Sirius Real Estate Stock

Good morning, everybody, and welcome to today's presentation of Sirius Real Estate's full year results for the period ending March 31, 2026. My name is Andrew Coombs. I am the Group Chief Executive Officer of Sirius, and I'm joined this morning by Chris Bowman, who is the Group Chief Financial Officer of Sirius Real Estate. Together, we will take you through this morning's presentation.

As you all know, Sirius is an on-balance sheet best-in-class owner and operator of mixed-use light industrial business parks on the edge of key towns in Germany and the U.K. Please remember that Sirius has for the last 4.5 years operated in both the German and the U.K. markets under the brand of Sirius in Germany and for the last 4.5 years under the brand of BizSpace within the U.K.

The group currently operates over EUR 3 billion of property, 90% of which is wholly owned. This consists of over 160 sites and nearly 2,000 commercial buildings. We have 76 sites in the U.K., 78 sites in Germany and 7 sites within the Titanium joint venture.

If we turn to Page 6, we can look at the highlights for the period. The Sirius Group is a rigorous, well-run and growing organization. We have proved the resilience and the reliability of the business model during Brexit, during COVID, during the Liz Truss budget, the Ukraine war and the gas crisis in Germany, and most recently, through a period of rising interest rates in Europe and the U.K. During which time, we have successfully protected valuations despite yield expansion. And in that time, we have continuously grown our revenues, increased our dividend payments. And as I have said, we have made sure that the value of our properties goes up, not down.

In the period to March 31, 2026, we once again grew the group like-for-like rent roll by more than 6%. And as a result of acquisitions in the period, we have grown total rent roll by more than 11%. So I'm pleased to report to you another year of business as usual for Sirius despite the macroeconomic headwinds and political uncertainty of recent months. We have increased our FFO to more than EUR 133 million, which has resulted in a 4.5% increase in FFO per share. And I'm pleased to tell you that we will be paying a dividend of EUR 0.0322 for the second half of the year. This brings the total dividend for the period to EUR 0.064, which is 4.1% up on the previous year.

But where does that leave us in terms of the ambition of this company going forward? Because everything I talked to you about is in the past. Let's spend a couple of slides looking forward. As you know, we have an immediate ambition to get to EUR 150 million of FFO. And I say immediate because we should now be less than 1 year away from achieving that EUR 150 million FFO ambition. And that's why 6 months ago, we started to roll out our plans to extend our achievement in future years to beyond EUR 150 million and on to the new ambition of EUR 175 million of FFO.

Now, I know you're all going to ask me when? Well, these are ambitious goals, and they focus the team at Sirius and BizSpace on how. If we were to commit to when, they wouldn't be ambitions, they'd be targets. The importance of the ambition is it focuses our thoughts and our activities on the how. And as you can see, aside from our core business of owning multi-let out-of-town industrial parks, 2 very important pieces of the how are now coming into the picture, namely defense and self-storage.

And if you turn to Page 8, we can spend a little bit of time talking about our self-storage ambitions. Sirius has been operating its Smartspace self-storage products in Germany for over 15 years now. Today, we are live in over 30 locations in Germany, serving just over 4,000 customers. In the U.K., we're doing something similar in just 4 locations. As you know, we hired Tom Lampard last year. Tom is a former Director of Lok'nStore and more recently Shurgard. He has a great deal of experience in overseeing the planning, the building and the opening of new self-storage stores.

I'm delighted to tell you that we have already started to build our first dedicated self-storage store in Berlin, and we will soon begin the conversion of a small number of sites in the U.K. into dedicated self-storage stores. And we can see a path to more than doubling our revenues from self-storage. And of course, these stores in every single case will be even more high-yielding than our traditional core sites.

Let's now turn to Page 9 and look at defense. So back in June of last year, in fact, almost to the day, we appointed Angus Fay as a strategic adviser to Sirius. His remit being to advise the company on the defense sector. At the time, we sought to understand what was happening because we believed, and we still do believe, defense capabilities are underpinned by industrial capacity. And that capacity is normally housed in industrial properties. Therefore, if you own industrial property in scale, defense will become unavoidable.

And we wanted to understand what sort of effect this might have on the asset class as a whole. By September, it had become clear that this opportunity was one that Sirius should be participating in. And we purchased just over EUR 60 million of assets in Munich and in Bedford, assets that contain tenants from the defense sector. Then, in February of this year, we raised capital and purchased a further EUR 140 million of defense-related assets in Germany. As you can see from this slide, this leaves us with a portfolio of just over EUR 200 million at nearly 9% gross yield.

And our ambition is to continue going in order to build somewhere around EUR 500 million of defense-related property portfolio, at which point we will seek third-party capital to form a joint venture focused on the defense sector. We are at least 1 year away from that, maybe 2. But our goal is clear here. Our ambition is to go it alone to EUR 0.5 billion and then to go further than that with the help of third-party joint venture capital. That is our ambition. So EUR 150 million of FFO is in our sights. We will not be stopping there. We're already planning the journey to EUR 175 million. Within that plan, we will be scaling up our presence in self-storage. And where defense is concerned, we've acquired EUR 200 million in 12 months, and we plan to build to EUR 500 million in the future.

Perhaps I can now hand over to Chris to take you through the income statement.

Thank you, Andrew. Good morning, everybody. I'll just spend the next few pages going through the highlights of the income statement and the balance sheet and then come back later as well and just talk about some of the capital allocation decisions that were made during the year.

So as you've already heard Andrew speak about the FFO, very pleased to have another year of very healthy growth of FFO, 8.4% up year-on-year to finish the year at EUR 133.5 million. That focus on FFO, funds from operations, the cash profits of the business after tax and after financing expenses runs through the entire business. We are not a jam tomorrow real estate business. We're about capturing cash income today.

So rental income level, you can see we were up 11.4% year-on-year to EUR 239.8 million of rental income. I can tell you, we actually finished the year with rent roll well in excess of EUR 250 million. So there is growth baked into our portfolio for the year ahead.

Looking further down, just to highlight, we obviously still have the JV with what is now BNP, previously called AXA, with EUR 350 million of assets in Germany. That has been very healthy returns for us. We have EUR 75 million of capital invested in that JV. And as you can see, we've made EUR 8 million return. There was a performance fee in the prior year. That's why it's slightly down. But in terms of ongoing returns there, they continue to be very healthy double-digit returns on our equity.

Service charge recoverables. This is obviously a focus of the business. This is part of our DNA of doing better than the competition in terms of recovering our property expenses. As we've had a very active year of acquisitions, then we tend to see a slightly higher recoverables as we inherit other people's recovery strategies. That will return to more normal levels. We expect to typically recover 92% of property expenses of mid-80s of occupancy.

Coming further down, you can see corporate costs and overheads. Very pleased to say that we've kept that to a 3% increase despite a portfolio, which has obviously increased over double digits. So you're seeing operational leverage there. We are getting more efficient. We are doing more with less. We are bringing obviously technology into the business, but also the platform is able to scale. That has driven an 11.6% EBITDA increase to EUR 158.3 million. And you obviously see the benefits of the operational leverage there offsetting that initial increase in the service charge recoverables.

Finance expense continues to be the biggest headwind that the business faces. We are on a journey of going from obviously very, very cheap cost of debt into what I call more normal levels. So I would guide to around 4% incremental cost of debt. We'll come on to -- I'll talk about that a little bit more later. But you can see net finance expense, EUR 23 million, of which there was a EUR 36 million interest cost with a EUR 13 million income. I would guide you towards the year ahead. The income will be very low single digits. The interest cost will be marginally higher in the year ahead.

Tax, you can see we've brought our current tax charge right down EUR 1.8 million from EUR 6.8 million in the prior year. We've had some very successful tax structuring during the year, merging loss-making entities or entities that have losses in them with our profit-making entities at a property level. That's allowed us to release some of the losses in a very efficient manner. I think going forward, you should expect that tax charge to return to mid-single digits level, but a very healthy performance this year. And that all feeds into the FFO, as I've said, of EUR 133.5 million.

Adjusting items, I talked about in the first half, there is an unrealized foreign exchange translation in there. There are finance fees associated with our activity, particularly on the RCF and the bond market. But those together, some of those are one-offs, which will roll back out, in particular, the FX.

I would then just highlight the surplus on the revaluation. So EUR 110 million increase in our investment properties. And that's a reflection of that focus on driving rental income. Yields have essentially been stable. Andrew will come on and talk about those a little bit more later, but they are essentially stable. We had capitalized then the benefit, particularly in Germany of the upside in rental income. That then feeds through the NAV, which I'll talk about in a second. But net-net, you get down to a profit before tax up 5% at EUR 211 million.

Just putting that into a waterfall, I think when we drive that FFO that then allows us to grow our dividend. So for the 25th consecutive period, we are very pleased to be announcing an increasing dividend. As Andrew said, EUR 0.0322 in the second half gets us EUR 0.064 overall for the year. The waterfall down from NOI EUR 207 million, take off the costs and the finance expenses for FFO, together with those adjusting items of FX and finance fees, again, all going in the right direction to drive a dividend growth.

Just flipping on to the balance sheet, fairly self-explanatory. Obviously, highly, highly active year for acquisitions of property. In terms of what actually hit the balance sheet in the year, it was roughly EUR 400 million of assets that actually fell in, in terms of completions during the year. Together with that valuation uplift of EUR 110 million, you saw an increase in investment properties of just over EUR 500 million. The cash balance, therefore, has shifted slightly down from EUR 604 million to EUR 410 million at the year-end, reflecting that move into assets. We also did a bond tap during the year for EUR 105 million, and we did an equity raise for EUR 88 million. So piece those 3 items together, they flowed into the EUR 400 million of completions of assets during the year.

I'd just highlight as well, there's quite a big shift on the tax line. You can see that deferred tax dropped from EUR 110 million down to EUR 86 million. I flagged this at the first half, but you see the full effect now of the German government's fiscal stimulus measures have included reducing the corporate tax rate in Germany, which goes from 15% down to 10% over the course of 5 years from 2028. So that's a real live example of the fiscal stimulus in action. What does that mean? That means that our embedded profits on our portfolio, there is essentially a lower potential tax liability associated with those. So that allows that deferred tax release.

But that is obviously direct evidence of the effect of that stimulus, which hasn't actually even come yet, and so it's not actually affecting the economy, but from a sort of deferred tax perspective, we've got visibility on it. That drives down -- we've got the 3 different NAVs there. The basic reported NAV is up 7%. That includes the effect of that deferred tax release. The adjusted NAV, which is the one that we focus on, that strips out the deferred tax and then the EPRA as well. So each of them up 7%, 5% and 4%, respectively.

I will hand back to Andrew now just to go through country-by-country KPIs.

So in terms of Germany, the strongest market in the period, as you can see, annualized rent roll up by nearly 18%, obviously, partly driven by the acquisitions and partly driven by the 7.3% like-for-like organic growth.

