Supermarket Income REIT (LSE:SUPR) Q4 2025 Earnings Call

0:00 Good afternoon and welcome to the Senior Market Income REIT plc 4 Year Results Investor Presentation. Today's call to presentation, investors will be in listening mode. Questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. You simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can view all the questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following poll. I'd now like to hand you over to Rob Abraham. Good afternoon, sir.

0:28 Thanks Alessandro. Good afternoon everyone. Thank you for dialling in for our results presentation. You can see on the page here the headline we've been running with is it's been a transformational year and I think we've got a really positive story that will take you through. I'm Rob Abraham, CEO of Supermarket Income REITs. I'm joined by Mike Perkins, CFO and let me firstly take you through some of those highlights from the year that, as I say, has been transformational. We've demonstrated alignment with shareholders, we've been demonstrating asset values and we've been demonstrating affordable rents and those three items have really helped us to drive value for shareholders and we've seen a corresponding reaction in the share price. So that really has been achieved by delivering on our key strategic objectives.

1:23 Firstly, lease renewal. These were done 13% above our value as ERV Revenue Revenue Revenue Revenue

2:47 And the material cost savings from internalising the management means that we're now targeting an EPRA cost ratio below 9% and materially improved dividend cover. A strategic joint venture, that's a £403 million partnership with Blue Hour Capital. and that has released proceeds for us alongside as part of our capital recycling strategy alongside other disposals that we're now able to deploy into accretive acquisitions. Debut bond issuance, this is something Mike and the team worked hard on just in July which is a £250 million six year unsecured bond for the first time And then lastly, changes to our listings.

3:40 So the secondary listing on the Johannesburg Stock Exchange and the commercial companies categories, we changed to that category. That just allows us to appeal to a broader range of investors and enhance liquidity in the shares and we're starting to see the benefits of that come through now. So I think if you were to take And all of that's been achieved at a time when super's investment case is as compelling as it's ever been. We're operating in a defensive sector. Grocery is non-discretionary spend and that just means it's resilient through economic cycles. We've got strong tenants which are the leading and largest grocery supermarket operators and that means we're providing stable and predictable income and we've got 11 year walks on our leases.

4:48 The portfolio we own is of mission critical last mile omnichannel fulfillment hubs so these are critical assets to our tenants and those stores are seeing growing like for like sales and that just provides for our own rental increases coming through as landlords being sustainable. We've also got a cost efficient shareholder aligned team of sector specialists now following the internalisation and bringing all that together means we're now positioned for growth with a very attractive pipeline to deploy capital into. On that I will hand over to Mike to take you through the numbers and then I'll come back to the strategy.

5:33 Great, thanks Rob, good afternoon everybody. If we start with the highlights for the year, set out on this page, £150 million in net rental income, that does include our joint venture rents, that was up 7.3% year on year. As Rob mentioned, the internalisation has started to deliver cost savings, so you can see the upper cost ratio is down to 13% and we'll jump into that in some more detail later on in the slide deck. We've declared dividends of 6.12 pence which is up 1% Portfolio Evaluation of 1.6 billion was up 1.9% on a life-life basis and FNTA was a 10.1 pence which was broadly flat over the year but we'll take you through the evolution of NAS since June 24 later on in the slide deck and total accounting return of 7.2% So looking at Revenue Income in greater detail as mentioned 7.3% increase year-on-year set out in this chart is the drivers of that of that growth you can see 1.9 million pounds growth coming from uh like for life growth we we've completed 45 rent reviews across the year and they've settled an average uplift of 3.4% 8.6 million pounds coming from acquisitions.

