Audited results for the year ended 30 June 2024

About this update from Supermarket Income Reit Plc

[{"type":"text","content":"\n \n  SUPERMARKET INCOME REIT \n (the \"Group\" or the \"Company\") \n AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2024 \n STABLE VALUATIONS AND STRONG BALANCE SHEET UNDERPIN CAPACITY TO PURSUE ACCRETIVE ACQUISITIONS AND DRIVE EARNINGS GROWTH \n   \n The Board of Directors of Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with secure, inflation-linked, long-dated income from grocery property, reports its audited consolidated results for the Group for the year ended 30 June 2024. \n FINANCIAL HIGHLIGHTS \n \n \n \n \n \n \n \n 12 months to \n 30-June-24 \n \n \n 12 months to \n 30-June-23 \n \n \n   \n Change \n \n \n \n \n Annualised passing rent 1 \n \n \n £113.1m \n \n \n £100.6m \n \n \n +12% \n \n \n \n \n Adjusted earnings per share 1 \n \n \n 6.1 pence \n \n \n 5.8 pence \n \n \n +4% \n \n \n \n \n IFRS earnings per share \n \n \n (1.7) pence \n \n \n (11.7) pence \n \n \n +85% \n \n \n \n \n Dividend per share declared \n \n \n 6.1 pence \n \n \n 6.0 pence \n \n \n +1% \n \n \n \n \n Dividend cover 2 \n \n \n 1.01x \n \n \n 0.97x 2 \n \n \n n/a \n \n \n \n \n EPRA cost ratio 1 \n \n \n 14.7% \n \n \n 15.5% \n \n \n n/a \n \n \n \n \n \n \n \n 30-June-24 \n \n \n 30-June-23 \n \n \n Change \n \n \n \n \n Portfolio valuation \n \n \n £1,776m \n \n \n £1,693m \n \n \n +5% \n \n \n \n \n Portfolio net initial yield 1 \n \n \n 5.9% \n \n \n 5.6% \n \n \n n/a \n \n \n \n \n EPRA NTA per share 1 \n \n \n 87 pence \n \n \n 93 pence \n \n \n -6% \n \n \n \n \n IFRS NAV per share \n \n \n 90 pence \n \n \n 98 pence \n \n \n -8% \n \n \n \n \n Loan to value 1 \n \n \n 37% \n \n \n 37% \n \n \n n/a \n \n \n \n \n   \n Secure and growing income \n ·    12% increase in annualised passing rent to £113.1 million, reflecting: \n o  4% average like-for-like rental uplift \n o  Accretive acquisitions in the year \n ·    100% occupancy and 100% rent collection since IPO \n o  75% of rental income from Tesco and Sainsbury's \n ·    4.4% increase in adjusted EPS to 6.08 pence driven by rental growth and accretive acquisitions \n ·    Fully covered FY24 dividend \n ·    FY25 target dividend increased to 6.12 pence per share \n   \n Earnings accretive acquisitions \n ·    Acquired 20 assets in UK and France for £135.8 million before costs at an average NIY of 6.7% (UK: 7.0%, France: 6.3%) \n ·    Earnings growth further supported through maintaining tight control of costs, achieving an EPRA cost ratio of 14.7% with further cost efficiencies targeted in FY25 \n     \n Strong grocery sector growth \n ·    UK grocery market sales forecast to increase by 5.8% to £251.6 billion in 2024 3 \n o  Tesco and Sainsbury's increased sales and market share in the year with a combined 43% market share 4 \n o  Online market share at 12% and growing following post pandemic reset 4 \n ·    French grocery market sales forecast to increase by 2.1% to €290 billion in 2024 5 \n o  Carrefour has a 19.6% market share in France 6 \n o  Carrefour is targeting 3x online sales growth to €10 billion by 2026 (base year: 2021) 7 with its online grocery channel forecast to grow 8.25% in 2024 8 \n o  Online market share is currently at 10% and is one of the fastest growing channels 9 \n   \n Strategic transaction with Carrefour \n ·    One of the largest grocery operators in the world \n ·    Investment grade rated (BBB) 10 \n ·    Acquisition of 17 omnichannel Carrefour stores in relationship led sale and lease back transaction for a consideration of €75.3 million before costs \n ·    Acquired at a 6.3% NIY versus 4.4% funding cost \n ·    Carrefour's second ever sale and lease back transaction in France and first in 12 years \n ·    Carrefour now represents 4% of portfolio GAV \n ·    Highly affordable rents with uncapped inflation linked uplifts 11 \n   \n Supermarket property valuations stabilised \n ·    Portfolio independently valued at £1.78 billion, inclusive of acquisitions of £135.8 million \n ·    Net Initial Yield (\"NIY\") of 5.9% (30 June 2023: 5.6%) \n ·    Following a decline in valuations in 2023, like-for-like valuations were broadly flat in H2, up 0.1% \n ·    Strong level of transactional activity across the sector with return of traditional institutional participants to the market \n ·    Operator store buybacks, particularly Tesco, demonstrating mission critical nature of large format stores \n   \n Proactively managing balance sheet \n ·    LTV of 37% as at 30 June 2024 (30 June 2023: 37%) \n ·    Strong debt covenant headroom supporting acquisition led growth \n ·    100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8%, including post balance sheet events (30 June 2023: 3.1%) \n ·    Fitch BBB+ investment grade rating reaffirmed providing access to attractively priced long-dated debt \n ·    New £104.5 million unsecured facility with SMBC at a weighted average margin of 1.45% with a maturity of three-years and two one-year extension options \n ·    Post balance sheet: \n o  New £100 million unsecured facility with ING at a margin of 1.55% over SONIA with a maturity of three years and two one-year extension options \n o  Oversubscribed 7-year Euro private placement at 4.4% fixed all-in cost, providing natural currency hedge for Carrefour portfolio acquisition \n   \n Further progress on key sustainability initiatives \n ·    EV charging operational at 30% of sites and solar arrays across 20% of stores \n ·    Science Based Targets validated and approved by the Science Based Targets initiative including a commitment to reach net zero by 2050 \n ·    Strong tenant net zero commitments driving significant tenant capital expenditure on stores \n ·    Prepared and submitted EPRA Sustainability Best Practices Recommendations disclosures for the first time \n   \n Nick Hewson, Chair of Supermarket Income REIT plc, commented: \n   \n \"The Company's operational performance has been resilient with 100% occupancy and 100% rent collection despite the broader market and macro-economic challenges of the past years. We have taken a disciplined approach to capital deployment and have recently begun to see opportunities to add accretive acquisitions in the UK and France. We continue to monitor opportunities to recycle capital via asset sales and joint ventures. \n Looking ahead, we remain optimistic that the improving interest rate environment should provide positive tailwinds for the Company. We are pleased to recommend another increased dividend of 6.12 pence per share for FY25 and remain focused on delivering a progressive dividend for shareholders.\" \n   \n PRESENTATION FOR ANALYSTS \n   \n The Company will be holding an in-person presentation for analysts at 08.30am today at FTI Consulting's offices, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. To register to attend in-person, please contact FTI Consulting: [email protected]. There will also be a webcast available. To join the presentation via the webcast, please register using the following link: \n   \n Supermarket Income REIT - Full Year Results Presentation 2024 | SparkLive | LSEG \n   \n The results presentation is available in the Investor Centre section of the Group's website. \n   \n   \n \n \n \n \n FOR FURTHER INFORMATION     \n \n \n     \n \n \n \n \n Atrato Capital Limited                                        \n \n \n +44 (0)20 3790 8087    \n \n \n \n \n Rob Abraham / Mike Perkins / Chris McMahon      \n \n \n [email protected]      \n \n \n \n \n   \n Stifel Nicolaus Europe Limited                       \n \n \n   \n +44 (0)20 7710 7600    \n \n \n \n \n Mark Young / Rajpal Padam / Madison Kominski   \n \n \n     \n \n \n \n \n \n \n \n \n \n \n \n \n Goldman Sachs International   \n Tom Hartley / Hannah Mackey \n \n \n +44 (0)20 7774 1000  \n   \n \n \n \n \n \n \n \n     \n \n \n \n \n FTI Consulting                                                       \n \n \n +44 (0)20 3727 1000    \n \n \n \n \n Dido Laurimore / Eve Kirmatzis / Andrew Davis                                      \n \n \n [email protected]      \n \n \n \n \n   \n NOTES TO EDITORS:   \n   \n Supermarket Income REIT plc (LSE: SUPR) is a real estate investment trust dedicated to investing in grocery properties which are an essential part of the feed the nation infrastructure. The Company focuses on grocery stores which are omnichannel, fulfilling online and in-person sales. The Company's supermarkets are let to leading supermarket operators in the UK and Europe, diversified by both tenant and geography. \n   \n The Company's assets earn long-dated, secure, inflation-linked, growing income. The Company targets a progressive dividend and the potential for capital appreciation over the longer term. \n    \n The Company is listed on the Closed-ended investment funds category of the FCA's Official List and its Ordinary Shares are traded on the LSE's Main Market.  \n   \n Atrato Capital Limited is the Company's Investment Adviser.    \n   \n Further information is available on the Company's website www.supermarketincomereit.com     \n   \n LEI: 2138007FOINJKAM7L537  \n   \n Stifel Nicolaus Europe Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Supermarket Income REIT plc and no one else in connection with this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Stifel Nicolaus Europe Limited nor for providing advice in connection with the matters referred to in this announcement. \n Goldman Sachs International, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the United Kingdom, is acting exclusively for Supermarket Income REIT plc and no one else in connection with this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Goldman Sachs International nor for providing advice in connection with the matters referred to in this announcement. \n \n \n CHAIR'S STATEMENT \n Dear Shareholder, \n I am pleased to report another resilient year for the Company. Occupancy on our portfolio of grocery stores was 100%, as was rent collection, and indeed annualised passing rent grew year on year by 12%, due to accretive acquisitions and inflation protection in over 80% of our leases. Our vigilance on our cost base was again notable and we have one of the lowest EPRA cost ratios of our peers. We expect our cost ratio to reduce over the next 12 months as we focus on further operational efficiencies across the business. Once again, we are benefitting from our interest rate hedging strategy and we expect the interest rate backdrop to be more supportive from this point in the cycle. \n All of this is permitting us to recommend a further, if modest, increase to our dividend for the coming year to 6.12 pence per share (2024: 6.06 pence per share). This is in the context of our stated aim to deliver sustainable, long-term, growing income from the grocery real estate industry. The last three years have seen some challenging macroeconomic headwinds but we have weathered the storm and increased the dividend every year. We believe we have now seen the worst of it. Our job is to maximise our earnings and continue to increase the dividend on a covered basis, and benefit from the inherent affordability of the rents our grocery tenants pay us. \n The background to the challenging nature