Occupancy increased and so did rate. You can see that the move-ins reflecting the new business sales volume was 12% up on the previous year. But we need to be careful. It's not all good news. We're closely managing the rate in terms of the move-outs. You can see people are moving out at roughly the same level they're moving in at. We normally like to have a decent EUR 0.50 or so up on the move-in rate versus the move-out rate. Sorry, we've got that. What I mean is March '25 to March '26, instead of driving in -- instead of driving down the move-out rate, it's moved up by EUR 0.03. So a marginal difference. But nonetheless, these areas are narrowing rather than getting further apart.

And then, if you look at the move-outs, you see that actually the move-outs are 34,000 square meters higher, whereas the move-ins are only 26,000 square meters higher. What's missing here is the expansions of the customers who stay but buy more. But suffice it to say, whilst it's the strongest of the 2 markets, we're still having to work very, very hard to use the platform to keep everything in balance. Sometimes you can see that just pure new business alone will overcome what's moving out. We're having to use both new business and also expansions to be able to make sure we get that extra 1% in occupancy, and we continue to drive the rate upwards.

We go across the page and look at the waterfall effect. As you can see, we're losing nearly EUR 21 million, but we're gaining EUR 24.3 million in terms of the move-ins. And then really, it's the like-for-like uplifts that get us that good healthy growth from EUR 140 million to EUR 150 million. We then have acquisitions on top. And you can see that's how we grow the rent roll by nearly 18% within the year.

And then, if you look at the acquisitions here on Page 15. On the left, you can see Dresden, so Silicon Saxony, effectively, where all of the offshore chip manufacturer from years gone by has been moved back into Germany. This is a particularly strong market. You can also see Geilenkirchen. Geilenkirchen is near to a strategic NATO air base, close to the Dutch border. This is not one of our defense plays, but we love the location of this asset. And the fact that it is located where it is has only added to the reason as to why we bought this high-yielding 10.2% gross yielding asset.

And then Mönchengladbach, which we think has got a lot of opportunity based on the low price, the high vacancy and the fact that it's so well located in an area like Mönchengladbach. But if you have a look at the capital rate per square meter of less than EUR 250 per square meter, that clearly is part of the strength of this asset.

Then, you go across the page again and you come into the defense-related stuff, Feldkirchen, is where the company makes the night viewing devices and the laser technology for the German Army. Kiel is 60% Rheinmetall, so electronics for armored fighting vehicles. And Fulda, that was announced last week, is where the body armor for the Bundeswehr. So effectively, the antiballistic and Kevlar plates are made for the German Army. And, of course, with the 2 new divisions, including the 45th division in Lithuania, the need for this kit is expanding quite rapidly. So all of this is growing, government-backed, very, very sticky defense income, hence, why we bought it.

Chris, over to you.

Okay. So just coming back to capital allocation and how we put our -- particularly our CapEx budgets to work. So just on Slide 17, you can see part of a core pillar of the Sirius growth strategy is how we transfer what are our value-add sites and transform those into our mature sites. And today, roughly 64% of our portfolio in Germany is value-add. That is EUR 1.4 billion of book value. And it has just under 300 -- sorry, it has 270,000 square meters of vacant space, which we can put relatively modest amounts of capital into to transform into higher quality, more lettable at higher rates space to drive occupancy, rate, and ultimately, value.

So just to give you an idea of how much that actually leverages in terms of value, if you look at the capital value per square meter on average of our value add, that sits at EUR 928 per square meter, which we see the 36% of our portfolio, which we consider mature, that currently sits at EUR 1,357 per square meter. So the opportunity to drive up what is 46% upside in value is huge there from a valuation perspective, but also what it does is there's an opportunity there to go from EUR 7.61 a square meter rate up to EUR 8.31 a square meter and to reduce what is 100 basis points of service charge leakage between 7.9% and 6.9% gross and net yield to reduce that down to just 30 basis points. So, net-net, the benefits are not just to value, not just the top line rental income, but also to reduce leakage as well as service charge and to the benefit then also of the entire site when we put capital to work of improving the quality of the entire site, which isn't even captured in here, which is then the benefit to -- the knock-on benefit to the other space on site as well.

So where -- just moving over the page, I'll give you some examples of where we've put our CapEx to work in year-to-date. So total CapEx invested, EUR 48.8 million. That's roughly split 2/3, 1/3 between Germany and the U.K. Really, the value-add CapEx is where we move the assets from value-add to mature. In Germany, EUR 15.6 million. You can see some examples there on the right-hand side, some of the pictures there, taking space and doing, as I say, very modest spend, so low-risk spend. This is often redoing floors. This is redecoration, some reconfiguration of space, dividing up space into smaller units, for instance, which may be more lettable at a higher rate and at greater scale.

Andrew has touched on self-storage. That's obviously been a core part of how we take vacancy, put self-storage units into that vacancy, and again, drive income. You can see the example there at Göppingen. That's -- that's first floor space at Göppingen, which had been empty for years when we bought that site. That site sits right next door to an existing independent self-storage provider. That self-storage provider is full. So the market opportunity was already proven by our essentially competitor next door. So again, low risk.

I'll touch on new builds in a second. Renewals, small numbers, but continues to be very, very high returns for us. Works and ESG within U.K. and Germany, there's roughly EUR 5 million of spend in each. That has been in Germany, a focus on PV systems, where we get a direct cash -- double-digit cash return on that spend. In the U.K., that's been a focus on the EPC certification process and continuing on the journey of cautiously going on the EPC journey given the lack of regulatory clarity that we have from the U.K. government on that.

Just flipping over the page. What does all that mean on a 3-year basis on the value-add CapEx? We have been -- we have spent over the last 3 years EUR 29.2 million on value-add CapEx. On average, we've achieved a return on that investment of 38%, so -- and that is still on the journey. So some of that space will have only just been very recently refurbished. You can see that the occupancy at 80%, there is still further to go. So I expect that ROI to actually trend towards over 40%.

Renewals, small -- relatively small numbers, but very, very profitable for us, over 50% ROI. And this will continue to be really, really good use of our CapEx spend to generate really high ROIs and drive occupancy, income and rate across the portfolio.

Moving on to new builds. I started talking about new builds, I think, probably this time last year. I said at that point that we would carefully allocate capital to new build projects. These projects compete for capital against acquisitions of new sites. So this is putting in development into our existing sites on either surplus land or space, which at the moment is, for want of a better word, essentially derelict, but I'll talk about that in a second.

On the left-hand side is what we've done. So at Gartenfeld, many of you have been to our site in Berlin, just outside Berlin, Gartenfeld, we've built 3 new production halls, warehouses. All 3 of those spaces have rented immediately. You can see we've achieved rates of over EUR 13 a square meter against budgeting. We were budgeting just under EUR 11. I mean, to give you an example, the local emergency services has taken one of those halls in its entirety on a long-term lease. It is expensive to build in Germany. So development will only make sense where the returns are available. So the yield on cost on that site was 9%. We still are able to generate a 21% IRR because the site is valued below 6% already. And this has continued to improve the quality of the site overall.

On the right-hand side, what do we have in the pipeline? We have EUR 20 million of projects in progress. One of those on the bottom left of the right-hand side, you can see in progress the build of our self-storage, stand-alone self-storage site at Gartenfeld in Berlin. On the bottom right, we bought a site in Hamburg earlier this year. There is a new build opportunity there, which we are just starting on as well. The right-hand side, essentially box that you can see there is an existing tenant is expanding into that space. So this is not speculative development. We have the tenant already signed up.

On the top left, a self-storage type product, garages as well, has been very successful in the German market. We are building 72 garages at our existing Hanover site on surplus land. And then, on the top right, at our Dresden Metropolis site by the airport, there is an opportunity to fully refurbish an existing what was the offices' mess of that site. It's an old Air Force site, and we are investing around EUR 5 million into that site as well.

All of this, we are targeting IRRs of around 20%. That's obviously highly, highly attractive compared to the acquisitions opportunities as well. But it's also an area which will be complementary to acquisitions. So as I say, it will not work everywhere in Germany, but where it works, the opportunities are great.

And I'll hand back to Andrew to talk about the U.K.

Okay. So whilst we are still very positive about the U.K. market. Comparative to Germany, U.K. is the market that was less strong throughout the period we're talking about. And whilst you can see that we increased the annualized rent roll by even more than the 18% we did in Germany, we were working off a lower base in the U.K. And we were more dependent on acquisitions for that increase in the rent roll.

We did increase the like-for-like rent roll by 4.6%, and we did that through increasing rate and also occupancy. But if you look at the move-outs at the bottom of this page, what you can see is that this was more a story of managing churn than it was a story of increasing new business sales. And you can see that in as much as the 25 move-outs versus the 26 move-outs were actually 50,000 square meters less. You can see that the new business in the U.K. was challenged, particularly in the fourth quarter of the last calendar year when the politicians in the U.K. dealt with the budget in the way they dealt with it. That hit our U.K. business and our tenant demand particularly hard. That cost us sales in that period.

Fortunately, although new business sales were down by 22,000 square meters year-on-year, we were able to more than make up for that in terms of managing the churn within our business. We are still faced with the challenge that people are moving out at GBP 18.5 per square foot, and we are attracting new people in at GBP 2 less. That is very much a story of regional offices, and it's a story whereby we're able to maintain occupancy in regional offices in the U.K., but we are having to work much harder on price in order to do that. So again, you see the strength of the platform here in the U.K. with the assistance of the centralized platform in Berlin.

You can see that the power of that platform mitigates the risk and that we are able to bring this all together to give total growth of nearly 20%, like-for-like growth of nearly 5%. But we have had to work much harder this year, in particular, because of Q4 at the end of last year than we have at any time in the last 4.5 years. And if you see that reflected on the waterfall, what you can see is that the like-for-like move-outs and move-ins, we lose just under GBP 1 million, and we need the uplifts to be able to make it back to that GBP 64.1 million. And you then see the effect of Vantage and acquisitions, which gives you that nearly 20% growth.

If we go across the page and look at some of the acquisitions, I've talked about Bedford, which is the defense-related acquisition. This is where they make component parts for the ejector seats for fighter jets. It's also right next to where the planned development of Universal Studios is going to be. So both from a defense perspective and also from a local property perspective, it would be quite difficult to go wrong in Bedford in the next couple of years.

Hartlebury is the 171-acre site just south of Birmingham. And the key point about this is that 80% of that 171 acres is undeveloped. So there is huge development possibility for Hartlebury.

And then, we have Chalcroft on the right-hand side, which again has significant development and re-leasing opportunity. We have very strong inquiries from a very large supermarket to develop the front of this site. We have over 3,000 homes going up next door. They're currently being built. And we've already relet a couple of the units here at significantly higher prices than we had in the business plan. Plus, we have the opportunity to develop some of the buildings at the back on the right-hand side of the site and create effectively a new product similar to the stuff that Chris has already shown you in Berlin Gartenfeld. So lots and lots of opportunity in this site.

