assets, valuation performance coming through. The industrial portfolio benefited greatly from very decent leasing activity at occupancy of 97.2% and our renewal reversions at 0.8%. I was slightly disappointed by that number.
If it wasn't for one lease in particular to our portfolio, that number would have been closer to +4%, which again speaks to the very decent demand that we are seeing, particularly for logistics and well-located warehouses. Our weighted average unexpired lease term at 4.6 years, still very healthy. Leasing activity at 230,000 sq m, similarly good. Our average lease escalation at 6.5% certainly positions this portfolio for growth. The one area that unfortunately we weren't able to do was to relet at Cato Ridge the short-term Kyoto lease. So that for us is a key focus area for FY 2026. As you can see on the lease expiry front, only 8% coming up for renewal this year.
Then lastly, just on our alternative income, very chuffed with this performance that we managed to break that ZAR 100 million barrier, and we've grown our revenue by 15.6% year-on-year. That certainly for us sets a nice base from which we can hopefully grow even further. As you can see, the main thrust of that coming through our InMob and Xtra Media, Kiosk and e-Exhibitions. With that, I'm gonna hand over to Andrew for Poland.
Thanks, Leon. Okay, just moving on to Poland. As you can see, not much has changed over the past year or so from an asset allocation perspective. It is worth noting that the self-storage exposure has basically doubled from half a billion ZAR to 1 billion ZAR this year, principally due to development activity. ELI, as you know, is equity accounted, so the see-through value of the assets invested in ELI or logistics in Poland is just on 10 billion ZAR. Okay, just moving on to some salient outcomes for the Polish region. A standout outcome would be the cost reduction plan that was implemented during the course of FY 2025, significantly improving EPP's operating profit margin, and Ntobeko will be touching on that as well in his presentation.
I just want to go back and say there is a slide on it that the focus on reducing complexity and high leverage in the joint ventures remains a significant focus. Unfortunately for us, the institutional investment activity in that region is subdued, and it's principally driven by geopolitical concerns in the region. There is a process underway to sell an office in Poznań called Malta, and we'll give feedback on that as we journey along. Renewable energy is a strong feature in EPP's case, where roughly 25% of their future consumption will be from renewable energy sources. We've made good progress to eliminate EPP's core debt amortization. Once again, and Nthabeko will touch on that. Just ELI this year had a good year.
They've doubled their contribution to the group, coming off a base of ZAR 100 million, delivering just over ZAR 200 million in this period. Then there are 7 self-storage developments that are in advanced stages of going to ground. That, over the next 3-5 years or so, maybe sooner, will effectively double the net lettable area of our self-storage exposure, which will take that platform to institutional grade. Which is very important to attract an institutional investor to further grow that segment. Just in terms of the joint ventures, I've already mentioned that there's been a significant focus, and it will continue in 2026 to be one. The Horse Group or the M1 portfolio, as I prefer to call it, we are doing very well in terms of selling surplus land to residential developers, all subject to rezoning.
There are different phases to the implementation of that disposal process. The two power parks remain on the market. In terms of the Henderson JV, that's an office JV. There are three properties in this joint venture, and Malta will be the first office park where we are looking to sell that off first. If we can and be successful, the other two will follow suit. Just on ELI. As you can see, there's a big focus on improving the equity yield that is resulting in extra contribution to the overall distributable income. But at this point in time, given that we have now split the portfolio into two with Madison, we have now optionality with this portfolio.
Whilst we wait for the existing stock in the market to be sold off, there was about 10% of the market up for sale. I think it might have come down a bit through some portfolios that have been withdrawn. Whilst we wait for that market to come alive from a transactional perspective, it gives us the opportunity to improve the earnings profile of that. There is already, I see a question from someone on that, and we will deal with it then. In terms of EPP's core portfolio, as you can see, pretty stable. Nothing really has changed over the period. In terms of outcomes, you'll see a very pleasing set of metrics here, where everything is trending positive. Occupancy, as we said earlier, at 99.4%, virtually fully let.
The indexation is a function of the Eurozone inflation rate at 2.1%. Renewal reversions moving positively. Weighted average lease term stable. Tenant retention very healthy at 95%. Yes, annual footfall slightly down, but I just wanna mention that overall tenant sales have been unaffected by the lower footfall. You'll see a strong renewal success rate by GLA at 77-odd%. Very pleasing that the rent to sales ratio is at 9%, well below the 10% level. If you're above 10%, then you need to be concerned. In terms of the joint ventures, you'll note here that there is a lot of activity here. On the retail ones, particularly the Horse Group as well as Galeria Mokotów, you'll note there's negative reversions. They are 3.9% and 9.1% respectively.
This is a consequence of significant leasing activity during the period. For example, in the M1 case, we had 13% of the GLA that was renewed and a further just under 8% were new lets. That did drive occupancy slightly upwards to 98.3%, which was about a positive 1% improvement. If you look at Galeria Mokotów, that in this financial period celebrated their 5th year of being open, there was a lot of activity there similarly, where they had about 10% of their GLA renewed and a further 11% which were new lets. Those new lets were effectively to reposition and refocus the tenant mix, which has driven a very pleasing rent to sales outcome ratio, which you'll see there at 9.8%. Previously, it was well over 10%.
