Release Date: March 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Supermarket Income REIT PLC (LSE:SUPR, Financial) reported a 3% growth in adjusted earnings, driven by acquisitions and rent reviews.
- The company's portfolio was valued at GBP1.83 billion, reflecting a 0.5% like-for-like increase.
- The proposed internalization is expected to deliver significant cost savings of at least GBP4 million per annum.
- SUPR has one of the lowest EPRA cost ratios in the sector at 13.6%, with a target to reduce it further to below 9%.
- The company maintains a strong balance sheet with a BBB+ investment grade credit rating and a loan to value of 38%.
Negative Points
- Finance costs have risen to GBP12.9 million due to higher leverage and increased debt.
- The company operates at a higher leverage compared to previous periods, which could pose risks if market conditions change.
- Despite the growth in earnings, the discount to NAV remains a challenge that the company aims to address.
- The competitive landscape includes operators like Tesco and Sainsbury's, which could impact SUPR's acquisition opportunities.
- The transition to unsecured debt and refinancing efforts may introduce uncertainties in the short term.
Q & A Highlights
Q: Can you provide insights on the lease re-gears that are 13% above ERV and how they compare to the overall portfolio?
A: Rob Abraham, Fund Manager: The transaction demonstrates that valuers are conservative, with rents 13% above their expectations. Our portfolio is generally 13% to 15% above the valuers' ERVs, indicating strong rental performance. We aim to educate valuers on the affordability and trading performance of our stores to reflect true market conditions.
Q: Regarding the joint venture, will it involve assets from your existing portfolio or new acquisitions?
A: Rob Abraham, Fund Manager: The joint venture will likely be seeded with assets we already own, allowing us to release capital while retaining long-term optionality. This approach avoids execution risks associated with new acquisitions and leverages our existing asset knowledge.
Q: Are you now competing with operators like Tesco and Sainsbury's for acquisitions?
A: Rob Abraham, Fund Manager: We've always competed with operators, especially Tesco, which has invested significantly in buying back stores. However, operators have capital constraints and must prioritize their investments, so they don't acquire every strong store.
Q: How should we think about the size and structure of the joint venture?
A: Rob Abraham, Fund Manager: The joint venture needs to be meaningful in scale, likely structured as a 50/50 partnership. This allows both parties to have a significant say while enabling us to retain long-term control and optionality over the assets.
Q: Will the proposed change in listing affect your REIT status?
A: Mike Perkins, Finance Director: We do not anticipate that the change to the commercial company category will impact our REIT status.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
