Supermarket Income Reit Plc · LSE:SUPR
Supermarket Income Reit — FY2021 Earnings Presentation
52 slides from Supermarket Income Reit's earnings presentation, Sep 23, 2021
Slide 1: Results Presentation for the Year to 30 June 2021
RESULTS PRESENTATION FOR THE YEAR TO 30 JUNE 2021 INVESTING IN THE FUTURE OF UK GROCERY
Slide 2: Agenda
Agenda Supermarket Income REIT Board of Directors Section Page 1 Market Update 3 Nick Vince Prior Jon Austen Cathryn Vanderspar 2 Financial results 5 Hewson Senior Independent Chair of Audit Independent Chairman Director Committee Director 3 Current portfolio 21 Atrato Capital Senior Team Investment
Slide 3: Strong sector tailwinds continue
Strong sector tailwinds continue Persistent uplift in grocery sales Record level of grocery sector investment Strong property market backdrop 3 Image: Tesco, Colchester
Slide 4: Financial highlights to June 2021
Financial highlights to 30 June 2021 £600m £1.3bn 8.5% Cash Portfolio LFL valuation deployed(1) assets(2) increase(3) 108p 10.9% 5.94p EPRA NTA FY 21 total FY 22 increased per share shareholder dividend return target (1) Includes additional Sainsbury’s Reversion Portfolio acquisition and excludes al
Slide 5: Financial results
Financial results • Income statement • Growth in rental income • Adjusted EPRA metrics • Financial statement • Movement in EPRA NTA per share • Portfolio growth • Debt financing • Summary • ESG 5 Image: Tesco, Preston
Slide 6: Income statement – rental income
Income statement – rental income Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) Net rental income 48.0 26.4 64.9 EPRA net income from joint venture (undistributed) 6.6 0.5 12.3 Administrative & other expenses (9.3) (5.2) (10.3) Finance expense (8.5) (4.9) (
Slide 7: 109% growth in annualised rent
109% growth in annualised rent(1) 70 30.0 1.3 60 50 40 Value £m 64.9 30 60.0 20 28.7 10 0 Annualised IFRS rent 30 Direct Portfolio Rental uplift Annualised IFRS rent 30 Twelve months June 2020 annualised acquistion June 2021 pro forma rent (1) Direct Portfolio only. Acquisitions during the period ba
Slide 8: 109% growth in annualised rent by acquisition
109% growth in annualised rent(1) 70 2.7 1.3 60 3.0 0.8 1.6 1.7 50 1.1 1.1 3.9 0.5 1.0 2.3 0.3 40 2.4 3.0 0.8 Value £m 3.8 60.0 64.9 30 20 28.7 10 0 rent 30 June 2020 Waitrose SLB Newmarket Telford Bracknell Newcastle Leicester Leicester Harborough Winchester Wisbech Bangor Melksham Prestatyn Colche
Slide 9: Income statement – joint venture
Income statement – joint venture Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) Net rental income 48.0 26.4 64.9 EPRA net income from joint venture (undistributed) 6.6 0.5 12.3 Administrative & other expenses (9.3) (5.2) (10.3) Finance expense (8.5) (4.9) (
Slide 10: Income statement – EPRA earnings
Income statement – EPRA earnings Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) Net rental income 48.0 26.4 64.9 EPRA net income from joint venture (undistributed) 6.6 0.5 12.3 Administrative & other expenses (9.3) (5.2) (10.3) Finance expense (8.5) (4.9) (
Slide 11: Income statement – dividend cover
Income statement – dividend cover Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) Net rental income 48.0 26.4 64.9 EPRA net income from joint venture (undistributed) 6.6 0.5 12.3 Administrative & other expenses (9.3) (5.2) (10.3) Finance expense (8.5) (4.9)
Slide 12: Income statement – EPRA cost ratio
Income statement – EPRA cost ratio Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) Net rental income 48.0 26.4 64.9 EPRA net income from joint venture (undistributed) 6.6 0.5 12.3 Administrative & other expenses (9.3) (5.2) (10.3) Finance expense (8.5) (4.9)
Slide 13: Adjusted EPRA earnings
Adjusted EPRA earnings Twelve months to Twelve months to Twelve months 30-Jun-21 30-Jun-20 pro forma £m £m £m(1) EPRA earnings 36.8 16.8 57.0 Net income from joint venture (undistributed) (6.6) (0.5) (12.3) Adjusted EPRA earnings 30.2 16.3 44.7 Adjusted EPRA EPS 4.6p 4.9p 5.5p Dividend paid 35.5 20.