I think we've got a far better and more sustainable tenant base in Galeria Mokotów, although we've had these negative reversions in this period. As you can see, most of the other, from a retail perspective, metrics, largely positive or stable. Henderson, being an office-focused joint venture, you'll note that there's pressure on occupancy there. They have had almost 5% lower occupancy from the prior year, from 82-odd% down to the 77% level. Henderson does operate in very difficult office nodes in Kraków, Łódź, and Poznań. Okay, just moving on to the ELI portfolio. Once again, as I said earlier, ZAR 10 billion invested from an asset perspective.
If you have a look at the metrics here, largely in line with last year because there has been no development activity in this period. If you just look at the outcomes here for ELI, very happy that occupancy has been lifted from 91 odd% to 97 odd% in this period. That has contributed quite significantly to the improved uplift in contribution to the distributable income from a group perspective. Renewal success, very healthy at 62%. Renewal growth, just under 7%. Market rentals for logistics in Poland are growing, and this is mainly because development activity has slowed down. Unfortunately for us, and this is the time in your career when you want a very low weighted average unexpired lease term. At 5 years, unfortunately, we don't have the full benefit of that renewal growth.
What is very encouraging is that our portfolio is under-rented, so it bodes well for future valuations and future income growth as those leases mature, and we're able to renew them at better market rentals. Tenant retention, very healthy at 67%. It's positive year-on-year. Indexation, once again, applies from a Eurozone inflation point of view. As you will see there, almost 89% of the GLA is let to national and international tenants. We've been very successful with the relets and renewals of roughly 28,800 sq m of industrial space at an average rental of just under EUR 5 per sq m. In terms of self-storage, as I said, this is an expansion of a very low base.
The carrying values, you can see there, it's almost doubled in the period, principally because we had a development that was completed. Then you'll also see there that we are growing our asset base, and that is leading to, unfortunately, a bit of a pressure on the occupancy levels, but that is because of the new development that came on stream at 66%. Four developments are in progress. In 2026, they will add 18,800 of that 33,000 sq m of developments in pipeline that I spoke about earlier in 2026. Moving on to what we are gonna be focusing on in 2026 from an investment strategy perspective. We will continue to exercise discipline when allocating capital. Restructuring the offshore joint ventures to simplify the asset base will remain a focus.
Unfortunately for us, we do have an element of restraint in that we need institutional investment activity to return to Poland, and the reason for that simply is that you can do single asset transactions, but currently at very opportunistic yields, which is value destructive and doesn't make sense to us. We wanna do portfolio transactions that are sensible. Very importantly, fostering tenant engagement to understand evolving needs. We need to provide space to people that is relevant to their needs and is proactive. The only way to do the adjustments proactively is to understand their needs, and this is where communication is so important. With that, I'm now gonna hand over to Ntobeko.
Thank you, Andrew. Good afternoon, everyone. I think if we just look on the optimizing capital, we've been very focused on balance sheet strength. That is for us just to drive the growth and some of the growth that we've started to deliver as we talk through the FY 2025 results. Just on some of the key outcomes on the funding, I think really for us, the credit metrics that are improving, that's really what we believe is gonna enable long-term value creation. Just some of the significant outcomes. The LTV, which last year was at 42.3, is very pleasing. That is fairly now within our range at 40.6%.
Another key metric that we watch quite closely is our ICR, which has improved to 2.2 times compared to the 2.1 times that we have recorded last year. Quite healthy, as Andrew's touched on, the ZAR 6.7 billion of liquidity, which ZAR 5.1 billion of that is the facilities that are committed and undrawn, and then the ZAR 1.6 billion was cash on hand. Also pleasing on the debt margins, we've seen on the group weighted average cost of debt coming down by 50 basis points to 7%. If you break that up on our ZAR-denominated cost of debt, we've also seen a corresponding margin improvement to 8.9% from the 9.2% that we printed last year.
On the FX debt, we also saw a bit of an improvement from 5.1% to 4.5%. Given that the interest rates levels are in their long-term averages, we've also now started to take opportunity of widening tenure. If you look at our total percentage debt hedged, we've increased that from 78.9% to 83.2%. On the group weighted average term of debt, that is quite healthy, just above three years at 3.2 years. We're also pleased that our rating, we maintain our credit rating of Moody's of Ba2 with a stable outlook. If we just go to the loan-to-value ratio, firmly within our medium target range of 38%-41%.
I think if you look at the bridge, really the key issue is there because the cash that we generate and the DV, that over time should fairly match, is really the valuation impact, the ZAR 1.9 billion uplift, giving us that 0.8, and also the cash, which is ZAR 668 million that we retained by issuing 150 million shares in the DRIP. That's also nicely contributing to the reduction of our loan-to-value ratio. We do give you the sensitivities on the bottom left in terms of the property values, which is one of the drivers over time, is that a 1% movement, which is ZAR 700 million, equates to 0.3% in the South African portfolio.