6:56 Now that reflects in part four years of income from assets we acquired in 24 and also some revenue coming through from assets we acquired in the current financial year. And the disposals of the Tesco Newmarket MDR joint venture disposal starts in 2.2 million pound reduction in rent but that is a par year impact and we'll take you through the next slide the impact, the full year impact on parsing rent as a result of those transactions. graphics on the right you see 100% occupancy 100% rent collection again really gives us an unscored by our asset quality and tenant base and we have predominantly single net assets so there is raised income leakage free to credit charge avoid costs and you can see 9.3% gross net rent ratio it is one of the highest across the sector So just to go into a slightly more detail around the impact of disposals and passing rent, so we set out on this idea that the movement in passing rent from June 24 to June 25 due to the fee for the first charge of £1.4 million of growth coming from acquisitions and like the like, like the low growth, the new market disposal resulting from the buying of accounts reduction in rent income, the proceeds of the new market disposal, past the proceeds were used to fund the management termination, and that was under 19% of the open costs. And then the final chart, or bottom chart, in May 25, the nationality of £40.3 million reduction in past events, but what that

8:29 transaction has unlocked is that we can now receive £300 million net proceeds, the disposal was 6.6% in initial years and now it's down to 3% in pre-exploitable years. The set-up here on this item is the evolution of the annual cost ratio. As we mentioned, we are targeting the 9% cost ratio. You can see from the chart that for a reduction from FY24 to FY25 was about 178 points, We believe we can get to it very quickly. Clearly we've only benefited from one course like the savings from management fee, post internalisation so we get a full benefit, but post savings coming through at 126 and beyond and then we get to make that, if raised to a approximately 35% reduction in costs versus at 124. And just putting that into context as to where to proceed relative to our peer group, the peer group here is 50 through 50 as a brief. Clearly at 13% we already want to be meeting almost official platforms in the sector and delivering the same target we were praying We can see that Core Earnings are up to 0.1p and that's really a reflection of 0.9p coming from like-for-like growth in our rental portfolio but also from acquisitions.

9:53 The cost savings we've achieved in the year have improved earnings by about 0.1p and then that has been partially offset or largely offset by an increase in financing costs now. That is broadly 50% due to an increase in average draw debt over the period and then also due to an increase in weighted average debt costs. As you can see, 0.2p is passed on the EPS but 6p represents 98% covered. So turning to the balance sheet We can see here in the chart is a bridge from June 24 to June 25.

10:38 So we've covered across the components of the 6p earnings, 6.1p dividends paid and as I mentioned that was 98% covered by earnings. What is quite interesting in terms of the valuation or revaluation of portfolios is We've now increased by 2.2p as a result of our active asset management during the year and what we've done is just break that down further so that the first bar in the middle then 0.9p of NAV growth coming through real life gains from the disposal of new market and the joint venture 4.4% premium to book value. 0.8p coming from the three lease-free years that we did in the year and Rob will talk to those in more detail later on. And finally 0.5p of unrealized gains. Property yields were broadly flat during the year so that growth is coming from rent, the contracted growth in the portfolio leading to an increase in capital values. and those combined to offset the cost of internalisation.

11:47 So that was a one off payment to the previous investment advisor and that was 1.7p relative to AD. So of course the year broadly flat but a lot of activity in the year and as I said the active asset management form offsetting the cost of internalising the company's management function. And then at the bottom you can see that results in 7.2% post accounting return which is underpinned by high scoring We were very active in improving our target and improving our average debt maturity profile. If you see in the chart on the left we showed that the debt maturity profile was June 24th and that was two years after we rate £355 million for new vets with an average tenner of 6.2 years and fixed at 5% which is a fixed or retracted price relative to where we're seeing pipeline transactions at the moment.

12:48 So to take you through the bond issuance in greater detail as mentioned in the complete intro there will also be an opportunity price to transact in July and we managed to execute something in that window. The £250 million issuance fixed year tenner was £150 million in basis points over yields and that resulted in a coupon of 5.125% with the issuance being three times over-subscribed. So significant confidence from the investors in our business model and our strategy. But part of the key strategic benefits for us on the right there, it improves or aids our transition to a 100% unsecured debt stack. 100% of our drawn debt as of today is now unsecured. We've further diversified the capital structure which will help us grow as a business.

