Cibus Nordic Real Estate AB (publ) (CIBUS) Q4 FY2025 Earnings Call Transcript & Summary

Welcome to the Cibus Q4 2025 Report Presentation. [Operator Instructions] Now I will hand the conference over to CEO Stina Lindh Hök and CFO Pia-Lena Olofsson. Please go ahead.

Hello, and welcome to the Cibus Q4 presentation. My name is Stina Lindh Hök, CEO of Cibus. And with me, I have Pia-Lena Olofsson, CFO. To start with here, I just want to say that I'm glad that I had that opportunity to continue to develop Cibus. I have followed Cibus for several years, and I've been with the Board for the past year. And I do believe that the company has a very interesting business idea and also is in a very exciting phase. For those who don't know me, I have most recently been CEO of Nyfosa, listed on Large Cap. And during my time at Nyfosa, we have a strong focus on growth and constantly building stronger cash flows. And during the time I was there, we grew from SEK 15 million to SEK 40 million with focus on increasing cash flow per share. Cibus has a unique business concept, converting food into yield, which means that the company mainly focuses on grocery properties and are the sole listed real estate company in the Nordics. The aim is to create stable cash flows and monthly dividend to our shareholders. The company has been listed since 2018 and has grown from owning food properties only in Finland to having operations now in 7 countries, Sweden, Norway, Finland, Denmark, and the Benelux countries. This platform is a good start to continue growth in existing markets, and we also look into new markets in Europe. And my ambition is to continue this growth journey. In Q4, we see increasing income and operating income for 2025. But what I like to highlight is the profit from property management that has increased to EUR 0.25 per share, an increase of 25% compared to 2024. Another thing to point out is that we have a positive unrealized value change of EUR 7 million with an unchanged yield of 6.4%. And Pia-Lena will continue to go through the results more in detail. But some key facts. As I said, strengthened profit from property management increased by 25% compared to Q4 2024. And that improved profit from property management is partly a result of lower interest rate and better margins in the credit market, but primarily a result of the earnings accretive transaction that we made over the year. So, it's basically that the work from the team over the last year is now shown in the results. During the fourth quarter, we also bought properties acquired in Sweden, Finland, Denmark, and Belgium at a value of EUR 136.2 million. And I will give you some more flavor on that later on. We also had an increased earning capacity, increased up to EUR 1.8 per share, and the step into Benelux that had been a significant part of that growth but also the acquisitions in our existing market have been and are important part of the work to grow earning capacity. Increased local presence, Cibus had properties in 7 countries now that said and we continue to grow. We also would like to build up new offices in each market. We are kind of replacing consultants' step-by-step. During this year, the office in Denmark opened, and we have now our own employees in all markets except Norway. And I believe with presence, we can become even more proactive in helping our tenants, and we can get close to the market. And when you get closer to the market, more opportunities also arise. Worth to mention is also the bank issue. We continue to see a strong credit market which has also been demonstrated after the quarter by Cibus refinancing and issuing new bonds totaling of EUR 85 million. The margin was 2.1%, and actually, the lowest Cibus has received so far on a 4-year bond. And finally, the Board proposes an unchanged dividend of EUR 0.9 per share with a monthly dividend as before. This means that we continue to distribute a high part of our cash flow but also keep some money for the future investment. Last year, this time, Cibus had a portfolio of -- or in Q3 -- Q4, Cibus had a portfolio of 483 properties. Today, the number is 672 with a value of EUR 2.6 million. And here, you also see on the slide that Cibus tenants mainly consist of well-known and established grocery players in our different countries. Stable cash flow is the key for our strategy. Even though the portfolio has grown during the year, still 81% of our rental income comes from daily good tenants, and still 95% of the properties are anchored by grocery tenants. Furthermore, 99% of the leases are slightly linked, and the average contract length has increased to 6 years in Q4. More than 90% have net or triple net leases. And also worth mentioning is that the average property is 2,100 square meters, which means that the exposure to each property or each store is relatively small. And also, in addition to protect cash flow, we also have a hedging ratio of 98%. And capacity increased, as I said, up to EUR 1.08 per share. And the aim is to continue accretive growth. It's about constantly trying to find opportunities. We will continue to work close to the market and search for deals. And this is how we will and shall continue to grow in form of increased earnings per share, but also in form of increased profit from property management per share over time. We've seen activity in the leasing work over the year and grocery tenants rarely move, but there is always some ongoing new and relocation work, and in 2025, 20 leases were signed for a value of EUR 3.3 million. There are always also a number of ongoing projects linked to reconstruction, conversion of premises or energy savings. And normally, we also sign new agreements in connection with this project. The lease length has increased to 6 years and the occupancy rate was 95.7% in Q4. And you also see here an example of this where we proactively replaced K-Citymarket with a Puuilo in Finland and at the same time, increased the length of lease with 8 years. And just some information about the new acquisition that we made since my start. We have acquired 11 properties through 5 transactions in 4 of our existing markets, Sweden, Finland, Denmark and Belgium. And each of those deals has been found with contacts in each country. So that also shows the importance of being present. As you also see here, there are some nice hedge on properties on the portfolio. We have ICA in Sweden and Axfood in Sweden. We have Netto in Denmark and Ahold Delhaize in Belgium. And we also include new construction with Tokmanni. And all these properties have double net lease structure, and the average contract length is 11.6 years. And this is actually an example of how I hope, and I believe that we can continue with transactions going forward, use our existing platform to find the right opportunity. Okay. Over to you, Pia-Lena.