of the last three years has been the fact that we have all had to get used to operating in a higher interest rate environment compared to that in the 2010s. Those higher interest rates seem to have peaked during the summer of 2023, with 5-year swap rates exceeding 5% in July 2023. At that time, the Company prudently paid down debt to run at a lower LTV of 33%. This strategically conservative approach to leverage has, however, meant that 2024 earnings growth has been modest. On the other hand, we believe that property valuations reached a floor in December 2023. Consequently, we have been confident in 2024 to increase leverage, including through our oversubscribed debut Private Placement debt issuance, to help drive earnings growth through acquisitions which will benefit future years. \n In growing through acquisitions, the Investment Adviser's position as a sector specialist gives the Company unique access to off-market opportunities to acquire these assets at yields which are above the cost of our debt financing. We have been highly selective in our acquisitions and maintain our focus of investing in top trading omnichannel stores let to the strongest grocery operators. \n While continuing to pursue our core UK strategy, we have also sought to broaden our investible universe and enhance the diversity and covenant strength of our tenant base through a highly selective expansion into Europe. \n In April, we made our first investment into the €290 billion French grocery sector with an off-market, direct sale and leaseback of 17 omnichannel stores with Carrefour. The transaction was the culmination of over 12 months of discussions, leveraging the Investment Adviser's deep grocery expertise and long-standing sector relationships. This was Carrefour's first sale and leaseback in France in 12 years and underlines the Company's credentials as a trusted and expert counterparty. \n The transaction highlights the attractive opportunities to acquire and finance omnichannel supermarkets let to high-quality covenants with highly affordable rents in Europe. The acquisition was made at a 6.3% net initial yield and financed at an accretive 4.4% fixed cost of funding in Euros. However, this was a tentative exploration into non-UK property assets, representing some 4% of the portfolio. \n We continue to see interesting opportunities such as this and if we decide to increase further our exposure to continental European grocery assets, we will first consult with shareholders and seek shareholder approval to revise our Investment Policy accordingly. \n Our thesis at IPO in 2017 was focussed on the mission critical nature of omnichannel stores as last mile fulfilment hubs and the long-term attractiveness of owning these infrastructure-like assets. This thesis is as valid as ever in 2024 in both the UK and France. \n The strong performance of the UK and French grocery sectors and our omnichannel stores within them means our stores benefit from higher sales densities. This ensures rents remain affordable for our tenants. Rent to Turnover (\"RTO\") at store level is the key affordability measure in the sector. The Company's UK portfolio is at an average 4% RTO which is in-line with the long-standing industry standard level for high-quality stores. \n The discount to EPRA NTA at which the Company's shares have traded through the year is a frustration for the Board and closing this discount is a key focus for the Company. We continually review how best to allocate our shareholders' capital. The Board believes that over the medium term, earnings growth and the sustainability of the dividend will serve to narrow the discount. We are also focused on capital recycling opportunities through the sale of individual stores or larger JV opportunities. \n We regularly assess the use of share buybacks and at a certain price and in sufficient quantity they make mathematical sense if one can achieve both at the same time. However, the Board has given the Investment Adviser a mandate to achieve growth, on the basis that growing earnings through a selective approach to acquisitions will generate a higher return than that offered by share buybacks over the medium to long term. This position has remained under continuous review over the past year and will continue to be debated while our shares trade at a discount to EPRA NTA. \n I am particularly pleased this year with the progress being made on the Company's sustainability activities. A key milestone has been achieved with the validation and approval of the Company's science-based targets by the Science Based Target initiative (\"SBTi\"). We have also seen the continued addition of EV charging and solar panels at a number of our stores. Our tenants have also made ambitious net zero commitments and a benefit of owning mission critical real estate is the continuing capital expenditure our tenants make into our stores to meet their own commitments particularly in the area of refrigeration. Our Task Force on Climate-Related Financial Disclosures (\"TCFD\") compliant annual report is accompanied by our second standalone sustainability report published today. The Company has prepared EPRA Sustainability Best Practices Recommendations (\"sBPR\") disclosures for the first time and is also currently preparing its first net zero transition plan. \n In the coming months we also expect to proceed with a secondary listing on the Johannesburg Stock Exchange (\"JSE\"). Based on positive investor feedback following a non-deal roadshow undertaken in February 2024, we believe that the secondary listing will help improve trading liquidity and the diversity of our shareholder base. Such listings require minimal additional reporting and have relatively low ongoing costs to maintain. I look forward to welcoming South African investors to the shareholder register and in time we hope that these investors will grow to represent a strong and supportive addition to the Company's register.  \n As part of Board's succession planning, we appointed Sapna Shah as head of the Nominations Committee and as Senior Independent Director (\"SID\"). She, along with the other members of the Nominations Committee, will be determining the process for identifying and recruiting three new NEDs over the coming two years including a new Audit Chair and a new Chair. We thank Vince Prior for his service as Chair of the Nominations Committee and SID. \n Outlook \n In the context of the recently challenging macro headwinds, we can now begin to consider the possibility of a more favourable interest rate environment. Market expectations of modest interest rate cuts over the coming months, albeit not returning to the levels of the 2010s, provide confidence that we have now seen the floor in this current cycle. We have a balance sheet and asset portfolio which will enable us to deliver sustainable, long-term, earnings growth even at these new 'normal' interest rate levels. I am hopeful that as the equity markets re-focus on the attractiveness of real estate, the quality of our assets and the secure nature of our growing income stream will once again be recognised. \n In the meantime, due to our sector specialism, we continue to be able to selectively add attractive assets to our portfolio to grow earnings and ultimately dividend. Due to the prudent steps taken to run lower leverage throughout 2023, the Company has had the balance sheet capacity during 2024 to take advantage as these opportunities arise. Earnings will also be enhanced through our programme of even stricter cost control delivering a low EPRA cost ratio of 14.7% which we expect to reduce further over the next 12 months, in search of our goal to be the company with the lowest EPRA cost ratio of our externally managed peers. \n Nick Hewson \n Chair \n 17 September 2024 \n \n   \n A conversation with Justin King about the future of the UK grocery sector \n Justin King is a senior adviser to Atrato Capital, the Group's Investment Adviser. Justin is recognised as one of the UK's most successful grocery sector leaders, having served as CEO of Sainsbury's for over a decade and previously held senior roles at Marks & Spencer, Asda, PepsiCo and Mars. \n He is currently Non-Executive Director of Marks & Spencer and Chairman of Allwyn Entertainment which operates the National Lottery licence, Ovo Energy and Dexters, London's leading estate agent. Justin also advises a series of high-profile consumer-focused companies including Itsu Grocery and Snappy Shopper. Justin is an advocate for responsible business, has been instrumental in launching several charitable concerns including the charity Made by Sport, which championed the power of sport to change young lives. Justin brings an unrivalled wealth of grocery sector experience and a deep understanding of grocery property strategy. \n   \n Question 1: The Carrefour sale and leaseback provided a unique entry point into the French grocery market. Do you consider this this market to be very different to the UK market? \n It's less different than many think! It's a significant €290 billion market 12 , with supermarkets being the most dominant channel and the four top grocers holding over 70% of the market. Just like the UK, this operator concentration has been achieved through very well-located shops, great customer service, well-developed supply chains and an increasing focus on omnichannel business models. \n Carrefour is one of the largest grocers in the world, has a 19.6% 13 share of the French grocery market and provides an excellent addition to SUPR's portfolio, further diversifying its tenant mix. So, taken all together, the transaction capitalises on the opportunity to leverage the Company's grocery specialism in generating attractive investment prospects whilst also being highly complementary to the existing portfolio and strategy. \n Of course, entering any new market comes with risk. I believe an essential component to managing that risk is through developing strong partnerships with leading operators. It is noteworthy that Atrato has entered this market via a direct sale and leaseback with Carrefour, benefiting from the insights derived from this relationship-based model which has always been a core part of the Company's strategy. \n   \n Question 2: You mention the benefits of leveraging sector specialism. How important do you think Atrato's deep knowledge of the omnichannel model will be when considering investing in grocery property markets like France? \n Firstly, it's important to remember that the UK's grocers were early pioneers in online grocery, resulting in one of the highest penetration rates for online grocery sales globally. This success was driven by an early transition to multi-channel stores which have been able to provide seamless integration between online and offline channels. I think it's fair to say that operators across the world have long looked at the UK as a template and we are seeing a global convergence to the omnichannel model. \n SUPR is the largest landlord of omnichannel grocery stores in the UK. That makes the Company an attractive property partner for grocers looking to capitalise on the online opportunity thorough transitioning toward omnichannel trading strategies. It also provides a valuable pathway to source