Supermarket Income REIT plc

Right. Good morning, everyone, and welcome to Super's Interim Results to the 31st December 2025.

So I'm going to start us off with a strategic overview, and then I'll hand you over to Mike to take you through the numbers. So it's been an incredibly busy period for us with significant levels of activity as we delivered on our strategy to grow earnings.

And shareholders are now seeing the benefits of this as we're increasing the minimum dividend uplift to 2% from the next financial year onwards. And we're positioned for further growth with an attractive near-term pipeline of over GBP 500 million.

So just to take you through some of the proactive steps we've taken over the last year to create a platform for growth. We've achieved much greater shareholder alignment through the internalization of the management.

And shortly after that, we completed the joint venture, which has allowed us to undertake capital recycling and also generate management fee income. And during the period, we scaled that to GBP 845 million, demonstrating our access to capital alongside the debut bond issue that Mike will talk to in a moment.

We've established a cost-efficient and scalable platform, evidenced by our 9.2% EPRA cost ratio, and this continues to trend lower as we look to grow the business. And to support this future growth, we've also been making investment hires.

So just to take you through a couple of the more recent names that bring a depth of grocery property expertise. Jamie Cowen, who joins us as Strategy Director with 30 years of experience in real estate, the majority of which has been with Sainsbury's as a Director of Estates & Investment.

And also Justin Upton as Head of Investment, who most recently was CIO at Urban Logistics REIT and also prior experience as a Fund Manager, investing in a portfolio that also included supermarkets and grocery-anchored retail parks. So we've doubled down on our sector specialism and now have a team -- a dedicated team of 18 across investment, asset management, finance and investor relations.

And it's the sector specialism that allows us to underwrite opportunities for growth across grocery real estate. And in the left-hand columns there, you've got U.K.

food stores across the range of both formats and grocers, but also it's about investing in mission-critical top-performing food stores for us. And sometimes that comes with adjacent retail, and we absolutely have the in-house capabilities not only to manage that, but also to maximize the returns.

And then lastly, the column on the right there, our European exposure, and we've taken France to scale now with our latest tranche of sale and leaseback with Carrefour. And then lastly, along the bottom of the page there, you've got some of the grocers that we see opportunities to work with going forward.

And with these plans to grow, we have ambitions to double the size of the portfolio. But all the while maintaining those attractive investment fundamentals, such as 90% or so grocery income, long leases on average of around 12 years and of which around 80% is inflation linked and always maintaining that high quality of income with around 70% being investment grade.

And what we've shown at the bottom of the page is an illustration of the evolution of the portfolio as we double in size. And you'll see that the core driver of the business is still U.K.

food stores, but with an allocation as we already do to grocery-anchored retail to European food stores. And then lastly, you'll see the new addition there, grocery distribution.

Now what we're saying here is that it will be opportunity led, and it will come down to where we can best allocate capital to deliver returns, but we've got the team, the expertise and the relationships to be able to underwrite anything in the grocery property investment universe. So with that, I'll hand you over to Mike.

Thank you, and good morning, everybody. As Rob said, it's been an exceptionally busy period for the company.

We've delivered a number of important strategic milestones, each designed to position the business for growth and create long-term value for our shareholders. As anticipated, these proactive steps have had a short-term impact on H1 earnings.

However, they have significantly strengthened the foundations of the business and our ability to deliver sustainable returns. So turning now to the headlines of the period, which we explore in more detail shortly.

Net rental income was GBP 57 million, down 2%. Our EPRA cost ratio improved to 9.2%, a reduction of 440 basis points.

We paid dividends of 3.1p, up 1% on the prior period. The portfolio, including post-period end activity, increased to GBP 2 billion, up 20% since June '25.

Our EPRA NTA was marginally higher at 87.5p. And taken together with dividends paid in the period, we delivered a 4% total accounting return for the first half.