Thank you. So, let's start off with some key events during the fourth quarter. We made 2 caps on bond loan 108 at a margin of 210 basis points for a 3.3-year bond, which was the lowest margin to date. Cibus then acquired the remaining shares in the joint venture One+ and became the sole owner. At the same time, we established a new 50-50 joint venture with a developer, securing the right of first refusal on Belgium retail projects. And then as we know, Stina Lindh Hök was appointed CEO of Cibus. The 19th of December, we acquired 11 properties, as Stina mentioned just now across 4 countries. After the period, we have refinanced bond loan 105 at a lower margin of 210 basis points from 400 basis points and at a longer maturity of 4 years. The Nomination Committee has proposed that Louise Richnau and Stefan Dahlbo becomes new Board members at Cibus. All other Board members are proposed to be reelected, except Mr. Nils Styf who has declined. Looking at the P&L in more detail, the net operating income amounted to EUR 41.7 million. Administration costs include a nonrecurring agreed remuneration to the former CEO of minus EUR 0.8 million. Exchange rate changes amounted to minus EUR 0.4 million. So, profit from property management, excluding nonrecurring items and exchange rate effects was EUR 20.5 million. Unrealized changes in value of properties was plus EUR 7 million. During the quarter, all countries, except Finland, recorded stable or increasing property values. The value uplift was mainly due from completed acquisitions and lower vacancy assumptions. In Finland, values declined due to expectations of longer lease cycles and the low CPI index adjustments driven by low inflation. Current tax includes a one-off of minus EUR 0.3 million related to exit tax in Belgium in connection with the merger. Earnings for the quarter was EUR 27.3 million or EUR 0.33 per share. The current earnings capacity shows a net operating income of EUR 167.7 million, an increase of plus 37% compared to the 1st of January 2025. And this is mainly due to acquisitions but also CPI index increases. Administration costs increases mainly due to new acquisitions, but also due to continued investments in building. Profit from property management was EUR 88.3 million or EUR 1.08 per share, an increase with plus 9% compared to a year ago. Looking at the net operating income in our comparable portfolio, the increase in vacancy during the fourth quarter was primarily attributed to our previous communicated property in Lahti Finland, where Kesko has vacated. Leasing activity is high, as Stina mentioned, with more than 50 new retail leases signed during 2025, of which EUR 1.9 million will commence after the 1st of January 2026 and is not yet included in the like-for-like. Index increases was plus EUR 1.2 million. We have low inflation and thus low CPI index increases, especially in Finland. Like-for-like NOI decreased with minus 2.1% to EUR 119.6 million. The NOI grew with plus 39% due to acquisitions. So, the earnings capacity strengthened significantly with total NOI up plus 37% to EUR 167.7 million. So, these segments are countries. Finland remains our largest market, accounting for 48% of NOI, although it's lower than the 68% reported in Q4 last year. Belgium is