Supermarket Income Reit Plc · LSE:SUPR
Supermarket Income Reit — FY2022 Earnings Presentation
55 slides from Supermarket Income Reit's earnings presentation, September 2022
Slide 1: Results Presentation for the Year to 30 June 2022
RESULTS PRESENTATION FOR THE YEAR TO 30 JUNE 2022 INVESTING IN THE FUTURE OF UK GROCERY Image: Sainsbury's, Melksham
Slide 2: Agenda and Presenting Team
Agenda and Presenting Team Welcome and introduction – Ben Green 2 Financial results – Haffiz Kala 9 Ben Green Haffiz Kala Sustainability and portfolio – Robert Abraham 23 Principal Finance Director Investment market – Steven Noble 30 Appendix: Financial 40 Appendix: General 49 Robert Abraham Steven
Slide 3: The outlook for Supermarket Income REIT
The outlook for Supermarket Income REIT HIGHLY STRUCTURALLY OMNICHANNEL INFLATION- RESILIENT SUPPORTED STORES LINKED SECTOR INVESTMENT RENT REVIEWS STRATEGY Image: Sainsbury’s, Washington 3
Slide 4: Business highlights
Business highlights £597m 15yrs 11% Cash Portfolio Increase in deployed(1) WAULT(1) EPCs A-C(2) FTSE 250 1.7x 100% and EPRA Index Money multiple Hedged or inclusion on JV store fixed rate sales(3) debt(3) (1) For the period 1 July 2021 to 20 September 2022 Past performance is not indicative (2) To d
Slide 5: Financial highlights to 30 June 2022
Financial highlights to 30 June 2022 £1.8bn 115p 6.5% Total EPRA NTA EPRA NTA assets(1) per share per share increase 7% 1.08x 6p FY 22 total Dividend FY 23 shareholder cover dividend return target (1) Includes investment in joint Past performance is not indicative of future results. There is no vent
Slide 6: Financial Results
Financial Results Income statement Growth in rental income Debt financing Financial statement Movement in EPRA NTA per share Portfolio growth Summary Image: Waitrose, Winchester 6
Slide 7: Income statement – rental income
Income statement – rental income Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 +50% Net income from joint venture (undistributed) 12.2 6.6 Administrative & other expenses (13.9) (9.3) Finance expense (13.0) (8.5) EPRA earnings 57.4 36.8 EPRA ear
Slide 8: Growth in passing rent
Growth in passing rent 100 3.7% LFL growth 2.7 18.4 (0.9) 75 Value (£m) 50 90.9 80.2 60.0 25 - Annualised IFRS Acquisition Rental uplift Lease regear Annualised IFRS Twelve months rent for year rent (Leicester) rent for year pro forma(1) to June 21 to June 22 Growth in passing rent relates to the di
Slide 9: Growth in passing rent by asset
Growth in passing rent 100 2.7 1.2 0.3 1.9 3.4 (0.9) 75 3.2 1.7 1.9 2.3 0.3 0.3 0.2 1.7 50 Value (£m) 90.9 80.2 60.0 25 - Annualised IFRS Failsworth Liverpool Liverpool Workington Prescot Swansea Maidstone Cannock Sheffield Cwmbran Washington Carcroft Rental uplifts Lease regear Annualised IFRS Twel
Slide 10: Income statement – joint venture
Income statement – joint venture Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 Net income from joint venture (undistributed) 12.2 6.6 +85% Administrative & other expenses (13.9) (9.3) Finance expense (13.0) (8.5) EPRA earnings 57.4 36.8 EPRA ear
Slide 11: Income statement – EPRA cost ratio
Income statement – EPRA cost ratio Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 Net income from joint venture (undistributed) 12.2 6.6 Administrative & other expenses (13.9) (9.3) +49% Finance expense (13.0) (8.5) EPRA earnings 57.4 36.8 EPRA e
Slide 12: Income statement – finance expense