Net rental income reduced by 2% in the period, which is in line with our expectations. This was largely driven by the timing gap between receiving the JV proceeds, which completed in May '25 and the subsequent redeployment.

Operationally, performance remains very strong. On the left-hand side of this chart, you'll see we completed 19 rent reviews, achieving an average uplift of 3.8% transferred into the joint venture.

And as Rob said earlier, the JV proceeds have now been fully redeployed with a financial benefit expected to come through for FY '27 onwards. We continue to have a highly secure and efficient income profile, another period of 100% occupancy and rent collection, 76% of our portfolio is investment grade, providing strong visibility and security.

And our gross to net rent ratio of 99.5% is among the highest in the sector. So turning to our administrative costs.

We've made very good progress so far and have delivered over GBP 2 million of cost savings in the first half. As the chart shows, our EPRA cost ratio of 9.2% now places us firmly at the low end of the peer group.

As I mentioned previously, we're still working through a small number of transitional costs following the internalization. However, we remain on track to reduce the cost ratio to below 9% for FY '27.

So bringing these elements together, EPRA earnings per share were 2.7p compared with 3p in the prior period. The main drivers were as follows: Firstly, and as I set out earlier, the transfer of assets into the joint venture reduced earnings by 0.2p.

Management fee income from the JV alongside GBP 2 million of cost savings, increased earnings by 0.3p, which has fully offset the increase in debt cost further to our proactive decision to refinance and extend the term of our debt. And finally, 0.1p reduction from a general increase in weighted average drawn debt compared with the prior period.

So turning to our portfolio, which has increased by 20% since June '25. On the left-hand side of the chart, you will see we have deployed GBP 398 million of capital at a 6.5% net initial yield.

The portfolio delivered revaluation uplift of GBP 7 million or 1.3% on a like-for-like basis, outperforming the MSCI All Property Capital Growth Index by 90 basis points. The movements post period end reflect the agreement with Blue Owl to transfer five of our assets into the joint venture and the deployment of a further GBP 9 million of capital.

Altogether, this results in a combined portfolio value of GBP 2 billion. The chart here illustrates the movement in EPRA NTA per share, which increased to 87.5p, up from 87.1p at June '25.

Starting with the bar on the left, EPRA earnings were 2.7p. We paid dividends of 3.1p during the period.

The portfolio delivered a 2p uplift on a like-for-like basis, which is partially offset by acquisition-related costs. The total accounting return for the period was 4%, driven primarily by income, which represented approximately 88% of the return and is underpinned by a portfolio predominantly of investment-grade occupiers.

We've also been very active in the debt capital markets, and we continue to manage our extending the average maturity and further diversifying our funding sources. The chart on the left shows our maturity profile.

We have only one drawn facility maturing in the next 12 months, which we expect to refinance imminently. Of the debt that's maturing in FY '28, GBP 284 million benefits from extension options out to FY '30.

Our debut bonds and U.S. private placement notes were issued with a blended tenor of just over 6 years and an attractive fixed rate of 5%.

As the chart on the top right shows, we have successfully diversified our sources of funding, giving us access to greater pools of capital and the flexibility to enter different markets when conditions are favorable as we have demonstrated in the period. At 4.8%, our weighted average cost of debt has now largely adjusted to market levels.

And importantly, 92% of our drawn debt is either fixed or hedged, which we expect to increase towards 100% in the coming months. In December, Fitch Ratings reaffirmed the company's BBB+ investment-grade credit rating, and we remain fully committed to at least maintaining this rating.

We have been very active in the investment market and have taken leverage to 43% as we executed on our pipeline. We monitor leverage through both loan-to-value and net debt-to-EBITDA.

On a pro forma basis, net debt-to-EBITDA is 8.2x, but with a full period of income from recent acquisitions, we expect to operate at the lower end of the 7x to 8x range within the next 12 months and consistent with historical levels. Our income is largely backed by investment-grade covenants, which supports operating at the current levels.

