Good afternoon, everybody. Welcome to Redefine's group interim results for the half year ended 28 February 2026. As per usual, I'll kick off with an overview and give you a little bit of insight into our strategic thinking. I'll then hand over to my colleague, Leon Kok, who's gonna take us through the South African aspect of investing strategically. I'll then talk about Poland. I'll then hand over to our CFO, Ntobeko Nyawo, who will take us through optimizing capital, operating efficiently, engaging talent and growing reputation. I'll wrap up, and then we'll have some time to reflect on what we discussed this afternoon.
Just in terms of the overview, this is a slide you're very familiar with in terms of our primary goal, which as you know, is to grow and improve cash flow, and that is our focus, and it will be always top of mind in any choice we make. From a property asset platform perspective, you'll note that the split between Poland and South Africa is slightly different to prior periods in that Poland has shifted down from the 35 % odd it's usually at. That's because of exchange rate differences where the closing euro-rand exchange rate was from a rand point of view, 9% stronger than at the prior year. I think the key takeaway from the exposure to the various sectors is that around 75 % odd of Redefine's group asset platform is skewed towards the consumer, the balance mainly offices services driven.
Just some key financial outcomes. We are very happy with these results. As you can see, they are solid. The property asset platform, as you can see, is about ZAR 2 odd billion less than last year. That is because of exchange rate differences. We will talk a little bit about it in course. We are very happy with the loan to value ratio sitting at 40.3%, well within our target range. Interest cover ratio is improving at 2.3x versus last year's 2.2 x. The NAV is about ZAR 0.01 less than last year. We have got a slide on there to explain it. It is all about exchange rate translation differences driving that reduction. It is temporary. In terms of undrawn committed cash facilities and on hand, you will see we have got ZAR 5.4 billion available. It is lower than last year. It is not because we have spent any money.
It's more about rolling of debt loans which has caused that, but nothing to be alarmed about in terms of that reduction. Very healthy nonetheless. Group net operating profit margin improving. Overall at 77.2%. Got some way to go to get to 80%, but I can tell you that South Africa's knocking on the door of 80% and EPP has got some work to do to get us over the line there. Our dividend per share for the period is at, or declared at ZAR 0.2183 per share and is up 6.1%. Our distributable income per share sits at ZAR 0.278 per share.
In terms of strategic outcomes for the period, as you would note through this presentation, we have transitioned from recovery into momentum, and I think that is what you're gonna see as a recurring theme throughout this reporting period and into the next one as well. From an investing strategically point of view, I've already noted the asset value decrease, and as you can see, it is all down to the rand appreciation, which has caused that ZAR 2.3 billion shrinkage. The fair value of properties have gone upwards both in South Africa as well as in Poland. However, the combination of disposals as well as the repayment of a loan has offset that number.
In terms of optimizing capital, we are very happy to be the first South African REIT to price under 100 basis points for a three-year bond. We've already spoken about the strong credit metrics that we have. Mr. Nyawo will elaborate thereon as well. In terms of operating efficiently, our distributable income growth in ZAR terms is up 7.4%. I've already spoken about our operating profit margin lifting to 77.2%. What is very, very pleasing is to see the South African and our logistics occupancy in Poland improving to 94.2% and 98.7% respectively. Don't worry, EPP is maintaining its very high level of occupancy. As a consequence of maintaining, it's not on the slide, it is there. In terms of engaging talent, we are very excited with our youth development program now extending its coverage for technical and sustainability scarce skills.
You'll note healthy staff retention levels and the ongoing awards that we receive are noted over here. In terms of growing reputation, we are proud of the fact that we've maintained our industry regional as well as global ESG leader badges. We are in a league of our own when it comes to the Sustainalytics recognition. Leon will elaborate on our solar and our South African backup water. As you can see, very healthy water storage capacity of on average 3.5 tons. Okay, I'm gonna hand over now to Leon, who's gonna take you through the local asset platform and some key outcomes.
Thank you, Andrew. Good afternoon, everyone. In terms of investing strategically, as you can see there, Andrew explained there's ZAR 101 billion roughly split 65%, 35% between South Africa and Poland. The South African portfolio increasing by ZAR 1 billion, ZAR 875 billion in fair value gains, about ZAR 430 million of disposals, and then the CapEx number there of ZAR 659 million. The ZAR 3 billion reduction in Poland is largely driven by fair value or by currency translation reserve, with the rand being stronger. You can also see on the deployment of capital, roughly just over ZAR 1 billion being spent on CapEx. Again, the split between South Africa and Poland, not that it was by design, but it's uncanny that it was very similar to the actual total portfolio split 65%-35%.
As you can see, similarly for the South African portfolio, spent almost equally across our sectors. In terms of the South African portfolio and the outcomes, our carrying value of our portfolio at half year sits at ZAR 66.5 billion. From an exposure point of view, 45% of that within retail, so we are retail biased, 34% within our office sector and 20% in the industrial sector. Similarly, from a tenant composition point of view, a factor we're very proud of, 71% of our tenants is within the A grade as classified by the JSE listing requirements, and we believe that is the underpin for a sustainable revenue basis within our South African portfolio.
Similarly, what you can note there in terms of the number of properties over the period, we've got a net reduction of properties and as part of our active asset management, where we typically dispose out of the lower grade properties, lower often the lower value properties. That's what's causing that, the average value per property to have increased from ZAR 287 million to ZAR 297 million. In fact, there's two factors, the fair value changes, as well as selling out of our lower quality properties and typically the lower value properties. In terms of the outcome on a total basis, we're very pleased with that active occupancy number of 94.2%. That was achieved on the back of a very healthy tenant retention at 96%, which is obviously supported by the actual renewal success rate of 91%.
