Supermarket Income Reit Plc · LSE:SUPR
Supermarket Income Reit — FY2023 Earnings Presentation
56 slides from Supermarket Income Reit's earnings presentation, Sep 20, 2023
Slide 1: Results Presentation for the Year to 30 June 2023
RESULTS PRESENTATION FOR THE YEAR TO 30 JUNE 2023 SUPR Primary 1 20 SEPTEMBER #405268 2023 INVESTING IN THE FUTURE OF UK GROCERY Photo: Sainsbury’s Preston
Slide 2: Agenda and Presenting Team
Agenda and Presenting Team Welcome and introduction Financial results Ben Green Haffiz Kala Grocery market SUPR Primary 1 Principal Finance Director #405268 Portfolio Appendix Steven Noble Robert Abraham CIO Managing Director 2
Slide 3: Omnichannel grocery, a growth sector
Omnichannel Long1term grocery, SUPR Primary Robust balance sustainable #405268 a growth sheet returns sector Photo: Tesco, Bishops Cleeve 3
Slide 4: Financial Results
Financial Results Financial highlights Income statement Growth in annualised passing rent Contractual rental growth SUPR Primary 1 #405268 Earnings reconciliation SRP value creation Valuation stabilised in H2 Debt strategy Sustainability Image: Tesco, Llanelli 4
Slide 5: The UK's only dedicated listed grocery platform
The UK’s only dedicated listed grocery platform £1.7bn 14 yrs 5.6% Total WAULT(2) NIY(1) assets(1) SUPR Primary 1 #405268 93p 35% 6.06p EPRA NTA EPRA FY24 dividend per share(2) LTV(2) target Past performance is not indicative of future results. Photo: Tesco, Bradley Stoke 1) Based on 30 June 2023 va
Slide 6: Income statement – rental income
Income statement – rental income Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 +32% Net income from joint venture (undistributed) 11.7 12.2 Administrative & other expenses (15.4) (13.9) Finance expense (34.3) (13.0) EPRA earnings 57.2 57.4 SUPR
Slide 7: Growth in annualised passing rent
Growth in annualised passing rent 120 4.1% avg. rental uplift 2.1 20.7 100 80 Value (£m) 60 SUPR Primary 1 #405268 103.0 40 80.2 20 - Annualised rent for Acquisition rent Rental uplifts Annualised IFRS rent for year to June 22 year to June 2023 Past performance is not indicative of future results Mo
Slide 8: Contractual rental growth
Contractual rental growth Rent review profile Rent increases driven by annual reviews Annual 5 yearly FY23 Reviews 15 2 SUPR Primary 1 Annual – 56% 5 yearly – 43% Value of uplift (£m) £1.8m £0.4m #405268 Uplift (%) 4.1% 17.0% Annualised uplift (%) 4.1% 3.4% 7 yearly – 1% Past performance is not indi
Slide 9: Income statement – joint venture
Income statement – joint venture Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 Net income from joint venture (undistributed) 11.7 12.2 -4% Administrative & other expenses (15.4) (13.9) Finance expense (34.3) (13.0) EPRA earnings 57.2 57.4 SUPR P
Slide 10: Income statement – admin and other expenses
Income statement – admin and other expenses Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 Net income from joint venture (undistributed) 11.7 12.2 Administrative & other expenses (15.4) (13.9) +11% Finance expense (34.3) (13.0) EPRA earnings 57.2
Slide 11: Income statement – finance expense
Income statement – finance expense Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 Net income from joint venture (undistributed) 11.7 12.2 Administrative & other expenses (15.4) (13.9) Finance expense (34.3) (13.0) +164% EPRA earnings 57.2 57.4 SU
Slide 12: Income statement – adjusted earnings