In the EPP, the property values moved by 1%, which is ZAR 0.2 billion. That will have a 0.1% impact on the LTV. We're pleased to report that there were no covenant breaches, maintained all the covenants quite healthy, with the ICR still in this FY 2025 reporting period being relaxed to 1.75 times. Then in FY 2026 in August, it will then revert to 2 times. We're quite comfortable as we're building, and we've seen with this ICR of 2.2 times getting quite healthy, and we expect that to improve. Our see-through gearing from its peak has been coming down and that has been gradually, you know.
We're now seeing that in FY 2025, that is at 46.7%, and really that will be through debt amortization and all the other things on a gradual basis. To Andrew's point, we will need a transaction in one of the joint ventures to actually meaningfully bring that to the levels that are much more closer to our comfort levels. On the funding profile, I think quite proactively. Now we really have dealt with most of our maturities in the near term. We're now proactively just working on FY 2027 and FY 2028, where we've got early refinancing opportunities. In this year, we've got, if we look at twenty-six, the ZAR 3.1 billion, which is 7% of our group debt that is coming up in FY 2026.
Out of that, there is in SA term funding of ZAR 1.2 billion, and there's an EPP term facility of EUR 0.9 billion, which is the Marszałkowska assets. We've also got some DCM that are coming up in the bond market of ZAR 1 billion. In SA, I think we're pleased that out of that 3.1, that is, that has the 1.2 of SA has been refinanced at four years at a three-month EURIBOR plus a margin of 2%. If you compare that to the previous maturing margin, we achieved a margin compression at 65 basis points in that transaction, which is very, very pleasing for us.
Subsequently as well, to year-end, we also took some proactive opportunities where we refinance in SA ZAR 4.1 billion of secured debt between 3.8- and 5.5-year tenors, and that also resulted in a margin compression from the 150 basis points average to a 134 basis points. We actively now working on our FY 2028 maturities, which are largely in the EPP core portfolio. About 5.3 of that is really where in that 2028 bucket we've got opportunities that we're proactively working on. Overall, very, very pleasing for us is that our margin in SA reduced by 20 basis points, 1.6% in FY 2025. Last year it was 1.8%.
I think the longer term trend tells really the proactive strategy here that we've taken on board. In FY 2022, that margin was 2.1%, and now it's coming at 1.6%. If we look at some of our hedging, I think really here for us is that, you know, the low inflation and where the long-term averages are, is giving us the opportunity to really start extending tenure. We had ZAR 9.4 billion of interest swaps that matured with an average fix of 7.1%. We entered new ones at ZAR 9.5 billion at a fix of 7.1%, but we upped the tenure to 1.8 years. Post the reporting period, we also had...
We took out ZAR 2 billion of interest swaps, which were at a fixed rate of 6.7%, and there also equally, we also extended the tenure to 2 years. You can see that is proactively what we'll do as the hedging becomes attractive. On the cross currency side, we also had EUR 299 million of expiries, which, we refinanced at a fixed rate of 3.9%, and that was just a replacement as we roll, and we kept that on a 1-year roll going forward. The point I was making earlier, if you just look at the bottom left on your screen, we have our group margin split between SA and EPP. The group margin at 1.8%, in SA is 1.7%.
If you cast your mind back into 2023, that margin in SA, which is now 1.7%, was 2.1%. At a group level, that was 2.2%, and that has come down now to the 1.8%. We continue here, I think, to diversify our funding base is one of our key focus. I think just to show you that some of the opportunities that you're starting to see now are largely in our DCM program, just given the liquidity there and the margin compression that we believe with our credit metrics improving, we can actually achieve here. Our focus areas in terms of this strategic priority for us is to really expand our sources of capital. It is the focus that Andrew touched on reducing our see-through LTV.
I think also our hedging has to be an active strategy given where we are in the interest rate cycle, and given some of the anticipated benefits of lower, further lower interest rates if SA firmly then goes to lower inflation with the revised target of 3%. The outcomes that we expect out of that is the lower cost of capital that is effectively managed through market cycles. We also really, that if we address our see-through LTV, that will improve the pricing of our equity, and then we could really start doing exciting things in the business. I think in terms of the hedging for us, it's really to manage the predictability of our funding cost in relation to our earnings volatility over time and give you certainty in terms of that.
If we touch on operating efficiently, I think really for us it's very pleasing that the business is well positioned for organic growth that will lift the operating margins on a gradual basis going forward. Let's look at some of the key outcomes. I think it's you know the margin improvement for us is really what is driving the quality of our earnings. If we look at the group distributable income, it grew by 7.8% to ZAR 3.6 billion. That is very pleasing in this environment to achieve that growth. I think also corresponding to that is the in euro terms the improving contribution from our business in EPP, that when we restructured, we're very clear that EPP will generate more than EUR 50 million of earnings.