The difference between the two is one is by GLA, the other one is by GMR. That certainly bodes well and kind of speaks to what we talk about property fundamentals. A fairly active year from a letting point of view over the last six months. In terms of our average unexpired lease term at 3.4 years, we think that's a very healthy position to be in, and it doesn't pose any undue risks. What you will also note is within each of our sectors, we've given you the lease expiry profile, and we don't foresee any significant years in terms of expiries coming up. We also, as usual, give you an analysis of our portfolio vacancy. As you can see by GLA, it sits at that 5.8% and we convert that by GMR.
In other words, we translate that into what we are advertising that space for. It's at 4.1%. The reason why we show you that is just to indicate where the vacancies sit, in particular from a retail as well as an industrial point of view. As you can see, there's a severe reduction in that, implying that's the lesser quality space. From a revenue point of view, the opportunity doesn't necessarily sit there. Whereas an office portfolio, clearly given that the vacancy is at 11%, we still believe from a revenue opportunity point of view that 8.4% presents opportunity to grow revenue within the office sector. The other pleasing thing to note within this result is on the fair value changes, where across the board, all three of our sectors have achieved positive revaluation for the first six months.
Just to remind you, these are externally performed valuations. The other point to note there is that from a valuation metrics point of view, principally our exit cap rates as well as our discount rates, these have remained largely consistent over the last six, in fact 12 months. Those value improvements is on the back of actual revenue and income performance, which we think places those valuations in a position that we comfortably should maintain that. The other nice element to note here is the increase in our solar PV capacity. Our installed capacity as at half year sits at 62.3 MW peaks, which is a 6.6% increase in the underlying capacity. In terms of our retail portfolio, valuation at ZAR 30.6 billion, 54 properties and as you can see, it is dominated by regional and convenience center.
We've got the one super regional in Centurion Mall. Across the board, all our formats performing positively from a fair value point of view, as you can see at the bottom graph. In terms of our retail outcomes, occupancy very nicely up at 95%. Our renewal reversion, which has been a key focus area for us, as you can see last year we had a 0.4, slightly positive, whereas this year it's at a 3% positive reversion. We foresee that lease expiry profile in next year, where 24% of by GMR leases coming up as the real opportunity to drive growth within our retail portfolio. We've similarly given you a retail renewal reversion analysis of what has happened underlying within the portfolio.
As you can see, that positive reversion was almost across the board, whereas 96% of all our renewals were either flat or positive, which again speaks to the underlying health of the portfolio. That's obviously supported by a very healthy trading density at ZAR 37,200 per sq m, which is on the back of an increase in underlying tenant turnover at 3%. We believe our rent-to- turnover at 7.7% still bodes well for the future from a growth perspective. As you can see from a solar PV capacity point of view, the bulk of our solar PV sits within the retail sector. Now, from opportunity to further expand that, based on our rooftops, we are largely complete once we complete that projects in progress.
The next opportunity from a solar PV point of view would be we are exploring certain car parks. We certainly also are exploring certain battery installations. The real next big opportunity for us would be to exploit wheeling opportunities. Firstly, from an Eskom to Eskom point of view, which there are now frameworks in place. And we have entered into a very attractive wheeling arrangement there, which will come online by the end of this year, early next year, and then potentially also exploiting virtual wheeling opportunity. Within office portfolio, at ZAR 22.4 billion, a standout feature in our office portfolio is that value by grade, where 95% or 96% of our portfolio is invested in A and premium grade properties.
That certainly, in our view, supports the increase or the improvement in demand we have seen, which was not general market demand, but certainly quite selective in terms of node and quality. We believe our portfolio is well-positioned to attract that. Similarly, from a valuation point of view, you can see across the three sectors where that performance has come through. Again, the point to make, that's on the back of actual leasing activity that we've seen that improvement in valuation. The office portfolio, the outcomes on the occupancy point of view, we've improved to 87%-88.9%. We're sitting at a vacancy at 11.1%, which is about 120 basis points better than what SAPOA reported. Again, speaks to the point about the difference in performance of quality of assets versus your lesser grade.
The one negative within the performance in office continued to be our renewal reversions. For the first six months, we achieved a - 15.8%. As you can note there, footnote, that was on 14% of the portfolio versus last year at 9%. Again, that relative improvements relative to last year's six months on a bigger part of the portfolio, it does suggest that market rentals are improving. As you can see, again, on our renewal reversion by GLA, we've given you an indication that it's not just one-way traffic. Not all leases are negative reverting. Where we do still experience these deep negative reversions is on the single tenant at large buildings that typically come off expiry of a six to a 10-year kind of lease.
If you have a lease construct that's escalating at a 7%, in the strongest of markets, you're typically gonna experience a kind of negative reversion. From a strategy point of view, where we do focus on, is to make sure we improve that occupancy so that additional revenue that's coming into the base will offset some of those negative reversions. We foresee that - 15.8% to dilute towards the end of the year, we're anticipating to end at about a - 12% on the reversion front within the office portfolio. To move onto our industrial portfolio, a mainstay of the South African performance over the last number of years. A carrying value of ZAR 13 billion, 82 properties. As you can see, quite a healthy mix of various exposures, and largely our portfolio is invested in logistics and modern warehousing.
As you can see, a bit of a mixed bag on the fair value outcome. Again, that's given that we've segmented it on a fairly smaller basis, so individual movements can cause that volatility. By and large, the positive income coming through and supporting our valuation growth within our industrial portfolio. Our occupancy at 97.2% maintained to last year. We were successful in the short-term renewal of Cato Ridge with Toyota until the end of this financial year. We've managed to secure a long-term tenant for half of that space, so for 18,000 sq m, which will commence in November of this year. We're quite happy with that.