13:37 Those are median term borrowing costs and in part is the earnings provision of our acquisition pipeline. On debt for now, just look at this greater detail in these covenants. So we set out two charts in this slide at the top. One is the Net Debt to EBITDA ratio. Here you have the joint venture competing. In age 25, we used the net proceeds of that short term to repay debt. So you can see Net Debt to EBITDA June 25 was 5.1 times. and the chart beneath you can see 31% owing to value which is down from 37% in the prior year but we would expect those to increase as we deploy the pipeline 100% of our debt is now withdrawn debt is fixed or hedged to term and the average debt cost down today at 4.8% and we have £350 million of undrawn liquidity headroom which we'll be able to utilise to make acquisitions which will be earnings-enhancing and just probably just there as a reminder our policy on leverage is to operate between 30 and 40 percent but we will where we see the increase of acquisitions yet we're happy to give them a stage potencycle and we're happy to take leverage to the low 40s as we've demonstrated previously but we only do so where we've got a clear half way to come back down to that 30 to 40 percent where we'll be able to operate in the medium term. So in summary we've delivered material cost reductions targeting that extra cost ratio below 9%.

15:06 Materially improved our debt maturity with the two private placements and bond issuance, and with £350 million or £300 million we are well positioned to grow. And I'll hand back to Russell for the strategic update.

15:22 Thank you Mike. So just to start with the grocery market and of course we're fortunate as I said earlier to operate in what is a very defensive growing grocery market is non-discretionary spend and you can see on this chart that consistent growth 4.3% per annum since super's IPO in 2017 forecast to reach 259 billion of sales this year so it really is a huge market and we've got tenants that are absolutely huge players within that but of course that growth isn't evenly distributed On the left hand side you've got our key, our largest tenants Tesco and Sainsbury's. They have been winning through scale. Grocery is ultimately a scale driven exercise. The larger you are the more buying power you have and therefore the wider margins you have and that gives you the ability to be most competitive on price whilst preserving margins. So they've been able to capitalize on Poor performance elsewhere.

16:25 It's been well publicised. Morrisons, ASDA, they have suffered more recently. But they have certainly suffered over the last 12, 24 months. They've lost market share. Like-for-like sales are still down for the likes of ASDA, but Morrisons has returned to growth and we're really starting to see, I guess, the green shoots of recovery coming through for the turnaround strategies for those operators. and Aldi and Lidl have been some of the beneficiaries there as they continue to pursue growth they're investing heavily in new store openings it's the fastest growing channel but we are starting to see them open stores or we've been seeing them open stores in in more highly competitive areas and of course it therefore gets increasingly difficult to make make the returns stack on a new store so it is the discounters that have been making the headlines and you can see in this chart the growth in sales by channel across the total market.

17:26 Discount food stores up 26% since 2022, large format up 13% and convenience up 9% but then when you adjust that to reflect the additional new space that has come online in each of those channels you can see discount has actually only grown by 5% on a sales per square foot basis and as I mentioned we think it's going to be increasingly difficult to be opening new stores and finding sites In the middle there you can see large format that's really been what is actually very profitable growth for large format stores because it's largely coming from existing space so 12% increase in sales per square foot from existing large format stores and then again you compare that to convenience another big growth channel in terms of new space for operators and when you adjust to that then it's only 4% growth increase in sales per square foot so it's that middle box is where we really operate and it's those stores that we own that are seeing the most profitable growth come through.

18:15 And it's for that reason that you're seeing Tesco also spending a further $138 million during the year buying back large format stores such as the ones we own. Three examples on this page, Southwark, Congleton, and then the last one, Newmarket, is actually Superstore that we sold back to Tesco at 7% above book value. So these transactions, if you want, who knows more about kind of grocery and the value of the real estate in Tesco, and they are the ultimate insider and they're spending $130 million buying back these large format stores. It demonstrates exactly how strategically important Income REIT Plc That was 13% above the value of the ERV as I mentioned earlier but very importantly at 4% rent to turnover benchmark and that's the most important metric in our space is rent to turnover so it's all about the affordability relative to the sales performance.