attractive future investment opportunities. \n Carrefour's objective of growing its omnichannel customer base to 30% and online sales to €10 billion annually by 2026 14 is a clear recognition of the additional value to be captured through leveraging its supermarket estate and I know this was a key consideration in Carrefour selecting SUPR as its partner in the sale and leaseback transaction. \n   \n Question 3: How should the market think about affordability of rent on grocery property and how that impacts market rents in particular? \n For grocery operators, a key metric for determining the affordability of rent is the ratio of rent to store turnover, with c.4% being the long-standing industry benchmark in the UK. This equates to roughly two weeks of store sales and is considered affordable by operators, comparing favourably to other asset classes such as retail parks at c.12%, hotels at c.20% and shopping centres at c.25%. \n Whilst it's important to note that the grocery sector has lower margins than some of these comparable retail or leisure sectors, it is also important to note that typical EBITDAR margins at the store level are around 12%. This provides approximately 3x cover of rent at the market standard rent to turnover, which makes rents highly sustainable at that level. \n Currently, SUPR's portfolio sits at c.4% rent to turnover and is therefore considered to be approximately rack rented from a UK grocery property perspective. \n I believe the affordability of rent is one of the reasons that supermarket property investment performance over the last 15 years has been a stand-out positive performer relative to other asset classes despite multiple periods of macro-economic uncertainty. Having said that, not all supermarket property is equal and specialists like the Atrato Capital team are essential to ensure the right asset selection for the long term. \n   \n Question 4: Like-for-like sales growth in 2024 is lower than 2023 with staffing costs rising, does this signal margin pressure for the multichannel grocers? \n A key point here is that disinflation rather than deflation is taking effect across the grocery sector - prices are rising more slowly, rather than falling. In the four weeks to July 2024, the rate was 1.6%, the lowest rate since September 2021 and far below the recent peak of 19.0% seen in March last year. Against that backdrop, like-for-like sales growth will be naturally subdued verses the inflation-fuelled comparatives. \n However, living standards for the average customer are gradually improving, with wage growth outpacing price inflation for several quarters, which will in turn feed both enhanced sales volumes and improved product mix for the grocers. We are clearly seeing the benefits of that in the latest grocery market share data with Tesco and Sainsbury's capturing a further 100bps combined market share over their rivals and reaffirming their profit targets. \n This is why traditional grocers carry an extensive range and mix in their supermarkets to cater for the changing needs and buying trends of the customers' shopping basket and that customer focus has sustained the success of the grocers for the last 100 years \n   \n KEY PERFORMANCE INDICATORS \n We set out below our key performance indicators for the Company. \n   \n \n \n \n \n KPI \n \n \n Definition \n \n \n Performance \n \n \n \n \n 1.    Total Shareholder Return \n \n \n Shareholder return is one of the Group's principal measures of performance. \n Total Shareholder Return (\"TSR\") is measured by reference to the growth in the Group's share price over a period, plus dividends declared for that period. \n \n \n 8% for the year to 30 June 2024 \n(Six months ended \n31 December 2023: 23.2%, 30 June 2023: -34%) \n \n \n \n \n 2.    WAULT \n \n \n WAULT measures the average unexpired lease term of the Property Portfolio, weighted by the Portfolio valuations. \n \n \n 12 years WAULT as at 30 June 2024 (31 December 2023: 13 years, 30 June 2023: 14 years)  \n \n \n \n \n 3.    EPRA NTA per share \n \n \n The value of our assets (based on an independent valuation) less the book value of our liabilities, attributable to Shareholders and calculated in accordance with EPRA guidelines. EPRA states three measures of NAV to be used; of which the Group deem EPRA NTA as the most meaningful measure. See Note 27 for more information. \n \n \n 87 pence per share as at 30 June 2024 (31 December 2023: 88p, 30 June 2023: 93p) \n \n \n \n \n 4.    Net Loan to Value \n \n \n The proportion of our Portfolio gross asset value that is funded by borrowings calculated as balance sheet borrowings less cash balances divided by total investment properties valuation. \n \n \n 37% as at 30 June 2024 (31 December 2023: 33%, 30 June 2023: 37%)  \n \n \n \n \n 5.    Adjusted EPS* \n \n \n EPRA earnings adjusted for company specific items to reflect the underlying profitability of the business. \n \n \n 6.1 pence per share for the year ended 30 June 2024 (31 December 2023: 2.9p, 30 June 2023: 5.8p)  \n   \n \n \n \n \n   \n Adjusted earnings is a performance measure used by the Board to assess the Group's financial performance and dividend payments. The metric adjusts EPRA earnings by deducting one-off items such as debt restructuring costs and adding back finance income on derivatives held at fair value through profit and loss. Adjusted Earnings is considered a better reflection of the measure over which the Board assesses the Group's trading performance and dividend cover. Finance income received from derivatives held at fair value through profit and loss are added back to EPRA earnings as this reflects the cash received from the derivative hedges in the period and therefore gives a better reflection of the Group's net finance costs. Debt restructuring costs relate to the acceleration of unamortised arrangement fees following the refinancing of the Group's debt facilities during the year. \n   \n Adjusted EPS reflects the adjusted earnings defined above attributable to each shareholder. \n   \n The Group uses alternative performance measures including the European Public Real Estate (\"EPRA\") Best Practice Recommendations (\"BPR\") to supplement its IFRS measures as the Board considers that these measures give users of the annual report and financial information the best understanding of the underlying performance of the Group's property portfolio. The EPRA measures are widely recognised and used by public real estate companies and investors and seek to improve transparency, comparability and relevance of published results in the sector. \n   \n Reconciliations between EPRA measures and the IFRS financial statements can be found in Notes 11 and 27 to the financial information. \n   \n EPRA PERFORMANCE INDICATORS \n The table below shows additional performance measures, calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association. We provide these measures to aid comparison with other European real estate businesses. \n   \n For a full reconciliation of all EPRA performance indicators, please see the Notes to EPRA measures within the supplementary section of the financial information. \n   \n \n \n \n \n Measure \n \n \n Definition \n \n \n Performance \n \n \n \n \n 1.    EPRA EPS \n \n \n A measure of EPS designed by EPRA to present underlying earnings from core operating activities. \n \n \n 4.3 pence per share for the year ended 30 June 2024 (30 June 2023: 4.6p)  \n   \n \n \n \n \n 2.    EPRA Net Reinstatement Value (\"NRV\") per share \n \n \n An EPRA NAV per share metric which assumes that entities never sell assets and aims to represent the value required to rebuild the entity. \n \n \n 97 pence per share as at 30 June 2024 (30 June 2023: 103p)  \n \n \n \n \n 3.    EPRA Net Tangible Assets (\"NTA\") per share \n \n \n An EPRA NAV per share metric which assumes entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax. \n \n \n 87 pence per share as at 30 June 2024 (30 June 2023: 93p) \n \n \n \n \n 4.    EPRA Net Disposal Value (\"NDV\") per share \n \n \n An EPRA NAV per share metric which represents the Shareholders' value under a disposal scenario, where deferred tax, financial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. \n \n \n 90 pence per share as at 30 June 2024 (30 June 2023: 98p)  \n \n \n \n \n 5.    EPRA Net Initial Yield (\"NIY\") & EPRA \"Topped-Up\" Net Initial Yield \n \n \n Annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs. \n \n \n 5.9% as at 30 June 2024 (30 June 2023: 5.5%)  \n \n \n \n \n 6.    EPRA Vacancy Rate \n \n \n Estimated Market Rental Value (\"ERV\") of vacant space divided by ERV of the whole portfolio. \n \n \n 0.5% as at 30 June 2024 (30 June 2023: 0.4%)  \n \n \n \n \n 7.    EPRA Cost Ratio (Including direct vacancy costs) \n \n \n Administrative & operating costs (including costs of direct vacancy) divided by gross rental income. \n \n \n 14.7% for the year ended 30 June 2024 (30 June 2023: 15.5%)  \n \n \n \n \n 8.    EPRA Cost Ratio (Excluding direct vacancy costs) \n \n \n Administrative & operating costs (excluding costs of direct vacancy) divided by gross rental income. \n \n \n 14.4% for the year ended 30 June 2024 (30 June 2023: 15.2%)  \n \n \n \n \n 9.    EPRA LTV \n \n \n Net debt divided by total property portfolio and other eligible assets. \n \n \n 38.8% as at 30 June 2024 (30 June 2023: 35.2%) \n \n \n \n \n 10.  EPRA Like-for-like Rental Growth \n \n \n Changes in net rental income for those properties held for the duration of both the current and comparative reporting period. \n \n \n Rental increase of 2.1% for the year ended 30 June 2024 (30 June 2023: 2.7%) \n   \n \n \n \n \n 11.  