now the next largest market with 16% of NOI, followed by Denmark with 14% of NOI. Moving on to the balance sheet. The property value amounted to EUR 2.6 billion. Secured debt totaled EUR 1.3 billion, resulting in a loan-to-value on secured debt of 49.9%. In addition to this, Cibus has unsecured bonds of EUR 275 million. The net loan-to-value was 58.2%. The EPRA NRV was EUR 13 per share, up EUR 1.3 per share since Q4 last year. The WAULT increased to 6 years at the end of the fourth quarter. Cibus is an active landlord that continuously extend lease agreements with its tenants. The WAULT has been very stable, as you can see in the graph below. Over to funding, average interest rate was at 4%, down 0.2 percentage points from last year, supported by low margins on refis, financed bank loans and bonds. For the fourth quarter, however, it was an increase of 0.1 percentage points on the average interest rate due to a maturing low-rate interest cap that was replaced with a higher interest rate cap. At the end of the quarter, we have a record low average credit margin of 1.7%, and we have extended our average interest fixing to 2.7 years. We have also been active on the bond side, as I mentioned before, doing 2 taps on the loan 108 million and after the period, refinancing a bond of EUR 50 million with a new EUR 85 million bond at a lower margin, which went from 400 to 210 basis points at a longer maturity. For Cibus, stable cash flows are very important. 98% of our external loans are hedged. Interest rate sensitivity shows that a reduction of market interest rates have a greater impact on earnings than increased market interest rates since a large part of Cibus hedges are interest rate caps. An increase of market interest rates with 1 percentage point would affect earnings by minus EUR 0.8 million annually, while a decrease with 1 percentage would affect positively with plus EUR 4.5 million annually. Looking at our key credit metrics, the net loan to value, the net LTV was stable at 58.2%. Net debt to EBITDA increased to 7.9x, reflecting that debt is added on day one, while EBITDA is built over time during an acquisition intensive period. On a forward-looking basis, the net debt to EBITDA was 10.1x. The interest coverage ratio strengthened to 2.4x. For Cibus, as I mentioned before, stable cash flows are essential as they enable us to deliver monthly dividends to our shareholders, something that we have done consistently since September 2020. The Board proposes to the Annual General Meeting an unchanged dividend of EUR 0.90 per share paid out in 12 installments. The Cibus share is a liquid share trading at 1.7x its market cap annually, which is more than 112% above the average liquidity of other large real estate companies listed at Nasdaq Stockholm. During the quarter, Cibus continues its sustainability work by deepening tenant collaboration, expanding green lease clauses and installing additional solar panels now on 80 properties. Cibus progresses on climate-related investments such as roof insulation and ventilation and is phasing out natural gas in Finnish properties to strengthen long-term portfolio resilience. We also continue with community-orientated initiatives to support local social sustainability. Over to you, Stina.