19:18 Wanted jobs for shares and middleware, this was a Sainsbury's lease from York then into a 25 year inflationary lease that was actually acquired at 4.5% net initial yield but really importantly again the 4% rent to turnover metric being proven And then lastly, home-based conversions, so demonstrating how difficult it is to find sites for food stores and demonstrating the value in the existing properties is the fact that Sainsbury's and M&S, they've taken around 25 of the former home-based stores and they're paying rents, I believe it's reporting that rents of up to £28 per square foot have been paid. And of course that also requires, if it's a home-based unit and you have to convert it to a supermarket, it requires significant tenant capital investment to refit those stores. So definitely take the combination of this slide and the page before really highlighting the value and importance of owning good food stores to the tenants.

20:08 And it's in that context that we look at super's average rents to turnover at 4% and £23 per square foot as being highly affordable. So now turning to our portfolio. We mentioned earlier we've got a portfolio net to the leading and largest supermarket operators in both the UK and France. Total value of £1.7 billion. It's left across 84 supermarket sites. The net initial yield is 5.9% and 93% of those stores are omnichannel and when we say omnichannel we mean fulfilling online home delivery as well as your traditional in-store shopping. And you can see there in the bottom left, Tesco, 44% to 31% are very much our key tenants and they are also the tenants seeing the strongest performance at the moment. We also look to generate value in the portfolio through active management of the sites.

20:53 I mentioned on the left hand side already the lease renewals that we undertook on those three Tesco stores. That achieved an 80% capital value increase on those. In the middle column there where we've got some larger sites that have some non-grocery We had two home-based stores. They were both rapidly re-let. In the example on the screen, you've got the range. At the other site, it was B&M. And through that, it was a 10% capital value increase. So we underwrote the acquisition of those sites. We underwrote the home-based permanent risk very conservatively. So we were able to achieve, by getting some better quality tenants in there, a capital value uplift. That was 78,000 square foot of what was vacancy risk and we've been able to re-let that rapidly to do very little in terms of any lost income.

21:56 And then lastly on this page, just attractive development opportunities because we own these really kind of attractive sites that get high footfall and we're able to develop and we've got a discount operator. We're developing a new store for achieving an 8% yield on cost there for a new 20,000 square foot store with a 15-year inflation-linked lease. So where we're able to, we're putting the levers to really maximise social terms for shareholders. So the special market now, so supermarket yields present a buying opportunity. You can see there, if you look at that dark blue line, you can see it's plateaued. It's currently at 6.3%. The MSCI supermarket's net initial yield, it has flattened out around the level where we last saw the peak in 2009.

22:41 And actually, we plated on their super's own portfolio net initial yield of 5.9%, which is tighter than MSCI, just reflecting the better quality of assets we own. But it's still a very attractive level compared to the MSCI all-property index. and of course in a higher initial yield that just means you're getting a higher proportion of your return in income which is known and certain which is very valuable in the current environment. But whilst we're not expecting yields to come in, if you look back at 2009 yields tightened very quickly once again and that was a result of interest rates being rapidly cut to zero effectively. Obviously we're not expecting that this time but what we are seeing is investment market activity that makes us confident that yields have peaked and that it is therefore a good buying opportunity and just to take you through some examples of the transactions that have been taking place in our market. A few on this page, the four on the left, were acquired by other parties.