However, we do remain prudent in managing leverage and maintain significant headroom across all of our covenants. So in summary, we have delivered material cost reductions, a 32% reduction in overheads in the first half.

We completed earnings accretive acquisitions, deploying GBP 398 million of capital at an attractive 6.5% net initial yield. And we are pleased to upgrade our dividend guidance to a minimum uplift of 2% per annum for FY '27 onwards.

And with that, I'll now hand you back to Rob, who will take you through the market and investment update.

So U.K. grocery is one of the world's most competitive markets.

So it's really impressive that we've seen TESCO and Sainsbury's in this environment continuing to grow market share. And of course, that's coming from like-for-like sales increases from existing stores rather than new floor space.

ASDA remains the third largest grocer, but has continued to lose market share. But there is a clear -- a new management and a clear turnaround strategy for that business.

And another name just worth calling out on this page, little impressive market share growth, but of course, that is coming from new store openings. I mentioned some of ASDA's challenges there, and we did undertake a further 10 store sale and leaseback into our joint venture at an accretive 7.4% net initial yield during the period.

And as ever, it's about strong trading established grocery locations for us, evidenced here by the 23 years of average of trading history. And that just gives us absolute confidence that there'll be alternative occupier demand for these locations that are mission-critical assets with low competition.

The rents have also been set low at GBP 19.90 per square foot, which is highly affordable relative to the store turnover performance. And being a sale and leaseback, it means we get 3 years of trading history to be able to diligence that.

We've also got attractive lease terms of 25 years of annual inflation-linked uplifts. And then the last point on this page, capital value per square foot is around GBP 250, which is well below replacement cost.

And that's a function of that wide acquisition yield and also the low rents. And it's worth pointing out that if we had TESCO or Sainsbury's on those same attractive lease terms, that capital value would be more like GBP 400 to GBP 500 a square foot.

So this is a great deal for us, and we'd love to do more of it if we get the chance. And it's the scarcity of new foodstore locations that supports this demand from alternative occupiers.

And we've shown an example on the left here, a site in Wolverhampton over 40 years of trading history as a supermarket location under multiple grocers. Most recently, TESCO, who acquired from Waitrose.

And we know that TESCO have been looking to get into that catchment for over 25 years. The point being that strong food store locations simply don't go vacant.

Then on the right-hand side of the page, the Homebase administration and the vacancy that provided a rare opportunity and Sainsbury's paid a premium to take on 12 of the former Homebase leases and some of the rents there that we're seeing are upwards of GBP 28 a square foot, so setting some strong evidence for us. Right.

Online grocery. We've seen now return to its long-term growth trend, reaching 12.2% last year, and that's the highest it's been since the pandemic levels.

But when you drill down into that growth, you can see that it's the omnichannel grocers that continue to dominate online. And on the left-hand side, you can see strong growth from TESCO's and Sainsbury's.

And yes, Ocado was the fastest growing. But when you look on the right-hand side of the page and if you look at TESCO's online market share, the light blue at the top of the bar, you can see that, that TESCO's online business is more than double the size of Ocado's entire business.

And when you take account of the in-store sales as well, GBP 44 billion of annual sales for TESCO, that's more than 14x the size of Ocado. So grocery is all about scale.

And so you can see it's the omnichannel grocers that are best placed to win. And an interesting area of the market is that we've now seen rapid online grocery where consumers can get their products within a 30-minute drive time.

That's now around 10% of the convenience channel. And a few years ago, we saw a number of disruptors attempt to come into the market, investing significant amounts of capital to try and establish their own Dark stores networks and supply chains.

And in the bottom left there, we've given the example of Amazon that shows you even the most well-capitalized entrants to the market. It's not easy.

And in the middle, you can see, again, it's the omnichannel grocers that are able to respond to this new competition, and they've introduced rapid online fulfillment at a low cost through existing store networks and supply chains. And that's both through their own solutions in the middle, but also on the right through those third-party delivery providers.