Slide 14: Statement of financial position
Statement of financial position As at As at Pro forma 30-Jun-21 30-Jun-20 £m(1) £m £m Investment properties 1,148.4 539.4 1,243.0 Investment in joint venture 130.3 56.1 130.3 Cash and cash equivalents 19.6 20.3 22.2 Other assets 4.3 1.7 3.9 Gross assets 1,302.6 617.5 1,399.4 Borrowings (409.7) (126.
Slide 15: Movement in EPRA NTA per share
Movement in EPRA NTA per share(1) 110 1.2 105 5.6 (5.9) 8.3 1.4 100 (3.6) Pence per share - 108 95 101 90 85 EPRA NTA 30 June EPRA earnings Earnings Dividend paid Equity issue - Costs Acquisition costs Property revaluation JV revaluation EPRA NTA 30 June 2020 premium to NTA less 2021 issue costs (1)
Slide 16: Direct Portfolio valuation uplift
Direct Portfolio valuation uplift 1,200 £21m £40m 1,150 (£29m) £6m 1,100 8.5% LFL growth Value £m 1,050 £1,148m £1,110m 1,000 950 900 30 June 20 Direct Portfolio LFL valuation increase LFL valuation increase New acquistions yield shift Purchase costs on new 30 June 21 Direct Portfolio valuation from
Slide 17: Reduced cost of debt
Reduced cost of debt Twelve months Twelve months Twelve months to 30-Jun-21 to 30-Jun-20 pro forma Drawn debt 413.3 128.6 515.1 Total debt facilities 613.5 228.6 643.5 Net LTV(1) 34% 20% 39% Interest cost(2) 1.9% 2.0% 1.8% Debt maturity(3) 4 years 4 years 4 years (1) Based on Direct Portfolio only (
Slide 18: Diversified banking group
Diversified banking group Lender Facility Interest cost Expiry date Term to expiry(1) £52m 2.56% Jul 2023 2 yrs £150m 1.74% Aug 2023 2 yrs £35m 2.02% Aug 2025 4 yrs £150m 1.55% Jan 2026 4 yrs £100m 1.45% July 2026 5 yrs £97m 1.95% Sep 2026 5 yrs £60m 2.19% July 2027 6 yrs Total credit facilities £64
Slide 19: Consistent financial growth and performance
Consistent financial growth and performance Net rental income (£m)(1) Dividend paid per share 64.7 5.94p 5.86p 5.80p 47.9 5.63p 26.4 5.50p 17.2 8.9 FY18 FY19 FY20 FY21 FY 21 (PF) FY18 FY19 FY20 FY21 FY 22 (target) NTA per share Total shareholder return(2) 108p 11.6% 10.9% 101p 8.0% 8.0% 97p 96p FY18
Slide 20: Developing ESG initiatives
Developing ESG initiatives MATERIALITY MATRIX DEFINED TENANT ENGAGEMENT ENHANCED GOVERNANCE Key areas of importance to our Current Direct Portfolio EPC 2x EPRA Gold stakeholders governance awards E 3% 1. Building energy rating A 23% Independent Board members 100% 2. Risk and crisis management D 27%
Slide 21: Current Portfolio
Current Portfolio • Direct Portfolio growth • Direct Portfolio • Sainsbury’s Reversion Portfolio 21 Image: Sainsbury’s, Ashford
Slide 22: Direct Portfolio growth
Direct Portfolio growth 1,400 1,243 1,200 1,148 1,000 £609m 800 growth Value £m 600 539 400 368 265 200 - Jun-18 Jun-19 Jun-20 Jun-21 Pro forma Proforma includes post balance sheet acquisitions. 22
Slide 23: Direct Portfolio growth by tenant
Direct Portfolio growth June 2020 Today(1) Tesco Sainsbury’s Morrisons Waitrose Aldi M&S Increasing geographical and tenant diversification (1) As at 23 September 2021 23
Slide 24: Direct Portfolio - indexed linked income
Direct Portfolio - indexed linked income(1) Portfolio fundamentals 15 year WAULT 600 559 500 400 Value £m 324 4.7% £1.2bn 35 net initial portfolio 300 stores yield valuation 190 200 138 100 31 0 1-5 yrs 5-10 yrs 10-15 yrs 15-20 yrs 20-25 yrs Tenant split by rent roll 89% inflation or fixed uplifts(2
Slide 25: Sainsbury's Reversion Portfolio
Sainsbury’s Reversion Portfolio Sainsburys Reversion Portfolio Key points store map Co-owners SUPR, BAPTL(1) & Sainsbury’s SUPR JV Stake 25.5% SUPR’s investment at cost £108.5m Structure annual rent roll £53m Debt outstanding £347m(2) Number of stores 26 Highbury Dragon Two securitisations Finance B
Slide 26: Value creation in our JV portfolio