That will leave 18,000 squares within that 50,000 sq m facility vacant, but we're quite confident with the two big occupants there that we should be able to let that additional box. As you can see on the renewal reversion analysis, flat or positive territory within the industrial portfolio, which speaks to the underlying demand within the sector. We're very bullish about the industrial sector, and we believe this is a sector we would like to allocate more capital to in terms from an expansion point of view, twofold within develop to let activity within where we have land, as well as repositioning some of our well-located properties that potentially lends itself thereto. On the weighted average lease escalation at 6.44%.
Very healthy, that's the kind of level where we are renewing between 6.5%- 7.5%. Our weighted average unexpired lease term at 4.2 years, in our view, is also very healthy and does present continued expectation for growth within our industrial portfolio. Lastly, just to end on our alternative income. Last year, we said that we've targeted ourself to exceed ZAR 100 million, which we duly did. As you can see, the run rate's at the first or for the first six months is ZAR 54 million, so we should very happily exceed that ZAR 100 million. In fact, we need to sort of create a more audacious goal for us and sort of see how we can further expand this.
What is quite nice within this performance is that this is typically short-term income, so it's non-recurring. The fact that we are already at ZAR 54 million speaks to the underlying attractiveness of the various assets that we do target within this, and it kind of lends itself to recurring income, which is very positive. I'm now gonna play a short video just to give you a snapshot of some of the refurb and development activity we've undertaken in the retail portfolio. Once that's concluded, Andrew will take over and talk about the Poland portfolio. Thank you.
Let's move on to Poland. As you can see, as I said earlier, if you look at the second line, the property asset platform in EUR has in fact grown during this period, and that's principally driven by underlying asset valuation growth. Translating into ZAR, you can see the impact of the exchange rate. If you just look at some key outcomes for the Polish portfolio for the period, what is very pleasing is the contribution to the overall group distributable income, increasing from 22.5% to 28.3%. I've got a separate slide on it, but I wanna emphasize that there is an ongoing significant focus on reducing complexity and high leverage, the Polish joint ventures. At EPP, we have implemented strict cost controls to improve that profit margin.
I think it will come through more strongly in the second half than in this current half. The good news is that institutional investment activity is picking up in Poland. You'll note that two Power Parks have been sold. We're in the process of selling two logistics assets and undeveloped land. Logistics land is in the progress of being sold as well, which it bodes well from a pickup in activity and will support and expedite our endeavors to reduce complexity on the joint ventures. EPP's renewable energy power purchase agreement has increased their level of offtake to 25% during the period. The core debt within EPP has been refinanced with a five-year tenor, lower margin and no amortization. Three massive ticks there, and Ntobeko will elaborate there on in due course. ELI's dividend yield is improving.
Was at about 4%, now at about 5%. We'd like to get it higher, we will do so in due course. Self-storage developments in Warsaw have been opened, 914 units. We've got another two facilities that are in the process of being completed at the moment, which will add further to that, and we'll elaborate there on through an AV, as well as in the slide to come on Stokado. Okay, just in terms of the joint ventures, as I said, institutional activity is picking up from an investment point of view, and we are now starting to make progress. I know we've been talking for a while about it, but finally we're getting to a point now where tangible outcomes are gonna start coming through, particularly in the second half of this financial year.
The Horse Group, or the M1 portfolio, as I prefer to call it, you'll note there that the surplus land subject to rezoning is being disposed of, and we've made significant progress to simplify the joint venture. As I said, there will be an announcement in the next half of this financial year where that will be a lot clearer to all of you. Power Park Kielce as well as Tychy are in the process of being sold. I must actually correct that in that Power Park Kielce has been sold. We received the funds last week for that property, and Tychy is in the process. Already we can tick the progress there. In terms of the community joint venture, it is a medium term exit for us due to the proliferation of retail parks. However, we have extended the joint venture to March 2032.
In terms of Henderson, yeah, we would like to dispose this office portfolio. We only have 30% exposure, yeah, we are marketing the portfolio to establish whether there is investment appetite for this portfolio. As you know, offices are tough, particularly in the areas of Lodz and Kraków and Poznań where these properties are located. Galeria Młociny, we have optionality here. It is contributing very positively overall to the bottom line, Ntobeko Nyawo will show you that soon. Once again, we are sellers at the right yield, 6.5% ± , or we buy is at a yield of 7.5% +. It depends on our partner, we'll see how that progresses in due course.
The division of ELI provides us with optionality given the attractive asset profile and also the long WALT of 6.1 years. There is an ongoing focus to improve ELI's equity yield, which you would have seen already from the highlights. As I said earlier, we are selling zero yielding development land in Warsaw, realizing EUR 12.8 million, and then we've received an offer for low yielding Skawina and Błonie. Just in terms of EPP's core portfolio, I think what is very important to note here is that these properties are dominant in their respective nodes, and they're located in cities with the strongest consumer demand. When you look at the actual operating metrics, you'll understand why we are saying that these are core assets. Occupancy stable at 99.2%.
Indexation rate of 2% is in line with inflation from a EUR perspective. Our renewal reversion remains positive. It is, however, on a very small element of the portfolio. As you can see, around 10% odd of the core portfolio was affected by this renewal reversion. Our weighted average unexpired lease term remains at 3.8 years, and all the other metrics you'll see are positive, remain strong, and that rent to sales ratio under 9% is very, very encouraging. Okay, in terms of the EPP joint ventures, just to note, very stable, slight improvements across the board for all of the portfolios. Occupancy at the Horse Group and Młociny stable. EPP Community has improved its occupancy level by about 1%, and Henderson surprisingly as well. Importantly here, the rent to sales ratio is all under 10%.