Chris?

Yes. On to Slide 24, I'm just going to -- I'm really just going to highlight one thing really on here. So you can see that there's EUR 513 million in total of acquisition activity that we've either completed or notarized in the period. So hugely active period for us. I'd just highlight that, that brings with it EUR 36 million of NOI. Now, only half of that NOI hit the P&L in FY '26. So the full year effect still to come for the year ahead, the year we're now in, we essentially have baked in growth to come from all of that acquisition activity as well as obviously tackling service charge leakage, tackling occupancy, tackling development opportunity, CapEx spend, et cetera, and upside.

Now, we've acquired all of that -- all of those assets at an average of 8.2% gross yield, 7.6% net yield. That is higher yields than our existing portfolio stands on. So we're acquiring overall at better pricing than we already have our portfolio at and with opportunity in it as well for upside as well as obviously that baked in growth to come through on the P&L.

I'd just highlight, we continue to look for recycling opportunities, Pfungstadt being the most significant still to come. So that will complete during this summer for EUR 30 million. And in the meantime, we continue to look at opportunities as well for recycling of assets.

So in summary, FFO has grown by 8.4% to EUR 133.5 million. At per share level, it's grown by 4.5%. And we should be on track in the next 12 months to get to our ambition of EUR 150 million. We've been able to increase like-for-like rent roll across the group at 6.4%. And as Chris has just explained, we have acquired over EUR 500 million of new property, only half of the P&L effect having hit this year, the full effect being in the post for next year.

We have a clear strategic focus on our core German and U.K. businesses, together with increasing focus on revenues from defense and self-storage sectors. We've grown our dividend for the 25th consecutive time. We've grown it by 4.1% year-on-year. And in terms of the balance sheet, we have over EUR 700 million of undrawn facilities and cash sitting on the balance sheet.

In terms of the outlook, as I've said before, the U.K. suffered a weak Q4 of last calendar year, Q3 of the last financial year due to the economic effect of the political instability around the budget of November last year. However, the U.K. ended the financial year with strong momentum, and I'm pleased to tell you that momentum has continued into April and May.

The year finished strongly in both Germany and the U.K., and we have seen continued strong trading in both those countries despite what we're seeing in Iran. And that's not to say that we won't see an effect from Iran. We are cautious. But up until now, we have seen no negative effect in terms of what's happening in Iran.

Germany like-for-like growth continues to demonstrate the strength of the German operating platform, and the group continues to assess further opportunities in both Germany and the U.K. Future growth, we think, is going to be propelled by the current operational momentum. So that EUR 500 million plus of property, the momentum of that, the full momentum of that has still not hit the P&L in terms of the full year effect, and we will see that in this current year to March '27.

So thank you very much indeed for your time and attention. Chris and I will now try and answer any questions you may have.

It's Tom Musson from Berenberg. Just a question on the long-term ambitions in the self-storage market. It seems like you're formalizing a bit this morning. I know you show your road to EUR 15 million in revenue. But you're ultimately thinking that you want storage now to become a much more meaningful proportion of the total asset mix. I just wonder how you see that playing out longer term? And you mentioned yields there being higher than the core portfolio. Can you help quantify that?

Yes. Look, we like storage. We always have. And we think that we are different from the traditional self-storage providers. And what we've seen in the self-storage market over many, many years now is -- and it's gathered more pace recently, is typically lots and lots of people, particularly businesses, they start with a self-storage box, and then, they move to a bigger self-storage box. And then sometimes they move to 2 self-storage boxes.

And what we're seeing with the introduction of industrial outside storage containers is what people have started to do is when there's not a big enough box, and they need more than one, they move away from self-storage and into containers. Now, the traditional self-storage operators, for whatever reason, have decided not to address this. We think there's an opportunity because somebody as a business comes to us and they've got a workshop and they use a self-storage box and it gets bigger, and then, they need something bigger than a box, typically more than 6 square meters, they have a container. And then, maybe they need a couple of containers. And all of a sudden, they're not in containers anymore. They're in a 500 or 600 square meter storage hall, which is an ideal customer for us.

And what we've done is we've stuck with them all the way through their journey. When they started off and they needed that storage box, we provided that in a basement. Then, when they needed to be bigger, we could do that. And when they needed to go outside and use a container, we did that. And then when they needed to migrate from a container to a proper storage hall, then we did that, too. So we can address that journey in a way that we don't think anybody else in the market actually can.

In addition, what we've learned from Tom working with us is that the hardest thing for a self-storage company to do is to find the plot to build on. Well, we already own those plots. We have 150,000 square meters of non-income-producing land. In Berlin Gartenfeld, where we're talking about, it's opposite a site where 5,000 new homes are currently being built. In Chalcroft, we've got 3,000 new residences being built next door. We have a site in Potsdam. There's lots and lots of key sites we already own, whereby the most difficult thing for self-storage companies is to get the land we've got it already. So we think that there's a real opportunity that we can exploit here.

We think we can address a much broader range of the customer journey than anybody else in the market is able to do. And we think we can scale this quite quickly. And of course, the beauty of that is that because it's more high yielding than the core of what we do, this is naturally accretive. All we've got to do is hurry up and get on and do it. So yes, you will see it becoming a more important part of the mix at Sirius. And we'd like to think that it probably gets valued at a higher income multiple than maybe some of our more traditional services that we provide.

Okay. Maybe a second one just on your intention, you mentioned to seek a JV partner or bring in third-party capital on your defense assets. Do you have any idea today what sort of form you might want that JV to take in terms of economic ownership, economic split? Would the Titanium JV be considered for that? Or are you thinking this is with new third-party capital?

So look, it's very, very early. It's going to take us at least another year or 18 months to build the portfolio to the extent that we seek a partner. It's important that you get to a certain level before you seek the partner because the type of partner you could get today is different from the type of partner that you would get when you're EUR 0.5 billion looking at getting beyond EUR 1 billion. So it is really important to establish scale before you go and start to discuss JV with partners.

And of course, part of that discussion would be their ambition as well as ours, and that would help drive out the proportionality of ownership. But one thing is clear to us. Sirius is never going to be a predominantly defense-related property company. We don't want that. It needs to be a proportion. It needs to be a minority proportion, not a majority proportion. However, the dilemma is that the opportunity in industrial property that defense presents is far bigger than anything Sirius could digest with its own capital. So it needs to go and seek partnership.

And we don't need to decide on proportions yet. We don't need to make some of the key decisions you're alluding to at this point. But what is important is that we have a vision, we have a strategy, we set it out. And what is important is people understand that this will always be a minority, not the whole of what we do. And that because of the size and scale of the opportunity, we think we're going to need to partner with third-party capital.

It's Matt Saperia from Peel Hunt. I have 2 questions. The first one on capital recycling, views on sort of the quantum over the year. Is it going to likely be more from than we've seen over the last couple of years? And then, I guess, perhaps somewhat of a follow-on, Chris, the -- you've got the bonds maturing imminently. Can you just talk us through thoughts, not necessarily on that one, but the future refinancing over the next sort of 12 or 18 months?

So look, we're big believers in recycling. We recycle every year. We recycled in the year we're talking about here. We will recycle in the year that we're in. We're not going to put ourselves under pressure to sell specific amounts because that's how you get to really bad decisions in property. When you turn up and you either have to buy or you have to sell, that's where the person either buying or selling is able to sense that and you're driven into corners that you never really should paint yourself into. But suffice it to say, Chris has talked about Pfungstadt. There will be other recycling, both in the U.K. and in Germany. And we certainly would look at the cash we've got on our balance sheet, further recycling. Chris is going to talk about bonds. These are all sources of capital for the coming year, and recycling will definitely be part of that. In the past, we've typically recycled EUR 30 million to EUR 50 million a year. I would think we'll probably be recycling more than that in this next 12 months.

As for future refinancing, yes, we have a '26 bond, which matures 3 weeks today, so -- and that is essentially dealt with from the liquidity that's on the balance sheet at the moment. So moving ahead, looking towards November '28, there's EUR 465 million bond outstanding. That's the last of our, what I call our, kind of low-cost debt. So that's part of the journey back to what I think of as a normal cost of debt of around 4%, which is where we've been issuing most recently. We are entirely euro-denominated, and I would expect that to continue to be the case given particularly the differential between euro swap rates and gilts has widened even further in recent months.

As for how to deal with the November '28, it is, as ever, this is not an existential risk for us. We've got great support from the bond markets, from the banking markets. So it's really a case of how, not if. And core to this, I wouldn't underestimate the importance of the RCF that we put in place this year just gone. So we've now got EUR 300 million undrawn RCF. Strategically, you should expect us to look to run with the majority of that RCF undrawn. That is flexibility on the balance sheet, and that will be core to getting through bond refinancing windows in the most efficient way possible. So that we -- I don't ever want us to have our backs against the wall having to meet an auditor's requirement for going concern sign off and having to be active in the bond market when it might not be the right moment to be active in the bond market.

The RCF gives us a great deal of flexibility on the balance sheet to pick our timing as to how and when we tackle refinancing. So -- having said all that, we are a listed company, FTSE 250 listed. We can't leave things for the last minute. So you will see us always have sufficient liquidity on the balance sheet to deal with short-term refinancings. I would expect us to be active dealing with the '28 bond at the back end of '27, and then thereafter, at least partially, and then thereafter, be opportunistic about accessing the bond markets for refinancings in the run-up to it as well with a combination of the RCF as well.

Bjorn Zietsman, Pan Liberum. Just coming back to your self-storage ambitions. Across the U.K. and Germany, is the opportunity more in residential or commercial self-storage? I'll follow on from there.

So look, this is another thing we've noticed. Traditional self-storage operators don't seem to be particularly fond of businesses. And we know this, not just from what they say in their presentations, but from the market research we've done on businesses, particularly businesses at competing storage sites, where you literally stand outside the site and you say to people, have you ever been in any other form of storage? And quite a lot of them will tell you, yes, they've been with traditional self-storage, and they'll tell you why they've left. And it's a mixture of reasons, including the amount of space they need. But those reasons also include that those businesses feel that as well.

Now, we welcome people from residences into our self-storage facilities in the U.K. and in Germany. And we also welcome businesses. And whether we ended up with a situation whereby the majority of our customers were business customers rather than domestic, we would be comfortable with that. Of course, we'd be comfortable with that because if you look at what we are, we are essentially a business-to-business provider with through self-storage, in particular, a very, very small amount of B2C.

And again, that's very different from your typical self-storage providers, who are typically B2C providers who kind of have some B2B and want to be really careful they don't get too much of it. So we are again different in that respect. And we are happy to invite both markets, but what we recognize is that we offer greater value in the whole of the customer journey, where B2B is concerned than we do B2C. Does that answer your question, Bjorn? Are you trying to get at something else?

No, I think that answers my question. I guess, it follows then that you wouldn't consider any M&A opportunities for existing operators.