Income statement – finance expense Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 Net income from joint venture (undistributed) 12.2 6.6 Administrative & other expenses (13.9) (9.3) Finance expense (13.0) (8.5) +53% EPRA earnings 57.4 36.8 EPRA e
Slide 13: Transitioning debt facilities for growth
Transitioning debt facilities for growth SHIFT TO UNSECURED (2) Facility Committed debt Debt maturity 100% Secured £450m 3 yrs Drawn debt Unsecured £412m 6 yrs hedge ratio(1) Total credit facilities £862m 4 yrs DIVERSIFIED BANKING GROUP 2.6% Fixed New lender debt cost(1) (1) Including post balance s
Slide 14: Income statement – EPRA earnings
Income statement – EPRA earnings Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 Net income from joint venture (undistributed) 12.2 6.6 Administrative & other expenses (13.9) (9.3) Finance expense (13.0) (8.5) EPRA earnings 57.4 36.8 +56% EPRA ear
Slide 15: Income statement – dividend cover
Income statement – dividend cover Twelve months to Twelve months to % change 30-Jun-22 30-Jun-21 YoY £m £m Net rental income 72.1 48.0 Net income from joint venture (undistributed) 12.2 6.6 Administrative & other expenses (13.9) (9.3) Finance expense (13.0) (8.5) EPRA earnings 57.4 36.8 EPRA earning
Slide 16: Statement of financial position
Statement of financial position As at As at % change 30-Jun-22 30-Jun-21 YoY £m £m Investment properties 1,561.6 1,148.4 Financial asset held at amortised cost 10.6 0.0 Investment in joint venture 177.1 130.3 Cash and cash equivalents 51.2 19.6 Other assets 7.5 4.3 Gross assets 1,808.0 1,302.6 +39%
Slide 17: Movement in EPRA NTA per share
Movement in EPRA NTA per share 120 115 2.5 Pence per share 5.9 (5.9) 3.2 110 3.0 (1.4) 115 105 108 100 EPRA NTA 30 EPRA earnings Dividend Acquisition Equity issue - Property JV revaluation EPRA NTA 30 June 2021 paid costs premium to revaluation June 2022 NTA(1) (1) Net of equity issue costs Real Est
Slide 18: Rental growth driving valuation uplift
Rental growth driving valuation uplift 1,650 40 3 (18) 1,550 Value (£m) 1,572 1,450 1,547 1,350 FY 21 Direct Valuation increase - Valuation increase - Acquisition FY 22 Direct (2) Portfolio valuation rental uplifts yield shift costs Portfolio valuation plus acquisition at cost(1) (1) Includes regear
Slide 19: 5 years of growth and performance
5 years of growth and performance Net rental income (£m)(1) Dividend paid per share 72.1 5.94p 5.86p 5.80p 47.9 5.63p 5.50p 26.4 17.2 8.9 FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 EPRA NTA per share Cumulative total shareholder return(2) 115p 48% 40% 108p 28% 101p 96p 97p 16% 8% FY18 FY19 FY
Slide 20: Current Portfolio
Current Portfolio Sustainability Direct Portfolio growth Direct Portfolio Sainsbury’s Reversion Portfolio Image: M&S, Liverpool 20
Slide 21: Sustainability
Sustainability Change in EPC breakdown since June 2021 June 21 Current Supermarkets Portfolio EPC 11% Supermarkets Portfolio EPC(2) 70% IMPROVEMENT 81% rated A-C IN A-C(1) rated A-C Carbon emissions Governance Annual calculation of EV charging baseline emissions initiative Solar PV energy Annual rep
Slide 22: Direct Portfolio growth
Direct Portfolio growth 2,000 £640m growth 49 1,600 Stores owned 1,200 £m 1,788 800 1,572 1,148 £90.9m 400 Current rent 539 roll 265 368 - (1) Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Current (1) Direct Portfolio growth is as at June 2022 including Past performance is not indicative of financial assets he
Slide 23: Unique portfolio of handpicked supermarkets