Galeria Młociny is a little bit higher at 9.8%, that will come down as those renewal reversions work through the statistics going forward. I just want to say that Galeria Młociny is really doing well. They've introduced paid for parking. It's coming through the numbers, it is coming into its own. Okay, in terms of ELI, once again, stable. There's been no development activity in the portfolio this period. I think if you just look at its metrics, very solid. Its occupancy at 98.7% now. Strong renewal success rate. Renewal growth in line with the Euro inflation. Strong weighted average unexpired lease term at 6.1 years. It's lifted from last year's five years. Tenant retention very healthy at 88% odd.
If you just have a look at the overall portfolio, very stable. Also, what's important here is that the overall logistics market in Poland is transitioning from rapid expansion to structural maturity, I think those yields that you see at the bottom graph actually explains that quite nicely as well. Just in terms of self-storage, this is a platform that's expanding through development activity, our strategic objective here is to develop an institutional grade self-storage platform of EUR 100 million gross asset value.
We are well on track by the end of 2027 financial year to have achieved that, and you'll see that is through development activity, where we're going to be adding a further, if you have a look at it from a development point of view, a 30,000 sq m odd expansion from the current 32,000 sq m, so almost double. We'll be taking it up to 62,000 sq m by the year 2027. Okay, just in terms of our focus for the second half of this year, it goes without saying that disciplined capital allocation is paramount. We need to develop and build a portfolio that delivers durable organic growth. Simplification of the offshore joint ventures is another key priority for us, and then fostering tenant engagement to understand and respond to evolving needs is an ongoing management focus so that we keep our properties relevant.
With that, I'm now going to play you a short video to illustrate the development activity that's underway within our self-storage platform in Poland.
Thank you. It's a big pleasure to share with you on the balance sheet side. Very pleasing set of results for the first half of FY 2026. I think our focus has continued to be on balance sheet strength so that we can withstand the cyclical events. If we look at some of the key outcomes, very strong credit metrics that are consistent with our prudent risk management approach. Let's look at the SA REIT loan-to-value ratio that improved to 40.3% compared to the 41.2% in the prior year. An important metric, our ICR, which is improved from 2.2 x to 2.3 x. Healthy liquidity at ZAR 5.4 billion, which is made up of undrawn facilities that are committed and cash on hand.
Another pleasing aspect for us is really if you look at our group weighted average cost of debt reduced from 7% to 6.9%. If we break that up in terms of the ZAR-denominated cost of debt, also that improved from 8.9% to 8.6%. On the FX it was stable at 4.5%, similar to the prior period. In these times, I think Andrew touched on the volatility. We're quite cautious, and I think our hedging continues to be proactive. We've got 85.1% of our group debt that is hedged at FY 2026. From a ZAR point of view, that is 88.9%, and then on the FX side that is 78.9%.
We also share with you the weighted average term of debt at three years at February 28, 2026. Just to move along to break out the LTV. I think really this is, we're maintaining our LTV within our medium target range of 38%-41%. Largely, I think it's in the improvement in the asset values that Leon touched on, as well as the rand strength. If you look at the waterfall that we share with you, the valuation impacts you can see at 0.5% impact on the LTV. Similarly, on the FX impact at 0.3%.
Then, the disposal, which is the ZAR 430 million in SA also that coming through, and then some settlement of the loan repayments of the vendor loans between ELI and BRI also they're bringing down. I think, the key issue here, we always show on the bottom left, the sensitivities in terms of the LTV. You can see if the SA property values move by 1%, that will be an impact on the LTV of 0.3%. Similarly, for EPP property values, a 1% movement will result in a 0.1% impact. The big issue I think that we're all focusing on is the FX impact. If the rand depreciates or appreciates by 5%, that will have an impact of 0.2%.
It's pleasing that we continue to make our progress in the reduction of our see-through LTV. If you recall, in FY 2020 it is peaked at 54%. That now at half year is printing at 46.1%. The rand strength and the debt amortization that we've maintained in our offshore debt coming through there. We are pleased on the covenants that all covenants that were maintained in the during this period of reporting. Just to touch on our funding profile, I think really we've been quite busy. Our early refinancing opportunities that we've taken is continuing to improve our debt maturity profile.
If I can touch that, we had in the period, we combined a $10 million facility with a EUR 47 million facility into a single EUR 56 million facility, where we achieved a margin of 2% and achieving 65 basis points margin compression. Here in SA, we early refinanced ZAR 4.1 billion of secured debt at an average margin, which is very pleasing, attractive margin of 1.3% over a tenor of six years. That also achieved a 16 basis points margin compression.
Post the period, I think, we had a very successful auction where we issued in our bond program ZAR 750 million of listed notes that were split, the three-year tenor achieving 98 basis points spread on top of JIBAR, as well as the five-year money in that, achieving 1.18%. Following that, we had an auction that followed a private placement in April of ZAR 1.25 billion, where we took a seven-year tenor at a margin of 1.35%.
During April, which is post the period, Andrew touched on this, we refi-ed ZAR 6.2 billion of EPP core debt on a five-year basis that achieved a margin of 2% that resulted in achieving a 56 basis points margin compression. If you take all of this refinancing activity post the period, it really reduced our maturing debt in FY 2026, leaving only ZAR 200 million, which we're happy to repay given that we've got good liquidity. Also more importantly is that it improved our weighted average tenor of debt to 3.7 years compared to the three years that we had reported at half year. You can see on the bottom left, very healthy liquidity profile in terms of the maturity that of our debt maturity.
