Supermarket Income Reit Plc · LSE:SUPR
Supermarket Income Reit — H1 2022 Earnings Presentation
55 slides from Supermarket Income Reit's earnings presentation, March 2022
Slide 1: Interim Results Presentation
INTERIM RESULTS PRESENTATION FOR THE SIX MONTHS FROM 1 JULY 2021 TO 31 DECEMBER 2021 INVESTING IN THE FUTURE OF UK GROCERY Image: Sainsbury’s, Melksham
Slide 2: Agenda and Board of Directors
AGENDA Supermarket Income REIT Board of Directors Welcome and introduction – Ben Green Financial update – Haffiz Kala Nick Vince Prior Jon Austen Cathryn Vanderspar Hewson Senior Independent Chair of Audit Independent Chairman Director Committee Director Business review & ESG – Robert Abraham Atrato
Slide 3: £372m acquisitions, BBB+ rating, Premium listing
£372m BBB+ Premium New Investment grade listing acquisitions credit rating Migration from SFS For the period 1 July 2021 to date including all post balance sheet events. SFS = Specialist Fund Segment of the UK stock exchange 3 Image: Sainsbury’s, Ashford
Slide 4: Financial highlights – 6 months to 31 Dec 2021
Financial highlights – 6 months to 31 Dec 2021 £1.6bn 15 Yrs 1.13x Portfolio WAULT EPRA dividend assets(1) cover 113p 5.0% 3.0p EPRA NTA Growth in Dividend per share EPRA NTA per share (1) As at 31 December 2021 Including net investment in joint venture. 4 Image: Waitrose, Oundle
Slide 5: Strong financial results
Strong financial results 5 Image: Sainsbury’s, Melksham
Slide 6: 60% increase in net rental income
60% increase in net rental income Six months to Six months to % change 31-Dec-21 31-Dec-20 YoY £m £m Net rental income 32.6 20.4 60% EPRA net income from joint venture (undistributed) 6.2 2.9 113% Administrative & other expenses (6.2) (4.1) 51% Finance expense (5.7) (3.7) 54% EPRA earnings 26.9 15.5
Slide 7: Rental growth through rent reviews
Rental growth through rent reviews(1) 85 6.3% average rent 80 review increase(2) 75 70 65 £m 60 79.7 72.8 55 50 45 48.0 40 Annualised Wisbech Winchester Melksham Bangor Prestatyn Colchester Murton Failsworth Liverpool (A) Liverpool (M&S) Workington Prescot Swansea Maidstone Cannock Rent reviews Annu
Slide 8: Income statement
Income statement Six months to Six months to % change 31-Dec-21 31-Dec-20 YoY £m £m Net rental income 32.6 20.4 60% EPRA net income from joint venture (undistributed) 6.2 2.9 113% Administrative & other expenses (6.2) (4.1) 51% Finance expense (5.7) (3.7) 54% EPRA earnings 26.9 15.5 74% EPRA earning
Slide 9: Adjusted EPRA earnings
Adjusted EPRA earnings Six months to Six months to % change 31-Dec-21 31-Dec-20 YoY £m £m EPRA earnings 26.9 15.5 74% EPRA net income from joint venture (undistributed) (6.2) (2.9) 113% Adjusted EPRA earnings 20.7 12.6 65% Dividend paid 23.9 13.9 72% Adjusted EPRA dividend cover 0.87x 0.91x EPRA div
Slide 10: Delivering growth in assets and NTA
Delivering growth in assets and NTA As at As at % change 31-Dec-21 30-Jun-21 YoY £m £m Investment properties 1,413.5 1,148.4 23% Investment in joint venture 167.5 130.3 29% Cash and cash equivalents 24.1 19.6 23% Other assets 15.6 4.3 263% Gross assets 1,620.7 1,302.6 24% Borrowings (478.0) (409.7)
Slide 11: NTA increase pence per share
NTA increase 5 pence per share 120 115 3.8 110 2.1 (2.4) 2.1 Pence per share 0.9 (0.9) 105 113 100 108 95 90 EPRA NTA 30 Adjusted EPRA Dividend paid Equity issue - net Acquisition Acquisition Property JV revaluation EPRA NTA 31 June 2021 Earnings premium to NTA costs(1) costs(1) revaluation and earn
Slide 12: Direct Portfolio valuation uplift
Direct Portfolio valuation uplift 1,440 1,430 9 2 1,420 14 1,410 (12) Value £m 1,400 1,390 1,380 1,414 1,401 1,370 1,360 1,350 30 June 21 Direct LFL valuation increase LFL valuation increase New acquistions yield Acquisition costs (2) 31 December 21 Direct Portfolio valuation plus from rental uplift
Slide 13: Cost of debt
Cost of debt As at As at 31-Dec-21 30-Jun-21 £m £m Drawn debt 481.8m 413.3m Total debt facilities 643.5m 613.5m Net LTV(1) 32% 34% Running interest cost(2) 2.0% 1.9% Weighted average finance cost(3) 2.5% 2.6% Debt maturity(4) 4 years 4 years (1) Based on Direct Portfolio only (excluding Sainsbury’s
Slide 14: Current secured debt structure