Okay. The strategy will stay firm. Cibus will continue to invest in food and grocery properties with stable cash flow and which also means limited exposure to economic cycles. Cibus will continue to grow. We see opportunities in existing markets. And in parallel, we are evaluating new markets in Continental Europe. We will continue to work with refinancing and hedging to keep stable cash flow. We will build up offices in all markets. It's with presence, we continue to create business, both with our tenants and also transactions in the market. We should focus on property management per share. Profitable growth with accretive transactions, which will increase both earnings capacity per share, but also in a longer perspective profit from property management per share. So all-in-all, continue to grow and develop Cibus in line with them converting food into yield. Thank you. And now we open up for questions.

[Operator Instructions] The next question comes from Oscar Lindquist from ABG Sundal Collier.

I was wondering, could you give some more detail on what's the driver behind the increased vacancy. It seems to be the Finnish portfolio mainly.

We can do that. That's mainly a property that we have announced earlier this year, Lahti, which was vacated in Q4.

Yes, I just wanted to point out that the economic occupancy rate has actually increased to 95.7% end of the second quarter. But if you refer to the like-for-like, as Stina mentioned, that is mainly attributed to that single property in that we have communicated earlier where Kesko has vacated during the quarter.

But sort of underlying in the Finnish market based on what you know today in terms of lettings, how do you expect occupancy to develop?

I do think, I mean, I've been over there and seen all the properties in the latest month. And I mean, I'm positive for the market in Finland. I mean, they are tenants who are well-functioning and happy. There are a few discussions, which may be a few tenants leaving smaller ones, but then we also have new tenants coming in. But of course, there could be some kind of month between. But I expect it, to be honest, pretty stable over time.

So, expect underlying development and occupancy in Finland to be stable. Is that?

Yes, that's what I expect. Of course, it's really hard to -- We don't know what's happened going forward. But for me, it's like there are always a few discussions, but I expect it to be pretty stable going forward.

And then just jumping over to values. You mentioned that lower vacancy assumptions drive values in a positive direction, and then that value changes in Finland are negative. Could you give some sort of indication on volumes here?

I mean, it's not a huge difference in any market in that sense. The yield on the portfolio is still unchanged at 6.4%. But they are slightly, or they're negative in Finland, as we said, due to longer expected lease cycles, and then positive in other markets, but it's not dramatic in any of the markets, so to say.

And it's a few properties that are valued lower. It's not the whole market.

Yes, we can say that. As we said, it's one of those that has been vacated.

And just on the earnings capacity, firstly, is the softer NOI margin. Is that driven by the slightly higher vacancy? Or what's driving that?

What do you mean by softer? I'm not really sure I got your question.

So, the NOI margin in the earnings capacity as of Q3 was 94.7%. It's now at 94.3%.

Yes. It's just a small change, as we said, I mean it's due to that we also have some investments in building Cibus going forward. But it's fairly stable. It's not a large difference between the quarters.

And then, just finally, on announced acquisitions and the earnings capacity, what effect could we expect from announced acquisitions that you have not yet taken possession of January 1?

Yes. I mean, we have the property in Finland that is being built. And of course, that is not in the earnings capacity yet. Otherwise, we have taken possession of them. And then, of course, many of the 11 properties that we acquired in December just slightly gave revenue during the quarter. But they are in the earnings capacity, of course, because then we have taken possession of them. And as you know, the current earnings capacity is a snapshot.

And the property being built now, what rental income is expected from that?

We haven't guided on that.

No, I'm not, to be honest, we can look at it. I don't know that in my head.

The next question comes from Svante Krokfors from Nordea.

A couple of questions. First, you're present in 7 markets, and you are still looking at new markets. What should we expect there? What kind of markets are you looking at? Is it fair to assume it's the northern parts of Germany? Or is there something else that you have on your map?

Well, when it comes to growth and new possibilities, we will, as I said, both go into our existing markets and look into Europe. I mean, for me, it's not about growing for the sake, we should do it the best way we can. So, if we find better opportunities in existing markets, and I would say that we start there, but we will and are looking into new markets in Europe, and it's not here a specific market because we are really looking into, I would say, a few of them. And if something comes up there, those who are interested, we are absolutely there as well. But I will not give you a specific country because we don't know that yet.

That's fair. Then, do you have some comments on the transaction markets and yields in the countries you operate in, perhaps mainly Finland and Sweden? What kind of market activity do you see there?

