Supermarket Income REIT plc (SUPR) Earnings Call Transcript & Summary

Good afternoon. It is my pleasure to welcome you to the Annual General Meeting of Supermarket Income REIT plc. It is now 3:00 p.m. the time appointed for the meeting. My name is Nick Hewson, the Chairman of the company. Under the company's articles Of association, the quorum for an Annual General Meeting of the members is 2 members present in-person, by proxy, or in the case of a corporate member by duly authorized corporate representative. I confirm that a quorum of members is present, and I, therefore, declare this meeting open. With your permission, I'd like to take the notice of the meeting as read. Are there any objections? As there have been no objections, I will take the notice of the meeting as read accordingly. I'd like to note for the record that the record date and the deadline for receipt of proxies, as stated in the AGM notice, was 3:00 p.m. on Monday, November 22, 2021. I am pleased to welcome you to our first hybrid meeting, with attendance possible either physically or electronically. In order to maximize the engagement of all shareholders, we have made arrangements to allow shareholders to participate in the AGM electronically and live via the Lumi platform through which they are able to ask questions and vote online. I'd like to introduce now my fellow directors to my left, Jon Austen, and to my far left, Vince Prior, and on my far right, Cathryn Vanderspar. To my immediate right is Ben Green, Principal of our investment adviser, Atrato; and we are also joined in the room by our other professional advisers. Before turning to the formal business of the meeting, we'd like to take the opportunity for our investment adviser to provide a brief presentation to shareholders. And following this, we, the directors and the investment adviser, are happy to answer any questions you may have about the presentation or the resolutions. If you are participating via the Lumi platform, and wish to ask a question, please select the messaging icon from within the navigation bar and type your question at the top of the screen to submit your question, click on the arrow icon to the right of the text box. Following the presentation, a representative of the investment adviser will then take questions from the floor. And following this, read out the questions asked via the Lumi platform and the investment adviser and the Directors will endeavor to respond to these questions. The company will not answer questions if, a, to do so would involve the disclosure of confidential information, or b, the answer has already been given on a website in the form of an answer to the question, or c, it is undesirable or not considered by the directors to be in the interest of the company to do so. Shareholders are requested to restrict themselves to 2 questions or comments initially, and further questions will be considered if time permits. Questions and comments may be moderated to avoid repetition and to make them more concise. There may not be sufficient time available to address all the comments and questions raised during the meetings. After questions have been answered, I will ask you to vote on the resolutions. And I will now hand over to Ben Green for the presentation.

Thank you, Nick. I'm pleased to present to you, after a busy year for Super, I'm going to take you through some slides on Super's performance, the portfolio, the grocery sector in the U.K. and our progress on ESG. Turning to performance, as you can see top left, we've grown Super to achieve scale and diversification. At the same time, we've grown the dividend every year by inflation, NAV or NTA per share has also grown every year, and we've achieved a 39% total return for shareholders since the IPO. Turning to the portfolio. You can see that we now have 37 stores with a valuation of GBP 1.3 billion. They're valued at a net initial yield of 4.7%, and that leaves plenty of room for further yield compression. Looking at the portfolio in some more detail, you can see that we have broad exposure across the U.K. grocery sector and with 15 years on average remaining on our leases and 83% of our rental uplifts linked to inflation or fixed uplifts, we have a very secure long indexed income. The U.K. grocery sector continues to be very supportive for Super. Grocery sales, as a whole, are still up 9% versus 2019, so the last normal year, pre-pandemic. Online growth in grocery sales has far outstripped physical store sales. But of course, in online grocery, it's all about in-store fulfillment. So that means that our omnichannel stores have grown ahead of the general grocery market with sales up 16%. So why is it all about in-store fulfillment in online grocery? Well, it benefits both the operator and the landlord. So from the operator's point of view, omnichannel stores have higher sales. They enhance productivity and they lead to greater operational value. From our point of view, as the landlord, we also benefit. So we get higher rental values, the operator invests in our store, and all of this leads to higher capital values. I'll take you through the progress on our ESG initiatives now. So we've made good progress here. We started by asking our key stakeholders what mattered most to them, and they identified for us 8 areas to focus on. Unsurprisingly, building energy ratings came top, and so we've carried out a review of all of our EPCs alongside our tenants. And you can see that now 70% of the portfolio is rated C or above. Our tenants continue to invest in the sustainability of the buildings because they themselves have very stretching sustainability targets. And so we expect these ratings to continue to improve. And you'll also notice that we've received, on the governance side, and EPRA Gold award for the third consecutive year. Finally, I'm delighted to say that Super was recognized last week with an investment company of the -- investment company of the year award, sorry, and this is recognition of all of the progress we've made since IPO. I'll now hand back over to Nick.