More pleasing for us, one of the variables that is within our control in terms of managing cost of debt through the cycles is really what happens to our debt margins. You can see the pleasing progress we've made on the rand-denominated debt. In FY 2023, our margin was sitting at 2.1%. It is now at half year at reporting at 1.6%. Where we still have the opportunity, I think it is really in our offshore debt, 'cause that margin has been kind of stable at 2.5%. As we starting, you can see with the EPP refi, where we are achieving 2% on the ZAR 6.2 billion, that 2.5% will start coming down also very nicely. If we look at our hedging, I think earning certainty is very central to our hedging strategy.
We will continue to focus on this. If we look at the activity in the period, we had ZAR 4.8 billion of interest rate swaps that matured at a fixed rate of 7.3%. We entered into new swaps of ZAR 5 billion at an average fixed rate of 6.6%. More importantly here, I really want to emphasize is that at those attractive levels where the new fix is lower than the expiry, we're starting to build tenor. You can see that the tenor of two years, we took advantage of there. We'll continue to look for that, especially in these volatile times because we want to have a hedging profile that gives a lot of earning certainty. In terms of cross currency swaps, we had ZAR 140 million that matured during the period at an average fixed rate of 4.3%.
We entered into new swaps of EUR 140 million at a fixed rate of 4% over a two-year tenor to replace the ones that were expiring. Post the period, I think also it's quite pleasing that we further took a ZAR 2 billion interest rate swaps that had a average fix of 7.6% that had matured. We replaced those with another ZAR 2 billion of swaps at a fixed rate, which is very pleasing at 7.1% compared to the expiry fix of 7.6%. Also here, very important, you can see that we're taking tenor of two years to continue to build our hedging profile and make sure that there's earning certainty.
As part of the EPP refinancing in April, we concluded a collar of EUR 259 million, which is 80% of the debt that was refi-ed. That collar has a cap of 3% and it's got a flow of 2%. We will float between those two points, but we've taken the risk in terms of the volatility that if the rates in Europe, the Euribor runs above 3%, we have the protection. Also on the downside, we've capped the participation benefit down to 2%. Below that we won't participate. This was really at a time when we had to do this. The Euribor was pricing on five year close to 2.9%, which we believed was quite higher than the long term that we expect in Europe of 2%.
We share with you in terms of the weighted average hedge rate, both in terms of cross currencies at 4.1% and then the rand-denominated debt at 7.1%, and then our euro debt in EPP at 2.4%. I think we've done a lot of work in terms of diversifying our funding base. That really continues to strengthen our liquidity profile. As you can see, the progress we've made over the period that's shared in terms of we have no single counter exposure to any funder of more than 15%, and I think that we'll continue to build that with opportunities that we're focusing on.
In terms of the focus in this section of our side, I think really here continue to broaden our sources of capital is very important so that we can lower cost of capital through the cycle. Focus, and we touched on this as well, is really we have to keep our eyes on reducing that see-through LTV, recycling the non-core assets, as well as keeping our debt amortization. That will improve our equity risk profile in our offshore business. On hedging, I think it's just the tailoring of our strategy to take advantage if we can see that there's advantages to build tenor and make sure that earning certainty and also be able to maintain a predictable funding cost profile through the market cycle.
If I were to touch on operating efficiently, I think on the income side, I think here our focus, as you've heard, is really on operational excellence so that we can really drive sustainable organic growth in our business. It is pleasing for us that the positive operational metrics and that Leon and Andrew touched on both in the South African portfolio as well as in our Polish portfolio is coming through in our numbers. Also in that, we're very disciplined. I think across the group we've built a disciplined cost management, and those two aspects, those variables are really driving our margins. If we look at our group distributable income, it grew to ZAR 1.9 billion. That is quite pleasing.
The contribution from EPP directly held properties, in terms of distributable income in euro terms, also that improved from EUR 16 million in the prior period to the EUR 17 million in the current period. Also pleasing that, underlying, this is growth in our net property income. In South Africa it's 1.3%. If you look at it from an active point, portfolio point of view, that's the total, the 1.3%. On an active basis, that number is 3.3% with retail and industrial leading that and office being flattish. In EPP, also we're quite pleased that it also grew its net property income by 6%. If you look at our collections, very healthy across the two businesses, with SA collecting 99.7%. Equally also EPP collecting 99.7%, which is quite pleasing to maintain those collections.
I think from the solar point of view, Leon touched on it, but also that is where some of this is coming through in terms of our margin and the cost saving out of solar for the period at ZAR 107.5 million. I think for us, if you put it all together, it is really about the group net profit margin that improved by 0.3% to 77.2%. You can see it on the graph on the bottom right here, that South Africa is quite pleasing at 79.5%. EPP maintained its, which the directly held properties at EPP maintained its net operating profit margin at 72%, and that then builds up to the group of, at 77.2%. This is a really big testament in terms of profitable growth that we, our business is able to generate. We always give the sensitivities.
I think, in terms of the interest rates, you know, Euro rates, if they were to change by 50 basis points, on an annualized basis you will have a ZAR 0.005 impact on our EPS. The SA occupancy, if we were to change by 0.5%, there would be a ZAR 0.004 impact on our earnings. The indexation, a delta by 1% in Poland will have a ZAR 0.004 impact on our earnings. The ZAR- denominated debt, if it were to, if the interest rate were to move by 50 basis points, you'll have a 0.3%. If we just break that down, I think, it's pleasing that the retail recovery and really the reducing funding cost is what is driving this stronger organic growth.