Unique portfolio of handpicked supermarkets Map key and exposure by value(1) 8 Tesco 50% Grocery operators Sainsbury’s 32% Morrisons 8% Waitrose 6% 93% Omnichannel Asda 2% stores(1) Aldi 1% M&S 1% Iceland <1% 81% Inflation- linked rents(2) The portfolio shown is Including post balance sheet events t
Slide 24: Value add: Tesco Leicester case study
Value add: Tesco Leicester case study Omnichannel store Top quartile trader Value opportunity at acquisition 8yr WAULT Purchase price £63.7m Regeared to 15yr RPI lease Current valuation(1) £78.0m Significant capital upside Gain over cost +£14.3m IRR(2) 17% (1) As at 30 June 2022 For illustrative pur
Slide 25: Complementary non-grocery assets
Complementary non-grocery assets Image: Medical Practice, Winchester 7.2% 4yrs 5% Net initial WAULT of Direct yield Portfolio(1) Image: Glasgow Image: Glasgow Image: Pets at Home, Leicester Exposure by value(2) Image: Glasgow % of Direct Units Value Portfolio DIY 4 £20.2m 1.1% Medical and 8 £16.2m 0
Slide 26: Sainsbury's Reversion Portfolio
Sainsbury’s Reversion Portfolio SUPR’s SUPR’s SUPR’s SUPR’s valuation Co-owners investment implied ownership at 30 at cost(2) value(3) June 2022 (1) 25.5% £108.5m £177m £190m Highbury Dragon Two securitisations Finance BV Finance BV Number of stores 16 10 Option completion date March 23 June 23 Mone
Slide 27: Our Market
Our Market Omnichannel shift Supermarket property yields Transaction volumes Addressable market Inflation Outlook Investment strategy Conclusion Image: Tesco, Sheffield 27
Slide 28: Omnichannel generating largest LFL growth
Omnichannel generating largest LFL growth £130bn Supermarkets and online 16% £76bn Omnichannel LFL store sales growth vs pre-covid £45bn Convenience 12% £33bn 8% Discounters 13% 4% 5% 4% 0% Omnichannel Convenience Discounters supermarkets The statement “Online shopping is the largest growing superma
Slide 29: Supermarket property yields remain stable
Supermarket property yields remain stable 8.0% 6.0% 5.3% 5.2% 5.0% 4.8% 4.6% 4.5% 4.5% 4.0% 2.0% 0.0% 2016 2017 2018 2019 2020 2021 2022 (YTD) Atrato supermarket property yield series Property yields sourced from Atrato Capital research based on Past performance is not indicative of future results.
Slide 30: Grocery real estate transaction volumes
Grocery real estate transaction volumes 2,000 1,600 Volume (£m) 1,200 1,795 1,830 1,850 800 1,405 1,195 1,050 400 0 2016 2017 2018 2019 2020 2021 2022 (1) estimate Total grocery real estate transaction volumes from Colliers UK Grocery real Estate Review 2022 (1) Atrato Capital research 30
Slide 31: £40bn addressable market size
£40bn addressable market size Transaction Transaction Vendors(1) Purchasers(2) value £m value £m British Land Plc 1,028 SUPR 1,674 SUPR & BA(3) JV 520 Tesco Plc 1,340 Legal & General Property 367 Realty Income 1,099 USS 333 Sainsbury’s 520 Aberdeen Standard Investments 328 LXI REIT 277 Aviva 324 Bla
Slide 32: Illustrative impact of inflation on returns
Illustrative impact of inflation on returns 14% 12.4% Total return 12% 4% inflation growth 10% 2% inflation growth 7.9% Total return 8% 0% inflation 6% 4% 4.5% 2% 0% 0 1 2 3 4 5 6 7 8 9 10 Years Property yields based on 4.5% NIY, assuming no purchaser costs and no leverage with inflation based on il
Slide 33: The outlook for Supermarket Income REIT
The outlook for Supermarket Income REIT STRUCTURALLY HIGHLY STRONG, OPPORTUNISTIC SUPPORTED CONTRACTED, FLEXIBLE VALUE ADD SECTOR INFLATION- BALANCE SHEET TRANSACTIONS LINKED RENTAL GROWTH Image: Tesco, Newmarket 33