So it just creates a very high barrier to entry or to disruption. And it's the mission-critical real estate for the supermarket tenants that we own.

And we've shown you on the left, TESCO's online omnichannel distribution map, the blue dots being each of the omnichannel stores in their network. And on the right, in that illustration there, the green dots on the map are these regional grocery distribution centers, of which there's around 20 in the country, and that supports the entirety of the store network.

So these are absolutely mission-critical, supporting that 800 or so large-format stores, around 3,000 convenience stores. So it doesn't matter whether a product is sold online or in-store, it all goes through that same distribution network.

And of course, when we're acquiring these properties, we're talking to the tenants, the grocers to understand exactly how important they are to their distribution networks. Turning now to the joint venture.

So we've mentioned that we rapidly scaled this through a series of transactions to now be 23 stores, total value of GBP 845 million at a net initial yield of 6.5%. But this is really demonstrating the value of both the platform and our sector specialism as we're generating GBP 2 million a year of management fee income now.

And we've been recycling that capital from the joint venture into GBP 398 million of earnings accretive acquisitions since July. And on the left, again, that range of both store formats, but also grocers, and we took that our French exposure to scale, which I'll come on to in a moment.

But I mentioned earlier our ability to maintain those attractive investment fundamentals as we grow. And you've got that on the right-hand side of the page there, 6.5% net initial yield, average lease length of 15 years, a 100% of which is inflation-linked and again, maintaining that high quality of income with 70% being investment grade.

And all the while we're targeting this mission-critical grocery property led to the leading grocers. So in keeping with that was the EUR 123 million further tranche of Carrefour sale and leaseback.

Now this is a great grocer for us to be working with 21% market share, EUR 42 billion of annual sales and again, investment-grade credit rating. And then at the store level, we've acquired a 6.6% net initial yield.

So it's accretive, but also being a sale and leaseback, we get that 3 years of store trading history. So we're able to ensure, again, the rents were set very low and producing a very low capital value per square foot, which again is below replacement cost.

So as we grow, we're absolutely maintaining our capital discipline with that focus on quality and returns. And we've just shown you a few examples on this page.

On the left-hand side, a TESCO in Hampshire, which on the face of it, rents were affordable relative to trading. And so the returns would have stacked up.

But actually, when we did our diligence on it, site cover is high, competition is high, and that just meant store trading is actually pretty average. So it didn't meet our quality criteria.

The example in the middle there, another TESCO in Berkshire, which on the face of it, 14 years annual inflation-linked lease, strong performing store, omnichannel. So it ticked the boxes.

But actually, it was really quite over-rented. And where the pricing got to on that, it just started to stretch our returns assumptions too fast.

So we walked away from that one. And then lastly, on the right-hand side, the store we did buy.

So 16 years annual inflation-linked lease to Sainsbury's, very strong performing store. So the rents are very affordable.

And this was a store that we acquired in a truly off-market transaction. So just proving how our sector specialism unlocks those unique opportunities for us.

So now we're well positioned for the next phase of growth. We operate in a highly defensive sector that's resilient through economic cycles.

We own a portfolio of mission-critical food infrastructure assets with those attractive property fundamentals under triple net leases. The proceeds of the JV have now been fully redeployed.

And with that, we've updated our guidance to that 2% minimum dividend uplift per year from the next financial year. And as I mentioned, we have these ambitions to double the portfolio in size through an attractive pipeline.

And that is where our sector specialism comes in, the team, the expertise, the relationships to underwrite anything across the grocery property investment universe. And we have the access to capital as we've shown through the joint venture and through also the bond issue.

So with that, we will hand over to questions. Thank you.

John Cahill from Stifel. On presentation, particularly pleasing to see the significant increase in the dividend guidance.

I just wanted to refer back to Slide 7 in terms of your longer-term ambitions and 2 questions, if I could, please. First on the grocery distribution 10% element, maybe you could just give a bit of detail as to what that might look like in terms of the size of the units.