It's good to see our tailwinds being more than the headwinds. I think we've got ZAR 234 million of tailwinds and ZAR 103 million of headwinds. Big impact there. In the SA NOI, the active portfolio grew by 3.3%, giving us that growth of ZAR 81 million. It's also a story of lower base, lower funding, lower interest rate environment both here in South Africa as well as in Poland, but also with the margin focus that there you can see that the funding cost contributed ZAR 54 million. I'll just deal with EPP in euros just in the next slide. I think the other key issue to call on the headwinds is really the antecedent of ZAR 26 million, where last year we had a DRIP that we issued shares, ZAR 150 million.
This year it's not there. We only have this year the empowerment trust where we, it issued 29.9 million shares, which is then it causing that difference of ZAR 26 million. That ZAR 1.9 billion, a healthy contribution from South Africa as well as the improving contribution that Andrew touched on from offshore business. If we just unpack the EPP distributable income, also here very solid trading metrics, and also the lower interest rates is really helping our business to deliver the earnings growth. If you look at EPP core, it's up EUR 1 million, the contribution from the joint ventures is also up at EUR 0.8 million. The EPP, you can see that it was last year EPP contributed EUR 26.7 million. That improved to EUR 28.5 million.
Healthy NOI as well, which is largely driven on the indexation out of the EPP business. The lower funding costs coming through at 0.4. The pleasing aspect I think in the joint ventures that Andrew touched on, you look at Galeria Młociny increasing by EUR 1.1 million on the back of paid parking and also healthy leasing on other joint ventures like EPP Community. If we look at our NAV per share, I think marginally, it's really the year is a rand appreciation. It's causing a marginal reduction of ZAR 0.014 to ZAR 8.151 in terms of the NAV. You can see the two legs. On the liability side we get an improvement of ZAR 0.149, on the asset side, on the translation, you get a ZAR 0.481 reduction.
On a net basis, those two come through to ZAR 0.332. It's really a play in terms of what has happened to the currency, is a stronger rand, which appreciated in the period by 9.2%. We, at the end of August last year, the EUR/ZAR was at 20.68%, and now at the end of the reporting period, at the end of February, it was sitting at 18.78%. That is a 9.2% appreciation. I think it's, we're also pleased in terms of the interim dividend that Andrew touched on at ZAR 0.288. Really here we continue to be very balanced and consistent in terms of applying our 80%-90% payout ratio range.
We look at the CapEx that we need to keep the portfolio relevant and fresh and reposition our properties, which Leon Kok touched on in terms of the CapEx and the enhancements. Proactively, we've got a healthy liquidity profile. We also have to factor that. I think it's pleasing for us that at this payout ratio of 80% for the first half, there is no leak in terms of tax, so we've preserved shareholder value. Also, quite importantly, in terms of the credit metrics, maintaining our LTV and also looking at a headroom in terms of the ICR and the covenant levels that we keep. The DRIP will not be offered. This we look at case by case, but with this one, we will not be offering a DRIP. If you look, that's where the board concluded with this one.
If I just look at the focus areas in terms of operating efficiently, I think improving our net operating profit margin in the medium term towards the 80%. SA is closer to that. We've got our work cut out in Poland, also that we're focusing on quite clearly. The reason for that, we really want to drive a very sustainable organic distributable income growth profile of our business. We want to restore the earnings base so that we can improve the earnings to deliver on our total return target, and then we'll focus and accelerate technology adoption and identify and enhance operational efficiencies. That will continue to then improve our efficiency and strengthen the processes in our business. If I move on to cover engaging talent, I think empowering creativity and driving innovation is really we want to lead with purpose.
In terms of building a high performance workforce to support our sustainable income growth, you can see the employee retention rate quite healthy in South Africa at 97.1% and equally so quite healthy in EPP at 98.2%. I think for us, where we're really looking at here is we adopted and enabled an AI across the business, even into some of our HR apps, so that it can equip leaders with real-time insights and really get into improving the operational efficiency and drive higher margins across our processes in the business. In terms of the focus areas in this part of our business, I think we're quite clear we wanna build a future critical skills that is aligned to the evolving needs of our business that will anticipate and deliver an outcome of a transformed pipeline of scarce skills.
We want to align our structures and responsibility to strategy, and that is that we continuously review and refresh roles and work allocation so that we can drive execution across the business. We also want to create more growth opportunities for our people. That's really just to strengthen retention in a flat operating structure that we operate in. If I cover growing reputation, I think embedding ESG as an operational imperative continues to be our focus. If we look at how we deliver the long-term value through some measurable impacts, you can really look at the 18.1 MW of wheeled energy through our short-term power purchase agreement.
The increase that Leon touched on, the 7.2% increase in our solar PV to 62.2 MW also is quite pleasing because that is now those are these numbers that I touched on earlier in operating efficiently coming through in terms of cost savings. I think we're also quite pleased that nine of our buildings are on a net zero basis, and we'll continue to look for opportunities to improve that. On the social side, consistently maintain the level 1 BE. That helps in terms of driving also our empowerment status as a business. Then I think, in terms of the just a call-out in some of the awards in terms of our governance side, where we received, we continue our reporting continues to be leading.
We received awards in terms of the Mid-Cap Award. There we were first place, and then in the Ernst & Young 2025 awards, we came second place in terms of our integrated reporting. I think also similarly in Poland, we are making, demonstrating our responsibility towards the planet there. We're making significant strides in our sustainability journey also in Poland. I think 61 EPCs, energy certificates that we are proud of. Also we looking at, there is a solar of 7 MW that is installed, which is really the installed capacity there, which we're very also proud of.
I think we'll continue in that part of the world really to look especially on the wind energy and see how that could come through in terms of how we can grow that 33 that we buy through the power purchase agreements. In terms of the focus areas in this, I think we quite clear that extending the upside of us to all the stakeholders, leverage our market leading ESG position, and embrace the digital solutions so that we can have a strong Redefine brand, deepen our relationships with our stakeholders, and then also enhance our stakeholder user experience through all the things that we do. There, I'll hand over to Andrew for the wrap-up. Thank you.