We're pleased that this year it broke through that and delivered EUR 52.2 million in distributable income. If you take that outcome and just look at the corresponding margin improvement of 1.1% to the net operating profit margin of 76.2%, and you break it down in SA, very stable margins at 78.4%, and then with a big uplift that Andrew touched on coming from EPP, moving it to 71.3%, and then from a group level then achieving that 76.2%. I think our focus on the things that are also other than just growing revenue, we do pay a lot of attention to efficiencies, and I think one of those is our solar that this year contributed ZAR 156.6 million in savings. That's also part of our margin.
Also in our digital ratio, where we're really trying to leverage technology to serve our tenants better, that ratio that we measure has improved to 33.7%. I think also managing on the demand side in EPP is very pleasing to see the decreasing consumption by 1.8%. If we look at the healthiness of our cash collection in the business, I think is very pleasing, both in South Africa and in Poland, that our cash collection ratio is above 99%. In South Africa, being 99.3%, and then in EPP in the directly held assets being 99.8%. If we just break down our group distributable income, that grew from 3.378 to 3.640.
Largely, I think for us, the expansions, which was the acquisition there, that's the ZAR 140 million, include our two key marquee acquisitions in Mall of the South and in Pan. Those are contributing quite significantly to that number. Also the EPP uptick, which I will just deal with it in the next slide, and then also the pleasing contribution in the improved contribution from Redefine Europe. I think when we last spoke, we did indicate that the portfolio split will result in ELI having about EUR 2.7 million of additional distributable income. I think also that is a large number that contributed to ELI, but also ELI leasing activity, lifting its occupancies into the deep 90s% was also very pleasing and supporting that positive outcome.
From the debt bad debt point of view, I think if you look at last year, that number was at ZAR 60, and now this year it's at ZAR 30, so that's why you've got an uplift of ZAR 30. That's really just the quality and getting rid of the tenants that we continue to focus on the quality of the tenants. There's a little bit in terms of the cost of debt, as we have spoken to the margins and some of the lower rates also that are coming through. We also have the accretion because of the DRIP shares, that ZAR 150 million DRIP shares that we issued. I think on the headwinds, just to deal with some key numbers there. On the FECs, it's really these notionals.
We took EUR 25 million that we cycled this year compared to the EUR 52 million last year. That's largely because in the prior year, we had turnover proceeds that we had to hedge for. That's what, if you put all of that really pleasing performance from the business, from positive operational metrics that are driving our profitable growth. If we just unpack EPP, I think the administration cost is one number that really contributed EUR 4 million, and I think that was driven by a number of initiatives. One key initiative that we did there is that we insourced the accounting function so that we could standardize group reporting and all the things that we want to achieve in that part of our business, and that really delivered efficiencies of about EUR 1 million.
The net fee income is the charge that we charge to the joint ventures. That also improved, that was renegotiated. The NOI at EUR 2 million, that's really driven by some of the positive operational aspects that Andrew was talking about. In terms of the headwinds, I think there's really one call-out here, is the one-off that related to the M1 Marki claim, EUR 5 million of cash that we had reimbursed, that was released in the prior year and is not in these numbers, therefore, it will have the impact in terms of the numbers that we achieve from EPP. But EPP breaking through EUR 52 million, very pleasing for us.
Just to touch on the NAV, I think, also here to see our NAV growing by 28.2 cents to 816.5 cents, very pleasing. Largely is the valuation. If you look at the 1.9, that translates to 26.8 cents in the valuation, because the profit that we generate and you knock off the dividend, those two should be fairly stable over time. We really then, you will see the currency factor on the asset side with the 26 on our offshore business on the 26.9, and then the 10.9 on the liability side, coming through, and then those are the numbers that drive our NAV per share.
In terms of the final dividend for the year end at 31 August, I think really you can see the high quality of our earnings, the healthy liquidity that we've continued to demonstrate, and the encouraging prospects that we've then support this improved payout ratio to 87.5%, which was 85% in the prior period. I think that is very consistent for us with our 80%-90% payout ratio that we've always articulated. I think it factors all the other usual factors in terms of the CapEx requirements, managing liquidity, and also we're pleased that at this payout ratio level, there's no tax leakage, and also maintaining our loan-to-value ratio, as well as also being proactive in terms of the direction where the ICR is heading. If we then look at the
Priorities and the focus areas in operating efficiently, I think very clearly we've set ourselves an internal target of lifting our margins in the medium term to about 80%, and you can see at 76.2% is heading in the right direction, and we're gonna focus on that. It's gotta be a combination of what happens in the engine of our business from a leasing point of view, as well as being very conscious in terms of the cost and the value that you could derive out of the money we spent. In terms of restoring the earnings base, I think it's pleasing for us to grow our earnings this year by 7.8%. We'll focus and maintain that going forward. Accelerating technology is really at the heart of that.
It's really about how in our digital transformation strategy, at the center of it is how we could improve doing business with our tenants. Some of the anticipated outcomes. If we focus on those areas, it's really to continue driving our organic distributed income growth, and then also, improve our earnings to deliver an exciting total return target. Then also, I think lastly is just also to improve efficiencies and strengthen processes by leveraging technology. I think, with that, I would like to share with you some of, in the AV format, just some of, the initiatives that we've achieved in terms of our digital transformation journey, and then Andrew will come back to conclude.