Value creation in our JV portfolio Sainsbury’s exercised purchase option to acquire 13 stores Proceeds will be received in 2023 Sainsbury’s option to acquire further 10 stores by Jan 22 Purchase price assumes a new 20-year lease to Sainsbury’s Current leases to continue to 2023 completion date 26 Im
Slide 27: Our Market
Our Market • Omnichannel shift • Property yields • Relative value • Private equity • Conclusion 27 Image: Waitrose, Market Harborough
Slide 28: Omnichannel stores capture online growth
Omnichannel stores capture online growth +9% +85% +110% Yo2Y supermarket Yo2Y online Yo2Y in-store sales growth (1) growth (1) online fulfilment(2) 1) Kantar 12 weeks to September 2019 vs 2021 annualised. (2) Atrato Capital research 28 Image: Morrisons, Dalton Park
Slide 29: Supermarket transaction yields
Supermarket transaction yields 7.0% Tesco Farnworth Tesco, Kettering 6.0% 5.90% 5.95% 5.0% 4.0% Morrisons, Borehamwood Sainsbury’s, 3.50% West Ealing, 3.45% 3.0% 2.0% 1.0% 0.0% 2016 2017 2018 2019 2020 2021 Individual investment market transactions yield (1) Atrato Capital research. Based on represe
Slide 30: Atrato supermarket yield series
Atrato supermarket yield series 7.0% 6.0% 5.3% 5.2% 5.0% 4.8% 5.0% 4.6% 4.5% 4.0% 3.0% 2.0% 1.0% 0.0% 2016 2017 2018 2019 2020 2021 Average transaction yield Individual investment market transactions yield (1) Atrato Capital research based on representative investment market transactions exceeding 1
Slide 31: Relative yield value has never been so compelling
Relative yield value has never been so compelling 6.5% 6.0% 5.9% 5.5% 5.3% 5.2% 5.0% 5.0% 4.8% 0.6% 4.6% 4.5% 4.5% 4.6% 4.0% 2.2% 3.8% 3.5% 3.0% 3.0% 2.5% 2.7% 2.3% 2.0% 2016 2017 2018 2019 2020 2021 Tesco 5.5% Jan 2033 unsecured bond Atrato supermarket property yield series (1) Data sourced from Bl
Slide 32: Private equity buying into UK grocery
Private equity buying into UK grocery Completed Purchaser details Global PE capital investment drivers Status Acquired Under Offer Speculation Purchaser EG Group & TDR CD&R or Fortress - Mission critical grocery infrastructure Date Feb 2021 Nov 2021 - Price/est. price (bn)(1) £6.8bn £7.0bn est. £7.0
Slide 33: How we think about M&A activity
How we think about M&A activity Grocery is food infrastructure Asset selection is critical No material supermarket sale and leasebacks expected Pricing differential between property and debt even bigger than in 2017 33 Image: Tesco, New Malden
Slide 34: The outlook for Supermarket Income REIT
The outlook for Supermarket Income REIT Sustained grocery sales growth Omnichannel real estate key to grocers More news on Sainsbury’s JV in January Higher inflation feeding through 34 Image: Sainsbury’s, Ashford
Slide 35: SUPR Omnichannel Video
SUPR Omnichannel Video OOO SUPR°°° SUPERMARKET INCOME REIT
Slide 36: Long inflation linked income, future proofed stores
Long inflation linked Real asset backing: Future proofed stores income large flexible sites 36
Slide 37: Appendix 1: Financial
Appendix 1: Financial • EPRA metrics • IFRS income statement • IFRS balance sheet • Joint Venture income statement • Joint Venture income reconciliation • Joint Venture balance sheet 37 Image: Sainsbury’s, Hessle
Slide 38: EPRA metrics
EPRA metrics As at As at 30-Jun-21 30-Jun-20 EPRA NTA per share 108 pence 101 pence EPRA NRV per share 118 pence 109 pence EPRA NDV per share 107 pence 100 pence Twelve months to Twelve months to 30-Jun-21 30-Jun-20 EPRA EPS 5.6 pence 5.0 pence EPRA NIY 4.8% 5.0% EPRA cost ratio 16.8% 19.3% 38
Slide 39: IFRS income statement
IFRS income statement Twelve months to Twelve months to 30-Jun-21 30-Jun-20 £m £m Net rental income 48.0 26.4 Administrative and other expenses (9.3) (5.2) Changes in fair value of properties 36.3 13.0 Share of income from joint venture 15.5 3.5 Operating Profit 90.5 37.7 Finance expense (8.5) (4.9)
Slide 40: IFRS balance sheet
