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

Welcome to the Cibus Q2 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead.

Thank you. This is Stina Hök. I'm CEO at Cibus. And with me, I have Pia-Lena Olofsson. It's been a stable quarter for Cibus with increasing earning capacity per share linked to the transactions we made during the quarter. And -- but before I present the result further, I'll just give you a short Cibus presentation for those of you who don't know Cibus before. Cibus focus on grocery properties, and we have now business in 7 countries, Finland, Sweden, Norway, Denmark and the Benelux countries. And we are the sole listed daily goods real estate company in the Nordics. The aim is to create stable and over time growing cash flows. We distribute monthly dividend to our shareholders. Why grocery focus? Daily goods tenants are characterized by the noncyclical underlying business. Food is essential for everyone regardless of the wallet and regardless of the economy and the grocery store often stick to the location over a longer period, depending on the customer habits. At the map shown, every plot more or less representing a grocery store, a place where people every day come and buy food. And this is the fundament for our stable business. This portfolio is a good start to continue growth in existing market and investigate new markets in Europe. The financial summary for the quarter, Pia-Lena will get deeper into that soon, but I would like to highlight that profit from property management per share increased with 7% since last quarter. A few more things I would like to highlight. We had a stable underlying business and increasing occupancy rate. The income has -- the net operating income has increased with 15%, and the occupancy rate is now up to 96.1% from 95.3% depending on both new lettings, but mainly better occupancy rate in newly bought properties and divestment of some vacant properties. We still have focused on letting, especially in Finland, where we have hired 3 people who will focus on leasing and management. And this is also a step from outsourced to in-sourced management. And it's the way both to come closer to the tenants, but this will also give us some cost savings. We have had continued growth during the quarter, 24 properties were closed at a value of EUR 107 million. And as a consequence of those transactions, the earning capacity increased since last quarter up to EUR 1.11 per share, which is an increase of 3% since last quarter. We see a strong capital market. And as all of you probably are aware of, we still have a volatile interest rate market linked to an unpredictable environment with a continued risk of increased inflation. But on the positive side, the banking and capital markets remain stable and are willing to support the business in Cibus. We also in Q2 saw positive market value. During the quarter, property values increased by EUR 2.3 million, so a small increased value change. All markets have stable and/or increasing valuation. We have sold 5 properties and bought 24 properties, and that means that the portfolio now consists of 690 properties. The value is EUR 2.8 billion and net operating income from earnings capacity totals of EUR 176 million, giving a yield of 6.4%, in line with last quarter. The grocery market in Nordic are dominated by a small number of well-established grocery chains, which makes most of the tenants stable and professional. Our tenant mix is intact. with Kesko as the biggest tenant, followed by Tokmanni. Worth mention is that Tokmanni continues to convert the Tokmanni stores to EUROSPAR, which means more focus on grocery than they had before. This is a slide I say I come back to every quarter, but it is important, so I repeat. Stable cash flow is the key for our strategy. And today, 82% of the rental income is coming from daily goods tenants. 94% of the properties are anchored by those grocery tenants and furthermore, 98% of the leases are CPI linked. The average contract length is 5.9 years and more than 90% have net or triple net leases, which make us less sensitive for energy prices and cost increases. The average property is 2,100, which means that the exposure each property per store is relatively small. In addition, we protect the cash flow with a hedging ratio of 96%. As mentioned, we closed 24 properties at an acquisition price of EUR 107 million this quarter, and those properties are located in Finland, Norway, Sweden and Denmark with an occupancy rate of 99.5%. And the anchor tenants are Tokmanni and Lidl in Finland, Rema 1000 in Norway and Denmark and ICA in Sweden. Those properties are generally in a very good standard and are located in established areas where the underlying operations performed well. This acquisition both strengthened the quality and increased earnings per share as shown in the Q2 figures. We have also divested 5 nonstrategic properties with high vacancy, 3 of which are in Finland and 2 in Sweden at values in line with book value, EUR 5.5 million. Those divestments only reduced the net operating income by EUR 92,000 on share basis. So basically, that's 1.7% on initial yield and we see that we can invest those money on better ways. Just some examples of new lettings during the quarter. We proactively developed a K-supermarket together with our tenant, Kesko in Kuopio. And at the same time, we've also signed a long lease agreement with that tenant. We also made a new letting where Alma in Denmark has signed a new lease agreement on a vacant area in one of our properties there. We have much focus on letting going forward.