At Redefine, we're people, not landlords. Our tenants aren't occupants, they're the heart of our business. That's why tenant centricity is a core pillar of our digital transformation journey. From first contact to signed lease, we've reimagined the tenant onboarding process. What was once a manual, paper-driven process is now a streamlined, automated workflow. Our list platform initiates digital onboarding from the moment a prospective tenant is added, enabling faster qualification, greater accuracy, and a seamless user experience. Our secure tenant portal was built with our tenants' needs in mind. It offers 24/7 access to key account information, from statements and reconciliations to lease milestones and alerts. It's an all-in-one, centralized, real-time dashboard. Our tenant app simplifies building access. Tenants can manage visitor entry, generate QR codes, and even activate facial recognition for secure, frictionless movement across our spaces.
A further refinement will include a service bot to give tenants instant access to property intelligence, maintenance requests, communications, and accounts tools in one digital touch point. Efficiency meets sustainability with our smart water metering systems. Redefine tenants can now monitor their consumption in real time, detect leaks early, and play an active role in sustainable water use. Internally, we've transformed how we manage tenant documents and payments with DocuWare. This digitized workflow system ensures faster, more accurate processing to enhance operational efficiency and financial governance. Behind every digital interaction is a modern IT platform monitored around the clock. While we don't publicize our cybersecurity protocols, our investors can be assured our tenant-first approach is underpinned by strong digital governance and security. For Redefine, digital transformation isn't a concept, it's how we do business, all day, every day.
It empowers our people, transforms our spaces, and most importantly, it creates long-term, tenant-focused value. Redefine is future ready, people led, and digitally driven for our tenants and everyone who puts their trust in us. Redefine: we're not landlords, we're people.
Moving on to our human capital. Some key outcomes. As you will see there, our employee retention rate, very stable, both in South Africa as well as in Poland, both in the 93-odd% region. I mentioned our learnership program earlier, but it is, just to note, in its 12th year. This year we've had 12,000 applications for the 2025/2026 intake. Just in terms of our net promoter score that we do on a regular basis, you'll note there that South Africa's moved a little bit backwards. We understand there are reasons for it, mostly driven by our insistence that there is a return to work, no longer flexible working policy in place. EPP has transformed their relationship with their staff, improving by 11 from -5 to 6, which is positive.
As you can see in Poland, we were recognized with an HR Quality Award. In South Africa, we were certified for the tenth consecutive year as a top employer. This is group-wide, this is South Africa and Poland. Group-wide, our employees bring a combined 5,375 years of experience, so we're highly experienced and highly educated, as you can see, with 510 tertiary qualifications amongst 700-odd members of staff. Just in terms of focus areas for the coming year, we're gonna continue to refine skills and capabilities. This is really necessary to ensure that we have the right people doing the right work and having the right skills to do so. Our structures need to be aligned to ensure that our strategy is capable of execution, and that's an ongoing process.
As our strategy adapts, so do responsibility allocations and so forth as well. Then having a very flat structure, we need to create growth opportunities for staff so that they do believe that they have a future growth from a career development perspective in the company as well. Moving on to growing reputation. Here in South Africa, you'll see our trophy cabinet is very full. I am not gonna go through these with you, but as you can see, we are very proud of every one of these outcomes. A number of them being ESG ones, both environmental, social, as well as governance-oriented, and even in Poland, similarly. This will continue. This is just demonstration that we're getting external recognition for our endeavors to operationalize ESG. It's no longer a tick box for us. It is an operational imperative for everybody across the organization.
From a focus point of view, we invited you some time back to be part of living the upside. We want to now extend this movement to the upside of us, to all stakeholders, and as part of building that Redefine brand, but very importantly, encouraging everybody to be mindfully optimistic. There's so much to be negative, but we all need to inspire one another to be more optimistic so that we can deliver what you expect of us. Leveraging market-leading ESG position is a continuous process, and that requires deepening relationship with stakeholders from a collaborative perspective, but also ensuring that ESG becomes a leasing tool. It becomes an efficiency tool. It becomes a sustainability tool. That permeates, as I said, not only Redefine structures, but every stakeholder out there similarly. Lastly, embracing technology disruptors. We are looking to become more efficient.
We're looking to become more centric in terms of our engagements with our various stakeholders, and technology enables us to do so. In terms of wrapping up, some time back, I started off with a clock that I copied from Gareth Alston. It morphed into a flywheel, and now we've refined our flywheel. As you can see, stability builds momentum, and momentum builds value. Lower inflation targeting is definitely a positive momentum driver. Exiting the gray list, there was already bond market movement in anticipation thereof, and then there's such a good prospect next year for a sovereign credit rating uplift. We believe that this is driving the flywheel to build on that rising optimism. It's translating into stable property fundamentals that you would have heard from Leon here domestically and I spoke about in Poland.