23:28 We are a sector specialist, so we see everything in our market. If you have a supermarket to sell, we are one of the first calls that you'll make. So we see everything. And of course, we consider these stores on the left. An example there, Tesco Bracknell, in the middle and bottom, £50 million lot size, 6.2% net initial yield. This store was really quite over-rented. That was actually bought by an ultra-high net worth individual. So just an example of that by a local government pension scheme. Income REIT Plc with a nine year lease remaining term and it's got annual RPI links up this rent reduced capped at 5% so we get that really visible growing contractual income growth and it's a strong trading store it's Q1 on trading density it's got 14 home delivery vans that means it's a large omnichannel hub for Tesco if you look at that satellite in the bottom left you can see standalone food store big home delivery section at the back large car park and if you were to zoom this out you would see it's got excellent connectivity on the roads there and it's got a cash flow population 3,000 to 400,000 that it's serving through that online delivery.

24:42 So that just means it's a really mission-critical hub for Tesco in its online fulfilment, given they have such a strong online market share as well. And it's not just us seeing the value in those types of opportunities. So we did establish a joint venture during the year, and that joint venture targets those sort of higher yields in Tesco and Sainsbury's. The JV itself, the rationale for establishing a vehicle like this instead of just selling us its outright, you get financial flexibility, you see a releasing capital that we can then recycle and deploy elsewhere. We're able to scale, in that instance, through third party capital at a time when raising in the equity markets has not been an option for us. It's been relatively expensive. Our dividend yield at 7.8% or so today is very attractive as an investor, but raising additional equity, that is relatively expensive compared to transacting with a third party. We get paid a management fee on their interest and we've got a very credible third party supporting our investment thesis.

25:32 But we also retain ownership, so we sold 50% interest That means we are able to retain half and we have an option to buy those stores back in the future at the market value as and when our partner wishes to exit. And the management fee itself is as attractive as £1.2 million a year so that makes a meaningful contribution to our earnings. with actually not too much additional management intensity. It is value add from our perspective because it's our tenant relationships that really drive the value when it comes to the higher yielding stores and being able to underwrite that risk. But that's where our kind of value and the value of the platform comes into play.

26:20 There is an opportunity or an aspiration to to grow this vehicle to £1 billion over time. It will depend on how that pipeline evolves as to exactly how it grows. But with £400 million a day on scale, there was no pressure to grow that vehicle. It was certainly worthwhile or sufficiently worthwhile by seeding it with those assets. So then where would we look to support the capital that we've effectively raised by creating that joint venture? Well, on the left hand side you've got Tesco Sainsbury high yielding opportunities these give you around 10 years of income but from investment grade operators so very strong tenants second column you've got the private equity backed operators in Asda and Morrisons now there is a value opportunity there because you are able to achieve net initial yields that are higher up six and a half maybe seven percent plus for lease terms of 20-25 years so you are getting compensated for the additional risk with the fact that they are not investment grade.

27:27 The third column there you've got CAR4 so only 5% of our portfolio today is in France. That allows us to deploy capital at a net initial yield of 6-6.5% but it's worth remembering that Mike and the team put in place, private placements during the year, so we're able to borrow Euro funding at a much lower rate than Sterling. You borrow at around 4%, versus the equivalent, say, 5%, 5.25% in the UK. So you get a really attractive spread between the net initial yield and the cost of debt for an investment-grade tenant. And then lastly, smaller formats. So those of you who've followed us for some time will know that Our primary focus is on large format on the channel stores but actually we do see some value opportunity in smaller format maybe even down to convenience where you've got lot sizes of 1.5 million to 5 million or so but you get 10, 15 year triple net leases from the likes of Sainsbury's, Tesco but also a broader range of operators, M&S, Waitrose, Co-op. and what you get here is net initial yield at 6-6.5% you're getting about 100 basis points additional yield for the smaller format than you do for a large format store with the same lease structure so there is a real relative value there for us it's not that we're going to

