Shaftesbury Capital Stock

Good morning again. Thanks so much for joining us today at our interim results presentation. We're delighted to report strong results for the first half, delivering growth across all key metrics. This is the agenda for this morning. I'll start with an overview. Situl will then take you through the financial review. And I'll then provide an update on the portfolio activity, and we'll finish with a summary and outlook. So it's been a successful period, delivering strong performance with an increase in rents, values, income and dividend. And despite the well-documented uncertain geopolitical and macroeconomic environment, I'm pleased to say that the West End continues to demonstrate its strength and our portfolio is well positioned to outperform.

We continue to see positive trends in footfall and customer sales growth across our prime portfolio. And the team, many of whom are here today, is successfully achieving significant leasing spreads with excellent levels of activity, limited vacancy and a strong pipeline of transactions. We continue to invest in our portfolio through capital expenditure and acquisitions and also disposed of noncore asset, Lillie Square, during the period. We have a strong balance sheet with access to substantial liquidity and are well positioned to take advantage of market opportunities.

So just turning to the headline results for the first half of the year. Total property value increased 3.4% like-for-like to GBP 5.6 billion. That was supported by a 3.8% increase in ERV. EPRA NTA increased 3.9% to 223p per share. That provided a total property return, which was 5% which is significant above the MSCI index of 2.6%. The total accounting return was 4.9%. We continue to deliver rental growth and operational efficiencies whilst aiming to enhance customer service. Underlying earnings overall increased by 8%, and the Board has declared an interim dividend of 2.2p per share, which is up 16%. And I think the performance demonstrates the exceptional qualities of the portfolio, delivering growth in rents dividends, ERV and valuation.

As one of the largest owners of property in London's West End, we play an important role in shaping the areas that we operate in and their long-term future. Visitors continue to be drawn to the West End's exceptional cultural retail and entertainment offering. Approximately 70% of footfall is driven by domestic U.K. visitors. Londoners account for around 45%, visitors from elsewhere in the U.K. a further 25% and international visitors into the capital contribute the remaining approximately 30%, creating a diverse, very resilient customer base that supports consistent trading performance. We've noticed that spend, basket sizes and overall trading productivity continued to improve. And this is supported by more frequent and longer visits reflecting the strength of engagement across our destinations.

Rental growth prospects are underpinned by strong fundamentals. Occupancy remains very high with the supply of new space limited, and this is creating continued scarcity value. The West End market has delivered quite predictable growth over the long term with annualized rental growth of approximately 4% per annum. Our portfolio has delivered ERV growth of nearly 7% per annum since 2010. And West End retail yields have also been remarkably consistent, averaging approximately 4% over many cycles, again, demonstrating its attractiveness and also its long-term defensive qualities.

So as I say, despite that backdrop, investment yields across our portfolio, which predominantly comprise a small lot size freehold properties remain very resilient. And there continues to be a broad pool of domestic and international investors attracted to the West End real estate market, particularly for those smaller lot sizes which is a very active component of the marketplace. So with that, I'll just hand over to Situl, to take you through the financial review.

Thanks, Ian, and good morning, all. As you've seen, there's been continued progress in the first half towards our medium-term targets and further growth in earnings, valuations and net tangible assets. Our strong balance sheet positions us well for investment expansion and growth. So starting with the income statement. Top line growth reflects a successful period of leasing and asset management. Gross rents of GBP 97.3 million are effectively up 4%, adjusting for the establishment of the Covent Garden partnership in April 2025.

In aggregate, commercial lettings and renewals were 5% ahead of ERV and 25% ahead of previous passing rents. Property costs reflect some inflation and a small increase in the expected credit loss, offset by operational efficiencies. Administration costs of GBP 20.8 million include the effect of an increased share option charge and ongoing savings. Continued income growth and operational efficiencies are targeted over future periods. Net finance costs have been reduced to GBP 17.5 million, reflecting lower levels of drawn debt. All of these movements taken together resulted in an 8% increase in underlying earnings to GBP 44 million or 2.4p per share, and we've increased the interim dividend to 2.2p.

There's been further growth in passing and market rents with embedded reversion in the portfolio and good visibility on income growth. ERVs were up across the portfolio, resulting in a 3.8% increase since December to over GBP 280 million. Retail and Covent Garden were the largest contributors to growth in passing rent during the period. Vacancy remains low with under 3% of the portfolio being available to let. As illustrated in the chart, there's the opportunity to grow rental income significantly, whilst also continuing to grow ERV. This will be through a combination of contracted income and rent-frees converting to running income, refurbishments being completed and ERV capture through the normal leasing cycle.

So turning now to the balance sheet. The main driver for NTA growth was increased property valuations. The market value of the portfolio is up 3.4% to GBP 5.6 billion or GBP 4.9 billion on a group share basis. Total property return for the period was 5%, outperforming the MSCI U.K. property index. Net debt is slightly under GBP 800 million with loan-to-value of 16%. NTA per share has increased by 3.9% since December to 223p and NRV per share is up to 241p. Rental values are up across the portfolio with retail and F&B, which account for some being the standout contributors. The equivalent yield was stable at 4.6% for the commercial portfolio. Our estates continue to be highly attractive to our customers and with average rental tones of around GBP 100 per square foot demonstrate good levels of affordability and leave plenty of room for growth.