Income statement – adjusted earnings Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 Net income from joint venture (undistributed) 11.7 12.2 Administrative & other expenses (15.4) (13.9) Finance expense (34.3) (13.0) EPRA earnings 57.2 57.4 +0% SU
Slide 13: Adjusted earnings reconciliation
Adjusted earnings reconciliation Twelve months to 30-Jun-23 £m EPRA earnings 57.2 Add: EPRA excludes income benefits Income on interest rate hedging derivatives 9.7 from hedging SUPR Primary 1 #405268 One off charge of transition to unsecured 1.5 debt structure Non-recurring One off loan arrangement
Slide 14: £16m value created through further SRP acquisition
£16m value created through further SRP acquisition 215 210 205 16 Value (£m) 200 4 4 SUPR Primary 1 212 195 2 2 #405268 190 196 185 180 BAPTL Discount on Loan Loan Income Fair value Net acquisition (1) purchase price arrangement fee interest movement proceeds Jan 2023 Jul 2023 Past performance is no
Slide 15: Income statement – adjusted dividend cover
Income statement – adjusted dividend cover Twelve months to Twelve months to % change 30-Jun-23 30-Jun-22 YoY £m £m Net rental income 95.2 72.1 Net income from joint venture (undistributed) 11.7 12.2 Administrative & other expenses (15.4) (13.9) Finance expense (34.3) (13.0) EPRA earnings 57.2 57.4
Slide 16: Statement of financial position
Statement of financial position Year ended Year ended % change 30-Jun-23 30-Jun-22 YoY £m £m Investment properties 1,686 1,562 Financial asset held at amortised cost 11 11 Investment in joint venture - 177 Cash and cash equivalents 37 51 Other assets SUPR Primary 1 139 7 #405268 Gross assets 1,873 1
Slide 17: Valuations broadly flat in H2
Valuations broadly flat in H2 2,000 (22) 1,900 (230) 1,800 1,700 Value (£m) (3) 1,951 SUPR Primary 1 1,600 #405268 1,500 1,697 1,400 1,300 FY 22 Direct Acquisition H1 valuation H2 valuation FY 23 Portfolio valuation costs (2) change change Portfolio valuation (3) plus acquisitions at cost(1) Past pe
Slide 18: NTA per share broadly flat on stabilised H2 valuation
NTA per share broadly flat on stabilised H2 valuation 140 Property revaluation 120 Property revaluation 100 NTA per share (p) 80 SUPR Primary 1 60 115 #405268 NTA -23p 92 NTA +1p 93 40 H1 (Jun 2022 to Dec 2022) H2 (Jan 2023 to Jun 2023) 20 - EPRA NTA Adjusted Dividend Property Acquisition Derivative
Slide 19: Enhancing balance sheet strength
Enhancing balance sheet strength 31 December 2022 Post balance sheet LTV 40% -6% 34% Debt maturity(1) Dec 2026 +13 months Feb 2028 SUPR Primary 1 #405268 Cost of debt 2.9% +0.2% 3.1% +Sumitomo Mitsui 7 lenders 8 lenders Relationship banks Banking Corporation Avg. hold = £123m (“SMBC”) Avg. hold = £8
Slide 20: Robust balance sheet
Robust balance sheet Group LTV headroom Group interest cover headroom(1) 60 % 4.1 x Significant headroom on group banking 34 % covenants(2) 1.8 x Current Covenant Current Covenant Weighted SUPR Primary 1 average debt #405268 maturity Debt reduced and term extended(3) >4 years(3) 300 Debt amount (£m)
Slide 21: Protecting dividend through hedging
Protecting dividend through hedging 100% fixed rate debt SUPR Primary 1 Hedged term extended by 12 months at no additional cost #405268 3.1% all in fixed cost of debt 21
Slide 22: Sustainability is a key part of our long-term strategy
Sustainability is a key part of our long-term strategy Mitigate environmental Governance and Stakeholder Citizenship and impact reporting Engagement communities • Fully TCFD compliant • Commitment to good • SUPR continued to • Improved social annual report governance reflected in improve the quality