Slide 34: Pillars of our investment strategy
Pillars of our investment strategy LONG INFLATION-LINKED FUTURE PROOFED REAL ASSET BACKING: INCOME STORES LARGE FLEXIBLE SITES Images: Tesco Prescot, Tesco Bracknell 34
Slide 35: Appendix 1: Financial
Appendix 1: Financial Appendix 1: Financial EPRA metrics Adjusted EPRA earnings IFRS income statement IFRS balance sheet Joint Venture income statement Joint Venture income reconciliation Joint Venture balance sheet Pro forma balance sheet Image: Sainsbury’s, Washington 35
Slide 36: EPRA metrics
EPRA metrics As at As at 30-Jun-22 30-Jun-21 EPRA NTA per share 115 pence 108 pence EPRA NRV per share 124 pence 118 pence EPRA NDV per share 116 pence 107 pence Twelve months to Twelve months to 30-Jun-22 30-Jun-21 EPRA EPS 5.9 pence 5.6 pence EPRA NIY 4.60% 4.80% EPRA cost ratio 16.50% 16.80% 36
Slide 37: Adjusted EPRA earnings
Adjusted EPRA earnings Twelve months to Twelve months to 30-Jun-22 30-Jun-21 £m £m EPRA earnings 57.4 36.8 Net income from joint venture (undistributed) (12.2) (6.6) Adjusted EPRA earnings 45.2 30.2 Adjusted EPRA EPS 4.6p 4.6p Dividend paid 53.2 35.5 Adjusted EPRA dividend cover 0.85x 0.85x (1) Incl
Slide 38: IFRS income statement
IFRS income statement Twelve months to Twelve months to 30-Jun-22 30-Jun-21 £m £m Net rental income 72.1 48.0 Administrative and other expenses (13.9) (9.3) Change in fair value of properties 21.8 36.3 Share of income from joint venture 43.3 15.5 Operating Profit 123.3 90.5 Finance expense (13.0) (8
Slide 39: IFRS balance sheet
IFRS balance sheet As at 30-Jun-22 As at 30-Jun-21 £m £m Investment property 1,561.6 1,148.4 Financial assets held at amortised cost 10.6 0.0 Investment in joint venture 177.1 130.3 Other non-current assets 5.3 1.0 Cash 51.2 19.6 Trade and other receivables 1.9 3.1 Financial assets held at fair valu
Slide 40: Joint Venture - income statement
Joint Venture - income statement Twelve months to Twelve months to 30-Jun-22 30-Jun-21 £m £m Rental income 52.9 52.4 Expenses (0.3) (0.3) Finance cost (14.3) (15.5) Taxation (3.6) (3.2) Joint venture earnings (undistributed) 34.7 33.4 Change in fair value of investment properties 133.5 31.8 Change i
Slide 41: Joint Venture income reconciliation
Joint Venture income reconciliation Twelve months to Twelve months to 30-Jun-22 30-Jun-21 £m £m EPRA net income from joint venture (undistributed) 12.2 6.6 (1) Gain on bargain purchase 0.0 3.3 Share of fair value gain on investment properties 31.1 5.6 IFRS net income from joint venture (undistribute
Slide 42: Joint Venture – balance sheet
Joint Venture – balance sheet As at As at 30-Jun-22 30-Jun-21 £m £m Portfolio valuation (1) 1,066.0 932.5 Rent receivable 29.9 29.6 Bonds notional value (42.7% LTV) (2) (338.6) (372.6) Interest accruals & other liabilities(3) (61.3) (71.8) Book value 696.0 517.7 SUPR share of net assets 177.1 130.3
Slide 43: Pro forma balance sheet
Pro forma balance sheet Pro forma £m Investment properties 1,777.7 Financial asset held at amortised cost 10.6 Investment in joint venture 177.1 Cash and cash equivalents 48.5 Other assets 1.9 Borrowings (605.1) Prepaid rents and other liabilities (29.2) EPRA net tangible assets (NTA)(1) 1,381.5 EPR
Slide 44: Appendix 2: General
Appendix 2: General Board and Investment Adviser Governance Key terms Investment strategy Debt facilities Share price performance Portfolio breakdown Inflation Relative value Image: Tesco, Sheffield 44