EPRA Capital Expenditure \n \n \n Amounts spent for the purchase and development of investment properties (including any capitalised transaction costs). \n \n \n £146.2 million for the year ended 30 June 2024 (30 June 2023: £377.3 million) \n \n \n \n \n   \n I NVESTMENT ADVISER'S REPORT \n Atrato is the Company's Investment Adviser. Ben Green (Principal) and Robert Abraham (Fund Manager) discuss SUPR's performance and the long-term outlook for the business. \n SUPR's performance remains strong at the operational level \n   \n The Company's operational performance remains strong. It has been another year in which SUPR has achieved 100% rent collection and 100% occupancy from its tenant base of leading supermarket operators. Coupled with this, the Company has achieved 4.0% like-for-like rental growth on leases that have been subject to review in the year, driven by inflation-linked contractual uplifts. \n   \n Our key tenants continue to perform strongly with impressive revenue growth. This is particularly true of the types of the omnichannel stores that SUPR owns in the UK and France. Sainsbury's and Tesco, which represent 77% of the portfolio by value have reported like-for-like sales growth of 10.3% 15 and 7.7% 16 respectively in their full year results. They reported even higher sales growth figures from their large format stores, like those owned by SUPR, up by 11.0% 15 and 8.2% 16 respectively. Importantly, such revenue growth remains ahead of rental increases, which ensures that rents remain affordable. Our newest tenant Carrefour has also performed strongly in its home market in France with ROI margins up 6.2% 17 , underpinned by accelerated price investments which have been more than offset by cost discipline. \n   \n Proactively positioning SUPR for a higher interest rate world \n   \n Our strong operational performance has been largely offset by higher financing costs due to the higher interest rate environment and our decision to reduce leverage. This has led to lower earnings growth and only a modest increase in dividend as we and the Board seek to position SUPR with a sustainable, long-term, progressive dividend. \n   \n We took two key steps to position the Company for a higher interest rate world. First, we fixed SUPR's cost of debt through the period of highest expected interest rates. Second, we recycled the proceeds from the final tranche of the Sainsbury's Reversion Portfolio disposal in July 2023 into reducing debt. \n   \n Through the second half of the year, as debt costs reduced, we had the opportunity to grow earnings through accretive acquisitions. As a result of the prudent actions taken to protect the balance sheet the Company has been in a strong position to take advantage of these opportunities. \n   \n Taken together with our contracted rental growth and rigorous cost control, we have positioned SUPR to deliver a sustainable, progressive dividend in the new higher interest rate environment. \n   \n In our view, valuations have bottomed out \n   \n We saw a valuation decline as at the December balance sheet date due to the impact on the grocery property market of higher interest rate expectations. The sterling 5-year swap rate peaked in July 2023 and this negatively impacted the investment market in the first half of our financial year. \n   \n Valuations held flat over the second half of the year with the market now having adjusted to expectations of a long-term UK base rate of around 3.5%. Investment returns at current market yields look attractive, particularly when considering the defensive characteristics of grocery. \n   \n We have observed a similar dynamic in the French market with reducing interest rate pressure and valuations at the bottom of the cycle. \n   \n We are of the view that the next movement in valuations, when it comes, should be positive. \n   \n Supermarket rents, affordability and ERVs \n   \n Within the UK supermarket sector, 4% rent to turnover is seen as the affordable rental level that operators are willing to pay to secure long-term occupation for strong trading stores. \n   \n Increasing store turnover, has improved the affordability of supermarket rents and has resulted in SUPR's portfolio having a ratio of 4% RTO. \n   \n Our view is that the valuers systematically underestimate the rents that UK grocers are willing to pay to secure trading from a site. This is important for two reasons. First, it provides us with value opportunities at the point of acquisition because vendors often underestimate rental potential. Second, we believe that there is significant embedded value in the Portfolio which is not reflected in the valuation or the NAV. \n   \n A detailed case study on this topic is available on pages 30 to 32. \n   \n Valuation yield metrics for the SUPR portfolio \n   \n \n \n \n \n Measure \n \n \n Jun-23 \n \n \n Dec-23 \n \n \n June-24 \n \n \n \n \n Portfolio \n \n \n \n \n \n \n \n \n \n \n \n \n \n NIY \n \n \n 5.6% \n \n \n 5.8% \n \n \n 5.9% \n \n \n \n \n UK supermarkets \n \n \n \n \n \n \n \n \n \n \n \n \n \n NIY \n \n \n 5.4% \n \n \n 5.7% \n \n \n 5.8% \n \n \n \n \n NRY \n \n \n 4.6% \n \n \n 5.0% \n \n \n 5.1% \n \n \n \n \n NEY \n \n \n 5.5% \n \n \n 5.7% \n \n \n 5.8% \n \n \n \n \n   \n The Net Reversionary Yield (\"NRY\") provided by our valuer for our UK supermarkets applies an average ERV of £22 per square foot (\"per sq.ft.\") to SUPR's portfolio which is broadly in-line with the UK average. \n   \n In practice we expect our leases to be extended (regeared) prior to expiry and at a level which would be higher than this average, due to the strong performing nature of the stores owned by SUPR. \n   \n Assuming UK supermarket rents regeared to 4% of turnover it would produce an NRY closer to the 5.9% current NIY on the portfolio, demonstrating the potential reversionary upside that can be achieved on the portfolio. \n   \n As an off-market sale and leaseback transaction, our Carrefour rents are set at 2.1% RTO, versus the average of 2.5% in France. \n   \n Attractiveness of French grocery market and Carrefour \n   \n The Company's entry into the €290 billion French grocery market 18 was the most strategically significant development of the year. \n   \n The European grocery property market provides the Company the opportunity to benefit from a diversification of the portfolio, an increased exposure to investment grade tenant covenants and lower cost of financing. Due to the size of the European market, we can be highly selective in assessing investment opportunities. \n   \n The French market has attractive similarities to the UK. Supermarkets are the primary grocery sales channel and the French market is dominated by a small number of operators. France also has Europe's largest online grocery market, which is primarily serviced by an omnichannel store network and is growing rapidly. \n   \n Carrefour is one of the largest grocery operators in the world with forecast annual global sales of €100.4 billion in 2024 19 . In France, Carrefour holds a similar position to Sainsbury's in the UK as the second largest operator with 19.6% of grocery sales 20 . As part of its 2026 strategic plan outlined in 2022, Carrefour has set ambitious online growth targets to increase online sales to 30% of total sales by 2026, and its online channel is forecast to grow by 8.25% in 2024 21 . \n   \n   \n Growing earnings through highly selective, accretive acquisitions \n   \n 1)     First international acquisition via a sale and lease back transaction with Carrefour \n   \n In April 2024, SUPR acquired a sale and leaseback portfolio of 17 strong trading omnichannel stores in France through a direct transaction with Carrefour. \n   \n The stores were selected based on a detailed analysis including trading performance, local demographics and competition. The stores have highly affordable rents and were acquired at an attractive 6.3% NIY. \n   \n The transaction was financed through an existing revolving credit facility with HSBC, and post period end was refinanced via a Euro denominated private placement at a cost of 4.4%. The positive cash yield is accretive to the portfolio and supportive of earnings growth through long-term, index-linked leases. A case study on the transaction is provided on pages 20 to 22. \n   \n We were able to leverage our deep sector relationships and reputation as a trusted counterparty to leading grocery operators, to work with Carrefour on this off-market transaction. This was only the second ever sale and leaseback transaction conducted by Carrefour in France, and the first in 12 years. \n   \n 2)     The continued attractiveness of the UK, albeit a reduced addressable market \n   \n With the UK grocery market continuing to perform strongly, we see attractive opportunities in the UK supermarket space, albeit now focused on Tesco and Sainsbury's due to comparatively less attractive covenants of the more highly leveraged multichannel operators, Asda and Morrisons. \n   \n In the UK we have focused on shorter lease assets, particularly those which we view as being mispriced by the market due to an underestimation of affordable market rent. The target assets are let to strong tenant covenants (i.e., Tesco or Sainsbury's), with an attractive yield providing an accretive spread to the current cost of debt. These opportunities are currently more accretive to earnings than longer lease, rack rented assets, which are currently pricing more keenly. An example transaction is Tesco Stoke, acquired in March 2024 and on which there is a case study on pages 16 to 17. \n   \n   \n A tale of two halves for the UK investment market, while operator activity across both sale and leaseback and store buybacks has been prominent \n   \n Investment market volumes for the 12 months remained broadly in line with the £1.7 billion average since the Company's IPO, as liquidity for the asset class remains strong. Unlike other sectors which have seen volumes fall away in a higher interest rate environment, through rapid repricing and continued investor demand, supermarket volumes have remained consistent. Supermarkets are a defensive asset class with investment appetite from a broad range of purchasers from institutions through to high net worth individuals. \n   \n 5 yearly supermarket investment volumes 22 \n   \n \n   \n We are however beginning to see more limited supply - particularly of stock in the UK which is suitable for SUPR in terms of being accretive to the cost of debt and therefore to earnings, whilst maintaining tenant quality. \n \n \n 2024 transactions breakdown 22 \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Vendors \n \n \n Value (£m) \n \n \n \n \n \n Purchasers \n \n \n Value (£m) \n \n \n   \n \n \n \n \n Asda \n \n \n 650 \n \n \n \n \n \n Realty Income Corporation \n \n \n 825 \n \n \n   \n \n \n \n \n Morrisons \n \n \n 196 \n \n \n \n \n \n Tesco Plc \n \n \n 127 \n \n \n   \n \n \n \n \n Abrdn \n \n \n 162 \n \n \n \n \n \n M&G \n \n \n 125 \n \n \n   \n \n \n \n \n Lothbury IM \n \n \n 133 \n \n \n \n \n \n ICG \n \n \n 103 \n \n \n   \n \n \n \n \n Waitrose \n \n \n 125 \n \n \n \n \n \n MDSR \n \n \n 98 \n \n \n   \n \n \n \n \n Other \n \n \n 723 \n \n \n \n \n \n Other \n \n \n 711 \n \n \n \n \n Total \n \n \n 1,989 \n \n \n \n \n \n Total \n \n \n 1,989 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n In the UK, the two largest sellers of assets during the year were operators. Asda (£650 million) and Morrisons (£196 million) both sold stores to Realty Income, subject to 20-year inflation linked leases. Waitrose also undertook a £125 million sale & leaseback with M&G. Each of these transactions attracted a lot of institutional interest. Asda and Morrisons also separately sold off their petrol forecourts to reduce leverage. We believe that the capital raised in these processes makes further significant sale and leaseback activity from these operators unlikely. \n   \n Tesco spent £127 million during the year buying back stores, including a 111,000 sq.ft. store in Sutton Coldfield for c.