Slide 23: Grocery market
Grocery market Grocery market snapshot UK grocery is a growth sector Grocery inflation driving store revenue growth SUPR Primary 1 Highly affordable rents #405268 Supermarkets offer strong relative value Supermarket volumes remain stable Photo: Sainsbury’s, Gloucester 23
Slide 24: 2023 Grocery market snapshot
2023 Grocery market snapshot Incumbents 19% peak Little new SUPR Primary 1 consolidate grocery store space #405268 online market inflation(1) added(2) share(3) 1) ONS grocery inflation in March 2023 2) Atrato Capital research based on IGD channel data 24 3) Incumbents refers to Tesco, Sainsbury’s, A
Slide 25: UK grocery is a strong growth sector
UK grocery is a strong growth sector(1) +30% growth £185bn SUPR Primary 1 £242bn #405268 2017 2023 +£57bn 1) IGD channel data 2017 to 2022 actuals, 2023 forecast 25
Slide 26: Omnichannel core component of grocery growth
Omnichannel core component of grocery growth 250 240 8 230 15 220 UK grocery market size (£m) 11 210 7 200 SUPR Primary 1 #405268 242 16 190 180 170 185 160 150 2017 Omnichannel Physical Convenience Discount Other 2023 supermarkets supermarkets Grocery channel growth IGD channel data 2017 to 2022 ac
Slide 27: Omnichannel growth achieved from existing space
Omnichannel growth achieved from existing space 250 240 8 230 15 220 UK grocery market size (£m) 11 210 7 200 SUPR Primary 1 #405268 242 16 190 180 170 185 160 150 2017 Omnichannel Physical Convenience Discount Other 2023 supermarkets supermarkets Grocery channel growth IGD channel data 2017 to 2022
Slide 28: Grocery inflation driving store revenue growth
Grocery inflation driving store revenue growth 20% 19% Grocery inflation(1) 15% Upwards pressure on rents Grocery inflation (%) 10% SUPR Primary 1 #405268 5% Rent cap - 4% avg.(2) 0% -5% Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23 Past performance is not indicative of future results. 1) ONS gro
Slide 29: Highly affordable rents
Highly affordable rents Rent-to-turnover ratios 3.8% SUPR average(1) SUPR Primary 1 #405268 4% 12% 20% Grocery Retail park Hospitality average(2) average(2) average(2) 1) Supermarkets portfolio only. Estimated store trading based on Atrato Capital research 2) Atrato research based on estimated marke
Slide 30: Supermarkets offer attractive relative value
Supermarkets offer attractive relative value 10.0 % Supermarkets 9.0 % 8.4 % All UK property 8.0 % Logistics 7.6 % 7.0 % Net Initial Yield 6.3 % 6.0 % SUPR Primary 1 5.9 % #405268 100bps 5.0 % 4.9 % 4.7 % 4.0 % 3.9 % 3.0 % 3.2 % 2.0 % 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Slide 31: Supermarket investment volumes remain stable
Supermarket investment volumes remain stable £2.5 £2.1bn £2.0 £1.7bn £1.7bn Transaction volumes (£bn) £1.6bn £1.5 £1.4bn SUPR Primary 1 #405268 £1.0 £0.5 £0.0 30 June 2019 30 June 2020 30 June 2021 30 June 2022 30 June 2023 Source: Knight Frank, Savills, MSCI, Atrato Capital research based on superm
Slide 32: Supermarket investment volumes remain stable
Supermarket investment volumes remain stable £2.5 £2.1bn £2.0 £1.7bn £1.7bn Transaction volumes (£bn) £1.6bn £1.5 £1.4bn SUPR Primary 1 #405268 £1.0 £1.8bn £1.2bn £0.5 £1.2bn £1.3bn £1.0bn £0.0 30 June 2019 30 June 2020 30 June 2021 30 June 2022 30 June 2023 Other Market transactions Source: Knight