The balance sheet is in a strong position with low leverage, access to significant liquidity and substantial headroom against covenants with loan-to-value at 16% and net debt to EBITDA of under 6.5x, there is significant flexibility to deploy capital. Most of our drawn debt is at fixed rates. The interest rate protection we have in place will be topped up with further hedging for future years. Other points on debt. Firstly, we have reduced gross debt using cash to repay the exchangeable bonds and the Lillie Square proceeds to pay down bank facilities.

Secondly, we've extended the maturity profile, most recently on the Covent Garden RCF. And three, debt margins have continued to improve with our most recent facility being completed at 90 basis points for and in the short term of 5 years. Post repayment of the private placement loan notes maturing later this year, the group will have access to over GBP 800 million of liquidity. We are very well placed to invest in our portfolio, and we'll continue to review financing opportunities, taking advantage of the attractive credit profile of the group.

So to summarize, there's been strong financial performance in the first half, and we have enhanced flexibility. The total accounting return in H1 was 4.9%, driven by rental growth and disciplined cost and capital management. We will continue to focus on our priority areas, progression in earnings and dividends, deploying capital accretively and maintaining balance sheet strength and flexibility. And with that, I will now hand back to Ian.

Thanks, Situl. So a little bit about the portfolio, just a recap. I think you know what we own, but it's an impossible to replicate portfolio. It's located in some of the most iconic destinations across the West End. Obviously, Covent Garden, Carnaby, Soho and Chinatown is GBP 5.6 billion of value that we have under management today comprises 2.8 million square feet of lettable space. That sits across 640 predominantly freehold buildings. Within that, there are approximately 1,900 individual units. The portfolio is broadly 1/3 retail, 1/3 food and beverage with the balance in the upper floors, which offer office and residential accommodation. And overall, the portfolio offers a very diverse occupier mix, a range of income streams and a range of unit sizes and rental tones.

As you'll have seen, occupational demand continues to be strong, and it prioritizes the best locations, not just in London but elsewhere in the world. Availability on many of our streets is now at near record lows and that's supporting competitive pricing. Portfolio vacancy was 2.6% at the midyear, and there's obviously been progress since that date. With this slide showing some of the new brands and renewals that occurred during the period. Overall, 226 leasing transactions completed. That represents GBP 23 million of contracted rent about 5% ahead of December '25 ERV and roughly 18% ahead of previous passing rents.

I think the long-term benefits of our active approach to asset management and our leasing strategy are becoming increasingly evident. Careful customer selection and the introduction of high-quality brands has driven higher sales densities, stronger customer performance and continued rental growth. And since the merger, we've welcomed over 180 new brands across the portfolio. And many of those new entrants are trading at significantly higher levels than the previous occupiers, which supports future sustained rental growth. The team take a very active and creative approach. This is informed by a really deep knowledge of the West End. And I think that positions the company to continue to outperform that long-term trend.

So a little bit about retail. London is definitely a priority market for retailers. It's perceived as a global gateway city. It has strong leasing demand, which manifests itself throughout the West End, but particularly in our locations. Carnaby Street, delighted to say it's attracting some leading international brands some to note are, Edikted, KOOKAI, K-Way and they've chosen the destination for their U.K. debuts and also Sephora opened this week with queues around the block for their first West End store. Covent Garden, Tiffany, an important customer for us. They've recommitted to the estate and while Matiere Premiere, launched their first U.K. store and that strengthened our offering in beauty and premium fragrance. Chinatown welcomed POP MART, which opened its largest London store. And together, these leasing successes have supported retail valuation growth of 5.4% and across the portfolio.

There continues to be a very active demand for our high-quality food and beverage locations. Leasing activity, it's largely been focused on founder-led restaurants and international operators that are making their U.K. debuts as well as established operators often within the portfolio that are expanding selectively. There is a broader shift in consumer preference towards high-quality experience-led dining. And our portfolio is very well positioned to benefit from this trend. Across Covent Garden and Soho, there have been a number of new openings, including Buvette, Bao Borough, Padella and Vagabond Wines to name a few, and we're very pleased with the way they've been received by the consumer. I think it's the vibrancy of our destinations that continue to attract strong customer and consumer demand supporting that very resilient level of leasing activity.

Overall, 12 new concepts opened during the period, and our available space -- any available space has been relet very quickly, often with multiple bidders. And that just leaves about 0.2% of the portfolio currently available for Let. 27 new lettings and renewals were signed, 9% ahead of December 2025 ERV again, supporting valuation growth, which for the F&B component was around 4%. The vibrancy of our locations, I think, does continue to attract office occupiers. It's that vibrancy of location as well as the quality of service and accommodation that we offer, and that continues to generate sustained leasing demand. Carnaby and Covent Garden portfolios offer very high amenity value. And for our smaller period properties, we continue to offer fully furnished flexible leasing packages which seems to be meeting consumer demand.

Residential portfolio is letting very well. During the period, 116 leasing transactions were completed at rents of around 2% to 4% ahead of previous passing. Now the scale of our portfolio allows us to shape not just the individual buildings, but also the spaces around our properties. And the pipeline of asset management and refurbishment activities that we're currently undertaking represents around 5% of ERV, which will be delivered over the next 12 months or so. In addition, we're working with local stakeholders to enhance the public well across various destinations, making them more enjoyable for everyone. For instance, Covent Garden's, Henrietta Street public realm is currently being transformed, and we're also undertaking significant improvements to Carnaby Street and Kingly Court to enhance the visitor experience. We also continue to rotate capital where appropriate.