£40 million - a large format omnichannel store, highlighting the strategic importance of such assets. We continue to see Tesco selectively participate in the investment market, depending on capital made available to the property team at any given time. Our tenants' competing demands for capital dictate their level of activity in the buyback market - this means that we continue to be able to buy some of Tesco's best performing stores. However, we do have the risk of a shrinking opportunity, as each store bought back by an operator is unlikely to return to the leasehold market in the future. \n   \n In addition to M&G, this year has also seen the return of other traditional institutional supermarket landlords as buyers in L&G (£46 million), Abrdn (£18 million), and DTZ Investors (£56 million). \n   \n Investment volumes in France were below average in 2023 totalling €320 million. However, volumes in H1 2024 reached €306 million which is a 135% increase year-on-year and 13% ahead of average since H1 2014. New retail development is at a 20 year low, a trend which we think will continue due to the net artificialisation (ZAN) of land by 2050. We expect a shift towards redevelopment of existing assets into mixed-use spaces rather than new developments. This will therefore reduce the amount of retail space making existing assets more valuable. \n   \n   Tight control of costs delivering one of the lowest EPRA cost ratios in the sector \n   \n In seeking to drive earnings growth we also maintain a tight control of costs. The Company's cost base is already one of the lowest across FTSE 350-listed REITs, with an EPRA cost ratio of 14.7% and is targeting a lower EPRA cost ratio in the coming year, in line with our goal of having the lowest cost ratio amongst the externally managed FTSE 350-listed REITs. \n   \n EPRA cost ratios (including direct vacancy costs): FTSE 350-listed REITs 23 \n   \n \n   \n Defensive nature of supermarket real estate continues to prove attractive to debt markets \n   \n During the year we agreed new debt facilities with SMBC of £104.5 million. Post balance sheet we agreed a new £100 million unsecured facility with ING and a private placement of €83 million loan notes at an all in fixed cost of 4.4% for seven years. \n   \n Both of the bank facilities are attractively priced at an average margin of 1.5% over SONIA. We have fully fixed the cost of these financings through hedging. \n   \n The cost of the private placement is fixed at 4.4% and is highly attractive when compared to the yield on our French supermarket assets. In addition, the Euro denomination provides a natural hedge for the Company's investment in the Carrefour portfolio acquisition in France. \n   \n These transactions, along with our BBB+ Fitch rating, underscore the Company's strong balance sheet, high-quality assets and tenants and our ongoing ability to secure debt from financially strong international lenders. \n   \n The ability to raise debt has allowed the Company to cautiously increase leverage up to 37% to enable it to take advantage of attractive acquisition opportunities, while maintaining significant headroom in debt covenants. \n   \n Including post balance sheet events, the Company has 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8% (30 June 2023: 3.1%). \n   \n Continued progress on sustainability reporting \n   \n Investing responsibly for long-term value creation remains at the heart of the Company's business model. The Company has continued to refine its approach this year improving ESG data processes and setting long-term targets for the Company.  \n   \n The Company's refreshed sustainability strategy consists of three key pillars: \n 1.     Climate and Environment \n 2.     Tenant and Community Engagement \n 3.     Responsible Business \n   \n These pillars are underpinned by the UN Sustainable Development Goals the Company has identified as most material to the business, and by the Investment Adviser's ongoing responsible investment commitments including in respect of the Net Zero Asset Managers initiative, UN Global Compact and UN Principles for Responsible Investment. \n   \n The Company has published its second standalone Sustainability Report which details its sustainability performance and progress against the three pillars of the sustainability strategy and plans for the year ahead. Highlights from the Sustainability Report, beyond the Company's science-based target setting, include the Company's first donation to the Atrato Foundation, improvements in ESG data sharing with tenants and further environmental asset management initiatives to benefit occupiers and communities. For the first time the Company has also undertaken external assurance over its reported location-based Scope 1, 2 and 3 GHG figures for FY24. The Assurance Report is available on the Sustainability section of the Company's website. \n   \n In addition to the Company's Sustainability Report, disclosures in line with the TCFD recommended disclosures and the Company's Streamlined Energy and Carbon Reporting (\"SECR\"), have been included within the Annual Report on pages 39 to 51. \n   \n Secondary listing on the Johannesburg Stock Exchange (\"JSE\") \n   \n The Company is in the process of applying for a secondary inward listing on the Main Board of the Johannesburg Stock Exchange by introduction. The listing of the Company on the JSE is expected to become effective by the end of the calendar year, subject to various regulatory approvals in South Africa. \n   \n The Company will not place or issue any new shares in connection with its application for a secondary listing on the JSE and will remain listed on the Closed-ended investment funds category of the FCA's Official List and traded on the LSE's Main Market. PSG Capital Proprietary Limited has been appointed as Corporate Advisor and Sponsor in South Africa. \n   \n The Company believes that admission to trading of the shares on the JSE will be beneficial to the Company and its shareholders. The secondary listing should contribute to liquidity in the Group's shares through its increased profile and improved accessibility in the South African market, where a number of investors have already shown strong interest in investing in the Company, driven by its high-quality portfolio of omnichannel supermarkets and secure income providing an attractive dividend. \n   \n Outlook \n   \n We remain resolutely focused on delivering sustainable earnings growth for the Company in our role as Investment Adviser. Whilst acknowledging the ongoing impact of macro factors such as interest rates which are ultimately outside of our control, we continue to drive strong performance at an operational level. We believe this will translate into positive momentum for the Company. \n   \n In the Company's core UK market we see accretive opportunities that meet our disciplined approach to capital deployment, albeit in a reduced addressable market. France offers an extension of this strategy and an attractive potential further source of earnings growth. Opportunities in geographies outside of the UK will only be considered where asset quality can be maintained and where we see attractive relative value. Should we look to further increase the Company's exposure to this market, we would first consult with shareholders and revisit the Company's Investment Policy. \n   \n Following receipt of the final portion of the Sainsbury's Reversion Portfolio disposal proceeds received at the beginning of the year, the most prudent decision was to pay down debt rather than deploy that capital into new assets and expose the Company to higher leverage and potential valuation decline. As valuations have stabilised and market sentiment has improved, we are more comfortable in gradually normalising leverage levels. \n   \n We continue to consider all options for the Company to achieve earnings growth. We are also exploring disposal and JV opportunities which present capital recycling opportunities, the benefit of which comes both through proving the portfolio NAV in the open market and through opportunities to redeploy sales proceeds in the most earnings accretive manner for shareholders at that time. \n   \n We currently consider that the Company's debt finance capacity is best deployed into accretive acquisitions to grow earnings. However, the option of share buybacks is continuously under review by the Investment Adviser and the Board. \n   \n In summary, we are focused on delivering earnings accretion through a rigorous approach to capital allocation. This, combined with tight cost controls in the business, as evidenced through the Company's continually decreasing EPRA cost ratio, should deliver efficient earnings growth and increased returns to shareholders. \n   \n \n THE COMPANY'S PORTFOLIO \n The Company has built a portfolio of strong trading, 'mission critical' omnichannel supermarkets backed by leading grocery operators. \n The central pillar of the Company's investment policy is to acquire omnichannel supermarkets that form a key part of our tenants' last mile fulfilment networks. These stores offer both an online provision and in-store shopping, helping to capture a greater share of the grocery market. Currently 93% of our supermarket assets are omnichannel, by value. \n The portfolio benefits from long unexpired lease terms with predominantly upwards only, index linked leases, helping to provide long-term income with contractional rental growth. \n Within the UK, operators typically look at the affordability of rent based on a benchmark of c.4% rent to turnover, simply seen as two weeks of trade. The Group's UK supermarkets average rent to turnover is 4%, which equates to £24 per sq.ft. We have highly secure income with 100% rent collection during the year and Tesco and Sainsbury's accounting for 75% of the Company's rent roll.  \n During the year, the Group acquired a hand-picked portfolio of Carrefour supermarkets in an off market, direct sale and leaseback with the operator. The assets form a key part of Carrefour's omnichannel operation with 15 stores operating Drive \"Click & Collect\". This channel accounts for 80% of online grocery in France. \n The standalone stores are subject to annual, uncapped inflation-linked rent reviews with 12 year unexpired lease terms (tenant only break at year 10) and are let on low and affordable rents of €7 per sq.ft. with an average RTO of 2.1%, below the RTO average of 2.5% in France. The rents produce a low capital value of €110 per sq.ft. The transaction helps to increase the Group's exposure to strong tenant covenants, further diversifies the portfolio and promotes further income growth through index-linked rent reviews. \n As part of the Company's investment strategy to acquire high-quality, strong trading supermarkets, it is sometimes necessary to acquire complementary non-grocery units that are co-located with the store. These units often create a retail destination helping to drive further footfall into the supermarket. Non-grocery assets represent 6% of the Portfolio by value. \n During the year, the Company selectively strengthened its Portfolio with the addition of 20 supermarkets for a combined total of £135.8 million 24 . \n ·    July 2023: A Sainsbury's in Gloucester, for £17.4 million 24 . The store has a 15-year unexpired lease term 25 and is subject to 5-yearly upwards only, open market rent reviews. \n ·    July 2023: A Sainsbury's in Derby, for £19.0 million 24 . The store has a 15-year unexpired lease term 25 and is subject to 5-yearly upwards only, open market rent reviews. \n ·    March 2024 : A Tesco in Stoke-on-Trent, for £34.7 million 24 . The store has a 11-year unexpired lease term and is subject to annual upwards only RPI-linked rent reviews. \n ·    April 2024 : A portfolio of 17 Carrefour supermarkets located in north and north west France, for £64.7 million 24 . The portfolio was a direct sale and leaseback with Carrefour with 12-year unexpired lease terms 25 and subject to annual, uncapped inflation-linked, rent review. \n The