Thanks, Ntobeko. Okay. Just in terms of the wrap up, I just want to remind everybody that whatever reason, in March, there's always been a trigger event that has kind of Redefine the second half of our financial year. This year is no different. What I want to mention is that after every trigger event, Redefine has emerged in much stronger shape. I think through this presentation this afternoon, we would have demonstrated how we are moving into better shape and where we've come from in terms of a fairly difficult position back in 2019. If we just move now on to the variables under our control, for us, is a constant focus on what we can manage without being distracted by all the noise out there.
In terms of capital allocation, we are building a quality, diversified portfolio to deliver that durable organic growth from an income and a capital perspective. Capital sourcing is very, very important. It is as important as capital allocation in terms of conservative balance sheet management, with the objective of optimizing that cost of capital. Rental growth and cost containment goes without saying. If we wanna improve our margin, that's where our focus is, and we're looking to use technology to assist us in enabling that endeavor. In terms of team and culture, is a constant focus on investing in and transforming our human capital to empower creativity and to stimulate innovation. Embedding ESG is an ongoing operational imperative. It's no more a department that sets the strategy.
It's up to every property and asset manager, every employee of Redefine, in fact, to embed that with every stakeholder at every touch point, with the objective of improving our stakeholder experience. Ntobeko would have showed you that closing slide under grow reputation. I urge you just to go look carefully at all the technology interventions that we are developing for every stakeholder to improve that level of touch point. In terms of durability, it's not built in a crisis, it's revealed in one. I think you're going to see Redefine demonstrate that not only in this past period but also in the period to come. For us, it's all about structural change that drives the value and outpaces the cyclical market factors. As we know, the distributable income recovery came on the back of lower interest rates, stabilizing vacancies, positive reversions.
What is very, very important is that the operational improvements are intact despite the cyclical Middle East conflict. For us, momentum is being maintained, and with that, we are revising our market guidance. One may ask, isn't there a interest rate risk here? I just want to point you out to page 32 of the operating efficiently slides, where we actually provide you with a sensitivity analysis there in terms of a 50 basis points interest rate rise, and the impacts thereof. On an annual basis, a 50 basis points rise in the interest rate translates into roughly ZAR 0.008 per share.
If there is an increase in May for South Africa and in the Eurozone in June, as we suspect, you will understand that the impact is roughly ZAR 0.002-ZAR 0.003 per share, which means we will be still within our market guidance of 6%-7% for FY2026. Our dividend payout ratio, and Ntobeko has already touched on, but I just wanna emphasize that our endeavor will be to maintain our current payout ratio, which was for the full year last year, 87.5%. Unless something comes along that it's impossible to do so, we will maintain that. With that, I wanna thank you for your time this afternoon, and I wanna open up now for some reflections on the results.
We have got some questions, we will proceed as per usual to answer them to the best of our ability. I will have to put on my glasses, unfortunately for this, because the font is a little bit too small. Excuse me for that. I'm going to kick off here. The first man out of the blocks today was Nazeem. His question is a question for Leon. How much more leasing risk is there from large long-term over-rented assets or leases? Says I only have Alice Lane in this, in H1 2027. Assume that's estimate, Nazeem. You're thinking of EDGE, which is good. Any others coming up in the next 18 months, Leon?
Nazeem, as always, you're quite correct. We've got two leases, Alice Lane, end of this year, so it's the first half of 2027 and early next year.
Okay. Thank you, Leon. That was a brief answer for a very long question. Mweisho's next. How much support do you expect the Polish government to create to protect the average consumer from rising energy prices? Mweisho, the Polish government were the first out of the blocks on that. I can give you the specifics of that package. It is kind of similar to what we are enjoying here in South Africa. The only difference between Poland and South Africa is that the Polish government haven't put a cap or a limit from a time perspective on such support. There definitely is support given to the consumer in terms of the fuel price increases and so forth. Nazeem's next question is: Did you highlight that two logistics assets are in the process of being sold in Poland?
I assume your English isn't right there, Nazeem. Yes, we are. What is the value of these sales? The value of these two sales, Nazeem, will be EUR 45 million odd. I'm always a bit coy to be quoting numbers before we've actually announced these transactions. I'm just giving you an indication of what they're gonna be. It is around EUR 45 million. Remember Targówek is another EUR 12.8 million. From a proceeds perspective, you know, you're looking at about EUR 58 million odd. In terms of the next part of his question, what would the pro forma value of the ELI, I'm assuming this is the portfolio, after adjusting for asset land sales? Nazeem, we've got roughly EUR 515 of assets within ELI.
As you can see, it will be roughly about a 13% drop in value as a consequence of these disposals. I've got a new person. Yeah. [Keith Wulsterham] from [Oxford Partners]. His question is, "What is your medium-term strategy for the self-storage portfolio?" Keith, the portfolio is to build an institutional grade self-storage platform with a gross asset value of EUR 100 million. As I indicated to everyone in the presentation, by the end of 2027 we will be there. We've got some other thoughts around how we could expand the self-storage platform through complementary product. More of that will come in the second half of this year once I've got board approval for my thoughts.
Kopano comes through with a question as follows: "What are the specific internal thresholds management is looking towards before considering a move toward the upper end of the 80% - 90% payout ratio?" Kopano, I think my colleague, Mr. Nyawo, was very clear that we will stay within the tramlines. There is a specific reason for that is that there is an element of structural defensive capital expenditure that does not enable us to go beyond 90%. We have learnt from mistakes of the past. When you distribute 100%, you need to fund from some source such defensive CapEx, and we are not gonna get ourselves tripped up once again in the temptation to grow dividend through manipulating the payout policy. Okay. Another question from Mweisho.