Well, let me start off by highlighting some key events during the quarter. As Stina has already mentioned, during the quarter, Cibus has acquired 24 properties, the majority of which were announced on the 28th of April. During the second quarter, Cibus also updated its green financing framework, which is in line with the ICMA Green Bond Principle and the EU taxonomy. At the AGM, Cibus removed Nordic from its company name and also appointed Louise Richnau and Stefan Dahlbo as new Board members. At the AGM in June, Cibus increased its share capital to EUR 15 million through a transfer from unrestricted equity. Over to the P& L net operating income amounted to EUR 45.1 million and included a one-off settlement income of EUR 1.3 million related to tenants early vacating a property in Denmark. Administration costs include minus EUR 0.3 million relating to the AGM's approved warrant program. During the quarter, we have recruited 4 employees to strengthen in-house letting and property management, increasing short-term costs but is expected to generate long-term savings by bringing services in-house that are outsourced. Net financial items included exchange rate changes of minus EUR 0.8 million. Profit from property management, excluding nonrecurring items and FX effects was EUR 22.6 million. Property values were slightly higher or stable with portfolio yielding remaining -- yield remaining at 6.4%. Interest rate derivatives contributed negatively due to market rate movements. Looking at the current earnings capacity. Rental income, primarily increased through acquisitions with additional support from indexation. Net financial items increased following acquisitions financing. The new higher hybrid bond cost is fully reflected in the quarter as the bond financed the acquisition completed during the quarter. Profit from property management, excluding noncash items and hybrid bonds expenses increased by 6% year-on-year to EUR 1.11 per share. Looking at the net operating income in comparable portfolio, the impact from changes in vacancy amounted to minus EUR 2.3 million. primarily attributed to the previous announced vacancy in Finland. Rental income from grocery and daily goods segment was positive in the second quarter. The impact from tenant transition was minus EUR 0.7 million, reflecting proactive asset management initiatives that are expected to support future earnings. Indexation contributed with plus EUR 2.1 million. Net operating income in the like-for-like earnings capacity decreased by minus 1.1% to EUR 154.6 million, while acquisitions contributed growth of 13.3%, resulting in a total growth of 12.7% to EUR 176.2 million. Cibus reports its segments by country with Finland remaining the largest market, accounting for 47% of NOI. Denmark was second largest market in the second quarter at 17%. However, this includes the nonrecurring settlement income of EUR 1.3 million relating to a tenant early vacating a property. Excluding this item, Denmark and Belgium each account for approximately 16% of the NOI. Turning to balance sheet. The property value amounted to EUR 2.8 billion at quarter end. Secured debt amounted to EUR 1.4 billion corresponding to a secured loan-to-value ratio of 49.8%. Including unsecured bonds of EUR 308 million, the net loan to value was 59.1%. The EPRA NRV remained stable at EUR 13 per share. Regarding the average remaining lease term, it also continues to be very stable and was unchanged at 5.9 years at quarter end. Regarding funding, the increase in bank loans were primarily driven by the acquisition completed during the quarter, and we continue to see strong support from our banking partners. . On the bond side, we updated our green financing framework to align with the latest ICMA Green Bond principle, reaffirming our commitment to sustainable financing. Regarding hybrid bond, we completed the repayment of the remaining outstanding portion of the previous called bond in April and thereby, finalizing the refinancing process. Cibus is 96% hedged against interest rate risk through a combination of interest rate cap swaps and fixed rate loans. As part of the hedging consists of caps, the negative impact of higher market interest rate is limited, while lower market interest rates have a greater positive effect on earnings, as illustrated in the sensitivity analysis. Looking at our key credit metrics. Remain -- they all remain within our internal targets and covenant levels providing solid headroom. Net debt-to-EBITDA increased slightly to 10.8x during the quarter, and this is typical during acquisition intensive periods as debt increase immediate while EBITDA is built over time. On a forward-looking basis, net debt-to-EBITDA was 10.1x. Cibus continues to advance its energy transition with an increasing number of properties being converted to renewable heating solutions, resulting in lower emissions. At quarter end, the value of Cibus's Taxonomy-aligned assets amounted to slightly more than EUR 1.1 billion. Before I hand over to Stina for closing remarks, I would like to say a heartfelt thank you. During my 7 years as CFO at Cibus, I've had the pleasure of meeting and working with many of you. Throughout transactions, financing activities, quarterly reports and countless analysts and investor meetings. What I will remember most is the open dialogue and insightful discussions that we've had. And I'm grateful for your engagement and support. It has been a privilege to share this journey with you. So thank you, and over to Stina.