Our interest rates are now at the long-term average, and hopefully, there will be some rate reduction in due course as we journey along this path of moderated inflation. As you all know, lower REIT and bond yields bode well for potential capital raises going forward, which will drive inorganic growth. The stable property fundamentals will drive that organic growth. We believe we are firmly now in the upward property cycle. In terms of 2026, you would have heard focus areas across the strategic priorities. Yeah, just to pull it all together, we will continue to build a quality, diversified portfolio that is capable of delivering sustainable risk-adjusted returns. Our focus on conservative balance sheet will continue to drive sustainable growth. Accelerating new data and digital platforms is necessary to lift the operating profit margin.
We know that we need rental growth, quite difficult in constrained markets such as offices in South Africa, particularly. We also need to drive efficiencies, and that's where technology plays its part. In terms of our team and culture, we will continue to invest in and transform our human capital to empower creativity and to stimulate innovation. From a stakeholder experience point of view, as I said earlier on, embedding ESG as an operational imperative is absolutely important, but it requires collaboration. In summation for us, a quality platform and a focus on conservative balance sheet management is very important to anchor growth going forward for us. Lastly, if we just look at our outlook, as I said, portfolio quality is important, balance sheet strength is important. These are the primary drivers of outperformance.
We are guiding the market to deliver distributable income share growth of 4%-6%. To put that into numbers, it is ZAR 0.545 per share-ZAR 0.555 per share. We will maintain a dividend payout ratio between 80%-90%, as Ntobeko outlined earlier. It depends on certain considerations and is done on a case-by-case basis. With that, I wanna thank you for your time with us this afternoon. We will now move on to questions. We have a screen over here that has been very busy already. I just wanna say, at every results presentation, there's always one individual who seems to dominate the questions. Today, the prize goes to Fais. For someone who's been very quiet for most of my career, he's gone into the opposite direction this afternoon.
Fais, we will endeavor to answer all your questions, and if we miss some, please reach out to us so that we can answer them properly for you. Let's go. The first question, and this is the first of very many from Fais. The first one from Fais is: What like-for-like rental reversion rates and occupancy uplift are you assuming for FY 2026 DIPS guidance? Now, I'm gonna throw this question into the air, because I think Mr. Kok should answer it, but maybe Mr. Nyawo must help him.
Very happy to take that, Andrew. Fais... Look, it's quite difficult to answer that in total. Let's do sector by sector. On the retail front, definitely renewal reversions trending positive, plus 3 about. On the vacancy front, as I indicated, not much opportunity to reduce it. That said, though, we're looking to reduce it by about 2 percentage points. Office, more of the same. We set ourselves a target to get our occupancy below the 10%, which is gonna be a challenge, but we certainly will try and achieve that. On the renewal reversion front, probably gonna be a negative minus 10. Industrial, more of the same as what we've done this year, with a real focus of getting those reversions to trend far more positively than it is now.
Slight improvement in the renewal reversions overall, and then a couple of basis points in terms of reduction in vacancy.
Great. Thanks, Leon. Okay, just moving on. This is Fais' second question: With FY 2025 operating margin at 76%, how much inflation pass-through is achievable before margins compress? Now, Fais, that took us a while to understand your question, but we think we know what it is. If we don't, please tell us and we can endeavor to answer it better. Ntobeko will take this one.
Yeah. Fais, I think, you know, we're not really worried about inflation in South Africa. If it's at about 3%-4%, that's what we consider as a low inflation environment. How we understand your question is probably in relation to the escalations that can be achieved. In SA portfolio, that's about 6.3%, and we fairly have been at about that 6%-6.5% level, and we expect that to stay in that, in relation to the lower inflation environment.
Thanks, Nthabeko. Fais' third question is: With SA REIT LTV at 40.6%, would you be comfortable with keeping the payout at 87.5%? What LTV levels would trigger higher payouts, and what do you see your long-term payout ratio at? Nthabeko?
Fais, our payout ratio, I think we have been very consistent that it will sit between 80%-90%. When we have been neutral-ish at the median of that, at 85%, which is what we've done over the recent years. Now with the prospects and where the things are heading up, we're comfortable. There are many factors that we have to consider. Yes, LTV is one of them. Our CapEx requirements is another factor. The tax consequences is also another impact. We will look at all of those, but I think with where we are in the cycle, we're comfortable that it's gonna probably sit between 85%-90%, which is still within our broader range of 80%-90%.
Thank you, Nthabeko. Just moving on. Once again, from Fais: 2025 ELI equity accounted earnings from JVs were volatile. What normalized distributable run rate should we use? I think the short answer, Fais, is that this is it now. You can work off this ZAR 200 million as a base going forward. Moving on, another question from Fais. On payouts again: Is there a scenario where you will move to 80%, if, for example, LTV picks up above 42% or ICR is 2x? Give us a breakdown of the use of the retained earnings, i.e., non-yielding versus yielding. I think we've kind of answered, Fais, your first question.