Thank you, Ben. We'll now deal with questions that can be asked by our shareholders, both here in the room and online. We'll invite questions from the floor first. And following this, we'll read out some questions that have been asked to us by the Lumi platform. If you are in the room and our shareholder or duly appointed corporate representative, or duly appointed proxy and wish to ask a question, please raise your hand.

I was wondering if you could explain the dividend policy, please?

Ben, would you cater, in large?

Yes. So we've increased the dividend every year since the IPO by inflation. What we mean by that is it's the inflation that we actually realize on the rents through the rental uplift. And so going forward, we expect that, that dividend will continue to increase by the inflation uplift that we achieved on our rents.

Thank you, Ben. Does that help? I think there's no further questions from the floor. It will be helpful to have a look through the questions on the platform then perhaps.

Yes. There are no questions at the moment. Should we wait a moment and just see whether -- someone to ask a question.

I think we've actually got 6 online guests, so it'd be quite useful to see one of them. But for next year, we'll definitely make sure there is a question from the platform.

So we have no questions online.

In view of that, we will move to the vote on the resolutions, which will all be voted on today by way of a poll. I will now formally propose the resolutions to the meeting. The full texts of each of the resolutions is set out in the notice of the meeting, a copy of which will have been received by members and those present. As the notice of the meeting has been taken as read, I will not read out the resolutions in full. Resolutions 1 to 11 and Resolution 16, each require a majority of over 50% and Resolutions 12 to 15 inclusive and 7 to 19 inclusive, each requires a majority of at least 75% of the votes cast by those shareholders voting either in-person or by proxy, or by a duly appointed corporate representative to vote in favor of the resolution in order for it to be passed. If you are participating via the Lumi platform, once I have formally opened voting, the list of resolutions will automatically appear on your screen. Select the option that corresponds with how you wish to vote. Once you have selected your vote, the option will change color and a confirmation message will appear to indicate that your vote has been cast and received. There is no submit button. To vote on all resolutions displayed select the Vote All option at the top of the screen. To change your vote, reselect your choice. To cancel your vote, cancel the select -- select, indeed, the cancel button. You will be able to do so while the poll remains open. Online voting in the poll will remain open for 10 minutes following the conclusion of this meeting. Those in the room may vote using the poll cards handed out by the registrar at registration. Only members present in-person or by corporate representative or by proxy are entitled to vote. I'd like to draw your attention to some procedural points. If a person is proposing to vote in more than 1 capacity, say as a member present in-person, but also as a proxy or corporate representative for another member, or to vote as proxy or corporate representative for more than 1 member, or to vote different parts of a holding in different ways, would they please use separate poll cards. Please speak to our registrar in order to obtain these. Those members present in-person or by corporate representative who have already lodged proxies need not vote on the poll unless they wish to do so because their votes, as recorded on the proxy forms, which they have already completed, will be counted in the poll. It would help the registrars who have to check against double counting. If they did not complete the poll cards, which were handed out at registration, or used the Lumi online voting system. A member is not obliged to use all their votes. If you are using a poll card and do not know the amount of ordinary shares held by you and nevertheless want to cast your vote in the same way in respect of your entire shareholding, you may leave the number blank. It will be checked against the register. It is not necessary for you to insert the number of shares held, provided that the vote is being cast in respect to the entire shareholding. If you do not know the amount of ordinary shares held by you, or if you want to cast your vote in different ways in respect of different numbers of shares, please speak to the registrar. Any member who appointed someone other than the Chair as their proxy need only complete a poll card if their proxy is not in attendance, or if they wish to change the way in which they directed their proxy to vote. Will members or corporate representatives or proxies representing members, please, write the member's name in block letters on the poll card, including, if applicable, the names of all joint holders. In the voting sections mark the appropriate box with an X, state if you are voting as a proxy and sign the form. Once you have completed the card, please return it to the registrars for verification against the register and for the recording of the total votes. Just to remind you, you have 3 options for the resolution. You can vote for the resolution, against the resolution or you may withhold your vote. A vote withheld is not a vote in law and will not be calculated for -- in the proportion of votes for or against a resolution. I now declare the poll open, both in the room and via the Lumi platform. As mentioned previously, voting online will remain open for 10 minutes following the conclusion of the meeting. [Voting]

The results of the voting, including the proxy votes on each resolution will be announced through a regulatory information service and published on our website as soon as reasonably practical. There therefore, being no further business, I declare the formal part the meeting closed, and thank you all very much, indeed, for attending. Thank You.