I suspect it won't be much, but what is the sensitivity to earnings to changes in the repo rates?" Mweisho, I've preempted your question already in the presentation. Nazeem asks, "What is strategy on ZAR swaps, given that keeping short term hedge term in anticipation of lower rate is unlikely to materialize? You talked to building tenure on ZAR swaps, but is two years long enough?" That's a question for Mr. Nyawo.
Nazeem, look, I think, you know, like we say, two years is where we see the ability to build tenure. I mean, if I look, we would like it to be more, of course. I think when the interest rates permit, we would like to do more than two years. At the moment, I mean, if I look at the five-year swaps, they are pricing in at about 7.5%. You look at the opportunities around two years, we were able to maintain and fire swaps at a rate much more closer to what we believe is a neutral policy, neutral rates in South Africa of about 7%. That's what we're trying to do. Definitely it's all just about earning certainty.
I think two years for now in the environment gives us that. We will do more when the macros change.
Great. Thank you, Ntobeko. Okay. Another question from Mweisho is: "Are you expecting retail reversions to experience a significant weakening towards 2027 due to the SA consumer losing spending power due to higher costs?" Leon?
Mweisho, no doubt the potential headwind from pressure on disposable income, given high inflation and such like, is something we're concerned about. What we have seen in, particularly during the run of last year, is that even though the consumer was still under pressure, we haven't seen that playing or coming through in the numbers from a tenant turnover point of view, which assisted us last year to turn slightly positive. We are hoping that the effect would be muted and that, you know, we will for the foreseeable future.
Thanks, Leon. Okay. We've got another new person asking questions. William Brederode. "Thanks for the presentation. Two points which interested me in the alternative revenue stream slide, with the mention of investigating decentralized data centers and more robots. Can you perhaps expand on what considerations have been made on those points and what opportunities you see?" Mr. Kok.
Again, these are just minor opportunities that we foresee to sort of expand the reach of data centers and maybe at a more mobile level. By no means is it meant to present massive opportunities. Again, it's just to kind of give you a bit of color around the kind of thinking that we do in this, in within this space. It's a, it's, you know, our team there has really been given license to be creative and really explore all avenues of revenue generation.
Thanks, Leon. Okay. Peter Kromberger asks us, "Can you please speak to the European banks that are participating in the core EPP refinancing?" Mr. Nyawo.
Yes, Andrew. Peter, I think the two lead banks in that EUR 6.2 billion refi were Erste and Helaba, which are very, very, very supportive of us. I think the important part, Peter, just maybe to touch on quickly, is that if you recall, we used to have a difficulty in negotiating amortization with those guys. We are quite pleased to achieve no debt amort with them, which really from a cash flow point of view, improved EUR 7.4 million of cash flow on an all else equal basis if you eliminate amortization. Strong liquidity, strong appetite from the regional and local banks in Poland. We're quite happy with the liquidity there.
Thanks, Ntobeko. A question from Francois du Toit. The Foschini Group and Pick n Pay are two of your three biggest South African retail tenants. Can you comment on their trading performance in your properties, and also on lease negotiations and whether their operating margin pressures are placing pressure on renewal terms? Leon?
Yes, Francois. I think Pick n Pay's challenges have been in the media for some time, and no doubt this latest question is as a consequence of the labor negotiations. That is, I suppose, another lever they're trying to pull to manage margin. As we indicated over the last, you know, couple of reporting cycles, we're in close collaboration with Pick n Pay. They continue to be a well-paying tenant, and the negotiation has been no different to what we've experienced with any other grocery retailer for that matter. Yes, they have embarked on the process to optimize stores within our portfolio. That is largely within the base, and we've concluded those optimizations in Dream Mall, for instance, where it was closed because it no longer served their purpose.
From an operational point of view, we don't foresee any undue risk. Yes, it's something that we continue to monitor and sort of see if there's opportunity for further optimization, but we will continue to see that. Foschini's update over the back end of last week and the media reports coming over the weekend, my own assessment of that and certainly what we've experienced from South African point of view is that those issues are more related to some of their offshore expansion. Locally, we have not experienced any difference in negotiation or any difference from an operating point of view.
As with all fashion retailers, we constantly monitor performance, and we make sure that they continue to invest in store upgrades, which we certainly sort of see there is a correlation between the store upgrade and turnover performance, and we will continue to monitor that. I think within the fashion and grocer, being both those categories being most landlords' biggest exposure within the retail sector, they continue to demand, as a management, attention and focus.
Thank you, Leon. Okay. The question from Kopano is the current level of cost containment sustainable, or are there inflationary or utility pressures that might catch up in the second half, Mr. Nyawo?
Kopano, I think a large drive in terms of our cost containment is really driven by the solar performance. In the numbers, we show you that that contribution we expect that is far much more sustainable. We think in the second half, yes, there are pressures and it's really helping us to absorb the above inflation administered cost, but really the drive of it is the solar savings. As the sun shines, we'll continue to drive those benefits.
Great. Okay, so that looks like we've answered all the questions for today. If anyone has any other thoughts driving home or while you're having a coffee this afternoon, drop us a line either via email, WhatsApp or simple telephone. We are available to answer any questions you may have. We're looking forward to the one-on-ones with all of you. I just want to thank you all once again for your time, your patience with Redefine, and also seeing all of the talk from over the past five or so years now starting to translate into tangible outcomes of distributable income recovery, balance sheet strength, and durable income, which as we know, is so important in this environment. With that, thank you once again. All the best. Please like, share, or repost all of our LinkedIn articles that will be following this results presentation.
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