Well, I mean, look, we're a bit small in the self-storage kind of space to be thinking about any of the large people. And I can tell you right now, we have considered M&A options with much smaller operators. But it is sometimes quite difficult. When people are running what typically is a lifestyle type business, the concept of aligning themselves to a much bigger organization is sometimes a bridge too far. So smaller operators, yes, of course, we would consider that. But there is a very different mindset for -- between sort of starting up an operation of 15, 20 sites and becoming part of and being aligned to a much larger corporate entity. So we'll try and build, we'll try and acquire. We'll try and do lots and lots of things. But we'll only do things if people are willing to be 100% aligned with us. We won't entertain any sort of special agreement for people to run side companies that we can't. We're a publicly listed company. And we're probably just better off to get on and build it ourselves.

Matthew Norris from Gravis. Great set of results. Slide 19, CapEx investment programs. Can you flesh out what the next -- this slide looks at the past 3 years, what about the next 3 years? What should we expect in terms of CapEx investment programs? How should the return on that investment differ in the future to the past? And what's the difference between the returns you generate in Germany and the returns you generate in the U.K., please?

Yes. So good question. So thank you. These numbers are purely for Germany. You should expect to see similar kind of returns going forward. And for instance, we are targeting doing at least 100,000 square meters of refurbishment each year for the next 3 years. So that's the opportunity within the value-add portfolio. We look to tackle that over a number of years.

We sometimes get questions from shareholders saying, why not do more, why not do it faster, et cetera. There is a risk-reward profile there. There is also the element that we want to be self-funding. So our CapEx spend comes from our FFO. Our FFO funds both the dividend and reinvestment into the portfolio and the CapEx. So we want to maintain; a, we want to be picking off the highest returning CapEx opportunities year-by-year, and they do move around from year-to-year. It depends what the market environment is at each micro location, but also we want to be self-funding as well, so -- but we are confident that we'll be able to achieve around the same returns. We target over 30% return on investment on our CapEx spend on the value add. And as you can see, that's what we've been achieving and more.

As for the U.K., so the U.K. historically, when we acquired BizSpace, were smaller sites, which just from the simple physical reality of those spaces, there just was not a significant amount of surplus space or structural vacancy within those sites. It's a typically more flex model historically in the U.K. You have to run with a certain amount of vacancy to make a flex model work to achieve the higher returns on rate. And so there hasn't been historically significant amounts of opportunity. That is starting to change. So you're seeing that the spend in the U.K. on value-add CapEx was around, I think, EUR 8 million in the year just gone. That's been focused on the larger sites. So Vantage Point, for instance, we have been refurbishing halls at Vantage Point.

We've successfully let one of the halls we took back from the range to an existing tenant on site, Big Doug. That CapEx spend allowed us to relet that space and at a 50% higher rate and essentially replace 50% of the rent that we lost from the range with only 1/3 of the space being relet. So essentially, there's much more opportunity as well at Vantage Point, for instance. We've put capital into one of the sites in the Northeast [indiscernible], an old bus garage, which we've put -- we've refurbished that space. We've subdivided that space and let a significantly higher rate. We are achieving -- we're starting to achieve similar kind of returns in the U.K. But just from the size of the portfolio, it will continue to be a work in progress as well. But there is increasing amounts of opportunity in the U.K. definitely.

It's James Carswell from Peel Hunt. Another question on self-storage. I'd be interested to hear a bit about, I guess, the synergies between your kind of existing core business and self-storage. I mean, will it require much investment? Or has it required to date much investment in terms of new systems, new people? Or is it very much just the same operating platform and you almost kind of point it in a slightly different direction?

We've been in the self-storage market for over 10 years. Since bringing Tom on board a year ago, we have changed the system that we run self-storage off, and we're 75% of the way through that integration. What's really important about that is that system gives us the ability to manage in excess of 25,000 customers. The previous system that we were on hadn't topped out yet, but it would have topped out way before we got to EUR 15 million. So that is essentially 75% of the way through, pretty close to being done.

You do obviously have to invest to build a self-storage center. So that is where the investment is effectively coming. But what I would say to you is a lot of this is stuff we already have. So we already have the land. We already have the staff on site. We already now have Tom and the small team that he operates with. We now have the system that we need. Now, that doesn't mean that we might not decide to buy some additional land or -- but this is not a standing start at all. We are servicing over 4,000 customers, raising over EUR 6 million in revenue at 30 different locations in Germany and 4 in the U.K. And the change here is that we are saying we are now building our own self-storage stores. The first one has already started at Berlin Gartenfeld.

Now, what is different in terms of the approach that we're taking compared to other providers? Do we just want to be a me-too? Absolutely not. We want to be something different. What's different about us? We are looking to attract businesses and consumers, and where businesses are concerned, we're looking to attract them and take them all of the way through their storage journey, not just into a box and then off to a container. We want the lifetime value of that B2B customer. That's what is different about our self-storage offering.

Justin Bell from Deutsche Numis. Just a question on the investment market. You obviously walked away from one of your target assets due to price fairly recently, and you are obviously looking to get up to EUR 500 million in defense. Are you seeing more competition in that market? And has that changed at all in the last couple of months or stayed as it is?

Sadly not. The reason that we walked away from the asset that you referred to, which is defense-related asset is because the owner revised their appraisal of what that defense asset is actually worth. It is amazing that given the fact that we draw that straight line between defense, industrialization and the home for industry being industrial property, it is extraordinary that we are not seeing more providers start to move into the defense space. But the fact is we are not coming across it.

And the word I would use at the end of that sentence is yet because it's going to become unavoidable. And as and when it does come, we think the yields that you buy defense-related property on will contract quite considerably. Now, that is not the investment case that we're buying on. The investment case we're buying on is sticky, government-based, long-let income into centers. That's why we're buying it.

Valuation is merely just a benefit should and when it arrived. But if it does, then we're going to find probably the EUR 200 million of property that we already bought is actually already worth EUR 0.5 billion. I don't suspect it will arrive anytime soon. I suspect just like the fiscal stimulus, it will be a long and slow drawn-out journey. But what we're interested in is the direction of travel. And as we see government spend more and as we see demand from defense companies increase, it is logical that they will pay more for the properties they sit inside, and therefore, the value of those properties will increase. If the yield they're valued at changes, that's just an extra slice on top. But we're not seeing it at the moment.

I've got a couple of questions from the Internet. The first -- sorry, the first, I think you've answered about the proportion of defense assets. The second is, do you think the EUR 150 million FFO target you had is achievable for the current fiscal year already?

What do you think, Chris?

I think it's weird. I think it's...

I think yes. I think yes.

That's why the analyst didn't put the name, but yes.

Yes. Put it this way, we're not going to get to EUR 149-point-something million and not find a way of getting all the way to the EUR 150 million.

Thanks, Andrew. Okay. What is the risk in the U.K. that the move-out versus move-in rent gap starts impacting like-for-like rental growth so that the net effect is negative?

Look, I don't think we're going to allow it to become negative. But I think the risk is that it does continue to make the 5% that we look for as a minimum challenging, as it has done this year. But I think we are capable with the platform that we have of making sure that it doesn't go negative. What we're really focused on is that 5% benchmark.

Okay. That's it.

Okay. Guys, thanks very much indeed.

Thank you.

Good morning, everybody, and welcome to today's presentation of Sirius Real Estate's Interim Results for the Period Ending September 2025. My name is Andrew Coombs. I'm the Chief Executive Officer of the Sirius Group, and I'm joined this morning by Chris Bowman, who is the Group Chief Financial Officer of Sirius Real Estate. Together, we will take you through this morning's presentation.

As you all know, we are an on-balance sheet, best-in-class owner and operator of mixed-use light industrial business parks on the edge of key towns in Germany and the United Kingdom. Please remember that Sirius operates in both the German and the U.K. markets under the brand of Sirius in Germany and BizSpace in the U.K. The group currently operates over EUR 3 billion of property, 90% of which is wholly owned by the group. This consists of 160 sites in total, 77 in the U.K., 76 in Germany and 7 sites within the Titanium joint venture in Germany.

Let's now turn to Page 4 and look at the highlights for the period. The Sirius Group is a rigorous, well-run and very importantly, growing organization. We have proved the resilience and the reliability of the business model during COVID, during the gas crisis in Germany and most recently, through a period of rising interest rates in Europe and the U.K., during which we have successfully protected valuations in spite of yield expansion. In that time, we have continuously, without exception, grown our revenues. We have continually, without exception, increased our dividend payments. And as I said, we have made sure that the value of our properties goes up, not down.

In the period to September '25, we successfully grew like-for-like rent roll by more than 5%. And as a result of the acquisitions in the period, we have grown the total rent roll by more than 15%. We have done this by maintaining occupancy in Germany and increasing it by just over 1% in the U.K. And we've increased like-for-like pricing in both markets by more than 4%. As a result of this, we are announcing a dividend of EUR 0.0318, which at per share level is a year-on-year increase of 4%.

So let me now ask you to turn to Page 5, and Chris will take us through the income statement.

Thank you, Andrew. Good morning, everybody. As Andrew said, over the next 4 pages, I will run through some of the highlights of the P&L and also the balance sheet, just picking out some of the key items.

So on Page 5, just starting at the top, very pleased that the -- that increasing like-for-like rent roll of 5.2% has underpinned growth in rental income of 7.7% for the first half versus the first half last year. So you can see there, we've achieved EUR 112.6 million of rental income. That has translated to a 4.9% increase in net operating income. As I've mentioned in the past, as we have acquired assets, we're in acquisition mode, very active acquisition mode. As we've acquired assets, some of those assets tend to have higher service charge leakage than in our existing core portfolio. So there is a small drag, which we turn around relatively quickly on service charge costs that you can see there. That is obviously upside for the future to come through.

Looking down at EBITDA, you can see of that 7.7% top line, we've achieved 9.7% increase in EBITDA. So very pleased to achieve some operating leverage there. As we grow the asset base, and we grow the income base, we are keeping a very tight control of our costs and to then improve our margins. Specifically within that corporate costs and overheads dropping from 24.8% to 22.7%. We have been very careful from a headcount perspective and found efficiencies. We've also tightened up and had various initiatives internally to improve our cash collection that has allowed us to be tighter on provisioning and again, has provided upside there.

Moving on. I'm going to be -- unfortunately, I'm going to continue to talk about headwinds of finance cost, unfortunately, for the next 2 or 3 years. We do have the finance cost headwind that we continue to outrun. So you can see there our net finance expense goes from EUR 6.3 million to EUR 9.4 million, and -- but still, we more than have outrun that with the growth in -- at the EBITDA level to achieve an FFO, up 6.6% of EUR 64.7 million. As I think those of you know us already, FFO is what we -- is our core target in the business. It's the cash flow, it's the profitability of the business that we really focus on. We are an operationally focused business. We are not trying to guess the property markets or play valuation yields. We're focused on providing profits -- growing profits to provide growing dividends. So very pleased to achieve that 6.6% increase in FFO.