This year, we completed the disposal of noncore asset, Lillie Square and invested GBP 31 million in target acquisitions and capital expenditure. And indeed, we're bidding on a number of properties at the moment. As Situl mentioned, we have substantial liquidity or access to substantial liquidity to take advantage of those market opportunities when they arise. So just in conclusion, we delivered a strong first half with leasing momentum and operational performance continuing into the second half of the year.

The operating platform that we have and the experienced team does differentiate Shaftesbury Capital. And that's translating active asset management and leasing into earnings and value progression. The West End is a highly attractive market with strong customer demand, high footfall sales growth, limited vacancy and a strong leasing pipeline. And we have significant growth potential across the portfolio and continue to deliver on our medium-term rental growth targets. And supported by that strong balance sheet, we're well positioned to pursue selective expansion opportunities and capitalize on those market opportunities as they arise. So that's the conclusion of the formal presentation.

I think we'd like to go to Q&A. So if you're on the phone, if you could let the operator know you like to ask a question, we'll come to you. If we can start perhaps with the room, useful if you could just say your name if you have a question. And we'll try and answer it.

It's Thomas from Berenberg. Just a question on leasing spreads. Last year, you were leasing 10% ahead of ERV. So far in 2026, it's 5% ahead. Is the competitive tension still as strong today as in the recent past that you're seeing? I appreciate you're also pointing to some higher credit loss provisions, too. Any color you can give on where you're seeing those would be helpful as well.

Yes, I feel strong. Every period of 6 months is different to the last period of 6 months. So a lot depends on the nature of the real estate that's actually coming due in that period. So we tend to look at it over the sort of medium term. In fact, so you've got our leasing director sitting behind you. So he and his team do all the deals, and he's quite happy at the moment. And so what we're seeing does support the forward look on those 5% to 7% rental growth targets that we've got out there.

And on ECLs, there was a small tick up over the period, which was really a function of 1 or 2 unexpected failures. One office tenant in Carnaby, we've taken the opportunity there to take the property back, we'll refurbish it and aim to relet that at higher rents. And second element is we've taken a slightly more conservative approach on our other customers, just a kind of macro level. But, as I said, relatively small numbers, nothing material to signal.

Cool. And maybe just second one, I think on Page 33 in the appendix, the Carnaby and Soho, like-for-like annualized gross income fell 1.1%. But ERVs there still moving up almost 4%. Just wonder if you can help explain that.

Yes. I mean Carnaby Street is doing really well, actually. I mean we're particularly pleased with the section to the southern end of the estate where we've got a whole bunch of new brands in 4 I mentioned, have opened up, opposite Edikted. So they're trading very well. And at the upper end of the street, Will and the team put in KOOKAI and various other brands. So we're well on the way to transforming the street. That should be enhanced with the streetscape improvements that you'll see rolled out at Kingly and along the street this coming year. So it's well on its way. So I do expect good rental growth over the coming years. This year, you've had a couple of failures, mainly on the office side that we didn't really expect. So that's had an impact on those numbers. But I think the trend is very, very positive for Carnaby Street.

It's James Carswell from Peel Hunt. And you talked a little bit about the acquisition and kind of the growth opportunities you're seeing. Could you give a little bit more color to what you're seeing? Are there kind of more standard bolt-on acquisitions? Are you seeing anything more meaningful? Are there particular parts of the estate that you particularly like to grow?

Look, I mean it's a very tight market in the West End and very actively traded. We've got a new valuer this year, and they've done a great job. But the comparable information that they've produced shows that certainly for lot sizes below GBP 20 million and up to GBP 50 million, it's really competitive. So where we are bidding, we are seeing multiple competitors. So I think our competitive advantage is often we can see where the rental growth will come. But you're generally competing at yields that are tighter than the valuation yields. So it's all about what my colleagues can actually do with these places over time. So priority of capital is always our existing properties. So Chris has got a number of refurbishments on at the moment. which I think will go very well. They're mainly offices actually, a couple of pubs and some retail, but they'll lease very well.

The next focus is buying adjacencies, so they're expanding the portfolio. So we bought properties around the southern end of Carnaby Street, for instance, bought a couple of things in Golden Square, which we're quite interested in. And we're bidding on something in Covent Garden at the moment. But we don't seek to buy everything. We generally want to find things that we feel we can make a difference to and that they're going to be accretive within a reasonably short period. But very, very competitive. I think when you get to the bigger lot sizes, they don't really come available that often. But when they do, we're well positioned to participate.

Ashnaa Vyas, Deutsche Numis. On Slide 10, you show that you have sort of 28% income reversion. I was just wondering if you could talk a bit more about the time frame you expect to capture this? And secondly, are there certain parts of the estate where you think you can drive rents harder.

Yes, I think -- I'll deal with the first one, maybe Situl can talk you through the bridge slide, which sort of explains it. But I think what's really noticeable is where we've had the opportunity to retenant they are trading at significantly higher levels than previous tenants, often well over 100%. So that gives us confidence that the rental growth will be sustained at above trend. So that's really very important, particularly noticeable around Seven Dials where we put, I think, 30 or 40 new brands in. Over the last sort of 12 to 18 months, they're doing well. And then Carnaby Street, I mean, it really is night and day on some of these trading densities. So that should be captured when they come up to revert, which is probably outside of the period where we'll capture GBP 25 million or GBP 28 million whatever it is. So this is about longer-term growth as well. And that's really comforting. Do you want to go through the bridge ?