29:01 pile hundreds of millions into that it takes longer to deploy capital into more granular units but actually we do see some real relative value To summarize on the outlook, so we've got a cost efficient platform for growth, so with a high caliber team of sector specialists, the internalization means that Super itself is able to capture the outside of that team as we do transactions like the joint venture. We're able to capture that in earnings with the management fee and we are able to have one of the lowest cost ratios in the sector as Mike talked to. We've got a really attractive pipeline and opportunity to deploy capital into those assets and as Mike talked to we've got a good couple of hundred million of capacity to now do that and in doing so we'll be enhancing earnings and what we're targeting by the end of this financial year is to have demonstrated to the market a fully covered and growing dividend by the time we get to the end of the year and I think that's the real capitalism and driver for us taking the business back to a point where we should be really trading after a round now if I would hope and closing out that discount that is a big focus for us and as is driving kind of investor demand by doing presentations whether it's in a format like this we're out on our investor road show in a couple of weeks and we're seeing

30:33 as many names as we can and we're looking to build awareness of super and looking to drive those and create some positive momentum. So with that I think we will turn to Q&A. I've just had a lot of speaking there so I might ask Mike to go first. We've got some questions on the platform. Mike, there's one there around the portfolio. Why don't you start with that one please?

31:06 So the question around the historic current and median term expectations for our walk. So as we said our walk today is 11 years. We have seen that naturally tick down given passage of time. The lease is now typically set at 15 years, so we've demonstrated with the three lease re-gears, new leases are typically set at 15 years. So on that basis we would expect to do targeting or warps in the medium term of between 10 to 12 years and sort of managing that warp actively by re-gears or portfolio composition. So very much a number that's in our control and something that we're cognizant of. um there is another question here around now um what company's growing from protecting capital aid of nta has gone from 208 p.m 21 to 87 in june 24 um and there's commenting on that so i guess real estate is cyclical um clearly yields probably worked their low point around 2022 and then we had this sort of mini budget at the end of 22 but 50 coffee yields move out so we want that and we were able to effectively sell 466 million pounds of assets also retaining interest in the JD but we sold those as lenders premium of a value of 4% so we were incredibly

32:36 comfortable growing that is clearly there were we have been able to grow now so within three years that by an 8% increase that we left in the home base of 10% cash up so we are able to drive that sort of total return but we are immune to the kind of statistical nature of real estate but that wouldn't be isolated to just our company Where we see yields now, yields have passed over the year, we see much more competition in money bidding process. So we feel that what we see in the market is that definitely yields have had heat and we would expect the next movement to be down and we would be in the position of net growth there after.

33:12 I think the starting point is that a large format store will turn over say £70 million plus a year of revenue for the tenant and the increase in business rates cost will be typically around £100,000 a year for a store of that size so relative to total trading performance It isn't that significant. Clearly it has an impact on profitability but again it's largely marginal. At the operator's total business level it's of course unwelcome and just further adds to pressure for increasing food prices and food price inflation.

34:00 Because the grocers operate supermarkets are ultimately a relatively fine margin business costs are pretty efficiently passed through and margins are largely maintained over time so actually we're not really anticipating the impact it doesn't necessarily move the needle in terms of the tenants occupancy cost versus rent and existing rates bill but what I do think you'll see is just along with national insurance changes it will translate into higher Food prices for consumers which is clearly unfortunate but from a landlords perspective we are pretty insulated and this all comes back to the benefit of being in what is absolutely a non discretionary sector is that demand is very very robust when it comes to food.

34:58 There's a question around the potential proposal or proposals for the government banning upward only rent reviews and the potential effects on supermarkets. I guess it is still very early stages and so we'll keep a very close eye on how that legislation evolves. Again one of the differences though in supermarkets is Your tenants want to secure long-term occupation of these assets. So our tenants are the ones who want to lease itself 10 years. They want to reset it back to 15. If there is a ban on upward-only rent refuse, well, then that changes potentially the willingness of the landlord to grant those long leases. So it's too early to say, but what we may well see is is for instance a move to fixed up this of a few percent a year rather than inflation linkage who knows but what I would say that again I think supermarkets will be one of the best placed assets to kind of deal with that.