I've included the detail all the way down to profit after tax on this page because there are three items that I think need further explanation. One, headwind, and two, tailwinds. So within the foreign exchange, you can see there EUR 14.3 million, there is a EUR 14.2 million of that is what is classed as a realized FX loss, which relates to sterling cash balances, which we held at the beginning of the period in anticipation of that cash being placed into U.K. assets -- U.K. investments. So it was a very busy first half for acquisitions. We acquired over EUR 200 million worth of property in the U.K. We held the appropriate level of cash in sterling to do that. When that cash converted from the cash line into the investment properties line, it was mark-to-market at the FX at that moment. So it is -- unfortunately, it does all flow all the way through EPRA earnings. So you'll see it, but it is a one-off, and I'll happily take questions further on that.

On the upside, we have EUR 14.4 million of valuation gain. So that is purely for the first half. I would expect to achieve better than that in the second half. But again, that's with virtually no yield contraction. We'll come on and talk about later. That's really valuing the increase in rent roll that we've achieved.

And then further down the page, you can see the profit after tax is materially up 56.8% at EUR 87 million. And part of the fiscal stimulus that Germany is -- has enacted is the reduction in the corporation tax rate from 15% to 10%. That goes down by 1% a year from 2028. What that means is that our deferred tax liabilities on the gains in our property portfolio reduce. So you can see there's a EUR 29.8 million reduction in deferred tax liabilities that flows through the P&L and hence drives that profit after tax number up.

Going over the page to Page 6, just reflecting that on a per share basis. We have the EUR 98 million of NOI converts to EUR 0.0652 per share. These numbers all still have the impact of the additional shares that came into the share count from July '24 equity raise. So prior year, there was a weighted average number of shares, now this is on the full number of shares that is outstanding. And the interest and current tax equates together to EUR 10.8 million. That's a EUR 0.72 cost line gets us to the EUR 0.043 of FFO. Below the FFO line, really the thing I would flag is that EUR 14.2 million foreign currency translation that then has an impact on the adjusted earnings and EPRA earnings, but as I say, is noncash. If you look at our cash flow statement, our operating cash flow broadly correlates with the FFO.

We have paid out in dividend EUR 0.0318 or proposing to pay out EUR 0.0318, as Andrew said, up 4%. That equates to a 74% payout ratio for the first half. That will start to transition down going forward, and we will settle around 70% payout ratio in the next 3 to 4 years as we go through the financing windows.

On to Page 7, just looking at the balance sheet. At the top line, you can see that our investment properties have increased by EUR 300 million. So within that, you have the EUR 295 million of acquisitions that we actually completed on in the period. You've got EUR 14.4 million of valuation gain across the group and then a disposal of some smaller sites in the U.K. is the balance. The cash balance has come down to EUR 424.9 million, of which EUR 389 million is ours, excluding the deposits of tenants. The EUR 179.9 million movement is net of the bond tax that we did in the period of EUR 105 million. And then on the bottom half of the balance sheet, really, the only thing to flag there is that the debt outstanding is at EUR 1.416 billion. Bear in mind that we have the repayment of the June '26 bond coming up for EUR 400 million, hence, why the cash balances are relatively inflated and also the debt balance is relatively inflated as well, but those two net each other off. Just a reminder, we also put in place EUR 150 million RCF during the period, which provides that liquidity to repay that debt.

Looking down NAV, reported NAV is up 0.8%, benefiting from that valuation gain. Adjusted NAV is down 0.9%, roughly EUR 0.011. Again, there is a foreign exchange unrealized currency translation there of EUR 29 million, which in simple terms is just converting our U.K. assets into our reporting currency of euros. Bear in mind that if you then convert the entire NAV back to sterling, our sterling is up on a sterling base -- our NAV is up.

On to Page 8, just quickly just running through the waterfall of NAV from EPRA at each end from March to September. I think EPRA NAV going from EUR 117.6, we target ourselves on adjusted NAV, EUR 118.89. As I say, the EUR 0.02 headwind is the unrealized FX of EUR 29 million. We achieved EUR 27.5 million recurring profit after tax in Germany. We had EUR 17.7 million upside in valuation in the German portfolio as well as then EUR 19 million of profit after tax in the U.K., which is EUR 1.27, a small valuation loss after CapEx of EUR 2.2 million in the U.K. Net of the dividend gets you back down to EUR 117.84. So really, the delta in there, the movement is the FX, which without the FX, we would have been up in NAV terms. I'll hand over to Andrew on Page 9.

So Page 9 deals with the organic growth in Germany. And just before I delve into the numbers, let me give you a little bit of the narrative because if I cast my mind back to the beginning of the period, the first quarter of this financial year, so April starting quarter, it's easy to forget that the German government had only just taken power in April of this year. And I think it's probably fair to say that the new government was still establishing itself and certainly hadn't gained any momentum at that point. And we certainly felt that in the trading. The first quarter of this year in Germany was a tough quarter. We made our numbers, but the effort and the workload that we had to put in to achieve that was certainly much greater than it normally is. We saw the momentum start to establish itself in the second quarter. And I'm pleased to tell you the 6 weeks following the end of the period, we very much feel that, that momentum is gathering pace. I would describe Germany, at the moment, is in a transitionary phase. And it's quite confusing because when you look at numbers like the numbers on German manufacturing, you don't see any substantial increase at this point in time. Lots of people, therefore, turn around and say, what's happening in Germany and are things good in Germany. What we see on the ground is we see reorganization. So we see factories stopping production. We see things being reorganized. And they're typically being reorganized towards defense. But the problem right now is that you have to stop producing what you produce in your factory in order to strip it out and prepare the production lines to produce defense-related items. And that's what I mean by a transitionary phase. And that's why the production numbers are going down. But what is happening is the preparation is being laid for -- in a couple of quarters' time, those production lines to be up and running and operating not just one shift as we often see here in the U.K., but typically a continental shift pattern of three shifts every 24 hours, at least six days a week. So what we believe is that Germany is preparing to substantially increase its output. We've seen this before in previous years. We've seen it where they've used in the past, furlough or kurzarbeit as they call it in Germany, where suddenly what happens is the economy appears to flip. Some have called it in the past, the German economic miracle. It's no miracle at all. It's Germans preparing before they flip the switch. That is exactly what we see happening in Germany at the moment. And in that period, what we were able to do is we were able to grow the like-for-like rent roll by EUR 7.2 million, so 5.3%. We were also able to increase the overall annualized rent roll by 12%. But the difference between that 5.3% and the 12% is, of course, acquisitions. We were able to increase pricing by 4.7%. Would you believe it? That's a little bit more than we wanted to do. We are in an occupancy-led strategy here. What that means is that we want to control our pricing to about 4% and get the rest of the effect out of increase in occupancy. When you've got a workforce who've been used to putting prices up, not only do you have to get your processes and your systems to do the right thing, you've got to get people to do what is the opposite of what we've been asking them to do for years, which is put prices up by less. And actually, in that regard, we slightly failed because our occupancy remained constant and price, we were aiming for 4%, price nearly hit 5%. You can see that in doing that, what we did is we had to lower our move-in rate, and what we achieved was a move-in rate that was just marginally higher than the move-out rate. So move-in at EUR 7.66 versus move-out at EUR 7.52. But all of that was successful in lifting the underlying like-for-like rate per square meter in the portfolio as a whole from EUR 7.38 per square meter per month to EUR 7.73 per square meter per month. So a delicate balance largely due to the first quarter, but successful in as much as we continue to push rate up in the portfolio. And in doing so, we've been able to make sure that we at least maintain our occupancies.

We go across the page, and we look at that rent roll movement, you can see the EUR 7.2 million is reflected in the difference between EUR 135.3 million and EUR 142.5 million. What we faced was EUR 19.5 million of move-outs and the way in which we compensated for that was really the EUR 6.2 million of CapEx-assisted move-ins together with the EUR 14.1 million like-for-like move-ins. Those two gave us a total of EUR 20.3 million, so EUR 800,000 above the move-out effect. And then the uplifts, the pricing at 4.7% gave us 6.4%, and that 6.4% together with the 0.8% gets you to the 7.2%. But really, the exciting thing is those acquisitions in the right-hand column. And bear in mind, the last EUR 40 million of acquisitions in Germany that completed only last week, not included in these numbers. But what you've got is you've got over EUR 9 million of second half effect to come from those acquisitions. That EUR 9 million will build closer to EUR 10 million. So that's a EUR 20 million annualized effect that's going to bake through into next year's numbers. Now half of it will get eradicated by increased interest rate, and Chris will talk about that. But we've got sufficient acquisitive growth here to be able to deal with the increased interest and still have EUR 10 million of FFO growth. Put on top of that, the 5% organic growth. And I hope what you can see is rather than using interest rate increases as an excuse to go backwards, what we've been able to do through careful planning and careful execution over the last 18 months is put ourselves in a position where we can outgrow next year's problem.

If I go across to the following page, we can talk about valuations. So the first thing that I would draw your attention to is on the right-hand side above the total assets black headline, net yield shift of 1 bp. That shift is the yield coming in, not going out. Why the valuers would have bought us in by 1 bp, I cannot imagine, but I would suggest it is a signal. And the signal is clearly that the direction of travel is that the yield is shifting in, in Germany, not out. Clearly, it's made very little, if any, difference because we started in March '25 with a valuation of EUR 1.890 billion, and we get to September '25 on EUR 1.921 billion, clearly, a EUR 31 million shift there. That EUR 31 million shift comes from EUR 2.3 million of additional rent roll valued at a gross yield of 7.4%. And what you can see in the bottom right-hand corner of this page is you can see after the acquisitions that we're talking about have been made, the yield at a gross level goes up slightly and the capital value per square meter goes down. That is because we are buying vacancy. That is because we are buying lesser quality rent roll because that is exactly our runway to put our machine across the top of it and improve it. So the reason that you are seeing that gross yield go out is because of the opportunity that we're buying and the belief that we can do something with that opportunity by putting it over our platform.

If I go across to the inquiry stats, what we can see here is the number of sales, the number of customers we have acquired is 3% down. The sales volume that we've acquired compared to same period last year is 2.5% down. However, what we are pleased about is sales conversion is at 14.6%, up from 12.8% and close to our long chased target of 15% sales conversion. We are at last beginning to hit those numbers on a regular basis. What this shows is it shows the pain in quarter 1 of the first half, and it shows our ability to work the platform harder in the form of sales conversion in order to make what we've got count and drop more frequently to the bottom line. So this reflects the first quarter, but it also reflects the strength of the platform to deal with issues as and when they arise.