Yes, of course. Look, the 3 main elements are contracted, refurbishment and the under-rented element, if you like. On the contracted, that's a combination of what we signed up and what's currently in rent-free. Those periods tend to be quite short. So the majority -- and there are some step rents in there as well as a third element. So the vast majority of that will come into running income over the next 12 months or so, and that's just a cycle that's just a function cycle of activity.

On refurbishments, there's GBP 13 million, GBP 14 million within that. Again, most of these are smaller schemes. In fact, they're all smaller schemes. Some of them are pre-let. And on the others, we have a high conviction about ability to let those. And as Ian mentioned, when we retenant we typically see a big tick up in productivity and hopefully, rents. And then the third element, the under-rented element, that's really a function of the leasing cycle. So it's kind of velocity of pace of transactions. And remember, we're trying to do at the same time as increasing ERVs. So that metric around consistently beating ERV on our transactions and passing rents is very important contributor to kind of growing income line.

I think you had a question, Zach.

It's Zachary Gauge from UBS. Just to pick up on the questions on the office sector. You mentioned a couple of failures during the period. I guess that explains the fairly soft like-for-like growth you saw in the sector. Are those sort of isolated one-off events? Or was there any particular macro or wider factor that drove them?

Actually, Matt Martin, who runs Carnaby, I think he's quite pleased to get the space back. Because I think you've got quite an exciting refurbishment that you told me you're going to get much higher rents on, right? Yes. So I think it's nice. So that one did surprise us actually. We've had a few on the food and beverage side as well, but we kind of expected those. And where that space comes available, there's multiple bids. We've got a space on -- I won't name the tenant, but in Soho, where you've got 5 or 6 bids on it on at significantly higher rents than passing. So that should all feed through. So no discernible trends, I think there.

Okay. Great. And then second question. You've got the GBP 163 million PPN maturing. If I'm not mistaken, that's towards the end of this year, so a limited impact on '26. You said you'd refi through existing facilities. Could you just give an indication on what the marginal cost do you think will be on that?

Yes. So we put in place a new facility quite recently. And that's -- remember, this is within the Covent Garden business. And that's a 5-year facility with two 1-year extensions. So there's a good term on it as well. That's the lowest margin that we've secured on a bank facility for some time actually, and lower than we had planned for within the business. So that's at 90 basis points. So there will be a tick up in the weighted average cost of debt inevitably our judgment has been that actually using the bank market for 5 to 7 years is a pretty good place relative to the longer-term market, but we still feel rates are slightly dislocated. So the marginal cost on that will be SONIA before any hedging plus 90 basis points.

Is anybody on the phone? Anybody on the call? Maybe just give the phone for a second, there's one question, I think. Sorry, did you finish that? Sorry. And then maybe back to the room, any final questions?

[Operator Instructions] We have a question from Aaron Guy from Citi.

Just a question on the sort of broader kind of market. Can you just give a bit more color on what you're seeing in the other estates across the West End, so Oxford Street, Regent Street. Is there more competition coming from the other sort of parts of the West End. And if the demand is just so strong across the West End, where rental growth seems to be pretty strong everywhere, is there anything more you can do to accelerate the cash conversion of rents? So I'm sort of thinking of things like trying to encourage higher tenant churn or shorter leases or more CapEx?

Well, I think the trend has been that vacancy across the West End has fallen significantly from where it was a couple of years ago, but there are still pockets of vacancy. Oxford Street has probably got the higher level of vacancy, probably above 10%. But we don't really compete with those places generally. Our units for retail and hospitality are relatively small. Oxford Street tends to be sort of larger box type. But obviously, the reduction in vacancy there assists general sentiment in the market. And the areas around us have also seen that tightening of availability, whether it's Regent Street or otherwise.

But the reality for us is that we're often competing with other parts of the world. So a brand that wants to come into London for their first store, such as Edikted, for instance, they might also look at them -- in Paris. They might look at somewhere in Milan. So we're always looking at the relativity of pricing for the West End, which is actually very affordable compared to a lot of other major cities, particularly if you compare it with the U.S. So they do see high productivity in the U.K., particularly in our stores because you're trading long hours, very, very high footfall 150 million footfalls. So that's really what attracts it.

And then for the restaurateurs, that's largely domestically driven as well as international operators wanting to come. They like the fact that it trades almost every day of the year, multiple churns on covers. And you can see from the update that we've got demand across the whole range, which is very pleasing. They also see the benefit. I think, of just working with a landlord that takes a forward view on running these estates. And they're confident that they're going to be surrounded by like-minded people. So I think for us, I wouldn't say we operate sort of in isolation because there is competition everywhere. But we have a pretty unique portfolio in the context of London the marketplace.

As far as retail leases, there's been no discernible trend, I would say, in reduction of leases, particularly F&B generally want longer leases. So standard retail lease will be between 5 and 10 years. We do have a turnover component in all of our leases, which does cut in, it generally gets baked into the next review or the next rent review. And the same for the food and beverage. So we're not seeing any internal changes. The office leases have got shorter. And it's not our market, but for larger office spaces, the incentives seem to be reasonably full.

