Region Group

Thank you and good morning and thanks for joining us for the Region Group FY26 full year results. My name is Greg Chubb and it's a privilege to welcome you to my first results presentation as Chief Executive Officer. David Salmon, our Chief Financial Officer, is presenting these results with me today and Erica Rees, our Chief Operating Officer, is also in the room with us. This morning I'll start with an overview of our strategy before looking at the operating performance of the portfolio and the opportunities we see to drive both organic and inorganic growth. David will then take you through the financial results before I return to discuss the guidance and outlook for FY27. And we'll start with our strategy on slide four. And since joining region earlier this year, I've met with our major retail tenant partners, a number of our investors, and visited many of our centres around Australia where I've spent time reviewing priorities with our people. This has reinforced two things for me. Firstly, we have a resilient scale supermarket-led portfolio of essential retail centres, strong tenant partnerships, talented people, and an internally managed operating model that provides a solid foundation for growth. Secondly, we have a significant opportunity to unlock more growth and value from the portfolio we already own. The results we're announcing today demonstrate the strength and resilience of our portfolio. The opportunity now is to build on that performance by accelerating the next phase of growth. Our fundamental strategy is to maximise the performance from Australia's leading internally managed essential retail portfolio. A key enabler is our integrated operating platform. By bringing our people, capabilities and decision-making together around each asset, we can execute consistently across the portfolio. Better execution improves the experience for our retail tenant partners and shoppers. It helps facilitate growth in retailer sales and ultimately supports stronger rental growth and improved operating margins. What has and will evolve is how we unlock that growth. We're accelerating our focus on proactive organic growth through active asset management, including majors and specialty leasing optimisation, operating consistency, and targeted investment that improves the productivity of our centres. While unlocking organic growth is our primary focus, we will continue to pursue selective inorganic growth opportunities through portfolio optimisation and growing the existing Metro Fund partnership with a global institutional investor, where it strengthens our portfolio and creates value for security holders. Across both growth pathways, our approach to capital management and allocation remains disciplined and enables maximising long-term returns. Now I'll move to slide five. The quality and purpose of our essential retail portfolio remains the foundation of everything we do. We're strongly positioned as Australia's leading internally managed essential retail REITs with a high quality scaled portfolio underpinned by supermarkets and a non-discretionary specialty retail and services. Across the portfolio, our supermarket operators generate over $5 billion in annual sales, and we have relationships with more than 2,200 specialty tenant partners. Our scale gives us broad and defensive income base, while our exposure to essential retail supports resilience through economic cycles. Importantly, our portfolio comprises local centres that sit at the heart of more than 100 communities providing convenient access to groceries, services and other essential retail categories. Let's move to slide six and FY26 highlights. FY26 was a strong year for Region with continued momentum across the portfolio. Comparable supermarket MAT growth of 4.1%, increased portfolio occupancy to 98.1% and positive average specialty leasing spreads of 4% together contributed to comparable NOI growth of 3.3%. We recorded statutory net profit of 268.8 million and NTA increased by 4% to $2.57 per security. We also delivered growth in FFO and AFFO to 16 cents per security and 14.1 cents per security respectively. Our approach to capital management remained disciplined with 100% of debt hedged at below market rates. We have refinanced more than a billion dollars of debt at improved margins, which has helped maintain our 4.5% weighted average cost of debt. We also continued our on-market security buyback, purchasing 12.7 million securities for $29.2 million at a discount to NTA at an average price of $2.29 per security. Overall, this positive momentum translated to a 9.8% total security holder return over the period, which outperformed both the ASX200 and ASX200 AREIT indexes. Now let's look at retail sales on slide eight. And with an ever-changing consumer environment, spending on everyday essentials has remained resilient over the past year. Total comparable portfolio MAT growth was 3.3% for the year. Supermarkets that generate 70% of our total portfolio sales have delivered 4.1% growth and that's up from 3.3% last year. We saw sales growth across each of our essential retail categories and specialty sales productivity has increased by more than 3% over the period to now being $10,345 per square metre. Specialty comparable sales growth was 2.5% and that's largely driven by our key non-discretionary categories such as food retail, services, medical and other retail. These results reflect the strength of trading across our centres and provide a strong foundation for sustainable rental growth over time. Slide nine. Our major retailers include Woolworths, Coles, Aldi and Wesfarmers related businesses. They're fundamental to the portfolio and generate 45% of total gross rent. We continue to strengthen our partnership with our major retailers, including the prioritisation of centre enhancement projects, alongside their investment in store refurbishments, expansions and the rollout of e-commerce facilities. We completed a further six e-commerce facilities and we now have 77 of these increasingly important facilities in total. with an additional two currently underway. This represents over 90% coverage across the portfolio of supermarkets. Aligning our capital programs alongside Coles, Woolworths and Aldi facilitates both retailer sales growth and rental growth. Online sales are included in