It's more about the breakdown of the use of the retained earnings yielding versus non-yielding, and that then speaks to our capital commitments that we are shown in our slides, which effectively is a combination of both. That there will be some defensive CapEx in there, as well as yielding. We can provide you with that breakdown. I don't believe, Nthabeko. You've got it.
Let me just give them.
Okay.
In our committed capital of ZAR 1 billion, only ZAR 156 million is non-yielding, which goes into our development. If you look at that from a percentage point of view, it's about 15% of our committed capital. The rest is yielding in terms of expansion and improvements.
Nthabeko. Okay. Another question from Fais: What is the DIPS sensitivity to further rate cuts? What can we expect for each 100 basis points rate cut? Nthabeko, we've got a slide on that.
We've got a slide that gives the sensitivities, Andrew. Fais, if you go to slide 38, I'll get it to you now. Slide 38 of our presentation, we give a breakdown. Let me just take you through it. In terms of the local Euro rates, interest rates, if they move by 50 basis points, you will have a ZAR 0.002 impact on the DIPS. On the ZAR, if there were to be a 50 basis point change on the interest rates, you will have a ZAR 0.003 change in the DIPS. It's on slide 38.
Thank you, Nthabeko. Now a question from Moeshue from Standard Bank Securities: Please give us more detail on why the ELI income was so much higher. Moeshue, I think Nthabeko did touch on it in his commentary. Nthabeko, is there something there that you wanna add to where that extra ZAR 100 million came from?
We touched on it, but I think, Weshu, it's really two things that drove that number, Weshu. In euro terms, the EUR 2.7 million was a benefit from the portfolio split, which I think we guided to and articulated when we last spoke with you.
Mm.
The rest was really the improvement of 6.1%. If you look at the leasing activity in terms of occupancy, printing out at 96.8%. Basically, a vacancy reduction, which that portfolio had quite a bit of vacancy. That's where it came from.
Okay. Another question from Weshu is, Please explain why the offshore admin expenses fell so dramatically by circa ZAR 100 million, Nthabeko.
Weshu, I think our cost reduction plan was always part of what we want to do in restoring EPP so that we can rightsize it. I think some of the initiatives that we took, which are actually touched on in the presentation, was around insourcing the accounting function. In doing that, we strengthened our reporting, but as a consequence, the cost of outsourcing, vis-à-vis the insource, provided about EUR 1 million of savings, which was part of many initiatives that took place.
Thanks, Ntobeko. A question from Adrian from Chronex Research is, Can you please comment on like-for-like property valuation movements in the Poland portfolio, including EPP core JVs and self-storage, as well as ELI, in local currency in FY 2025, and then what is your outlook for valuations over FY 2026 and 2027? Just on that, Adrian, do we have the percentages available or do we need to give that, Ntobeko, to Adrian separately in terms of the valuation movements? But I can just tell you offhand.
Send it to him.
We can send it to you separately.
Yeah.
I can tell you that the Polish retail as well as logistics assets have essentially been moderately positive. Moderately, even in local currency, in euros. Moderately positive, not going backwards at all. If you have a look at ELI, for example, the yields did shift a bit upwards, and that was as a consequence of transactional activity in that marketplace. In the main, it has been largely flat. From a self-storage perspective, it has been mostly driven by the development activity, any capital uplift over there. In terms of 2026 and 2027, we don't generally forecast or look to what the valuations are gonna look going forward. I can say that for us, it's a focus on income, not looking at the cap rates and so forth. That's outside of our control.
What is inside of our control is efficiencies to drive that net operating income, and those cash flows are ultimately what drives valuation. If we continue to deliver 4%-6%, we hope that our valuations will similarly start trending to that level of growth. From Weshu, another question. Apologies if I misheard, but it sounded like you said reversions were weaker because of a high amount of leasing activity for FY 2025. Does RDF not use a weighted average to calculate reversions? Weshu, you're right. Reversions are not a function of volume. It is as a consequence of doing deals that make sense to either retain the tenants or to make sure that they remain sustainable.
Particularly in the Metro portfolio, as well as in Galeria Mokotów, there were a number of cases where tenants were simply paying above market rental for the space they were occupying, and we wanted to retain them. That is what caused that negative reversion and assisted, for example, Mokotów to bring its rent to sales ratio below the 10% level, which is a more sustainable place to be going forward. A question from Nazim from Investec. Can you provide more detail on slide 29, the split of ZAR 603 million between Polish storage and local sectoral developments plus yields? How will all of this be funded? What is the sales pipeline? Nthabeko, do you wanna answer?
Sure. Nazim, I can send these to you separately, but the last chunk of that is really, I think, the 7 developments that are ongoing in the self-storage. That will be the last chunk, but we'll send you the breakdown for the SAPs.