And then for residential, it's standard sort of -- well, discuss how long is the lease today. But they tend to be 1 to 2 years long. So no discernible change. But I think the thing that we're interested in, and I've said this to you before, Aaron, is how -- is where there's opportunity to monetize our places a little bit beyond the real estate, what we call it non-leased income which is a very dry term. We must get a better term for that. But it's what can we do to reach the consumer and also perhaps use the spaces in between the buildings to generate revenue. We did quite a lot around the portfolio that, that non leased income line is growing.

Yes. No, understood. There's definitely opportunity there. Just can you just talk a little bit about Chinatown. Obviously, you mentioned the strong demand from international brands, et cetera, pushing rents up. Chinatown historically has performed very well. And do you think that performance can continue over the next decade in Chinatown can continue to evolve given its specialism?

Well, I think the team had done a great -- I mean Matt runs it. He's here. You can have a chat with him if you're in the room. But the reality is that the process has been to widen the choice for the consumer. So it's a pan-Asian offer now. And that is very well received. So we're seeing strong demand from the food and beverage industry. So whenever we get anything back, there's a high demand. I think it would be interesting to see whether we can maybe over time, bring some retail in.

Retail is very strong demand at the moment. So I think there's good growth over time, but it's probably going to revert to that mean market performance perhaps before Carnaby Street, for instance, which has got a long way to go and Covent Garden, which continues to deliver, frankly. So that's the way we look at it. It's 14% of our valuation base at the moment. But it's very consistent. It delivers every quarter. The footfall is fantastic. So it's a joy to own at the moment.

Just one final one, if I can. Just on the investment market. Investment demand in the West End grew 23% into '24, then '24 into '25. Are you seeing in the first half, again, I think you mentioned the investment demand strengthening again into '26. And can you just talk a little bit about the 2 different kind of markets. Your average lot size of GBP 8 million seems to be very sort of strong, particularly in the global uncertain market. But also, are you seeing any sort of increased bigger buyers at the, say, GBP 1 billion portfolio sniffing around the West End?

Well, I mean, it's very active below GBP 50 million, very, very active below GBP 20 million, and that's been reaffirmed actually by our new valuers in the list of evidential transactions that they put forward with the valuation. There's a whole list of stuff that has been sold at valuation or above. And we see when we're bidding on sort of GBP 10 million, GBP 15 million, GBP 20 million lot sizes, there's 4 or 5 people in the room. We're not really in that bigger market. I'm sure it tends to be dominated by the office market. We don't have large individual office buildings. But the valuers were saying to us that for GBP 100 million plus it's quite hard work. So I have no reason to disbelieve them. But our market has been incredibly active really now for -- well, last 3 years, really lots going on.

Those bigger lot sizes don't come available very often. But where they have done on Bond Street, for instance, they sold quite well. And the super prime locations around Berkeley Square and things like that, there's transactions in the market today, right? But not really qualified to answer that. That's not really our world.

There are currently no questions. And with this, I'd like to hand the call back over to Ian for any additional or closing remarks.

Anybody, any further questions in the room? No. Okay. Great. Well, look, thanks very much for joining us. I appreciate it. I hope you can find time over the summer to come and shop in the West End, maybe try 1 or 2 of our restaurants. Will can give you a list of his favorites, its quite long. But we'd love to see you come in the office. And again, thanks for your attention. I appreciate it. If you got any questions afterwards, you know where we are. Thank you very much.

Thank you very much. Okay. Yes, we've got the thumbs up. So if we're ready, we'll start. I know you've all got a very busy day and a very busy week. So very much appreciate you coming to our third set of annual results this morning. So we're really very pleased with the results for this year. Another excellent year of progress and performance. I think we're delivering growth as we said we would do. The agenda for this morning, fairly straightforward. I'll give you a bit of an overview of the results.

Situl will then go through the financial review. I'll then update on what's going on in the portfolio, and we'll finish with a summary and outlook and some Q&A. So as I said, another very successful year, delivering strong performance, an increase in rents, values, income and dividends while strengthening our financial position and creating significant optionality for the group. Obviously, macroeconomic issues and geopolitical risks have been well documented.

However, I'm pleased to say that conditions across the West End are very active. We continue to see positive trends in footfall and sales across our prime portfolio, and the team is successfully delivering leasing well ahead of ERV with excellent levels of activity, limited vacancy and a strong pipeline. During the year, we were pleased to have formed a long-term partnership on Covent Garden with the Norwegian Sovereign Wealth Fund, which highlights the fundamental value and attractiveness of our portfolio.

We continue to expand over GBP 100 million invested through acquisitions and capital expenditure and a number of properties are currently under review. And with enhanced liquidity, we're well positioned to take advantage of market opportunities. As one of the largest property owners in London's West End, we play an important role in shaping the area's long-term future. Visitors continue to be drawn to the West End's exceptional cultural, retail and entertainment offering, reinforcing its position as a leading destination for experience-led travel. The portfolio is benefiting from record international arrivals to London airports. Hotel occupancy remains strong, whilst the Elizabeth line continues to broaden catchment for visitors and workers alike.