Thanks. And thank you, Pia-Lena. And on behalf of Cibus,, I would like to thank you for really good and important job and great commitment until the last day. So thank you and good luck. And focus forward, we will still have a focus on profitable growth and increasing profit from property management per share. We will continue to work with the refinancing and hedging to keep stable cash flow. We will continue to work to build offices in our market. And it is with a presence close to the tenants in the market we continue to create the business. We will continue to develop our business and evaluate business with ambition to grow further in a sustainable and both sustainable and profitable way. Thank you. Now time for questions.

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

So firstly, on the early termination in Denmark, what can you tell us about the sort of reason behind the early termination? And what prospects do you see for reletting the premises?

We -- I mean the reason that just that they wanted to do it's a discussion between us and the tenant. But for us, it was -- we see this a good in a way since we got the whole contract length with rents right at once. And we also see we have a good possibility to let those areas going forward. So we've already started that work in our -- we have -- you could never know, but we have a good feeling about that.

Okay. And what is the current rental value of the property? .

I don't have that figure exactly in mind. You can -- If you want, you can send an email an e-mail and I can have a check on that.

Okay. Sure. And then on the NOI margin, very strong development Q-on-Q, what can you say about this? Is there some one-off effects here? Or how should we think about this going forward?

Yes. Well, as we said, I mean, we do have the one-off of EUR 1.3 million for the vacating in Denmark, which is affecting the NOI, of course. .

Yes. But I think even adjusting for that, the margin is quite strong Q-on-Q. Is it not?

Yes. Yes. But you need to adjust for that as well. But it's fairly in line, if you adjust.

Okay. And then the final question on M&A. You have EUR 50 million on the balance sheet in cash now, how should we think about the deployment of this over the coming quarters? And yes, let's start there.

Well, we will try to deploy it as good as we can always. And so I cannot really kind of say more than that.

Okay. Where -- or first maybe the LTV is 59%, now 59.1%. You have a target range of 60% to 65%. I believe. Where do you want to be sort of in the midterm?

Yes. If you look to the slide where we show the LTV now and backward, you see it's been just beneath 60%, and I think that's where we should stay going forward as well. So I mean, if you are kind of thinking how should we grow going forward, I will say that, I mean, there are different possibilities. Where we are now, we could kind of sell properties and employ capital with new profitable transaction. We could through emissions and profitable transactions or payment in kind or -- so that's the way I see it going forward. And it's not always -- I mean there is always possibilities. Sometimes, it's not that easy, but if you continue the work and dig deep, you will sooner or later find a path forward.

The next question comes from Veronique Mertens from Van Lanschot Kempen.

I was coming back to the lease terminations -- termination. Is this already included in the current vacancy number? Or will this still go up? And maybe on top of that, do you expect any other larger terminations in the coming 12?

I mean it was vacated during the quarter. So I mean, in the economically vacancy of course, it's only a little bit there so to say because we received rents most of the quarter. And then, Stina, would you like to comment on.

Yes. Going forward, no, we don't, I mean, we have always discussions with our tenant about what's going on and so on, but it's not like if there were any major things going on, we need to, of course, say something about that and it's not.

Okay. And then the scene maybe on the investment market, so there's quite some activity in your different markets, but could you provide some color to what extent specific asset portfolios are actually of interest for Cibus in terms of location and pricing. Is there enough opportunities for Cibus out there?

Yes, there are definitely opportunities. As I said before, if you work hard and dig deep, you always find good opportunities. And it's been -- we have so many countries, so many smaller markets and bigger markets in those countries, and we have lots of people out there looking. So we have a pipeline that we are comfortable with and we always have. Then, of course, you never know where you could be able to buy or you could -- you never know about that. But as long as you keep on trying and be in the market and so on, you sooner or later find something that strengthen our portfolio.

And are there any regions that stand out in terms of opportunities? Or is it more widespread across the portfolio?

No, I wouldn't say so. I think we have all the market in mind, and it depends on so many things. So no, I shouldn't say that.

The next question comes from Stéphanie Dossmann from Jefferies.