Slide 45: Board of Directors and Investment Adviser
Board of Directors and Investment Adviser Supermarket Income REIT Board of Directors New Board appointment Frances Davies Independent Director Nick Hewson Vince Prior Jon Austen Cathryn Vanderspar Frances Davies was Chairman Senior Independent Chair of Audit Independent Director Committee Director a
Slide 46: Governance
Governance 4th Consecutive EPRA Gold governance award 100% Independent Board members 40% Female Board membership and in leadership roles(1) ESG Committee assembled for oversight and reporting (1) Investment Adviser 46
Slide 47: SUPR key terms
SUPR key terms • UK listed REIT The Company • London Stock Exchange Main Market, Premium 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 • Atrato
Slide 48: Structurally supported investment strategy
Structurally supported investment strategy Working Grocery Digital from home Inflation transformation +350% +7% +73% Increase(1) Growth(1) Online sales growth(2) +11% Grocery growth vs. pre-covid(2) (1) January 2019 to December 2021 Annualised figures are backward looking and do (2) Kantar data July
Slide 49: Debt facilities providing capacity to grow
Debt facilities providing capacity to grow Lender Facility Term to expiry(1) £52m 1 yrs £150m 1 yrs £35m 2 yrs £78m 3 yrs £39m 5 yrs £97m 4 yrs Unsecured RCF(2) £250m 7 yrs Unsecured term(2) £100m 5 yrs Unsecured term(2) £62m 3 yrs Total credit facilities £862m 4 yrs (1) Including all uncommitted ex
Slide 50: Share price performance
Share price performance Relative share price performance since IPO (£p)(1) Trading volume - since IPO (£m)(2) 160.0 20.0 140.0 16.0 120.0 12.0 100.0 8.0 80.0 4.0 60.0 0.0 Jul-18 Jul-20 Jul-17 Jul-21 Jul-22 Jul-19 Jan-22 Oct-18 Oct-19 Oct-20 Jan-21 Oct-17 Apr-18 Apr-19 Apr-20 Oct-21 Apr-22 Jan-18 Jan
Slide 51: SUPR portfolio breakdown
SUPR portfolio breakdown Direct Portfolio - Sainsbury's Reversion Direct Portfolio - supermarkets Portfolio non-food Portfolio valuation £1,694m £190m £94m Passing rent(1) £83.7m £14.5m £7.2m Net initial yield 4.6% 4.9% 7.2% WAULT 15 yrs 1 yrs 4 yrs Vacant units 0 0 7 Average rent per sq.ft £25 £23
Slide 52: 81% inflation-linked rent reviews
81% inflation-linked rent reviews 17% 81% 2% RPI 8% CPI Fixed Open market 73% 81% inflation-linked rent reviews relates to the Direct Portfolio only, excludes Sainsbury’s Reversion Portfolio but includes post balance sheet events to date. Weightings based on percentage of rent roll. Rent reviews bas
Slide 53: Relative value to index-linked Gilts
Relative value to index-linked Gilts 8.0% 6.0% 5.3% 5.2% 5.0% 4.8% 4.6% 4.5% 4.5% 4.0% 2.0% 5.0% yield advantage 0.0% -0.5% -2.0% -1.7% -1.7% -1.8% -2.1% -2.7% -2.7% -4.0% 2016 2017 2018 2019 2020 2021 2022 estimate Atrato supermarket property yield series UK inflation-linked GILT - 2037 Bond data s
Slide 54: Important Information
Important Information THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, REDISTRIBUTED, COPIED OR PUBLISHED (IN WHOLE OR IN PART) TO ANY OTHER PERSON FOR ANY PURPOSE. ANY RECIPIENT OF THIS PRESENTATION AGREES TO KEEP PERMANE
Slide 55: Important Information
Important Information The information contained in this presentation has not been independently verified by the Company, Atrato or any other person, and some of the information is still in draft form. No representation, warranty or undertaking, express or implied, is made by the Company, Atrato or a
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