Could you even go for something forward funded, particularly at the Dark stores, a bit more color on that, please? And then secondly, not to try and sort of lead the witness too much, but it will take time to achieve this ambition.

But when you get there, is the view that you'll then be in a position to perhaps look at a dividend that is more closely aligned to inflationary increases as good as the 2% is, that will be sort of the holy grail.

Yes. I'll take the first bit and I'll let Mike do the second.

So look, the point for us is it's again about mission-critical properties. So we're open-minded as to what that might exactly look like.

And what we've shown here is an illustration because we may sit here in a year, 2 years' time and we've not bought any. It will be opportunity led.

It will come down to where we can best drive the returns. But what we want to be clear about is, anything that is in that grocery property investment universe, the same tenants where we're speaking to them and we can understand that it's mission-critical and we can deliver returns, we will absolutely kind of be looking at.

And we've brought the team. That's why we talked to some of the team members we brought in who have that expertise in the whole range of grocery property, whether it's distribution or stores.

Yes. And just on the dividend point, clearly, the last 12 months have been very transformational for the company.

We've worked extremely hard to deploy the capital from the joint venture proceeds. So we are now fully deployed, which gives us also in addition, the cost savings, gives us the confidence to increase the dividend to that minimum 2% target.

Of course, with being so heavily linked to inflation in terms of our lease structures, that would be the ambition at some point that we can pass through the inflation uplift that we're getting at the top line through to dividend growth. But I think notwithstanding the point that we've worked incredibly hard to get from a position where we were to today where we can upgrade that guidance to a minimum target of 2% uplift from next year onwards.

Jonathan Kownator from Goldman Sachs. So obviously, a strong ambition in terms of growth.

Would all these type of assets also apply to non-retail assets, i.e., would you also look at distribution assets on the consumer interest, the first question. And second, on the cost, obviously, as you scale up, potentially substantially over time, where do you think that type of conversation takes place or who controls it within government or multiple stakeholders?

I'll do the first, Mike. Can you do the second?

See, again, I think what I'd say is we're open-minded. I think the move when with Carrefour was a good example of working with an operator that ensured we've got sufficient scale in the market, but we could also understand that market.

So any new geographies or asset class in that, whether it's stores or distribution, we will be doing a lot of work before we enter that market. I think the easiest move for us in the near term would be TESCO, Sainsbury's, given our relationships and the extent of our exposure to them.

That's the obvious step if we were to do something in the distribution space. So yes, anything overseas, I think, will be very measured to it, to put it that way.

And just turning to the cost ratio point. We're, again, very pleased to see the benefit from internalization coming through, 32% reduction in overheads in the first half, 9.2%, we're very much on target to deliver that sub 9% for next year.

Obviously, we've made some investment hires. Operationally, we've got a very efficient business platform.

So as we scale, yes, I would expect that kind of hurdle to reduce. Probably be reluctant to put a number on it today.

But clearly, there would be a lot of operational leverage we'd be able to get that drive that more close to 8%.

It's James Carswell from Peel Hunt. Obviously, you rotated some of the assets from your own balance sheet into the JV and that looks to be pretty accretive.

I mean, in terms of the appetite from Blue Owl side, is there more appetite to do more of that? And equally on your own balance sheet, do you have more assets that would be suitable for that JV that you could rotate in?

And then thinking about building, what's your thoughts on kind of establishing new JVs and some of the kind of site adjacencies you've discussed?

Yes. So look, aspirational target when we created the joint venture was GBP 1 billion.

We've got to just shy of GBP 850 million already. And certainly, look, we just transferred that further set of stores into the vehicle.

So the appetite is definitely still there from Blue Owl. And from our perspective, it's a great way for us to be able to scale.

It's very efficient for us. We generate that management fee.

So there are more stores that we potentially would have earmarked to move across. And what it means is, if there are stores that are in the market that don't necessarily fit the JV, where we can acquire those directly on to our balance sheet and fund it by moving some more across.