IFRS balance sheet As at As at 30-Jun-21 30-Jun-20 £m £m Investment property 1,148.4 539.4 Investment in joint venture 130.3 56.1 Other non-current assets 1.0 - Cash 19.6 20.4 Trade and other receivables 3.1 1.7 Financial assets held at fair value through profit and loss 0.3 - Total assets 1,302.7 6
Slide 41: Joint Venture - income statement
Joint Venture - income statement Twelve months to Twelve months to 30-Jun-21 30-Jun-20 £m £m Rental income 52.4 52.4 Expenses (0.3) (0.4) Finance cost (15.5) (7.3) Taxation (3.2) (3.2) Joint venture earnings (undistributed) 33.4 41.5 Change in fair value of investment properties 31.8 - Change in fai
Slide 42: Joint Venture income reconciliation
Joint Venture income reconciliation Twelve months to Twelve months to 30-Jun-21 30-Jun-20 £m £m EPRA net income from joint venture (undistributed) 6.6 0.5 Gain on bargain purchase(1) 3.3 2.9 Share of fair value gain on investment properties 5.6 - IFRS net income from joint venture (undistributed) 15
Slide 43: Joint Venture – balance sheet
Joint Venture – balance sheet As at As at 30-Jun-21 30-Jun-20 £m £m Portfolio valuation(1) 932.5 900.7 Rent receivable 29.6 29.3 Bonds notional value (42.7% LTV)(2) (372.6) (377.3) Interest accruals & other liabilities(3) (71.8) (108.4) Book value 517.7 444.3 SUPR share of net assets (2020: 12.5% -
Slide 44: Appendix 2: General
Appendix 2: General • Key terms • Share price performance • Portfolio breakdown • Key market participants • Materiality Matrix 44 Image: Sainsbury’s Newcastle
Slide 45: SUPR key terms
SUPR key terms • UK listed REIT The Company • London Stock Exchange Main Market, Specialist Fund Segment Gearing • Targeted average leverage of 30-40% through the cycle IRR • Target IRR of 7 to 10% (1) Governance • An independent board of directors; compliant with the AIC Corporate Governance Code •
Slide 46: Share price performance
Share price performance Relative share price performance since IPO (£p)(1) Trading volume - since IPO (£m)(2) 160.0 6.0 140.0 5.0 120.0 4.0 100.0 3.0 80.0 2.0 60.0 1.0 40.0 - Nov-19 May-19 Sep-17 Nov-18 Jul-17 May-18 Nov-17 Jul-20 Jul-21 Jul-20 Jul-21 Mar-18 Jul-18 May-19 Jul-19 Nov-19 Jul-17 Nov-17
Slide 47: SUPR portfolio breakdown
SUPR portfolio breakdown(1) Sainsbury’s Direct Portfolio - Reversion Non-food Total supermarkets Portfolio Portfolio valuation £1,199m £118m £44m £1,361m Percentage of overall portfolio valuation 88.1% 8.7% 3.2% 100% Annualised passing rent income £58.5m £14.7m £4.2m £77.3m Percentage of overall ren
Slide 48: Current portfolio valuation
Current portfolio valuation(1) Portfolio valuation: £1.3bn Portfolio valuation: £1.4bn (including JV net asset value) (including JV gross asset value(2)) Sainsbury’s 26.0% Tesco 41.9% Sainsbury’s 26.9% JV 8.7% Tesco 38.0% Sainsbury’s 24.4% JV 17.2% Morrisons 9.8% Waitrose 7.8% Aldi 1.4% Morrisons 8.
Slide 49: Current portfolio rent roll
Current portfolio rent roll(1) Portfolio rent roll: £58.6m Portfolio rent roll: £73.3m (excluding JV) (including JV) Tesco 46.6% Sainsbury’s 27.4% Aldi 1.4% Tesco 37.9% Sainsbury’s 22.2% JV 19.0% Morrisons 9.8% Waitrose 7.7% M&S 0.4% Morrisons 7.9% Waitrose 6.2% Aldi 1.1% Non-Food 6.7% M&S 0.3% Non-
Slide 50: Key market participants in the last 36 months
Key market participants in the last 36 month(1) Transaction Transaction Vendors(1) Purchasers(2) value £m value £m British Land Plc 902 Realty Income 1,047 USS 333 SUPR 1,026 Aviva 265 Tesco Plc 937 Aberdeen Standard Investments 258 LXI 164 Consensus Business Group 238 Blackrock 130 Legal & General
Slide 51: ESG Materiality Matrix details
ESG Materiality Matrix details Rank ESG Stakeholder Priorities Score Rank ESG Stakeholder Priorities Score 1 E Building Energy Rating 3.22 Tenant Sustainability Impact 17 G 2.87 ESG Governance and and Incentives 2 G 3.17 Reporting 18 E Sustainable Procurement 2.85 Engaging with tenants on Health and
Slide 52: Strictly confidential disclaimer
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