Current secured debt structure Running Lender Facility(1) Expiry date Term to expiry(3) Cost(2) £7m 2.17% Jul 2023 2 £52m 2.75% Jul 2023 2 £150m 1.87% Aug 2023 2 £27m 2.22% Aug 2025 4 £300m 1.69% Jan 2024 4 £100m 1.59% July 2023 5 £97m 2.09% Aug 2024 5 £60m 2.39% July 2025 6 Total credit £793m 1.91%
Slide 15: Consistent financial growth and performance
Consistent financial growth and performance Net rental income (£m)(1) Dividend per share(2) 5.94p 79.7 5.86p 5.80p 47.9 5.63p 5.50p 26.4 17.2 8.9 FY18 FY19 FY20 FY21 PF 22 FY18 FY19 FY20 FY21 FY22 EPRA NTA per share Cumulative total shareholder return(3) 113p 48% 108p 40% 101p 28% 97p 16% 96p 8% FY1
Slide 16: Key strategic milestones achieved
Key strategic milestones achieved 16 Image: Tesco, Colchester
Slide 17: Rapid deployment into high quality assets
Rapid deployment into high quality assets £372m 4.6% 17 yrs Acquisition Acquisition Deployed NIY WAULT For the period 1 July 2021 to date including all post balance sheet events. 17 Image: Sainsbury’s, Hessle
Slide 18: Diversified portfolio of high quality assets
Diversified portfolio of high quality assets £1.54bn Direct Portfolio(1) Geographical diversification 41 supermarkets 4.7% net initial yield 15 yrs WAULT Tesco Sainsbury’s Morrisons Waitrose Aldi M&S Asda (1) Including post balance sheet events to date and non-food units 18
Slide 19: Portfolio benefits from inflation-linked rent reviews
Portfolio benefits from inflation-linked rent reviews 85% inflation-linked uplifts Inflation uplifts by frequency RPI 85% 3% 12% 2% Annual CPI 34% 5 yearly 9% Fixed 5 yearly 7 yearly OMV 64% 76% Annual Including post balance sheet events to date. Weightings based on percentage of rent roll. 19
Slide 20: Value-add transactions
Value-add transactions Tesco Prescot (Merseyside) – regear at acquisition Potential to expand online fulfilment Attractive omnichannel store Value opportunity De-risked acquisition New 15-year annual CPI lease 4 years unexpired lease term Top quartile trading store Rent rebased to 4% of turnover Ove
Slide 21: Sainsbury's JV driving value
Sainsbury’s JV driving value Investment case Outcome to date JV value uplift to date Sainsbury’s commitment to Sainsbury’s buying +£30m stores 21 of the 26 stores +13% on value of our Yield compression +£14m(1) investment Running yield >10% +£16m(2) Total gain = £60m (1)Store valuations of the buyba
Slide 22: Commitment to the sustainability agenda
Commitment to the sustainability agenda 5% increase in EPCs A-C since Jun 21(1) Ambitious net zero targets Current Direct Portfolio EPC(2) Carbon neutral since January 2019 E 3% A 17% D 22% Net zero by 2035 75% rated C or above B 29% C 29% Net zero by 2040 (1) Based on number of stores (2) As at 1 M
Slide 23: Progress on sustainability journey
Progress on sustainability journey Review of board skills and diversity Investment policy grounded on responsible investment principles Appointment of a Head of Sustainability(1) Third party engaged to begin work on SECR(1) Atrato commitment to donate percentage of cash profit to charity(1) Adopted
Slide 24: Structurally supported investment strategy
Structurally supported investment strategy 24 Image: Tesco, Bracknell
Slide 25: Structurally supported investment strategy
Structurally supported investment strategy Inflationary Digital WFH tailwinds transformation 25 Image: Sainsbury’s, Taplow
Slide 26: Strategy benefiting from changes in consumer habits
Strategy benefiting from changes in consumer habits +88% Yo2Y online growth(1) +10% Yo2Y supermarket sales growth(1) +4% Yo2Y physical sales(1) (1) Kantar 52 weeks to January 2022 vs 52 weeks to January 2020 26 Image: Tesco, Newmarket
Slide 27: Resulting in omnichannel sales growth
Resulting in omnichannel sales growth +16% Yo2Y omnichannel stores sales growth(1) (1) Average omnichannel store sales, based on January 2022 Kantar and January 2020 grocery sales data. Physical vs online sales based on IGD online grocery and physical sales market share 2020 to 2022. Per store deter
Slide 28: Atrato supermarket yield series
