Atrato Capital on Supermarket Income REIT’s growth strategy; benefits of internalisation

Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF) fund manager Robert Abraham and finance director Michael Perkins take Proactive's Stephen Gunnion through the company’s interim results for the six months to December 2024.

Abraham highlighted the company’s strategic progress, including cost reductions through the proposed internalisation of its management team, asset disposals, and lease renewals. He noted that a recent disposal to Tesco demonstrated the value of these assets, selling at a 7% premium to book value. The lease renewals extended three short-term leases to 15 years at significantly higher rental rates, reflecting the strong demand for top-performing supermarket assets.

Discussing financial benefits, Abraham explained that internalisation is expected to save the company £4 million annually, strengthening earnings and dividend cover. He also mentioned plans to explore a potential listing change to attract more investors and enhance capital access.

Perkins outlined the financial performance, noting a 10% increase in net rental income to £58 million and a reduction in the upper cost ratio to 13.6%. Earnings per share rose by 3%, and the portfolio’s like-for-like valuation grew by 0.5% to £1.8 billion. The company’s loan-to-value ratio stands at 38%, ensuring financial flexibility for future strategic initiatives.

Looking ahead, Abraham said Supermarket Income REIT will focus on completing the internalisation, exploring a listing change, and advancing strategic joint venture discussions. He also mentioned refinancing plans, considering long-dated bonds to align with the lease profile.

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