Supermarket Income REIT (LON:SUPR) used its interim results call for the first half ended December 2025 to outline a series of strategic actions aimed at rebuilding earnings momentum after a “transformational” year, including management internalization, the scaling of a joint venture, and new funding activity. Management said these steps created a stronger platform for growth and supported an upgraded dividend outlook, despite a short-term drag on first-half earnings.
Strategy and platform build
Chief Executive Rob Abraham said the period featured “significant levels of activity” as the company executed on its strategy to grow earnings. He said shareholders would “now” see benefits through an increase in the company’s minimum dividend uplift to 2% from the next financial year onwards.
- Internalization of management, which he said improved shareholder alignment.
- Completion of the company’s joint venture, enabling capital recycling and generating management fee income.
- Scaling activity “during the period” to a GBP 845 million joint venture portfolio value.
- Building a “cost-efficient and scalable platform,” including an EPRA cost ratio of 9.2%, which management said is trending lower.
Abraham also said the company has made investment hires to support future growth and now has a dedicated team of 18 across investment, asset management, finance, and investor relations. He emphasized “sector specialism” in grocery real estate, spanning UK food stores, grocery-anchored retail, and European assets. Management also introduced “grocery distribution” as an additional area it could pursue in the future on an “opportunity-led” basis.
Looking ahead, Abraham reiterated ambitions to double the size of the portfolio while maintaining key portfolio characteristics, including roughly 90% grocery income, an average lease length of around 12 years, approximately 80% inflation-linked income, and about 70% investment-grade income.
Financial performance and earnings drivers
Chief Financial Officer Mike said the company delivered strategic milestones that were expected to have a “short-term impact” on first-half earnings, while strengthening foundations for sustainable returns.
Key first-half figures discussed on the call included:
- Net rental income of GBP 57 million, down 2%.
- EPRA cost ratio improved to 9.2%, down 440 basis points.
- Dividends paid of GBP 0.031, up 1% versus the prior period.
- EPRA net present value of 87.5 pence, described as marginally higher.
- Post-account return of 4% for the first half, including dividends.
Management attributed the 2% decline in net rental income largely to a timing gap between the receipt of joint venture proceeds (which completed in May 2025) and subsequent redeployment. The company said operational performance remained strong, including 100% occupancy and rent collection.
Mike said the company completed 19 rent reviews with an average uplift of 3.8% above the previous five-year rents, contributing GBP 1.1 million of additional income versus the prior period. Like-for-like net rent increased by 1%. Acquisitions added GBP 6.2 million of income, offset by assets transferred into the joint venture.
On costs, Mike said the company delivered more than GBP 2 million of cost savings in the first half and a 32% reduction in overheads. He said the company expects to reduce the cost ratio to below 9% for FY 2027, noting some transitional internalization costs remain.
EPRA earnings per share were 2.7 pence, down from 3 pence in the prior period. Management explained the movement in EPS as follows:
- -0.2 pence impact from transferring assets into the joint venture.
- +0.3 pence from JV management fee income and cost savings, which management said offset higher debt costs from refinancing and term extension.
- -0.1 pence from a higher weighted average drawn debt level versus the prior period.
Portfolio growth, returns, and valuation commentary
Mike said the combined portfolio, including post-period end activity, increased to GBP 2 billion, up 20% since June 2025. The company deployed GBP 398 million of capital at a 6.5% net initial yield.
The portfolio delivered a GBP 7 million revaluation uplift, or 1.3% on a like-for-like basis, which management said outperformed the MSCI All Property Capital Growth Index by 90 basis points. EPRA NTA per share increased to GBP 0.875 from GBP 0.871 at June 2025.
Management said the 4% total accounting return for the period was driven primarily by income, representing about 88% of the return. During Q&A, management estimated that acquisition-related costs of about GBP 25-26 million held back reported returns, suggesting an “adjusted” total accounting return could have been “more like 5% or low 5%” on a simplified view.
On valuation and estimated rental value (ERV) dynamics, Abraham said valuers are “ultimately conservative.” He pointed to prior re-gearing activity where rents were 13% above ERV, which he said drove capital value uplifts of around 10%-15% on those stores. He said the portfolio is “give or take” 9%-10% over-rented, but emphasized affordability at an average rent-to-turnover of 4% and an average rent of about GBP 24 per sq ft.
Capital structure and funding activity
Mike said the company was active in debt capital markets and continues to manage its funding structure proactively. In July, the company issued its debut GBP 250 million unsecured bonds, extending average maturity and diversifying funding sources.
Management said its debut bonds and U.S. private placement notes were issued with a blended tenor of just over six years and a fixed rate of 5%. The weighted average cost of debt is now 4.8%, and 92% of drawn debt is fixed or hedged, which management expects to increase toward 100% in coming months.
In December, Fitch reaffirmed the company’s BBB+ investment-grade credit rating, which management said it is committed to maintaining.
Leverage increased as the company executed on its pipeline. Management said leverage is 43%, and on a pro forma basis net debt to EBITDA is 8.2x. With a full period of income from recent acquisitions, management expects to operate at the lower end of a 7-8x range within 12 months, consistent with historical levels.
Investment pipeline, joint venture progress, and dividend outlook
Abraham said the company has an “attractive near-term pipeline” of over GBP 500 million. The joint venture scaled rapidly to 23 stores with a total value of GBP 845 million at a 6.5% net initial yield, generating about GBP 2 million per year in management fee income, according to management.
He also discussed an Asda 10-store sale-and-leaseback completed into the joint venture at a 7.4% net initial yield, with 25-year leases featuring annual inflation-linked uplifts. Abraham cited an average trading history of 23 years for those locations and said rents were set low at GBP 19.90 per sq ft.
In Europe, Abraham highlighted a EUR 123 million French acquisition via a Carrefour sale-and-leaseback at a 6.6% net initial yield. He described Carrefour as a “great grocer” for the company to work with and cited its 21% market share, EUR 42 billion of annual sales, and investment-grade credit rating.
During Q&A, management reiterated that potential investment in grocery distribution would be “opportunity led” and guided by mission-critical characteristics and returns, with Tesco and Sainsbury’s cited as the “easiest move” in the near term given existing relationships.
On dividends, management said the company’s full redeployment of JV proceeds, along with cost savings, supported confidence to upgrade guidance to a minimum 2% dividend uplift per year from the next financial year. Mike added that, given the inflation linkage embedded in lease structures, the “ambition at some point” is to pass through inflation-linked rent growth through dividend growth, while emphasizing the progress already made in setting a higher minimum target.
About Supermarket Income REIT (LON:SUPR)
Supermarket Income REIT plc (LSE: SUPR, JSE: SRI), a FTSE 250 company, is the only LSE listed company dedicated to investing in grocery properties which are an essential part of national food infrastructure. The Company focuses on grocery stores which are predominantly omnichannel, fulfilling online and in-person sales and are let to leading supermarket operators in the UK and Europe.
The Company’s properties earn long-dated, secure, inflation-linked, growing income. SUPR targets a progressive dividend and the potential for long term capital growth.