Atrato supermarket yield series 8.0% 7.0% 6.0% 5.3% 5.2% 5.0% 5.0% 4.8% 4.6% 4.5% 4.4% 4.0% 3.0% 2.0% 1.0% 0.0% 2016 2017 2018 2019 2020 2021 2022 Atrato supermarket property yield series Property yields sourced from Atrato Capital research based on representative investment market transactions exce
Slide 29: Information advantage provides opportunities
Information advantage provides opportunities Transaction Transaction Vendors(1) Purchasers(2) value £m value £m British Land Plc 902 SUPR 1,230 USS 333 Realty Income 1,099 Consensus Business Group 238 Tesco Plc 842 Legal & General Property 225 LXI 155 Aberdeen Standard Investments 211 Blackrock 83 C
Slide 30: Significant relative value in grocery property
Significant relative value in grocery property 8.0% +inflation 7.0% 6.0% 5.7% 5.3% 5.2% 5.0% 5.0% 4.8% 4.6% 4.5% 4.4% 4.0% 3.0% 3.0% 2.3% 2.0% Bells Finco 3.25% Feb 2026 (BB- secured) 1.0% Tesco 2.75% April 2030 (BBB- unsecured) Longstone Finance 4.8% April 2030 (A+ secured) 0.0% 2016 2017 2018 2019
Slide 31: Cheap source of inflation protection
Cheap source of inflation protection(1) 8.0% 6.0% 5.2% 5.3% 5.0% 4.8% 4.6% 4.5% 4.4% 4.0% 2.0% 6.8% yield advantage 0.0% -2.0% -1.7% -1.7% -1.8% -2.1% -2.4% -2.7% -2.7% -4.0% 2016 2017 2018 2019 2020 2021 2022 Atrato supermarket property yield series UK inflation-linked GILT - 2037 Inflation breakev
Slide 32: Well positioned for the future
Strong financial results Key strategic milestones achieved Structurally supported investment strategy Well positioned for the future 32 Image: Tesco, Newmarket
Slide 33: Appendix 1: Financial
Appendix 1: Financial • Proforma income statement • EPRA metrics • IFRS income statement • IFRS balance sheet • Joint Venture - income statement • Joint Venture - income reconciliation • Joint Venture - EPRA net income • Rent reviews • SUPR portfolio breakdown • Investment Grade balance sheet 33 Ima
Slide 34: Proforma income statement
Proforma income statement Annualised Six months to 31-Dec-21 £m Net rental income 79.7 EPRA earnings 65.3 EPRA earnings per share 6.6p EPRA dividend cover 1.12x Adjustment: net income from joint venture (undistributed) (12.4) Adjusted EPRA earnings 52.9 Adjusted EPRA earnings per share 5.4p Annualis
Slide 35: EPRA metrics
EPRA metrics As at As at 31-Dec-21 31-Dec-20 EPRA NTA per share 113 pence 104 pence EPRA NRV per share 123 pence 113 pence EPRA NDV per share 113 pence 104 pence Six months to Six months to 31-Dec-21 31-Dec-20 EPRA EPS 3.1 pence 2.8 pence EPRA NIY 4.6% 4.8% EPRA cost ratio 15.8% 19.9% 35
Slide 36: IFRS income statement
IFRS income statement Six months to Six months to 31-Dec-21 31-Dec-20 £m £m Net rental income 32.6 20.4 Administrative and other expenses (6.2) (4.1) Changes in fair value of investment properties 11.0 15.5 Share of income from joint venture 37.2 4.9 Operating Profit 74.6 36.7 Finance expense (5.7)
Slide 37: IFRS balance sheet
IFRS balance sheet As at As at 31-Dec-21 30-Jun-21 £m £m Investment properties 1,413.5 1,148.4 Investment in joint venture 167.5 130.3 Other non-current assets 5.1 1.0 Cash and cash equivalents 24.1 19.6 Trade and other receivables 10.4 3.1 Financial assets held at fair value through profit and loss
Slide 38: Joint Venture - income statement
Joint Venture - income statement Six months to Twelve months to 31-Dec-21 30-Jun-21 £m £m Rental income 26.6 52.4 Expenses (0.2) (0.3) Finance cost (7.7) (15.5) Taxation (1.7) (3.2) Joint venture earnings (undistributed) 17.0 33.4 Change in fair value of investment properties 128.8 31.8 Change in fa
Slide 39: Joint Venture income reconciliation
Joint Venture income reconciliation Six months to Twelve months to 31-Dec-21 30-Jun-21 £m £m EPRA net income from joint venture (undistributed) 6.2 6.6 Gain on bargain purchase(1) - 3.3 Share of fair value gain on investment properties 31.0 5.6 IFRS net income from joint venture (undistributed) 37.2
Slide 40: EPRA net income from JV (undistributed) - breakdown
EPRA net income from JV (undistributed) - breakdown Six months to 31-Dec-21 £m EPRA net income from joint venture (undistributed) in HY 2020 2.9 Rental income from additional stake 3.0 Increase in rental income due to rental uplifts 0.2 Decrease in finance expense 0.1 EPRA net income from joint vent
Slide 41: Rent reviews in H2 better able to capture inflation