36:04 Another one in a moment Mike I'll ask you to do the one on the JV warehousing but I'll take the one before that which is just around Two of the large and big four supermarkets are of far better financial shape than the other two. How do you view the risk of acquiring supermarkets from similar companies? Which is a great question. Fundamentally supermarkets and grocery is a localised market. Shoppers will not travel typically more than 10 minutes to the shop. Typically they won't travel past one supermarket to go to another one. So what you really need to do is make sure you're buying the best performing stores in those markets and that's our job as tech specialists is understanding that market, underwriting at the market level. So we should have a very good handle on the balance sheet for the operators and their own strategies and we'll be taking a view on those. But first and foremost your client's top performing stores because top performing food stores simply don't go vacant. They might change operator, they do not go vacant but also it's underwriting that kind of credit risk and we're well placed to do it.

36:53 I would say we are very much underweight those ends at the moment. We only have 2% exposure to us and 4% exposure to Morrison. So yeah we're in a really good place from that perspective.

37:03 I'll take those questions running around. As a joint venture, we refer to assets being warehouse, pipeline, and what is the asset horizon, and I'll debate some of the kinds of price you want. I get to take that and we refer to warehouse and pipeline. Typically, one thing that is required, because they're typically long-term holds in stock, once the asset's gone, it'll be some time before you see it back in the market. So part of the rationale for the joint venture was that we were able to, when the equity markets were closed, we were able to raise capital and sell 50% interest in our own assets and we have a right of first refusal that when they're sold the super will get a right of first refusal so potential to buy those stores back in on super financially directly in the future in terms of the exit horizon and the pricing for buying stores back in There's no predetermined pricing, there will just be fair market value as determined at the point of sale.

38:13 So yeah, it will be at market rates as determined by Income Revenue at the time.

38:20 Like many people, the supermarket comes to me via home delivery now these days. Given warehouses are cheaper than stores, do you think a risk is gross to start delivering directly from warehouses? That is effectively the Ocado model. There's a very quick answer to this in that, well, maybe not that quick, in that it was Asda and Sainsbury's both closed during COVID. They both closed these what are known as staff stores, customer fulfillment centers, these warehouses that fulfill online. They closed them during the pandemic when online grocery was really booming. And that was instead fulfilled through stores because the biggest element of cost when it comes to grocery online is the delivery element. And the shorter you can make your delivery journey, So Omnichannel stores like the ones we own are absolutely the method of fulfillment and you may have seen some headlines in the US in the last week or so from Kroger who've got a big partnership with Ocado where they said they were reviewing some of those warehouses and instead looking to potentially fulfilling through stores. So I think Omnichannel has been the kind of clear winner and you see that across the market over 80% of online orders are fulfilled from stores.

39:27 And I think that is actually all of the questions that were asked.

39:33 One more has just come in Rob on would we consider bidding for a publicly listed REIT. Well I think I guess on that, clearly one of the benefits of internalisation for us is that we are able to potentially look at some M&A activity but we'd only Income REIT Plc So we as probably most iron sector are looking at our options but nothing imminent that we would be talking to but clearly and at potential avenue that we would keep under review.

40:28 Perfect, well that's great. Thanks very much for answering those questions from investors. Of course the company can view all the questions that have been submitted today. We'll publish the responses out on the investigate company platform. But just before redirecting investors to provide you with their feedbacks, and it's particularly important to you both, Rob, can I just ask you for a few closing comments?

40:45 Thanks, Alessandro. Thank you, everyone, for listening in. It's for us, as we said, transformational year, incredibly busy, lots of significant milestones, but we are not done yet. We have plenty more to do. We've got capital to deploy. The priority now for us is getting that deployed into a creative opportunity that proves to the market We'd like to thank you for attending today's presentation. and good afternoon to you all.