turnover rent for over 97% of our supermarkets. In FY26, 58% of our supermarkets were generating turnover rent, and a further 15% are within 10% of their respective turnover rent thresholds. Moving to slide 10, we remain committed to refining the retail mix in our centres. We do this by favouring essential retail and service categories, including food and allied health, which were both particularly active trade categories for us over the year. We achieved 4% average specialty leasing spreads and average annual rent increases of 4.4% across the 380 leasing deals transacted. Average specialty rent per square metre has increased to $940 per metre, which represents compound annualised growth of 4.3% since FY22. A deliberate focus has been on the introduction of new tenants, with a record number of 172 new deals over the period. Demand for our essential retail space is evident through increased occupancy and strong leasing spreads of 5.2% on these new deals. Average tenure on these new deals is extended to 6.3 years, while incentives have decreased to 10.5 months. Tenant retention sits at 77% and specialty vacancy improved to 4.3%. we have a clear focus on improving portfolio occupancy by introducing more productive retailers. Sustainable specialty occupancy costs of 9.7% and favourable market conditions including very limited new retail supply and continued retailer sales growth indicates positive leasing momentum to continue. Now moving to slide 11. An important component of our organic growth strategy is disciplined reinvestment into our existing portfolio. An early priority in my tenure has been to review a number of potential projects with the team, and we see significant opportunity to drive further growth through active asset management and investment. We're targeting incremental returns of greater than 7%, with a focus on projects that improve productivity and long-term income growth, while responding to the needs of our retail partners and the local communities that we serve. North Orange Shopping Centre in Central Western New South Wales is a current example, where during the year we completed the first phase of the project, including a Woolworths store refurbishment and extension, adding approximately 720 square metres. The project also delivered direct to boot e-commerce offering of six bays and three dedicated home delivery hub docks. The expanded store has recently opened for trade. We intend to soon commence phase two of this project with the inclusion of an Aldi supermarket. The project has recently secured development approvals and has a project cost of approximately $9 million and a targeted completion date of Q4 of this financial year. At Pakenham, In Victoria, we've also recently completed a $10 million specialty leasing-led centre enhancement. This asset is now fully leased, strengthening the centre's retail offer and supporting its ongoing performance. Slide 12. And beyond the projects I've just discussed, we've identified a broader pipeline of potential opportunities to unlock further value from our existing portfolio. A few of these near-term opportunities include projects at Kwinana Marketplace in Western Australia, the Greenbank Shopping Centre, which is located in the southwest Brisbane growth corridor in Queensland, and Curranbine Central in Western Australia. And while every project is different, they all reflect the same disciplined approach, remixing existing space, activating surplus or underutilised land, and introducing complementary uses that enhance the everyday customer experience and deliver attractive returns. We'll continue to assess these and other opportunities, and we'll certainly keep you updated. Moving on to slide 13 for sustainability. During the year, we continued to make progress across our sustainability objectives. On the environmental front, we now have 21.8 megawatts of solar PV installed and operational across 33 centres with a further 3.2 megawatts in design. This ongoing investment improves the efficiency and resilience of our portfolio while supporting our pathway to net zero scope one and scope two emissions by FY30. Our centre teams contributed to more than 2,100 hours to local causes during the year, reinforcing the role our centres play as trusted community hubs. We remain on track to meet mandatory ASRS requirements during FY27, and throughout the year we continue to strengthen our climate governance, data systems and reporting capability to ensure we're well positioned for the new reporting framework. Now look at slide 14. Alongside our organic growth pathways, we are selectively optimising the portfolio through three inorganic growth levers, namely divest, invest and partner. Having undertaken a comprehensive review of the portfolio, we've identified a number of assets that are typically smaller, assets in smaller markets that we're progressing for potential divestment. We've demonstrated this through the very recent divestments of both Woodford Shopping Centre and Mission Beach Marketplace in Queensland for a combined value of $32.8 million. These assets had an average yield of 5.8%. These divestments allowed us to reinvest that capital into high-growth opportunities and such as the acquisition at Trendale in Western Australia at a 6.4% yield. This acquisition is strategically located next to an existing region asset, giving us the opportunity to capture operating and management efficiencies. The transaction market is competitive in our retail sector. We will continue to remain disciplined with our investments and look for opportunities where our scale, focus and expertise create value and advantage. It's also been a strong year of inorganic growth in our existing Metro Fund partnership alongside a global institutional investor. Together, we acquired Daly Ellip Shopping Centre in Western Australia and three additional strata properties at West Village in Metro Brisbane for a total of $124.8 million. These partnerships provide another avenue to grow the portfolio and we are well positioned to explore additional partnership opportunities over time. Our objective is to progressively strengthen the quality and growth trajectory of the portfolio while maintaining a prudent approach to capital management and allocation. And on that note, I'll now hand over to David to talk through our financial results.