If we go across to some of the acquisitions, I'm not going to go through every single one because they've been covered previously in lots of different announcements. But I draw your attention to Dresden. Dresden is, we think, one of Germany's best kept secrets. Silicon Saxony, where there is the most incredible amount of inward and foreign investment going in. Tim Lecky and I were in Dresden a few weeks ago. What did we count something like 17 cranes on the horizon and not 17 static cranes, 17 working cranes within the eye line in Silicon Saxony building things. Lubeck. Lubeck is in the area that benefits from the biggest infrastructure spend that is currently going on in Germany. And if we go across the page, we see Dresden again, no surprise. And we see Feldkirchen on the right, just outside Munich. This is an asset where 1/3 of the rent roll is a defense supplier, a defense supplier who specializes in the manufacture and development of optical devices, most notably night vision technologies for the military.

If I go across to Page 15, let me hand across or hand over to Chris.

Thanks, Andrew. And so just on Page 15, I just thought it would be good to update everyone on the current status of the portfolio and also on the next 2 pages on CapEx as well. Really, Page 15, I think, is the kind of secret sauce in Sirius for the growth of Sirius. That is how do we take the Sirius platform, put it to work on our property portfolio and take assets which have value creation opportunity and capitalize on that value. How do we create that value for shareholders? Now we break down our portfolio into the 2 buckets of value-add and mature. You can see there that the -- roughly speaking, it's 1/3 mature, 2/3 value add. And really, the value-add piece is the piece where we go to work on these assets to essentially try and mature them to try and put them into the mature bucket. And what -- why do we do that? We do that because of the opportunity to drive value. So you can see the average yield -- gross yield is 6.8% on our mature assets, 7.9% on our value add. Importantly, the gap between net and gross yield, the leakage on service charge is 90 bps on value add versus 30 bps on mature and also how the valuers then value that greater income and better performance. On average, we are at EUR 1,277 capital value per square meter in the mature versus EUR 868 in the value add.

You can see what we have to achieve to get from one to the other in terms of occupancy, on average, 78.9% versus 94% and also the upside from rate. So by improving our assets that have this opportunity in them, we get many benefits, not only additional rent roll, but how -- but also then better net operating income because better management in terms of property expenses. We get valued better by the valuers. And obviously, we've achieved higher rate as we improve the quality of the site as well. It becomes an ever-improving cycle essentially on those assets as we improve them.

Now we have overall 336,000 square meters of vacancy to power the growth in the business. On average, we typically look to improve roughly 100,000 square meters a year. That links into our CapEx plans each year. And so you have at least a 3-year runway of growth in the business. And obviously, as we're acquisitive at the moment, we are continually replenishing that opportunity.

Over the page, just looking at where we are really putting capital to work to help on that journey from value-add to mature. In the first half, we have invested EUR 18.6 million in our CapEx programs, roughly split 2/3 Germany, 1/3 U.K. The value-add CapEx is that piece of the pie that really generates the high returns. We put a minimum 30% return on investment. So that's cash return on what we spend. So we're looking for a 3-year payback on incremental rental income from all of our value-add CapEx spend. You can see again, it's split roughly 2/3 Germany, 1/3 U.K. On the right-hand side, you can see some of the pictures of where we've actually put that capital to work. Bottom right, Vantage Point, when the range -- when we moved the range out of Vantage Point, essentially, there was three large halls left for us to tackle. We have already refurbished one of those halls. We put EUR 1.5 million of CapEx into that hall, and we have let it to Big Doug, which was an existing tenant on the site. I think for those of you who have been to Vantage Point, I remember we visited them before they were moving into the new space. Pleased to say they have now moved in. And the effect of that EUR 1.5 million spend allowed us to achieve double the rate on that space that it previously was achieving.

New builds, we are in a cycle here where we have just finished the new builds at Gartenfeld. So on the top right there, you can see 1 of the 3 halls we built at Gartenfeld. So just EUR 800,000 went into just final completion of that hall. We've rented all three of those halls at Gartenfeld at far better rates than we expected. And then from a works perspective, just under EUR 10 million spend on works. So we keep a very, very tight lid on our -- that's essentially the maintenance CapEx. That's often the likes of renewing lifts, for instance, that type of spend. But within there, there is EUR 2 million of spend on ESG, which is principally PV solar in Germany as well as EUR 2 million in the U.K., which relates to EPCs and our continuing drive towards C and B.

Over the page, Page 17, just to -- I've rolled this forward essentially. So I'm looking back over the last three years, what is our spend, and how are we performing. We have put 293,000 square meters of vacancy. We have put CapEx into value-add CapEx. That equates to EUR 31 million of spend, on average, EUR 106 per square meter. So this is not what I'd describe as kind of high-risk CapEx. We're not -- as a norm, we're not completely rebuilding or knocking down space. We are typically refurbishing space. The most complicated it tends to get is subdivision and the fire safety regulations that come with that. But it's very much low-risk and low-cost refurbishment.

We've achieved EUR 12.7 million of rent improvement of that. So -- and at the moment, the occupancy is 74%. That continues to build as the CapEx we've spent in the most recent period, some of that space continues to be let up. And we're achieving rates of EUR 4.91, which gives us a return on investment of 41% cash return.

Just conscious of time, move on to Slide 18. As I say, new builds, we have just come to the end of the A, B and C halls at Gartenfeld, and I would highlight that we've achieved a yield on cost there of 9% on a site which is valued at 5.5%. So obviously, as that income is valued at 5.5%, we've achieved 21% IRR on those developments, which is on surplus land at Gartenfeld. In the pipeline, there is an additional EUR 25 million of projects. That's spread across. There's a site in Dresden -- there's two sites in Dresden where we have opportunity for development. And there is also another space at Gartenfeld as well where there is further development.

I'll hand back to Andrew to talk about U.K.

Okay. I've got switching to U.K. mode now and think about the U.K. picture, which is a different picture from the picture I described in Germany.

So let's start firstly with the annualized rent roll. The annualized rent roll, which obviously benefited from acquisitions. Many of you have seen Hartlebury, was up 21%. 5.1% of that comes from the like-for-like rent roll. And as you can see, what happened here was we were more successful in convincing our sales force to be able to lower price and in doing so, raise occupancy by 1.2%. However, you've got a slightly different situation here with your move-ins and your move-outs. We actually dipped below the move-out rate on the move-ins, but we were still successful in that equation in terms of lifting the like-for-like underlying rate in the portfolio by 4.1%, namely from 14.38p (sic) [ GBP 14.38 ] per square foot to GBP 14.97. How did we do that? Well, we did that with our expansion initiatives. As you can see, what happened is we had 344,000 square foot move out, 302,000 move in. But what we were also able to do is to work the existing base of customers to get some of them to take more space and some of them to take more products. So we've had to work very hard here in the U.K. in order to be able to get that 1% of occupancy and also to be able to not just maintain, but increase price by at least 4%. That 4% is important because we know inflation in the U.K. isn't as much as 4% at the moment, but it could be soon. And we don't want to be caught out by that. We don't want to be trying to catch the inflation. We want to make sure that we are in a process in the U.K., where we're always ahead of inflation in terms of the way in which we manage that rent roll of customers. So rate per square foot is up by 4.1%. Move-outs are at GBP 18.44, which is 57p or 3% lower than the move-outs. That's had about a 1% overall effect because your new business affects about 1/3 of your total. It's your renewals that affect typically the other 2/3. And what we're seeing in the U.K. in contrast to Germany is we're seeing the U.K. get harder. Germany is getting easier. U.K. is getting harder. We are not panicking about that. We believe that the platform in the U.K. is now well enough developed and strong enough to be able to overcome that market effect, and that's exactly what you're seeing in the figures on this page in front of you now.

If we look at the way it's built, you can see GBP 59.3 million rent roll moves in September '25 to GBP 60.4 million. You can see that the move-outs and move-ins that the move-outs are not quite covered by the move-ins. But look, that pricing uplift of GBP 3.8 million becomes so, so important because that's what gives you the final edge. And then if you look at acquisitions, GBP 14.4 million coming from acquisitions. As you know, in the last 6 months, the acquisitions have been slightly more weighted to the U.K. than Germany. That will change now going forward. We are going to be looking at a predominantly German-only effort, at least until May, June of next year.

If we have a look at what that looks like in a valuation perspective, net yield shift of 4 bps. Well, that's going out, not coming in. So again, the 4 bps don't really make much difference, but the signal from the values is that -- in the U.K. yields continue to widen. If we look at the bottom right-hand corner and you see the assets being included not just on a like-for-like basis, but the acquisitions that have been made in the period, you see the opposite to what I described in Germany. You see a gross yield coming in to 12.3%. At March 25, it was 14.1%. And you see the net yield coming in from 9.5% to 8.8%. That is reflective of the quality of assets we've been buying in the U.K. When you think about Hartlebury, when you think about Vantage, when you think about Chalcroft, I could go on. We have consistently been buying higher quality assets than the assets we inherited when we bought the business. They typically have longer lease lengths. That's not long lease lengths. That's longer lease lengths. So what we're doing in the acquisition program that we've conducted thus far in the U.K. that we are going to be pausing on until at least June of next year. What we've done is actively gone out to increase the overall quality of the portfolio, and that's reflected by what you see in the bottom right-hand corner.

If we go across the page, what we can see in the U.K. is we've been able to attract more inquiries. A little bit deceiving there because we're not passive. It's not like we just sit there and say, what does the market give us in inquiries. We have worked much, much harder to acquire more inquiries that we've -- then been able to convert into sales. Please don't look at these numbers and think U.K. market is going up, because this lead flow reflects what is happening when you just passively sit there and try and collect whatever the market gives you. These numbers are misleading if you read them like this. We have had to work a lot harder to increase that inquiry flow in the U.K.

If we go across to the acquisitions, I've talked about Hartlebury in the middle here. Bedford on the left-hand side, interesting enough, 1/3 of the rent roll in Bedford is underpinned by a company that manufactures parts for ejector seats for the defense industry. In fact, they make parts for the ejector seats in the F-35, Typhoon Eurofighter. So when you see these orders being announced by U.K. defense industry, that factory is one of the beneficiary of those orders. Chalcroft, I'm delighted to tell you that we've had very strong interest from a major supermarket. So Chalcroft next door to it has got hundreds of new houses currently being built. And we're in advanced discussions with a major supermarket to develop on the front land of that site, one of the big four supermarkets to serve that residential area. So call that a stroke of luck, call it whatever you like, but that's going to be quite good for us.

Let me hand over to Chris.