I think there have been more and more parties in the market wanting to buy grocery stores, no doubt about that. And you need to be close to the market. And I do also think that since we are a long-term owner, we'll be seen that it's been, I mean, profitable for us because they really want to have a long-term owner when they sell. So, it's an active market. We saw a few transactions in Finland. We have also seen in Denmark, and there are also a lot of portfolios out there. And normally, we see a lot of parties in that. So, we need to continue to look and be there to find the best of those, so to say. But, as we see now, we have opportunities in every country.

And then regarding your loan-to-value, 58.2% in Q4, below the midpoint at 58.2%. How do you look at where you want to keep that LTV? I guess it also has to do with the fact that your share is now trading at a smaller EPRA NRV premium compared to where we were 6 months ago. So, are you ready to increase the LTV further from the current levels?

No, that hasn't changed. We still have, I mean, we shouldn't care about 60. You've seen the limitation between EUR 55 million to EUR 65 million, but we still think that EUR 60 is a good figure to be below.

That's clear. And then in your earnings capacity, if we come back to that, the property expenses increased by 10% or EUR 0.9 million. That's quite a big increase compared to the top line increased only with the new acquisitions. So, could you elaborate a bit on that increase?

Yes, sure. I mean it's a little bit different combination, so to say. Some new properties have come in that, as said, are double net and not triple net. So of course, it makes a difference in the property expenses as well in that sense that there is a little bit different composition in that sense.

And then a question to Stina directly. Anything you want to -- obviously, you have been involved in the company for a long time, but anything you feel that you would like to change in your CEO role?

No, as I said, the strategy stay firm, and we will continue the growth story. Of course, there are always -- I mean, the team, I would say, is really forward-looking and really good. So, it's not like something that there are always some smaller changes that you do when you come in, but the strategy will stay firm and the aim to growth and it's the same. So, there is no change there.

The next question comes from John Vuong from Van Lanschot Kempen.

Just following up on the question on the investment markets. Are there any specific regions that you are more excited about going into '26?

It was a little bit low sound. Did you ask if we should increase in any specific market?

Yes, indeed.

As I just also said, we are looking in all the markets that we are already in. It's easy to make transactions when you are in the market, you know them better. So, if we find possibilities there, we will try to grow those markets, but we also look into new markets all the time, and we have a pipeline in Europe as well. But that's, of course, something that takes some more time, and we always need to dig a little bit deeper when we take the next step. And it's all about having the best transactions, not growing for the growth.

So maybe to ask it differently, looking at your acquisition pipeline or the opportunities that you see, is the geographical split basically the same as how you are right now? Or do you see, for example, more opportunities in Norway going into '26?

I would say it's very spread. The opportunities we see them in all markets. So, I can't really guide you on that because it's basically on every market. The good thing about it is that you can choose. We take the ones that are the best for the moment.

There are no more phone questions at this time. So, I hand the conference back to the speakers for any written questions or closing comments.

Yes, we have some questions from the web. How are you going to make Cibus a better company?

I mean, a company should always develop. And I think what we should do is to build -- what we can do better is to build up our own offices to be even more competitive, both for tenants and both for new transactions. So that's what we will continue to do as I said. And also, of course, being very close to the market and always, I mean it's about finding the right opportunities going forward. So, that's what I will focus on going forward.

Yes. And we have another question here. What will happen with the vacated Kesko Lahti asset in Finland? Do you expect this to be occupied again in 2026?

Well, we had a lot of discussion on that one, but it's really, really hard to say if it will end. It's a bigger property and you want to find the right solution. So, I don't know about that, to be honest. The discussions are on, but how it will end, I don't know.

Yes. And it was vacated mid this quarter or so.

Yes, it's been vacated for just a month or 2 so.

So, I think we have covered the rest. So, I think there's no more questions.

So, thank you for listening. And if you should take one thing away from this presentation, it is that Cibus has the highest ambition to continue to grow stable cash flow within the rest of the sector. Thank you.

Thank you.