Slide 33: Supermarket investment volumes remain stable
Supermarket investment volumes remain stable £2.5 £2.1bn £2.0 £1.7bn £1.7bn Transaction volumes (£bn) £1.6bn £1.5 £1.4bn £0.6bn SUPR Primary 1 £0.1bn #405268 £0.2bn £0.4bn £1.0 £0.4bn £1.2bn £1.1bn £0.5 £1.0bn £0.9bn £0.6bn £0.0 30 June 2019 30 June 2020 30 June 2021 30 June 2022 30 June 2023 Other
Slide 34: Supermarket investment volumes remain stable
Supermarket investment volumes remain stable £2.5 £2.1bn £2.0 £0.3bn £1.7bn £1.7bn Transaction volumes (£bn) £1.6bn £0.2bn £1.5 £1.4bn £0.6bn £0.5bn £0.3bn £0.3bn £0.2bn SUPR Primary 1 £0.1bn #405268 £0.2bn £0.3bn £0.4bn £1.0 £0.4bn £1.2bn £1.1bn £0.5 £1.0bn £0.9bn £0.6bn £0.0 30 June 2019 30 June 2
Slide 35: Portfolio
Portfolio Growth and diversification Unique portfolio of supermarkets Active portfolio management Capturing value opportunities SUPR Primary 1 #405268 Value from Asset Management Asset sustainability initiatives Non-grocery summary Strong relative value Image: Tesco, Bradley Stoke 35
Slide 36: Continued growth and diversification
Continued growth and diversification 120 Passing rent (£m) £103m Passing rent(1) 100 80 100% SUPR Primary 1 Rent collection 60 #405268 since IPO(2) 103.0 40 77.6 57.8 78% 20 28.7 Inflation-linked 19.2 rent(3) 13.7 0 (1) FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 PF Past performance is not indicative
Slide 37: Unique portfolio of handpicked supermarkets
Unique portfolio of handpicked supermarkets Map key and supermarket 55 exposure by value(1) Supermarkets Tesco 49% Sainsbury’s 30% Morrisons 6% Waitrose 5% SUPR Primary 1 93% #405268 Omnichannel Asda 2% stores(1) Aldi 1% M&S 1% Iceland <1% 3.8% Average rent to turnover(2) 1) Portfolio weighted by va
Slide 38: Active portfolio management enhancing returns
Active portfolio management enhancing returns Realising value …deploying into higher yield through disposals… opportunities £430m asset sales £399m asset purchases SUPR Primary 1 #405268 21 sites sold 11 sites acquired 4.3% NIY 5.5% NIY NIY = Net initial yield 38
Slide 39: Capturing value opportunities
Capturing value opportunities Tesco Worcester case study(1) Investment characteristics Acquired April 2023 - off market Strong trading 6.0% NIY Omnichannel 12-year WAULT Annual RPI (0%-4%) Annual, index-linked Store characteristics SUPR Primary 1 #405268 c.£65m Site revenue Q1 Trading density 65k sq
Slide 40: Adding value through asset management
Adding value through asset management Bristol Basingstoke Newcastle 22k sq.ft. foodstore 22k sq.ft. foodstore 21k sq.ft. foodstore proposed proposed proposed SUPR Primary 1 #405268 Target yield on cost ~7% 40
Slide 41: Asset management sustainability initiatives
Asset management sustainability initiatives(1) Solar EV charging 20% of the portfolio with operational PV 20% of the portfolio installed SUPR Primary 1 #405268 Solar and EV percentages by asset number Images: Thetford and Bracknell 41
Slide 42: Complementary non-grocery portfolio assets
Complementary non-grocery portfolio assets Image: Costa and Superdrug, Chineham 6% 8% 75% of Net initial Essential Portfolio yield retail Image: Glasgow Image: Bradley Stoke Exposure by value Image: Pets at Home, Leicester Units % of Portfolio Image: Glasgow DIY 4 1.1% Food and beverage 25 1.1% SUPR
Slide 43: Strong relative value