So I don't intend to -- just on Page 24, I won't go through these line by line, but I think the highlights, obviously, on -- in aggregate, we have acquired an 8.1% gross yield. You've seen earlier that our existing portfolio is valued around 7.4, 7.5, and in aggregate, we have acquired EUR 338 million, of which EUR 295 million completed in the period. Feldkirchen just at the bottom there in November, completed last week. So that is also now on balance sheet. I think if you look at timing, then just to reiterate Andrew's point earlier, the majority of these acquisitions actually completed towards the end of the first half. So really, that annualized rental income of EUR 25.8 million has yet to actually flow through into the P&L, but there is significant growth to come through, which is in the tank for future periods. On the disposals, Pfungstadt, we have notarized the recycling of that asset, EUR 30 million in Germany, that completes at the end of this financial year, so at the end of March for EUR 30 million. Just to head off, I'm sure I got a question on Tyseley, why have we sold an asset in Tyseley at 16.6% gross yield. There was also significant maintenance cost there and getting straight to the point, it needed a new roof, which would have been an additional EUR 3 million spend. So from a business planning perspective, it made sense to realize that asset at this time. And it's also linked to the continued consolidation of the U.K. portfolio. We're just looking to exit some of the non-core smaller assets, and you'll continue to see us do that.

Page 25.

Okay, folks. So just before I introduce Page 5 (sic) [ Page 25, ] let me remind you that we are currently within our stated mission to get to EUR 150 million. And according to consensus, we should get there at the end of the '28 year. We obviously want to do it earlier, but we should get there at the end of the '28 year.

Now if you look at this page on the left-hand side, it picks stuff up at the end of the financial year last year, so March '25, when we did EUR 123 million of FFO. As you know, consensus is that we'll do north of EUR 133 million this year, and we are trading in line with those expectations. So when you come out of this year at EUR 133 million, looking at doing something beginning with EUR 140 million next year, you then need to start thinking beyond your EUR 150 million goal. There is no point in a long-term business like property or wait until you get there and then go, let's pause, congratulate ourselves, start again after we've had a holiday and a bit of a break because you lose the momentum. You've got to start thinking far enough ahead about what you do now that determines your result in 3 years' time. Think about it, we buy a property now. And in some cases, it becomes -- you really get into the value add next year. But in a lot of cases, it takes 2 or 3 years to get into that sweet spot of value creation. And therefore, unless you're thinking about it now, you're not going to be there in 3 years' time. So it should be no surprise that now that we are in the EUR 133 million a year, moving into the EUR 140 million-something a year, that what we do is we start to plan beyond the EUR 150 million. And this is not just for shareholders. This is internally in the company. We are having meetings with people, and we're saying, what's next? Are we properly resourced? Do we have the right sites? So what you're seeing for the first time on this page is you're seeing us publicly talk about the next leg of the journey. Now beyond the EUR 150 million, the ambition will be EUR 200 million. But the first leg of the journey from EUR 150 million to EUR 200 million will be the leg to EUR 175 million, and that's what you see laid out here. And one of the things that you should take great comfort from is if you look at that pillar that says EUR 40 million, well, half of that is already done. Half of that has been executed, closed off, in the bag, in our control. What we need to focus on is the other half of it. And this EUR 175 million, when we get to this EUR 175 million, this should be driving a dividend at roughly a 70% payout ratio, a dividend that's somewhere in the region of about EUR 0.075. So at the moment, we're heading towards EUR 0.064. This EUR 175 million takes you to EUR 0.075. Now it does matter the detail of how you get there. But at the moment, it kind of doesn't because at the moment, it's about the aspiration. It's about the mindset. It's about the shape of your thinking to be pushing towards that EUR 175 million, to be able to realize the value creation and the value benefits that come from that. And that's why we're laying it out in public because we've already started to talk about it internally and plan for it. But what you should take some comfort from is the mindset of this company is to grow. And in spite of the headwinds that Chris has spoken about, those headwinds are not a reason for us to stop. They are a reason for us to accelerate. They are a reason for us to expand our thinking because if we're going to achieve the growth trajectory that we're used to, we need to think beyond the problem of the finance headwinds, which I hope we've demonstrated thus far, we are capable of overcoming.

Let me turn to the next page and let Chris take you through financing.

So yes, just on Page 26, just on financing, just as a reminder, on the balance sheet, we have EUR 1.21 billion of unsecured borrowings. That is in 3 bonds. So June '26, EUR 400 million comes due. That is essentially refinanced. We have the cash plus RCF to be able to repay that, and we have that cash earmarked for that. So that is done. November '28, we have EUR 465 million outstanding at a 1.75%. That is our last refinancing of what I call legacy debt. It's been great. It's been fantastic, but we need to take that journey back up to market. So EUR 465 million comes due in November '28.

I would guide you now to we will refinance that in autumn of '27. And that is factored into all of our forecasting, et cetera, to still outrun that, still grow FFO and get through that journey. January '32, we have EUR 350 million outstanding at 4%. That was a bond we issued in January this year for which we had around EUR 2 billion of demand. So we've got great support from the debt capital markets. And obviously, we also tapped the '28 bond in the summer for EUR 105 million. Again, great support for that issuance.

We do remain below a benchmark issuer. So we're having investment-grade rating that was reaffirmed by Fitch. But in the bond markets, over EUR 500 million gets you to benchmark issuer size. The reason I flagged that is because at the point that we become a benchmark issuer, you should expect our marginal cost to start coming in a little bit as well as we essentially become an issuer that investors need to look at as we go into those indices.

On the secured side, EUR 232 million with Berlin Hyp and Deutsche pbb that is secured out to 2030 on a portfolio of German assets at 4.25%. Net LTV is up at 38.3% at the period end, reflecting the acquisition activity during the period. Interest cover over 4.5x. Net debt- to-EBITDA 6.7x, well below 8x where we target. As I say, we also signed a EUR 150 million RCF in the period with BNP, HSBC and ABN AMRO. There is an accordion feature in there to be able to increase it by another EUR 100 million. I have verbal indications of wanting to do that from banks. So we are in a strong position liquidity-wise. And as well, as I said, we have a bond tap in the period.

Page 27. I'll just summarize before handing over to Andrew to conclude. So I think what have we seen in this period, we've seen fantastic strong organic growth as well as acquisitive growth that is in the tank, which has partly come through in the period, but will really start to accelerate our performance in the second half and beyond. So 6.6% FFO growth, underpinned by that 5.2% like-for-like rent roll, but the 15.2% increase in total rent roll gives you the marker as to where we are heading. U.K. and Germany, both performing well as discussed. And acquisitions, we've touched on. We've increased the dividend by 4%. That is ahead of expectations. I think the market was only expecting between 1% and 2%. I think you should take that as a sign of confidence from Andrew and I and also our Board in the future performance of this company. We want to continue to focus on generating cash flow, which we reward shareholders with through dividends. So I'd guide you to that kind of level of increase going forward as well. We're in a strong position on the balance sheet side, EUR 389 million of unrestricted cash plus the RCF that's undrawn, 38% LTV, and we've touched on the bond and RCF earlier.

I'll hand over to Andrew on 28.

Okay. So really, the sort of second and third point here are all about the 5% growth. I just want to sort of cover something that I think is quite important because the group continues to trade in line with management expectations for the full year, but the cynics around the table might possibly look at the 5.2% like-for-like growth and compare it to the same period last year at 5.5% and think actually, it's less than it was this time last year. And of course, factually, you'd be absolutely correct. I wouldn't draw a great deal from that at all because when we say that we're trading in line with expectations, we mean we're trading in line with expectations. And I would draw your attention to the half year in 2022, where in the first half of the year, we achieved 2.4% like-for-like growth. But what actually happened when we looked at the full year is we came out at nearly 6.5%. What we always do is try and make sure that our problems are stacked into the first half. If we have a lease that is a big move-out that's due to go on March 31st, we'll try and push it years before it happens into April. When we're signing something new, if we know that it's a high proportion of a site, we will tend to make sure that the lease can only terminate in the first half of the year. We deliberately try and stack our problems into the first half to get a better and accelerating run in the second half. And if you look historically at our performance in H2 versus H1, you will see time and time again that our momentum accelerates in the second half. We would plan to be somewhere in between that 6% to 7% like-for-like for the year, probably somewhere around the midrange of that. Please do not think that because we're 5.2% this year and 5.5% last year, that there is some kind of slowing effect here. That is not what we are seeing, particularly given the momentum that we're anticipating in Germany. We accept things are going to get more difficult in the U.K., but we believe that will be balanced out in Germany. And please let's not forget that what we have done here in this last 6 months is not just gone out and acquired EUR 340 million of property, but we have continued to operate the company and do so well with a decent set of numbers. So one has not distracted the other. We have demonstrated the ability of the portfolio to do both and to do both well.

And what I'd like to finish on is the 10-year track record of performance and growth where this company is concerned, and particularly at the top, the dividend, where we are now paying our 24th consecutive increase in dividend. And as Andrew Jones would say, dividend aristocracy is, I think, 25 years of progressively increasing dividend. We are now reaching the halfway point on that journey. Thank you very much.

Happy to answer any questions people may have.

Tim Leckie, Panmure Liberum. Just two questions. I think one for Andrew, one for Chris. Andrew, the 15% sales conversion from inquiries, what's behind that? Is 15% the number you -- is that a final point, or do we push on? What is your thinking there? And then after that, for Chris, you mentioned the margin improvement once you hit the EUR 500 million. Could you just perhaps remind us where you see your current spread, and what the improvement might be at that higher volume?

So when we consistently get to 15%, yes, we definitely will push higher. When I started this company, sales conversion was less than 3%. And when we started to target over 10%, there was almost rebellion because people said it's impossible. We're now touching 15%. And once we get above 15%, that target will increase. How have we done that? Well, we've done that by working out the component parts that make up sales conversion. And despite it not being broken, taking them apart, dismantling them and looking at every individual piece and working out how we can do it better. And specifically, the piece that we are doing better that is improving our sales conversion is self-storage. And what we have worked out, and I'm not suggesting that we worked out a better way of selling self-storage and self-storage specialists, not at all. But we have worked out a better way of doing it than we've been doing it in the past. And that is beginning to have a material difference on the overall sales conversion of everything we sell.

Chris here, on the margin, if I just take 5 years -- 5-year money, for instance, in the bond market, we are -- because we are sub-benchmark and the margin has tended to move around a little bit in the range of 160 to 190, and it's been particularly volatile over the last week or 2, given macro. I think the opportunity for us once we're into benchmark is to be at least probably 10 basis points tighter, but also less volatile. So -- and we will, I would expect, start to come in towards the lower end of that margin range. So that's the margin over 5-year swaps.

It's Tom Musson at Berenberg. Yes, just again, a question on conversion as it relates to the U.K. business, which I think is slightly under 9%. Have you got the same 15% conversion target for the U.K. as well? And is sort of achieving that a realistic prospect over time, or are there perhaps any sort of structural differences between the platforms, and how they operate in the two different geographies? And then the second question, now that the U.K. business is larger and so FX becomes more of a consideration, would you consider using hedging instruments going forward?