Shaftesbury Capital's irreplaceable portfolio of properties located at the heart of the West End provides high occupancy, low capital requirements and reliable growing long-term cash flows. Turning to results. Our valuation increased 6.6% like-for-like to GBP 5.4 billion. This was led by a 6% increase in ERV and a small 2 basis point inward yield movement. Total accounting return and total property return of 9.1% and 10.1%, which is in line with our medium-term targets. We continue to deliver rental growth, which increased by 6% and every effort continues to be made to enhance customer service whilst delivering meaningful cost savings. Underlying earnings are up 12%, and the Board has proposed a final dividend of 2.1p per share, which brings the total dividend to 4p per share, which is an increase of 14% for the year.

We have a very strong balance sheet and access to significant liquidity with low leverage. I think the performance overall demonstrates the exceptional qualities of the portfolio, delivering growth in cash rents, dividends, ERV and valuation. So I'll now hand over to Situl for the financial review.

Thanks, Ian. Good morning, everyone. As you've heard, financial performance was positive in 2025 with growth in rental income, earnings, dividends, valuations and net tangible assets. In addition, we have strengthened our balance sheet and enhanced the group's financial flexibility. So starting with the income statement. The main points are that over the year, there was growth in rental income of 6%, earnings were 12% higher, and we've increased the dividend by 14%.

We focus here on group share numbers, that is including Covent Garden at 75% post the transaction with Norges Bank. As is completed partway through the year, we've included in the appendix on Slide 43, a summary of how this affects year-on-year comparisons. Adjusting for this, gross rents were up 5.9% like-for-like to GBP 195.6 million, reflecting a successful year of leasing and asset management. In aggregate, lettings and renewals were 10% ahead of ERV and 14% up on previous passing rents. Management fees from Covent Garden for Q2 to Q4 represent the other income of GBP 3 million.

Administration costs of GBP 41 million reflects an increased share option charge, which was up by nearly GBP 5 million compared with last year. Excluding this, costs were effectively 8% lower. Notwithstanding upward pressures, we are targeting further reductions in the absolute level of cash costs over the next 2 years. During the year, the cash receipt from the Covent Garden transaction lowered net debt significantly. As a result, finance costs have been reduced by almost 30% to GBP 41.4 million. This year, we will refinance or repay GBP 400 million of maturing debt. However, based on current levels of borrowing, we are targeting finance costs to be broadly flat overall. All of these movements taken together resulted in a 12% increase in underlying earnings to GBP 81.9 million, equivalent to 4.5p per share. The proposed final dividend of 2.1p per share takes the dividend for the year to 4p, up 14% year-on-year.

Our leasing activity contributed to an increase in ERV of 6.2% over the year to GBP 270 million. As illustrated in the chart, there is the opportunity to grow passing rent significantly given the 26% uplift as we move through from annualized gross income on the left to current market rents on the right. There is embedded reversion in our portfolio and good visibility on the income growth potential in each of our locations. This includes almost GBP 16 million of income, which is contracted or relates to rent-free periods, the majority of which will convert to running income over the next 12 months. So turning now to the balance sheet. The market value of properties under management was up 6.6% to GBP 5.4 billion.

Net debt has been taken down from GBP 1.4 billion to GBP 0.8 billion on a group share basis with loan-to-value of 17%. NTA was up 7% over the year to [ 2.15p ] per share, driven primarily by the valuation movement. The main driver for the uplift in property valuations was rental growth with ERV up across all sectors and in all of our estates with retail and Carnaby Soho being the strongest performers. Yields moved in marginally by 2 basis points to 4.43% overall, and the commercial portfolio is valued at an equivalent yield of 4.6%. Our assets continue to demonstrate attractiveness and affordability to our customers with average ERV for the portfolio under GBP 100 per square foot and customer sales significantly ahead of 2019 levels, outstripping ERVs.

The balance sheet is in a strong position with low leverage and access to significant liquidity. With loan-to-value under 20% and the EBITDA multiple under 7x, there is flexibility to deploy capital towards growing our business through investment in existing assets and new opportunities. In October 2025, we entered into a new 5-year loan facility of GBP 300 million for Covent Garden. The maturity of the group's other banking facilities totaling GBP 450 million of undrawn firepower has been extended to 2029 and 2030. We've also taken the opportunity to reduce the margins on these facilities to better reflect current market conditions and the strengthened position of the group.

Part of the proceeds from the Covent Garden partnership were used to reduce gross debt and we are positioned for repayment of the GBP 275 million of exchangeable bonds, which mature at the end of March '26. As well as the new financing extensions and repricing, we have protected finance costs from interest rate movements by capping GBP 300 million of SONIA exposure at 3% for this year. We will continue to review financing opportunities, taking advantage of the attractive credit profile of the group.

So to summarize, financial performance has been strong, and we have enhanced flexibility. Total accounting and property returns of 9% and 10% have been achieved in 2025, driven by growth in ERV and cash rents, which, together with cost management, have resulted in good progression in our key financial metrics. We will continue to focus on our priority areas: earnings and dividend growth, deploying capital accretively and balance sheet strength and flexibility. And with that, I will hand back to Ian.

Thanks very much, Situl. I can tell you a little bit about the portfolio, a little bit of color for you. We own an impossible to replicate portfolio. It's located in some of the most iconic destinations across London's West End, Covent Garden, Carnaby Soho and Chinatown. The GBP 5.4 billion portfolio under management comprises 2.8 million square feet of lettable space across 640 predominantly freehold buildings with approximately 1,900 individual lettable units. Portfolio is broadly 1/3 retail, 1/3 F&B, with the balance in the upper floors, which offer office and residential accommodation.