Okay, great. Just in terms of sales pipeline, Nazim, you would have not noted that there is held for sale assets of roughly ZAR 69 million. Those are definite deals that are gonna happen that will flow into the 2026 year. We've got a number of other transactions that are possible, but in this market we've learned that deal risk is not only high, but deals take longer to conclude. A lot of those deals that flowed in 2025 were actually deals that were concluded in the prior year, where you would have seen net current assets held for sale of about ZAR 500 million flowing into this financial year. We've got a question from Lawrence, from ClucasGray, and he's. Well, he's actually got two questions. How do you measure or determine the ZAR 156 million in annual savings from solar?
Do you expect these savings to increase going forward? This is a question for Leon. The second question, which is for Ntobeko. What is a core digital ratio? By the way, Lawrence, I often ask Ntobeko this question too, so he knows the answer.
Lawrence, just on the annual savings for solar, that is the value of the kilowatt hours that was produced by our solar panels, effectively. That savings will increase twofold for two reasons. Firstly, as we roll out more solar PV plants, we'll have bigger capacity to generate electricity. Secondly, as the Eskom tariffs or municipal tariffs increase, that increase will effectively increase the saving or the value of our savings.
Great. Nthabeko?
Digital ratio.
Yes, digital ratio.
Lawrence, the way we work out the digital ratio is basically we look at the sets of key processes in the business, and then a percentage of what those are digitized is how we measure the digital ratio. To give you an example, in our procure to pay processes since March 2024, we've actually digitally processed about 300,000 transactions out of that environment. That's how that all fits into that ratio.
Thank you, Ntobeko. Another question from Fais. Are you comfortable with your cross-currency interest rates maturing hedging policy, even if the ZAR strengthens faster than expected? Ntobeko?
Fias, look, I think you're right, but I think our holding pattern, given the volatility of the rand, is actually we believe the most practical approach. We will continue to monitor it. If it gets closer to its maybe intrinsic value, maybe we could look at doing a bit more than the holding pattern. But we're very conscious. I think if I look just in some of the refis that we did this year, we do get a benefit in just in terms of the fix that came in at about 3.9% compared to where it used to be. Yeah. Thanks.
Thank you, Ntobeko. Okay, another question from Aweshu is: Is there any reason RDF's ICR appears to be battling to rise from 2.2 times relative to peers who are averaging circa 2.5 times? Ntobeko?
Aweshu, look, I think we're quite confident that our ICR, as we've guided, it will probably get to the 2.5 times in the next 18-24 months. That we've been clear about. I think if you break it up, we do give it in the Prezi. Like, on EPP standalone, I think that ICR is at 2.6. In SA, that's where we're a bit under pressure. We are through a combination of initiatives. I think one of them for me, which has been a very good driver, as you've seen in this year, widening margins and the profitable growth will work us out of that. Plus also some of our active asset recycling, when we retain cash, we also use that to reduce gearing and improve ICR.
Thank you, Ntobeko. Okay, moving on. There's a question from Lawrence, from ClucasGray. Is the 6.5%-7.5% in-force escalations anchored around the upper end of the 3%-6% SARB inflation target band? He goes on to say, Ntobeko touched on the SARB's attempt to anchor inflation expectations at 3%. Do you believe this could put pressure on in-force escalations in future lease negotiations? Perhaps move that to 4.5%-5.5%. Leon, do you want to answer?
Certainly. Lawrence, you're quite right. I mean, the official inflation number is often part of the negotiation process when we look at these in-force escalations. However, the point we absolutely make clear is that property-related cost is not necessarily reflective of the inflation numbers as published by the SARB. It is often subject to negotiation. If you think that the bulk of our property-related cost relates to utilities and administered costs, which typically increase well in excess of inflation, we do believe we still have sufficient runway to be able to land at that kind of broad range. Over time, we've got a long-term period of lower inflation. Clearly, that will, over time, have a sort of tempering effect on our in-force escalation we managed to negotiate.
Thanks, Leon. Okay, a question from Alex, I'm sorry, Adrian from Coronation Research. Another question. What was the approximate like-for-like NPI growth delivered by EPP in FY 2025? Have you got it there, Ntobeko?
Yeah, I don't have it in front of me, but I'll send it to you.
Okay. From my memory, it's 16%. Ntobeko will confirm that.
It was a number, yeah. It was a high number, yeah.
Okay. All right. We're gonna move now on to Lawrence from Miaga. His question is: Do you value solar PV separately, or do you capitalize it to the asset? That's an easy question, Lawrence. We capitalize our solar PVs to be part of the overall asset. Okay. Have we got any more questions? No. Okay. As you can see, the questions this afternoon, I think Fias clearly was the winner in terms of number of questions. Thank you very much. Aweshu, you were a close second. Thank you as well. With that, I just wanna thank all of you for your patience, your support and encouragement. It's been a long journey, but finally, we believe that Redefine now is building on its growth story, both from a capital point of view as well as from an income point of view. Thank you very much.
We're looking forward to the one-on-ones with you. If any of you have any questions outside of the one-on-ones, please reach out to us via our investor relations email. Last but not least, if you're not following us on LinkedIn, please, please follow us. There is a lot of good information on Redefine that you will receive. In fact, you can become a friend of Leon, who's recently become a LinkedIn member. Thank you very much. Have a good week further and all the very best.