Rent reviews in H2 better able to capture inflation H1 2022 Known H2 2022(2) Index Index Index Index Store Cap Actual Store Cap Actual month value month value 5-yearly Cumbernauld Sep 4.9% 5.0% 4.9% Bangor N/A N/A 2.0% 2.0% Wisbech Jul 3.1% 3.2% 3.1% Scunthorpe Sep 4.9% 5.0% 4.9% Newcastle Oct 3.2%
Slide 42: SUPR portfolio breakdown
SUPR portfolio breakdown Sainsbury’s Direct Portfolio Reversion - supermarkets Portfolio Non-food Total Portfolio valuation £1,487m £167m £54 £1,709m Percentage of overall portfolio valuation 87.0% 9.8% 3.2% 100% Annualised passing rent income £72.6m £14.7m £4.4m £91.7m Percentage of overall rent 79
Slide 43: Investment Grade balance sheet
Investment Grade balance sheet BBB+ Selected key rating drivers Potential benefits for SUPR Growing UK Long term Access to bond Flexibility grocery market leases market Sainsbury’s Unsecured Omnichannel Access to longer Reversion funding focused term finance Portfolio platform 43
Slide 44: Appendix 2: General
Appendix 2: General • SUPR key terms • Index inclusion timeline • Share price performance • In-store fulfilment • Omnichannel – slots by operator • Tesco omnichannel network • Colliers grocery transactions • Sainsbury’s Reversion Portfolio 44 Image: Sainsbury’s Newcastle
Slide 45: 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 C
Slide 46: Index inclusion expected timeline
Index inclusion expected timeline January 2022 Application submitted to FCA to migrate from the Specialist Fund Segment February 2022 Shares admitted to the Premium Segment of the LSE's Main Market June 2022 Potential entry into FTSE 250 and EPRA NAREIT indices 46
Slide 47: 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 0.0 Oct 17 Jul 18 Jul 19 Jul 20 Jul 17 Jan 20 Jul 21 Jul 20 Oct 18 Oct 19 Oct 20 Jul 17 Oct 18 Apr 18 Apr 19 Apr 20 Oct 21 Jul
Slide 48: In store fulfilment dominates UK grocery
In store fulfilment dominates UK grocery In-store shopping Omnichannel dominates C&C is the fastest growing remains dominant online fulfilment online segment 87% 80% 120% Instore grocery sales Of online orders Growth in through the tills(1) fulfilled from stores(1) click and collect(2) Omnichannel s
Slide 49: Omnichannel – dominant fulfilment method
Omnichannel – dominant fulfilment method 1.4 million increase in delivery slots since 2019 1,400 +100% 90% 1,200 Big 4 online fulfilment via omnichannel stores 1,000 Number of delivery slots (000s) +90% 800 +80% 600 400 +40% +270% 200 0 Tesco ASDA Sainsbury's Waitrose Ocado Pre Covid Post Covid 49
Slide 50: Tesco has expanded its omnichannel network
Tesco has expanded its omnichannel network Tesco omnichannel evolution No. of sites % of store estate Supermarkets 448 56% Omnichannel supermarkets + dark stores 353 44% Total 801 100% No. of Orders Tesco online fulfilment ecosystem % Development sites per week Manual omnichannel stores (MFCs) 344 1
Slide 51: Colliers' notable supermarket transactions in 2021
Colliers’ notable supermarket transactions in 2021(1) Buyer Location Operator Price Yield West Ealing £34m 3.4% Hythe £37m 3.8% Weybridge £13m 3.5% Herne Bay £57m 4.1% Wimbledon £32m 3.0% Hemel Hempstead £13m 3.9% Sheffield £73m 4.5% (1) Source: Colliers: UK Grocery Real Estate Review 2022. The Year
Slide 52: Sector strength attracting record investment
Sector strength attracting record investment(1) Total Capital Value (£m) Number of transactions (1) Source: Colliers: UK Grocery Real Estate Review 2022. The Year of the Big Spenders 52
Slide 53: 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% Number of stores 26 SUPR Investment at cost £108.5m Debt outstanding(2) £357.3m Highbury Dragon Two securitisations Finance BV Finance BV Number of stores 16
Slide 54: Strictly confidential disclaimer
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 PERMANENTLY CONFIDENTIAL ALL
Slide 55: Disclaimer (continued)
The information contained in the presentation is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment. No reliance may be placed for any purpose whatsoever on the information or opinions contained in the presentation or on their completene
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