Portfolio offers a diverse occupational mix and variety of income streams with a range of unit sizes and rental tones. Occupational demand continues to prioritize the best locations. Availability now on many of our streets is at near record lows, and this supports competitive pricing. Leasing success has been achieved across the portfolio with continued ERV growth. This slide shows some of the new brands introduced, which are attracted by the 7 days a week footfall and trading environment. 434 leasing transactions completed in the year, representing nearly GBP 40 million of contracted rent. They were achieved at an average of about 10% ahead of December '24 ERV and 14% ahead of previous passing rents.

Vacancy is very low at 2.6%. The team's active and creative approach, which is informed by a deep knowledge of the West End, positions Shaftesbury Capital to deliver further rental growth. Seeing very strong conditions in leasing -- in retail. Leasing demand is very positive and trading conditions are good. In recent months, we welcomed a number of new brands to Carnaby Street as we enhance the customer mix there. Charlotte Tilbury opened a new flagship store, and they'll shortly be joined by Sephora and also by Edikted over the coming months. Covent Garden continues to attract new high-quality brands, including Nespresso and Byredo, which were introduced during the course of the year.

All of this has contributed to a 10.4% retail valuation growth across the portfolio. We're home to approximately 400 food and beverage outlets. Operators are attracted to the vibrant pedestrian-friendly, well-managed estates. And there have been a number of signings across Covent Garden, including Borough in Floral Court, Harry's Restaurant and Bar on the Piazza and Buvette in Neal's Yard. There continues to be strong demand for Soho for the Soho portfolio with the introduction of several new concepts, including Padella and the Shaston Arms.

In Chinatown, we've introduced more variety to the area, increasing the pan-Asian offering at a range of price points. So across the portfolio, 37 new lettings and renewals signed 15.7% ahead of December 2024 ERV. Our vibrant locations and the quality of accommodation continue to attract leasing demand for office space. The Carnaby and Covent Garden portfolios offer high amenity value and excellent environmental credentials. And we continue to see customers relocating from other parts of Central London as employers recognize the importance of location and amenity value in attracting and retaining talent.

The residential portfolio continues to perform well. During the year, 285 transactions were completed with rents achieved around about 4% ahead of previous passing rents. We have the ability to add value through capital initiatives to our 640 properties. Our pipeline of asset management and refurbishment activities represents 4.2% of ERV, and it's expected to be delivered over the coming 12 to 18 months. The scale of our holdings also help us to shape not just the buildings, but the spaces around them, and we're working with local stakeholders to enhance the public realm across our destinations, making them greener and more enjoyable for everybody.

Covent Garden's Henrietta Street public realm is currently being transformed, and we're also undertaking early engagement on improvements to Carnaby Street to enhance the visitor experience whilst preserving the area's unique character. We continue to rotate capital, improving the quality of our exceptional portfolio. And in this year, we disposed of GBP 12 million of assets and invested GBP 80 million in targeted acquisitions. As I said earlier, we have a number of properties under review. Situl mentioned that we introduced sovereign capital to Covent Garden this year.

And by partnering with NBIM, leverages our operational expertise and property portfolio, providing investment and expansion opportunities. So our growth prospects are underpinned by strong fundamentals. The West End market has delivered attractive predictable growth over the long term with an annualized rental growth rate of approximately 4% per annum. Our portfolio has outperformed that with nearly 7% ERV growth delivered since 2010. And this is supported by consistently high occupancy and the scarcity value of the West End, where limited new supply continues to drive demand. A strength of the portfolio is its adaptable mixed-use nature, which allows us to evolve space in line with changing demand and importantly, to do so with relatively low CapEx requirements.

We benefit from aggregated ownership, enabling us to enhance the public realm and shape our places, supported by data-led customer and marketing approach. And finally, we actively manage the portfolio through capital rotation, focusing investment on our chosen assets and improving performance through refurbishment initiatives. So overall, these factors drive consistent long-term rental growth and valuation progression. I'd like to take a moment to thank everybody involved, including our customers, partners and our very experienced team in delivering this strong performance in 2025. Some of our senior leadership colleagues are with us today, and I hope you'll have the opportunity to meet with them afterwards if you didn't see them during coffee.

So in summary, we've had a successful year, and we've made a very good start to 2026. There are obviously a number of challenges in the economy, but the West End continues to perform with high footfall, customer sales growth and low vacancy. There are excellent levels of activity and a strong leasing pipeline. We're confident in our outlook and targets for rental growth of 5% to 7%, a total property return of 7% to 9% and a total accounting return of 8% to 10%. Through active management of our prime West End portfolio, the strength of our operating platform, and we're focused on sustained long-term growth in rental income, value earnings and dividends. And backed by our strong balance sheet, we're well positioned to grow and take advantage of market opportunities. So that concludes the presentation. We're going to move now to Q&A. For those of you that are on the phones, if you could let the operator know that you'd like to ask a question, we'll come to you. But if somebody likes to start the ball rolling in the room, that would be great. Max?

It's Max Nimmo at Deutsche Numis. Just a couple of questions, if I can. One on Carnaby and the ERV growth was exceptionally strong there. Do you expect that, that is likely to continue as you -- as it sort of catches up with some of the other villages within your portfolio, kind of extracting that low-hanging fruit? Should we expect that to be the strongest growth in the near term? And then secondly, just around kind of firepower with where you're at 17% LTV today. Obviously, fully acknowledge you're trying to manage the interest cost for the business, but how you see that and the relationship with Norges and what that does for their ambition to grow as well?