Thank you, Greg, and good morning, everyone. From FY25 to FY26, FFO per security increased by 3.2%, predominantly due to the inorganic growth initiatives. Importantly, we recorded strong comparable net operating income growth of 3.3%, driven by improved occupancy, positive leasing spreads, contracted annual rent increases, and controlled operating expense growth. Comparable revenue growth was higher than expense growth during the period, which has helped improve our NOI margin. We're also seeing the benefits from the capital invested into our asset enhancement and projects coming through earnings. The portfolio optimisation and partnership activity previously referred to helped contribute to our upgrade in earnings which we announced back in February. At the start of this financial year, we flagged an expected increase in the weighted average cost of debt due to the maturity of some favourable hedges. For the impact of this WAC-D increase, FFO per security growth for FY26 was more than 5%. Moving to slide 17. Our FY26 distribution is 14.1 cents per security, which is in line with guidance and provides growth of 2.9% on FY25. Net operating income growth of 3.3% was driven by the comparable NOI growth of 3.3% and the impact of transactional activity. Other operating income grew by close to $1 million, or 15%, due to the growth in our Metro Fund partnership. Interest expense growth during the year reflects the increase in WACD, which we flagged at the start of FY26, as well as the funding of our asset enhancements and projects and also the on-market security buyback. Maintenance and leasing capital spend was higher due to the increased number of new leasing deals this year, noting the average lease incentive per deal have reduced, also with longer average lease terms achieved. Following positive investment property revaluations, the statutory profit after tax was $268.8 million. Slide 18 shows our balance sheet. As of 30 June 2026, our total assets under management were $5.5 billion, which represents a 5.5% increase from the prior year. Our balance sheet remains healthy with pro forma gearing of 34.1%, below the midpoint of our target 30% to 40% range, and this includes the divestment of Mission Beach Marketplace, which settled in July 2026. This gives us the capacity to deploy capital when strategic opportunities arise. Our NTA has grown by 4% to $2.57 per security, primarily off the back of investment property revaluation growth during the year. Slide 19 shows additional information on the movement in the valuation of our portfolio, which increased by $224 million or 5.1%. The movement was driven by a 4.4% fair value increase, including capital expenditure plus net acquisitions completed as part of our portfolio optimisation strategy. Capitalisation rates firmed by an additional 11 BIPs basis points to 5.86% over the year, with income growth the key driver of valuation uplift. We continue to see potential upside in our portfolio valuations with both strong income growth and demand for assets in our sector. Moving to slide 20. We continued to execute on our disciplined capital management strategy during FY26. We have refinanced over $1 billion of debt facilities at improved borrowing margins. This included the issuance of a $300 million six-year Australian medium-term note at a borrowing margin of 1.22% and the repayment of $407 million of US private placement notes, which had a weighted average borrowing margin of 1.83%. These initiatives contributed to a reduction in our weighted average borrowing margin from 1.6% in FY25 to 1.5% in FY26. As I mentioned before, our weighted average cost of debt increased by 20 basis points to 4.5% this year, and 100% of our debt was hedged or fixed. Looking ahead, with gearing below the midpoint of our target 30 to 40% range, over $200 million of undrawn debt capacity, and high levels of hedging in place at attractive rates, we are well positioned. I'll now hand back to Greg, who will talk through our outlook.

Great. Thank you, David. Our strategy is targeting 3-4% plus sustainable AFO growth per security, and we're confident that that starts with the portfolio we already own and manage. Our focus is on proactively unlocking organic growth within our existing essential retail centres through active asset management, majors and specialty leasing optimisation, and targeted projects and asset enhancements. We complement that with selective inorganic growth opportunities through portfolio optimisation, disciplined acquisitions and partnerships where they strengthen the portfolio quality and create additional long-term value. Our internally managed integrated operating platform enables us to execute consistently across the portfolio, supported by our disciplined approach to capital management and allocation. Our strategy and growth model is designed to generate defensive and resilient cash flows that support growing distributions and deliver sustainable security holder returns. Now, finally, moving to slide 23 and FY27 guidance. Looking ahead, our priorities remain clear and our focus is on executing the growth strategy that we have outlined today. Against that backdrop and assuming no material change in market conditions, we're providing FY27 earnings guidance of 3% growth in FFO to 16.5 cents per security and 3% growth in AFFO to 14.5 cents per security with a targeted distribution payout ratio of 100% of AFFO. This guidance does not include any transactional activity beyond what we have already disclosed. With a high quality essential retail portfolio, a strong balance sheet and continued momentum across the business, I'm very confident that the team at Region is well positioned for the year ahead. And that concludes the formal presentation. I would like now to hand over to the moderator and open it up to any questions. Thank you.