So yes, it's just a very flexible way for us to grow. So we'll be, again, open-minded to how we deliver that.

And yes, the Blue Owl vehicle has a kind of specific strategy, and therefore, there is room for further joint ventures. And yes, given the platform and specialism around our unique portfolio, there is potentially an ability to see something maybe at the lower yield again.

So we're absolutely having those conversations.

Matt Saperia also from Peel Hunt. 4% total accounts are very respectable, but clearly, the backdrop is an awful lot of activity in the period.

Any idea how much that helped the total account returns back buying? Looking forward, what do you think a sustainable total accounting return is for the portfolio and the business as we are today?

Yes. So if I take an overly simplistic view of kind of what the adjusted accounting return might be, we showed that there was about GBP 25 million, GBP 26 million of acquisition-related costs.

So again, simplistically, that is just over probably 2p. I would then say our adjusted total accounting return would have been more like 5% or low 5s, but notwithstanding the point that we've been the strategic importance to entering into the joint venture and redeploying that capital.

All things being equal with kind of stable -- in a stable yield environment. You can comfortably see a pathway where we're delivering kind of 8x to 10x total accounting return or 10% total accounting return towards the upper end of that is very achievable for us.

A lot of the growth coming through over the last few years has been capitalizing from the rental uplift we get on the portfolio that are contractual. So you've seen that growth coming through.

So yes, absolutely, the upper end of 8% to 10% should be achievable for us.

Jonathan Kownator from Goldman Sachs again. On the valuations, I mean, obviously we've had these discussions before about are you recognizing where you could find ERVs and evidence versus what they're pricing?

Where are we in that debate currently?

So valuers are ultimately conservative, I would say. And look, we proved when we re-geared some stores last year at rents that were 13% above the value of ERV, and we saw a capital value uplift on those stores of around 10% since then.

So under the valuers' numbers, we're, again, give or take, 9% to 10% over rented. Our view is we're absolutely rented affordable at that 4% rent to turnover average of GBP 24 a square foot.

So one of the jobs we have tasked Jamie, our new arrival from Sainsbury's with is to get out there and educate the market on what an affordable rent is and pushing on that growth agenda. So it's as much on us as anyone else, I think, to drive that.

But in the meantime, we're very comfortable that the rents are absolutely affordable in the portfolio. Thank you, everyone.

I think that's everything.

Sorry, Rob, just online. So it'll keep you there for a moment longer.

What's the rationale for operators to sell their mission-critical assets into the market, and when they could potentially find cheap credit sort of using their own balance sheet? And is there -- from Super's perspective, is the high-yield segment should it be most interesting to the company?

Or is there other attractive opportunities across the piece?

Yes. I guess, look, from operator perspectives, TESCO, Sainsbury's, for instance, still own only around 60% or so of their stores.

So it's one element of their financing and balance sheet strategy. We've seen obviously ASDA, Morrisons undertaking sale leasebacks more recently, and that's in part driven by the private equity buyouts, but also historically, they own 90% or so of their stores.

So they've absolutely had the capacity to do it. So yes, it's -- from our perspective, it's a great way for us to access stock, and we're absolutely focused on making sure we buy the best performing stores when we do that.

And sorry, Chris, what was the second part of the question?

Sorry, just coming back. It was for Super, how do you balance, I guess, chasing high yield versus slightly tighter yielding stores?

How do you think about that in terms of benefits to the company?

I think if we were to try and only buy things that tick every box, you wouldn't buy very much, right? It has to be a strategy where we acquire some stores that are high yielding and some are lower yielding and provided on a blended basis, it's all accretive, then that's how we manage that strategy.

But I talked earlier to those investment fundamentals, so 70% or so being investment grade, 90% or so grocery income, the long leases, the inflation linkage. So that's the strategy, but we will buy stores that are tighter yielding, high yielding within that.

Only is that online? Okay.

Good. Thanks, everyone.