Strong relative value(1) 14.0% 77% 12% 12.0% Let to Tesco and Sainsbury’s(2) Leverage benefit 10.0% 8.0% 78% YTM/IRR 7.2 % SUPR Primary 1 #405268 Index-linked 6.0% rent reviews(3) 4.0% 2.0% 100% 0.6 % Occupancy and 0.0% rent collection UKTI 10yr TSCO 2042 Supermarkets since IPO Unsecured 1) Source:
Slide 44: Investment strategy underpinned by growth sector
1 Investment strategy underpinned by growth sector 2 Enhanced sustainability SUPR Primary 1 #405268 3 Capital recycling and strengthened balance sheet 4 Secure income, attractive total returns 44
Slide 45: Structurally supported investment strategy
Structurally supported investment strategy SUPR Primary 1 #405268 LONG INFLATION-LINKED FUTURE PROOFED REAL ASSET BACKING INCOME STORES LARGE FLEXIBLE SITES Images: Tesco Bishops Cleeve, Sainsbury’s Gloucester, Tesco Prescot 45
Slide 46: Appendix: General
Appendix: General SUPR key terms Rent review breakdown Movement in NTA SUPR Primary 1 PDMR share purchasers #405268 SRP: Sector specialism EPC breakdown Tenant food inflation Atrato yield series Image: Tesco, Sheffield 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)(1) Governance • An independent board of directors; compliant with the AIC Corporate Governance Code • Atrat
Slide 48: 78% inflation-linked rent reviews
78% inflation-linked rent reviews 2% 20% 78% RPI 7% SUPR Primary 1 CPI #405268 OMV Fixed 71% Weightings based on percentage of rent roll. Rent reviews based on current lease terms. As at September 2023. 48
Slide 49: Movement in NTA
Movement in NTA 140 120 2.9 (3.0) (18.8) 100 (1.4) (3.3) 0.9 2.9 (3.0) (0.2) (0.3) 1.6 NTA per share (p) 80 SUPR Primary 1 60 115 #405268 92 93 40 20 - EPRA NTA Adjusted Dividend Property Acquisition Derivatives SRP EPRA NTA Adjusted Dividend Property Acquisition Derivatives SRP EPRA NTA June 2022 e
Slide 50: Management and board share purchases
Management and board share purchases(1) SUPR Board Investment Adviser Chairman: Principal: Nick Hewson Ben Green +757k shares +676k shares Senior Independent Director: Principal: Vince Prior Steve Windsor +79k shares +379k shares Non-executive Director: CIO: Frances Davies Steven Noble SUPR Primary
Slide 51: SRP: Sector specialism unlocking value
SRP: Sector specialism unlocking value Invested £217m via JV into 26 Sainsbury’s stores on short leases(1) 7% Of Sainsbury’s UK turnover(3) Value created via underwriting Sainsbury’s ongoing occupation Sainsbury’s purchased Sainsbury’s leased Vacant possession Sainsbury’s purchase 21 stores for £1,0
Slide 52: EPC breakout
EPC breakout 84% of the portfolio is rated C or above A 4% D 16% SUPR Primary 1 #405268 84% rated C or above C 34% B 46% As at September 2023 52
Slide 53: Supermarket food inflation
Inflation: discounter price advantage narrowing 30% 25% 23.8 % 21.9 % Supermarket food inflation 20% 16.6 % 15% 14.4 % SUPR Primary 1 14.1 % #405268 10% 5% 0% May-22 Jul-22 Aug-22 Oct-22 Dec-22 Jan-23 Mar-23 May-23 Jun-23 3 months ending Which? Supermarket Inflation Tracker. Inflation is annual, bas
Slide 54: Atrato supermarket yield series
Atrato supermarket yield series 8.0% 7.0% 6.6% 6.0% 5.3% 5.2% 5.0% 5.6% 5.0% 4.8% 4.7% Tesco & 4.6% Net initial yield (%) 4.5% Sainsbury’s 4.0% SUPR Primary 1 #405268 3.0% 2.0% 1.0% 0.0% 2016 2017 2018 2019 2020 2021 2022 2023 (YTD) Past performance is not indicative of future results Based on indiv
Slide 55: 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 56: 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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