I take the first part if you take the second. So firstly, the U.K. business has a 10% target. We didn't get to 15% from 3% in Germany by saying the target is 15%. We got there in incremental steps, and we broke the journey down. And we're into the journey to 10% with the U.K. business. The U.K. market is a different market from the German market. The U.K. market is more intermediated. And from that perspective, getting control of initial inquiry is more competitive than it is in Germany. But interestingly enough, the U.K. inquiry market is changing, and it's changing faster than it's changing in Germany. And it's changing specifically and faster because of the use of AI. So what other operators may or may not realize is 25% of the property-based Google traffic of 12 months ago is now going through AI. And what that means is that a broker's life, particularly a web broker, is much, much harder. What that means is whereas web brokers used to spend time talking to customers, customers are spending much less time talking to brokers and more time talking to AI. And when I say talking, I mean talking. Instead of typing and tapping into a screen, people are talking to their phones and the AI mechanisms are bringing back the kind of conversation that normally would have happened in a call center broker-type environment. So that whole thing in the U.K. is shifting. The only piece that isn't shifting is pay-per-click, PPC, because AI is not touching PPC at the moment because it's not tried to monetize itself. And what you really need to be doing if you are a smart operator that wants to keep control of your inquiry flow is you need to start understanding this because this is now moving, and it's changing the passage of an inquiry, particularly inquiries for flexible space, an inquiry that instead of going through a web broker is going through, not in every case, but in 1 in 4 cases, going through AI. And you've got to work out how you deal with that because that is going to change the marketplace. So of course, we're concerned about getting to 10%, et cetera. But actually, in the U.K., what we're more concerned about is how we continue to capture inquiries because prospective inquiries of a certain size are now more interested in talking to an AI machine than they are talking to a broker or a call center. Still predominantly the broker and the call center has control, but that control is tipping out of the brokers' and the providers' interest and towards what I call mechanical AI systems. And we're going to need to know how to compete with that. So that will come to Germany, but it hasn't started to touch that market properly yet. You can see it much more clearly in the U.K. market. And that's why I say, don't be confused about the fact that our inquiry numbers are going up. Our inquiry numbers are going up, not because we're sitting there, our inquiry numbers are going up because we're going out and working other channels and doing things whereby we can take control earlier on rather than watch AI steal the bread from our table.

Chris?

Okay. I've spent a lot of time on investigating hedging and my conclusion is that it's brought with danger. So -- and it's a drug which once we -- if we got into, it will be very hard to come off. So I think to manufacture hedging, be it buy forward euros, let's, for instance, say, buy forward the entire U.K. portfolio to fix the value at the end of the financial year, for instance, and at that point, I would have to realize at the end of the financial year, a gain or loss on the portfolio on that forward, and I'd have to almost certainly roll that hedge, and there'll be a significant cost to putting that hedge in place. And ultimately, we are a business exposed to two markets. So I'd be trying to manufacture the exposure to the U.K. out of the balance sheet when in reality, we are exposed to two different markets. So going and putting in place some sort of derivatives to try and manage hedging, I've seen lots of CFOs get into all sorts of trouble trying to go down that road. And I don't want to be sitting here talking about the mark-to-market of derivative instruments every time I come and talk to you. So we have a shareholder base, which is spread across euro, sterling, rand, and I'm sure some are dollar-denominated as well. So investors who invest in us, I largely leave it to them to deal with hedging. Now the only structural piece of hedging that could, at some point, make sense is simply to put sterling debt into the balance sheet. So match the debt with the asset base. And I completely understand that challenge and that question. There's two points I'd say. Number one, in euro terms, we are still maturing on the balance sheet as an issuer in the debt capital market. So there is still upside in terms of the cost of our euro-denominated debt versus in sterling, we are certainly subscale to go into the debt capital markets for debt. So we will be forced down the secured lending route, which obviously creates much less flexibility from a balance sheet perspective. And obviously, the difference in cost between euro and sterling, I'm sure, has probably blown out even further in the last few days, but was 200 basis points. Let's say, it's between 200 and 250 basis points. There is a funding benefit to us through the FFO, and we are ultimately cash flow focused from an FFO perspective. And what I'd also say is then when you look at the portfolio, we're split, I think, 71%, 29% at the moment between Germany, U.K. With the acquisition activity that we expect going forward, which we expect to be more German focused, that balance will start to push more towards Germany again. So we will continue to be very much a minority exposed to the U.K. So I think my answer is no. I'm not going to get down the kind of manufacturing hedging. At some point in the future, it will make sense to put sterling leverage in, but we're on a journey at the moment. And I know it's difficult at the moment given the FX effects that you see on the balance sheet that -- to sort of have a knee-jerk reaction and say, "Oh, we must hedge." I think that's brought with danger. We're not going to go there.

It's Matt Saperia from Peel Hunt. I'm also going to ask one question to each of you, if I can. Andrew, I think on Slide 9, you talked about the 4.7% like-for-like rate growth as a failure and -- as much as it was above the 4% that you were targeting. Are you going to ask your colleagues to do things differently going forward, or are you still happy for them to push rate ahead of what you might be targeting when it comes to new demand?

Well, specifically, what we are saying more in the U.K. than in Germany is we need to increase our sales volume. And if we have to reduce price within certain parameters and corridors to do so, that's what we must do. And what we're seeing is we're seeing a lot of people sort of nod to that, but then kind of still favor price over occupancy. And therein lies our challenge because I think as things tighten in the U.K., what we're seeing is we're seeing tenants look for smaller spaces than they normally would. And what that means is we have to win more customers than we normally would to maintain and increase our occupancy. And to do that, you either have to get more inquiries and/or you have to improve your sales conversion. And one of, not the only thing, but one of the ways you improve sales conversion is loosen on price a little. Now all of that is in a very controlled environment, where we make sure that people can't lower the price so much that we start to bring the average rate per square meter or square foot in the U.K. of the portfolio down. But whereas we used to be in a very nice world where you just said, as long as you sell higher than they move out, it all works. Now you're having to operate in a corridor whereby you do sometimes have to sell at lower than the move-out rate, and you better make absolutely sure that you can make up for that in your renewals and expansions. Otherwise, you're going to start ticking the average rate per square meter of your portfolio down. So this is quite a delicate area. And in the U.K. rather than Germany, this is going to get kind of more detailed going forward. And some of that is because the average size that people in the U.K. are inquiring about is getting smaller. So what you have to do is work the platform harder to get more customers. So this is not a sort of -- you set it and leave it for 6 months, this is daily management. We have a professional sales force that's properly trained in specific methods with specific processes and systems that are managed on a daily basis, and we're continually pushing buttons and pulling levers where this is concerned. It's quite intense.

And Chris, on Slide 18, you talked about a EUR 25 million potential future new build program.

Yes.

Two parts. One is sort of what time frame are you talking about? And the second part, I'm assuming that's not exhaustive across the whole portfolio. There must be...

No, no, no. So that's specifically four opportunities, that is one at Gartenfeld, two at Klipphausen and one at Dresden site, MicroPolis. The Gartenfeld opportunity new build is likely to tangibly start in the new year. The Dresden MicroPolis site is probably going to depend on -- not necessarily a firm pre-let, but at least some very strong indication. And the Klipphausen site, I think we've talked about Klipphausen in the past, it's been a sort of poster child for us of success, and we have development land around the existing site, which we acquired at the time of original acquisition, and there is opportunity to build additional production holes there. Net-net, I think I'd guide you to the EUR 25 million of opportunities, you're probably looking at EUR 10 million per year actually coming through. So it is a separate bucket to our business as usual CapEx. It's capital that has to compete with acquisitions for use essentially.

Sarim Chaudhry from Jefferies. Just a quick one. I think this is for Chris. On the divi, you got mid-70s payout and then you doing medium-term guidance of 70%. I think previously when we've spoken, that was going to be in the mid-60s. So what's that change?

So we absolutely still have the aim to be at 65% payout ratio of FFO. And the model being 65% payout ratio plus the CapEx broadly equates to FFO as a whole. So we are, therefore, self-sustaining as a business. Actually, we are getting tighter and tighter on CapEx. So actually, we do have a little bit of headroom from CapEx versus dividend there. But we also flexed the payout ratio between 65% and 75% off the back of the fund raise, the equity fund raise last year and prior year to reflect the short-term dilution to FFO per share as we put the capital to work. So at the moment, you're essentially at kind of max. You're about 74% payout ratio. You should see that come down even at the end of the year, and you should see it come down and settle around 70%. What I'd also then say is that I think we are so confident and the Board is so confident about the growth prospects of the business going forward that we're also mindful that we're having to go through the financing headwinds as well over the next 3 years. So we are flexing within that 65% to 75% and saying that we want to settle around 70%, and we'll get there over the next 18 months, and we're happy, comfortable staying there through out to FY '29. On that chart, you saw the waterfall to get from EUR 123 million to our new target of EUR 175 million. The additional interest expense of EUR 34 million is all of the additional interest expense. So that is the journey of refinancing done. And in fact, there is an additional small amount of additional debt in there as well. So that is -- there is no more kind of headwinds to come beyond that essentially. And then obviously, once that journey is done, the results will be free to really outperform.

So can I just pick up on that because there's nothing new in this. We have always, for over a decade, operated in that 65% to 75%. We've always made sure that when we are facing things like deployment of capital, other types of headwinds that we flex up to 75%, knowing that we can come back down to 65% again. We're doing exactly the same. The difference is what we are saying is that we recognize that we are unlikely to get back down to the 65% until such time as we've overcome that interest rate challenge. And that ultimately won't be until the year ending March '29 because in December '28, we have another low interest bond to overcome. So realistically, we're going to be in that 70% to 75% corridor until we overcome that second bond. But once we do, the growth profile of this business will no longer have the headwinds. So therefore, you will really see the top come off it, and we'll then be able to return back to 65% in a very -- whereas to try and do it in this period, we think that that's unnecessarily kind of ambitious in terms of getting back to that 65%. So we're operating in the same way as we've operated for a very, very long time. We're just trying to give guidance to say, in the past, we've got down to 65% like really quickly. Because of these successive headwinds, we are probably going to be in that 70% to 75% bracket until we get to '29 and then we can put it back down to 65%. Still a very well-covered dividend.

Just a quick follow-up question. I think you talked -- sorry, it's Max Nimmo at Deutsche Numis. You talked a bit about the U.K. previously and saying we kind of just need to wait until we get through the budget. But it sounds like from what you're saying now that it's actually a bit more of a longer-term structural issue that's harder -- and so investment in this market is unlikely to be until, I think you said, next summer and that...

Let me tell you why that's changed. That's changed as a result of Thursday of last week. It's changed because what we can all see now is the leadership of the current government is under threat. And I don't care if they all came out and said, we've made friends, and we're all going to live happily ever after and not stab each other in the back. I won't believe it until I see the results of the May elections next year. And that roughly coincides with the announcement of our end of year results. So I'm not saying that we might not make the odd exception for a very small amount of money if it was something to do with defense or self-storage in the U.K. But unless it's in like a really exciting vertical for an amazing price, as far as I'm concerned, we are paused in the U.K. now until we understand the political outcome until at least the middle of next year. Clear?

Very clear, year.

Folks, thank you very much indeed.