Thanks, Yes, we're really pleased with the progress we've made on Carnaby Street. I think what gives us confidence that it will continue to perform really well is the brands that we brought into the estate are trading at significantly higher sales densities than some of the previous incumbents. And that gives us confidence that it will support rental growth over the medium to long term. And we are seeing reasonably positive improvements in Zone A rents, which is, as you know, is how the market actually looks at it. But they're still well below other locations within our portfolio and well behind the general tone in the West End. So yes, I do think you'll see significant growth, but we're delivering growth across the portfolio. Covent Garden is doing very well as is Chinatown. But yes, we've got high hopes for Carnaby Street, definitely. Do you want to?

Yes, sure. On your point about firepower leverage growth, I think we're in a very strong position. And that's a deliberate strategy so that we are well protected on the downside. And as you say, we're managing interest costs, but it means that we can put money to work when we see interesting opportunities. And one of our priorities is deploying that capital accretively. So there's plenty of room within our leverage ratios and our liquidity to do that. And as you also observed, the formation of the partnership is a further source of capital for growth in Covent Garden. So we see opportunities across all of our estates.

It's James Carswell from Peel Hunt. Maybe just one on -- following on from Max's question. You've got the firepower. What are you seeing in terms of acquisition opportunities? I mean I appreciate the small buildings pretty liquid in your kind of markets. But I mean, are you seeing any [indiscernible] of the larger lot sizes? Do you think that will kind of bring you some opportunities?

Yes. The team has got quite a lot of real estate that they're tracking. Obviously, whilst there's a lot of activity in the West End buildings that are adjacent to our portfolios don't trade very often. So we are focused really on driving value out of the 640 buildings that we've got and being in a position to move quickly when real estate does come available. We bought 1 or 2 things last week -- last year. They are sort of acquisitions that add value to the individual components of the estate. But clearly, at some point, we'd like to expand our ownerships substantially. And I think those opportunities will arise.

Oli Woodall from Kolytics. Congratulations on the strong set of results across the board, particularly your office segment seem to have very strong like-for-like rents. I wonder if you could give an outlook for the demand here for office and then separately for food and beverage and retail looking forward, kind of what your outlook is?

Yes. Thanks very much. Well, all parts of the portfolio are performing well. I mean office is about 20% of what we have split into 2 categories, really sort of purpose-built offices and then converted sort of Georgian properties. And as I said in the presentation, the demand is there, not just because the buildings are good and they're well managed, but the locations are really in demand. So we're seeing strong levels of demand, and I think we'll see continued rental growth in those components of the portfolio.

But the bulk of what we do is retail and hospitality and retail demand is continues to be very strong. I mean many commentators are saying the retail leasing market is as strong as they've ever seen it. I think there was one of the brokers put out a report recently saying demand is significantly higher than it's been for many, many years. So that supports the prime locations that we have. And you can see that in the number of new transactions that we've done and the pipeline.

I think Will Oliver is somewhere in the room. He's in charge of leasing. So he's a very busy man at the moment. So I think you'll see continued activity in that area. F&B also very positive. There's virtually nothing available. And where we do get something available, there's multiple operators want to take the space on. So yes, very, very, very positive conditions across the board at the moment.

Thank you very much. Any questions on the telephones? We've got a nod. We hand over to you Nimmo, excellent.

Okay. We do have one question on the telephone we've taken now. The question will be coming from Zachary Gauge of UBS.

Just a quick one from me. Looking at the sort of the consensus numbers for earnings in 2026. I think it's currently at 5p. So assuming a pretty similar growth rate to the one you saw in 2025. I know you don't give formal guidance, but just thinking considering the exchangeable bond refinancing at the end of March and obviously, interest rates in the U.K. probably coming in a little bit over the year with a slight headwind on cash. Do you think that kind of growth rate is in the right ballpark for the year considering that refinancing headwind?

Let's talk about the building blocks, Zach. As you said, we don't normally comment on consensus forecast, and there is a bit of a range. So if we go through the main components that we think about, rental income growth, we talked about aiming to grow that cash rents in line with ERV growth, and we have an ERV growth target of 5% to 7%. On the other components, you'll see continued improvement over the next couple of years in the property level net to gross, and there are a number of initiatives that underpin that.

And then on admin costs, we've been quite definitive on the guidance around that in terms of bringing down the cash cost element of that. And then the finance cost is, as you say, you've got some maturities and refinancing or repayment of that, and you've got lower leverage in terms of the effects of the transaction from last year. So our target with the current level of leverage is for the finance costs overall to be flat. So hopefully, that gives you a guide on some of the moving parts.

Ian, I will turn the call back over to you as we have no further telephone questions.

Thank you very much. Okay, short and sweet. If you'd like to hang around for coffee, Peel Hunt will be very happy to give you one. Thank you very much, Peel Hunt, for the use of the facilities. We'll be around for a little bit. I'd say most of the team are here, asset management team, investment team, marketing team.

If you'd like to spend some time with them, please feel free to do so. Otherwise, we look forward to seeing you down on the estate. The sun is out. There's plenty of nice places for you to go and eat and drink, plenty of places for you to go shop. So thank you very much for your attention, and we hope you have a good day. And if there are any questions, just call any of us as the day goes on. So thank you very much.