acquisitions during the year were purchased at an average net initial yield of 6.7% (7.0% UK, 6.3% EUR) providing an attractive spread to the Group's incremental cost of debt and were immediately accretive to earnings. The increased exposure to index-linked income also generates further contractual earnings growth underpinned by strong tenants. \n Acquisitions during the year were financed using existing headroom within our debt facilities and subsequently through the €83 million private placement which was announced in July 2024. \n For more information on financing arrangements refer to note 19 of the financial information. \n \n \n \n \n   \n \n \n \n \n Tenant \n \n \n Exposure by \n rent roll \n \n \n Exposure by \n Valuation \n \n \n \n \n Tesco \n \n \n 48% \n \n \n 48% \n \n \n \n \n Sainsbury's \n \n \n 27% \n \n \n 29% \n \n \n \n \n Morrisons \n \n \n 5% \n \n \n 5% \n \n \n \n \n Waitrose \n \n \n 4% \n \n \n 4% \n \n \n \n \n Carrefour \n \n \n 4% \n \n \n 4% \n \n \n \n \n Asda \n \n \n 2% \n \n \n 2% \n \n \n \n \n Aldi \n \n \n 1% \n \n \n 1% \n \n \n \n \n M&S \n \n \n 1% \n \n \n 1% \n \n \n \n \n Non-food \n \n \n 8% \n \n \n 6% \n \n \n \n \n Total \n \n \n 100% \n \n \n 100% \n \n \n \n \n \n \n \n \n \n   \n The Portfolio's weighting towards investment grade tenants provides secure long-term income with a weighted average unexpired lease term of 12 years. In addition, the portfolio is heavily weighted towards upwards only inflation-linked rent reviews. The average cap on our inflation-linked leases' rental uplifts is 4%. \n The Portfolio's weighting towards upwards only, inflation-linked rent reviews is 80% with 58% of the Portfolio being reviewed annually. \n \n \n \n \n Indexation \n \n \n Income mix by \nrent review type \n \n \n \n \n RPI \n \n \n 70% \n \n \n \n \n CPI \n \n \n 6% \n \n \n \n \n ILC \n \n \n 4% \n \n \n \n \n Fixed \n \n \n 2% \n \n \n \n \n OMV \n \n \n 18% \n \n \n \n \n Total \n \n \n 100% \n \n \n \n \n \n \n \n \n \n   \n   \n \n \n \n \n \n Rent review \n \n \n Income mix by \nrent review type \n \n \n \n \n Annual \n \n \n 58% \n \n \n \n \n 5 yearly \n \n \n 41% \n \n \n \n \n 7 yearly \n \n \n 1% \n \n \n \n \n Total \n \n \n 100% \n \n \n \n \n \n \n \n \n \n   \n   \n \n \n \n \n \n UK rental caps \n \n \n % of UK supermarket index-linked portfolio  \n \n \n \n \n 0-1 % \n \n \n 0% \n \n \n \n \n 1-2 % \n \n \n 1% \n \n \n \n \n 2-3 % \n \n \n 13% \n \n \n \n \n 3-4 % \n \n \n 64% \n \n \n \n \n 4-5 % \n \n \n 22% \n \n \n \n \n Total \n \n \n 100% \n \n \n \n \n \n \n \n \n \n   \n   \n \n The rent profile of the supermarkets is broadly in line with the market at 4% RTO. The rental maturity profile is well dispersed with the first material regear in 2029. \n \n \n \n \n WAULT \n \n \n WAULT \n breakdown \n \n \n WAULT \nrental breakdown \n \n \n WAULT \ncount breakdown \n \n \n \n \n 0-1 yrs \n \n \n 0.0% \n \n \n - \n \n \n 0 \n \n \n \n \n 1-2 yrs \n \n \n 0.0% \n \n \n - \n \n \n 0 \n \n \n \n \n 2-3 yrs \n \n \n 0.2% \n \n \n 0.2 \n \n \n 1 \n \n \n \n \n 3-4 yrs \n \n \n 0.0% \n \n \n - \n \n \n 0 \n \n \n \n \n 4-5 yrs \n \n \n 0.0% \n \n \n - \n \n \n 0 \n \n \n \n \n 5-6 yrs \n \n \n 3.0% \n \n \n 3.1 \n \n \n 1 \n \n \n \n \n 6-7 yrs \n \n \n 4.4% \n \n \n 4.6 \n \n \n 2 \n \n \n \n \n 7-8 yrs \n \n \n 6.1% \n \n \n 6.4 \n \n \n 4 \n \n \n \n \n 8-9 yrs \n \n \n 4.8% \n \n \n 5.0 \n \n \n 5 \n \n \n \n \n 9-10 yrs \n \n \n 12.1% \n \n \n 12.6 \n \n \n 21 \n \n \n \n \n 10+ yrs \n \n \n 69.4% \n \n \n 72.3 \n \n \n 39 \n \n \n \n \n Total \n \n \n 100.0% \n \n \n 104.2 \n \n \n 73 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n The environmental efficiency of our stores continues to be a key priority for our asset management initiatives, selective acquisitions and is supported by the ongoing investment by grocery tenants into respective store estates. A breakdown of our supermarket EPC ratings can be seen below: \n \n \n \n \n \n Supermarket EPC breakdown \n   \n \n \n \n \n EPC rating \n \n \n % of UK supermarket \n Portfolio by value \n \n \n \n \n A \n \n \n 4% \n \n \n \n \n B \n \n \n 52% \n \n \n \n \n C \n \n \n 31% \n \n \n \n \n D \n \n \n 13% \n \n \n \n \n Total \n \n \n 100% \n \n \n \n \n \n \n \n \n \n   \n   \n Active asset management delivering additional value and improving sustainability of sites  \n   \n The Company continues to seek sustainability and value creation initiatives at our larger sites which are not fully demised to the core supermarket tenants and therefore benefit from greater landlord control.   \n   \n Alongside our tenants, we are looking at ways to increase the number of Electric Vehicle (\"EV\") charging points at larger sites. We now have 58 EV charging bays across five sites, all completed at zero capex cost to the Company. Current EV sites: \n ·    Morrisons, Workington \n ·    Morrisons, Wisbech \n ·    Tesco, Bradley Stoke \n ·    Tesco, Chineham \n ·    Tesco, Beaumont Leys \n   \n Works were completed at Tesco, Thetford in partnership with Atrato Onsite Energy plc where Tesco entered into a 20-year Power Purchase Agreement (\"PPA\") for a new solar installation on the rooftop at the store. The EPC rating was re-assessed post installation and improved from a C to a B. \n   \n Opportunities to add complementary discount grocery operators continue to progress. At Tesco, Chineham, the existing planning consent was successfully implemented and terms are agreed with a discount grocery retailer. We have had three additional offers for new discount food stores across the portfolio. \n   \n At Tesco, Chineham, McDonald's has commenced fit out works of a unit with a new 25-year lease. In addition to this, Pets Corner is upsizing into a new unit. At Tesco, Bradley Stoke, works are currently being undertaken to amalgamate two units, one of which was vacant at acquisition and the other let on a concessionary basis, with B&M committing to a new 10-year lease, rendering the site 100% let. \n   \n Other developments are being considered at Sainsbury's, Newcastle, Morrisons, Workington and Tesco, Bradley Stoke and various negotiations are ongoing with potential tenants for those sites. \n   \n Portfolio valuation \n Cushman & Wakefield valued the Portfolio as at 30 June 2024, in accordance with the RICS Valuation - Global Standards which incorporate the International Valuation Standards and the RICS UK Valuation Standards edition current at the valuation date. \n The properties were valued individually without any premium/discount applying to the Portfolio as a whole. The Portfolio market value was £1,775.7 million, an increase of £82.8 million reflecting a valuation decline of £53.0 million (including currency exchange movements), which was offset by new acquisitions of £135.8 million pre acquisition costs. This valuation reflects a net initial yield of 5.9% and a like-for-like valuation decline of 3.2% since 30 June 2023. The benchmark MSCI All Property Capital Index during the same period was down 4.5%. \n The decline in valuation reflects the outward shift in property yields applied by valuers across the real estate sector as a result of higher interest rates and the macroeconomic environment. This was largely recognised in the first half of the year, with a like-for-like valuation decline of 3.2% reported in the Company's valuation as at 31 December 2023. Valuations remained broadly flat in the second half of the year. \n The valuation decline in the year has however been partially mitigated by our contractual inflation-linked rental uplifts. The average annualised increase in rent from rent reviews performed during the year was 4.0%. 82% of the Company's leases benefit from contractual rental uplifts, with 80% linked to inflation and 2% with fixed uplifts. \n   \n THE GROCERY MARKET \n UK \n Non-discretionary grocery market continuing to experience strong growth \n The UK grocery market has highlighted its defensive, non-discretionary characteristics this year with sales growth of 5.8% against a very strong inflation-led comparator of 9.2% for 2023. Total grocery market sales are forecast to be £251.6 billion in 2024, an increase of £59.6 billion or 31% since pre-pandemic levels in 2019. \n While the sector growth will continue to ease as inflation moderates in 2025 in year-on-year percentage terms, IGD projects continued healthy absolute sales growth in the coming years. With forecast annual growth of around 3% to 2029, the UK grocery market is expected to reach £296 billion in the same year. \n The growth from 2019 out to IGD's projected total sales figure would represent a 4.4% compound annual growth rate. The future projected growth is in line with long run RPI/CPI projections and underlines the grocers' ability to efficiently pass through inflation to consumers. The increased sales revenue at the store level will support higher rents over the medium term. \n \n Institute of Grocery Distribution (\"IGD\") UK Grocery Market Value 2019-2029 (forecast) \n \n This track record of strong growth in the sector has attracted new institutional investors into the grocery real estate investment market and has also seen a continued programme of store buybacks by Tesco with four stores purchased by the grocery operator in the year. \n Online grocery channel returned to growth following a rebase post pandemic \n Online grocery now accounts for 12% of the total market. Online market share has fallen back from the pandemic peak of 15%, but having rebased to 12%, it is still one of the fastest growing channels according to Kantar. The online channel was permanently enlarged throughout the pandemic - over 50% of online grocery shoppers during 2020 were new to the channel 26 and much of this change in consumer behaviour has been sticky. \n Omnichannel stores are optimally placed to benefit from the combined growth of both in store sales and online. Operators are able to increase online capacity at low cost and benefit from shorter drive times due to their existing omnichannel stores' proximity to customers. This results in a greater number of deliveries per hour and drives greater profitability than the centralised fulfilment (or 'dark store') model. Tesco recently announced that online sales participation is stable at 13% of UK sales with basket sizes up 4.2% and online sales up 10%. The return to growth of the online channel is evident in the latest IGD forecast which predicts growth of 27% (£6 billion) by 2029.   \n Online grocery spend (UK) (2017 to 2023 actual, 2024 to 2026 forecasted) \n \n   \n Omnichannel stores capture the largest share of growth \n Large format omnichannel stores, such as those which the Company targets, have captured the largest share of sales growth in the sector since 2019 27 . In that time the total UK grocery sector has increased from £192 billion in 2019 to £252 billion, with omnichannel supermarkets accounting for £20 billion of that growth. \n Importantly, this growth is being generated from existing store estates meaning this is like-for-like sales growth, resulting in improved sales densities and enhanced profitability at the store level. From a landlord perspective, this ensures that rents remain affordable for tenants, particularly as sales growth has been running ahead of capped rental uplifts. It also provides a strong backdrop for higher rents in the future. \n Large format stores have the scale to offer the full product range giving customers the widest product choice, whilst also offering the best value to customers through in-store only and loyalty scheme product offers. In the current inflationary environment shoppers are looking to achieve best value on their purchases. Tesco and Sainsbury's loyalty schemes which offer attractive discounts to members, have been very successful Sainsbury's reporting that nine out of ten £80+ weekly shopping baskets are sold to customers using their Nectar loyalty card. \n Tesco and Sainsbury's maintained market share whilst discounter growth begins to slow \n The UK grocery market is highly consolidated with the six leading operators accounting for 83% of the market. These operators can be divided into two groups: the four multichannel (in-store and online) operators, Tesco, Sainsbury's, Asda and Morrisons, and two limited range in-store only discounters, Aldi and Lidl. \n 5-year operator market share (UK) (June 2019 - June 2024) 28 \n \n \n Tesco and Sainsbury's, the Company's key tenants, continue to be the leading players in the UK grocery space with 27.7% and 15.2% market share respectively. Both operators have increased market share in the last 12 months and are seeing the benefit of investments in their stores, product ranges and loyalty schemes. Asda and Morrisons (12.8% and 8.7% market share respectively) have continued to lose market share following their highly leveraged takeovers in 2020 and in the face of competition from the limited range discounters. \n \n Discounter portfolio size (UK), 2017-2023 \n \n \n While Aldi and Lidl achieved impressive growth which accelerated in the period from 2020 to 2023, with Aldi's market share growing from 7.5% to 10.2% and Lidl's growing from 5.8% to 8.1% in the period, this growth appears to have slowed. In the case of Aldi, this growth reversed in 2024 with market share marginally declining to 10.0% while Lidl increased market share at a lower annual rate to 8.1%. This lower growth can be linked to several factors including a reduced rate of store openings which had previously been the key driver of market share growth. \n The challenge for the discounters will be achieving further growth whilst maintaining profitability. 98% of the Company's UK portfolio already has a discounter present within a 10-minute drivetime. We expect new store opening by the discounters to cannibalise existing discounter trade and therefore the marginal profit of new stores will be diluted. \n Lower inflation expected to drive grocery profitability \n Grocery price inflation has driven significantly higher revenues for supermarkets in recent years. Whilst the ability for supermarkets to pass through inflation to consumers highlights the non-discretionary nature of grocery, there has of course been an impact on consumers' shopping habits. Cost of living pressures have decreased consumer purchasing power, which has resulted in a trading down to supermarkets' own brand and value ranges. Through investment in cost reduction programmes and improved efficiency, coupled with product price increases, operators have largely been able to preserve squeezed margins. \n As food price inflation begins to moderate, we expect consumers to again adjust their behaviour, driving volume growth. However, the operators will continue to benefit from the cost efficiencies the high inflation rates of recent years have required and therefore we see volume growth in the coming years being a driver of increased profitability.  \n The highly competitive and ultra-low margin nature of the Discount market has meant Aldi and Lidl have had to increase prices faster than other operators in order to protect thin margins of 1-2%. Whilst the Discount channel has seen increasing market share, this has primarily been driven by increasing prices with Lidl and Aldi inflating prices by 25.7% and 23.1% respectively over the three months to April 2023 29 . \n   \n ONS: Grocery inflation (Jun 2020 - Jun 2024) \n \n With inflation beginning to moderate, grocery volumes are expected to increase as household cost pressures reduce, encouraging higher spending and purchasing a broader range of products, including non-essentials and premium items. \n Tesco and Sainsbury's have both recently announced a return to volume growth with increased basket sizes. \n FRANCE \n France Grocery Market Value (2019-2023, 2024-2028 (forecast)) 30 \n \n The French grocery market, one of the largest in the world by total value, has shown consistent growth over a prolonged period. The defensive and non-discretionary sector has experienced YoY sales growth of 2.1% against a strong average inflation-led comparator of 5.6% for 2023. Total market sales are forecasted to be €290 billion in 2024, an increase of €44 billion or 18% since 2019. The French grocery sector is expected to reach €321 billion by 2028 representing an annual increase of c.3%. \n Insee: Grocery inflation (Jun 2020 - Jun 2024) \n \n Similar to the UK, France has seen significant inflation pressure in recent years, helping to drive revenue growth at the expense of volumes as consumers changed purchasing habits to manage budgets. Grocery inflation increased to an all-time high of over 15% in 2023, up from 0.8% in 2020. As inflationary pressures ease, we expect to see volumes increase and consumers return to more traditional shopping habits. \n   \n French grocery market share (July 2024) 31 \n \n The French grocery market is highly consolidated with 60% of total market share controlled by three grocery operators; E.Leclerc, Carrefour and Intermarche. Over the last 6 months, Carrefour has increased market share by 0.3% to 19.6%. It has accelerated its price investment programme, the effect of which has been to increase market share in the face of competition from cheaper alternative grocers, while preserving profitability. Carrefour's increase in market share was also driven by volume growth as consumers return to traditional shopping habits and the effects of inflation subside.  \n French Online grocery spend (2017 to 2023 actual, 2024 to 2026 forecasted) \n \n Online market share in France has been permanently enlarged due to an increase in take up throughout the pandemic. The channel has grown by 93% between 2018 and 2024. The channel has been further strengthened by investment programmes by operators such as Carrefour which, across the group, is planning to invest €3 billion in the online channel 32 and for omnichannel customers to represent 30% of all customers by 2026 33 . \n Due to geographic differences between the UK and France, 80% of online sales are fulfilled via Click & Collect vs 20% in the UK. Operators will use large fulfilment centres 'hubs' to pick and pack dry goods which are then delivered to stores which operate as 'spokes'. These stores are responsible for picking fresh goods with the combined order collected by the customer in the car park. \n Whilst the French online model is different, it is built around mission critical omnichannel stores, in strong locations which provide last mile fulfilment to consumers.  \n   \n FINANCIAL OVERVIEW \n Atrato Capital Limited, the Investment Adviser to the Group, is pleased to report the financial results of the Group for the 12 months ended 30 June 2024. \n Financial results \n   \n \n \n \n \n   \n \n \n 30 June 2024 \n \n \n 30 June 2023 \n \n \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Net rental income \n \n \n 107,232 \n \n \n 95,244 \n \n \n \n \n Administrative expenses \n \n \n (15,218) \n \n \n (15,429) \n \n \n \n \n Net income from joint ventures \n \n \n - \n \n \n 11,746 \n \n \n \n \n Net finance expenses 34 \n \n \n (16,192) \n \n \n (19,162) \n \n \n \n \n Adjusted earnings \n \n \n 75,822 \n \n \n 72,399 \n \n \n \n \n   \n Net rental income \n In the year, the portfolio generated net rental income of £107.2 million (30 June 2023: £95.2 million), representing an increase of £12.0 million or 12.6% compared to the prior year. The growth in net rental income was driven by a full period of rental income from property acquisitions and the effect of contracted rent reviews. \n   \n On a like-for-like basis, EPRA net rental income increased by 2.1%. During the year we successfully completed 22 rent reviews increasing annualised passing rent by £2.9 million, with the reviews being settled on average 4.8% ahead of previous passing rent (or 4.0% on an annualised basis). \n   \n Net service charge expenditure remained broadly flat at £0.6 million (30 June 2023: £0.6 million), however our gross to net margin continues to be among the highest in the sector at 99.4% (30 June 2023: 99.4%), reflecting the strength of our core single-let strategy and further highlighting the covenant quality of our tenant base. \n   \n Rent collection rates were 100% for the year to 30 June 2024 (30 June 2023: 100%), as our focus on top trading stores and covenant quality provided exceptional income security. \n   \n Administrative and other expenses and EPRA cost ratio \n Administrative and other expenses, which include all operational costs of running the business, decreased by £0.2 million to £15.2 million (30 June 2023: £15.4 million). We continue to monitor the operational efficiency of the Group through its EPRA cost ratio, which is among the lowest in the sector, and improved by 80bps to 14.7%. \n   \n \n \n \n \n \n \n \n 30 June \n \n \n 30 June \n \n \n \n \n \n \n \n 2024 \n \n \n 2023 \n \n \n \n \n EPRA cost ratio including direct vacancy costs \n \n \n 14.7% \n \n \n 15.5% \n \n \n \n \n EPRA cost ratio excluding direct vacancy costs \n \n \n 14.4% \n \n \n 15.2% \n \n \n \n \n   \n Net finance expenses 35 \n During the year, the Group received £134.9 million following the divestment of its interest in the Sainsbury's Reversion Portfolio Joint Venture. Part of the proceeds were utilised to pay down debt, subsequent to which the Group increased its debt facilities with a new SMBC facility. \n   \n Net finance expenses reduced by £3.0 million to £16.2 million compared to the prior year, primarily due to the short-term loan in relation to the Joint Venture in the prior year and a lower average debt cost. \n   \n Adjusted earnings \n The Directors consider adjusted earnings a key measure of the Company's underlying operating results, and a reference through which the Board measures dividend cover. Adjusted earnings therefore excludes one-off items which are non-recurring in nature and includes finance income on derivatives held at fair value through profit on loss. Adjusted earnings for the year to 30 June 2024 were £75.8 million (30 June 2023: £72.4 million). On a per share basis, adjusted earnings increased by 0.3 pence per share to 6.1 pence for the year to 30 June 2024, an increase of 4% (30 June 2023: 5.8 pence). \n   \n A full reconciliation between IFRS and Adjusted earnings can be found in note 11 of the financial information. \n   \n Dividend \n In the financial year ended 30 June 2024, the Company paid the following interim dividends: \n   \n \n \n \n \n   \n Declared \n \n \n Amount \n pence per share \n \n \n In respect of the \n financial year ended \n \n \n Paid/ \n to be paid \n \n \n \n \n 6 July 2023 \n \n \n 1.500p \n \n \n 30 June 2023 \n \n \n 4 August 2023 \n \n \n \n \n 5 October 2023 \n \n \n 1.515p \n \n \n 30 June 2024 \n \n \n 16 November 2023 \n \n \n \n \n 4 January 2024 \n \n \n 1.515p \n \n \n 30 June 2024 \n \n \n 14 February 2024 \n \n \n \n \n 4 April 2024 \n \n \n 1.515p \n \n \n 30 June 2024 \n \n \n 16 May 2024 \n \n \n \n \n   \n Post period end, the Company declared an interim dividend in respect of the financial year ended 30 June 2024 of 1.515 pence per Ordinary Share (the \"Fourth Quarterly Dividend\"). The Fourth Quarterly Dividend was paid on 16 August 2024 as a Property Income Distribution (\"PID\") to shareholders on the register as of 12 July 2024. The Company has now declared four quarterly dividends totalling 6.06 pence per Ordinary Share in respect of the financial year ended 30 June 2024. \n   \n EPRA net tangible assets and IFRS net asset \n \n \n \n \n   \n \n \n   \n \n \n 30 June 2024 \n \n \n 30 June 2023 \n \n \n \n \n   \n \n \n   \n \n \n £'000 \n \n \n £'000 \n \n \n \n \n Investment property \n \n \n   \n \n \n 1,768,216 \n \n \n 1,685,690 \n \n \n \n \n Bank and other borrowings \n \n \n   \n \n \n (694,168) \n \n \n (667,465) \n \n \n \n \n Cash \n \n \n   \n \n \n 38,691 \n \n \n 37,481 \n \n \n \n \n Other net (liabilities)/assets \n \n \n   \n \n \n (28,207) \n \n \n 100,828 \n \n \n \n \n EPRA net tangible assets \n \n \n   \n \n \n 1,084,532 \n \n \n 1,156,534 \n \n \n \n \n Fair value of interest rate derivatives \n \n \n   \n \n \n 31,449 \n \n \n 57,583 \n \n \n \n \n Fair value adjustment for financial assets held at amortised cost \n \n \n   \n \n \n 3,493 \n \n \n 3,609 \n \n \n \n \n IFRS net assets \n \n \n   \n \n \n 1,119,474 \n \n \n 1,217,726 \n \n \n \n \n   \n EPRA net tangible assets (\"EPRA NTA\") is considered to be the most relevant asset measure for the Group, and includes both income and capital returns, but excludes the fair value of interest rate derivatives and includes a revaluation to fair value of investment properties held at amortised cost. \n   \n At 30 June 2024, EPRA NTA was £1,085 million (30 June 2023: £1,157 million), representing an EPRA NTA per share of 87 pence, a decrease of 6.3% since 30 June 2023 primarily due to the portfolio revaluation deficit of £65.8 million or 5 pence per share. \n   \n Portfolio Valuation \n The value of the portfolio at 30 June 2024, including the fair value of investment properties held at amortised cost, was £1,776 million (30 June 2023: £1,693 million). During the Year, the Group invested £135.8 million in 20 omnichannel supermarkets (excluding transaction costs). On a like-for-like basis, the portfolio recognised a revaluation deficit of £53.8 million, or 3.2%, which reflects the outward shift in property yields applied by valuers across the real estate sector as a result of higher interest rates and the macroeconomic environment. \n   \n Cash Flow and Net Debt \n Cash flows from operating activities before changes in working capital increased by £12.6 million to £89.6 million, primarily due to increased rental income received from rent reviews and property acquisitions. \n   \n During the year, the Group received £134.9 million following the disposal of its interest in the Sainsbury's Reversion Portfolio Joint Venture. Part of the proceeds were used to acquire two omnichannel supermarkets with a combined acquisition cost of £36.4 million (excluding transaction costs), providing earnings growth in line with the Group's strategy, with the remaining proceeds used to reduce drawn debt. \n   \n In the second half of the year, the Group drew down £106.8 million from facilities with existing lenders, to fund the acquisition of 18 supermarkets. \n Net debt increased by £25.5 million over the year to 30 June 2024, to £655.5 million, and represents a loan to value of 37% (30 June 2023: 37%). The Group continues to maintain a conservative leverage policy, with a medium-term target LTV of 30-40%. \n   \n Financing \n   \n \n \n \n \n   \n \n \n   \n \n \n 30 June 2024 \n \n \n 30 June 2023 \n \n \n \n \n Undrawn facilities 36 \n \n \n   \n \n \n £104m \n \n \n £190m \n \n \n \n \n Loan to value \n \n \n   \n \n \n 37% \n \n \n 37% \n \n \n \n \n Net debt / EBITDA ratio \n \n \n   \n \n \n 7.1x \n \n \n 7.9x \n \n \n \n \n Weighted average cost of debt 37,38 \n \n \n   \n \n \n 3.8% \n \n \n 2.9% \n \n \n \n \n Interest cover \n \n \n   \n \n \n 6.2x \n \n \n 4.1x \n \n \n \n \n Average debt maturity 39 ,42 \n \n \n   \n \n \n 4.0 years \n \n \n 3.7 years \n \n \n \n \n % of drawn debt which is fixed/hedged 37 \n \n \n   \n \n \n 100% \n \n \n 100% \n \n \n \n \n \n In the first half of the year, the Group completed a comprehensive debt refinancing exercise, completing a new £67 million unsecured facility with Sumitomo Mitsui Banking Corporation, at the same time reducing its HSBC facility from £150 million to £50 million and cancelling its Barclays/RBC facility of £77.5 million. \n   \n In the second half of the year, the Group increased its unsecured facility with Sumitomo Mitsui Banking Corporation by £37.5 million to £104.5 million, to facilitate the acquisition of a Tesco omnichannel supermarket in Stoke-on-Trent. \n   \n In April 2024, the Group drew down €81.7 million from its existing HSBC revolving credit facility, having also increased the total size of the facility by £25 million. The funds were used to acquire a portfolio of 17 supermarket stores from Carrefour. \n   \n At 30 June 2024, the Group has gross borrowings of £698 million diversified across eight lenders, including £415 million of unsecured borrowings and £283 million of secured borrowings. In addition, the Group has available undrawn facilities of £104 million (which includes a £50 million accordion) and plenty of headroom under banking covenants, providing the capacity to execute opportunistic transactions as they arise. \n   \n Post year end, the Group announced the completion of a £170 million refinancing through its first private placement issuance and a new unsecured bank facility. \n   \n As part of the refinancing, the Company completed an agreement with a group of institutional investors for a private placement of €83 million new senior unsecured notes, which have a maturity of 7 years and a fixed rate coupon of 4.44%. \n \n In addition, the Group also refinanced its existing £97 million secured debt facility with Deka through a new £100 million unsecured debt facility with ING Bank N.V., London Branch. The facility comprises a £75 million term loan and a £25 million revolving credit facility, which has a maturity of three-years and has two one-year extension options. Following the refinancing, the Company has a weighted average debt maturity of 4 years, a weighted average debt cost of 3.8% and available undrawn facilities of £176 million (including £50 million accordion). \n   \n The Group's interest rate risk is mitigated through a combination of fixed debt and derivative interest rate swaps and caps. During the year, the Group utilised the value of its existing in-the-money interest rate hedges to extend the term of its hedging arrangements by 12 months through terminating existing derivatives and acquiring new instruments that aligned with the expiry of the Group's debt portfolio. This exercise was performed at no additional cost to the Company. \n   \n The Group maintains good long-term relationships with all lenders and is currently in discussions regarding refinancing requirements over the next financial year. \n   \n The Group continues to monitor its banking covenants and maintains significant headroom on its LTV and ICR covenants. As at 30 June 2024, property values would need to fall by around 38% before breaching the unsecured gearing covenant. Similarly, net rental income would need to fall by 72% before breaching the unsecured interest cover covenant. \n   \n Fitch Ratings, as part of its annual review, reaffirmed the Group's BBB+ rating with a stable outlook. \n \n TCFD COMPLIANT REPORT \n Energy and Carbon Foreword \n The Company recognises the urgent need to address climate change and is committed to supporting the required transition to a net zero economy.  \n This year, the Company reached a significant milestone with the Climate and Environment pillar of its Sustainability Strategy, with the setting of a formalised 2050 net-zero commitment and associated GHG emissions reduction targets. These targets were approved by the SBTi in March 2024, and include a commitment by the Company to reduce Scope 1 and 2 emissions 42% by 2030 and to reduce Scope 1, 2 and 3 emissions 90% by 2050 (from a FY23 base year). \n The Company's Board and the Investment Adviser recognise the importance of transparent, decision-useful sustainability reporting to improve our accountability to stakeholders. As such, the Company's SECR and TCFD Report can be found below on pages 39 to 51. In addition, the Company has published a standalone Sustainability Report covering its wider ESG performance. \n The Company remains committed to further progressing its climate-related strategy and emissions reductions activities, as it continues to identify opportunities to reduce operational carbon and energy use and contribute towards a net zero future. \n Streamlined Energy and Carbon Reporting \n The below table and supporting narrative summarise the SECR disclosure. As a listed entity, Supermarket Income REIT plc is required to comply with the SECR regulations under the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Data for the year 2022-2023 and 2023-2024 is included as this is the Company's second year of SECR. \n Compared to the previous reporting year (2022-2023), there has been a slight increase in Scope 1 fuel consumption and a decrease in Scope 2 purchased electricity consumption. Overall, this has resulted in a decrease in total Scope 1 and 2 emissions from 111 tCO 2 e in the previous reporting year to 103 tCO 2 e (7% reduction) in the current reporting year. Due to this overall decrease in the Company's Scope 1 and 2 emissions, emissions from Fuel and Energy related activities (\"FERA\") (Scope 3 category 3) have also decreased from 37 to 32 tCO 2 e (14% reduction) for this reporting year. 40 Emissions from Purchased Goods and Services (Scope 3 category 1) have decreased from 3,132 to 2,215 tCO 2 e (30% reduction) for this reporting year, due to a decrease in total included spend as exclusions were more rigorous this year. This year exclusions from spend include service charge costs and costs that are recharged to tenants in full. This is due to a spend-based approach being used for the Scope 3 Purchased Goods and Services, which supports the Company in prioritising its suppliers for engagement on decarbonisation. This year no newly built properties have been added to the portfolio; therefore, no emissions are attributed to Capital Goods (Scope 3 category 2) this year. \n Two new supermarket sites have been acquired by the Company in this reporting year. Even with the two new sites acquired, Scope 3 energy consumption and resultant emissions from Downstream Leased Assets (Scope 3 category 13), which includes tenant Scope 1 and 2 emissions, have decreased from 83,794 to 81,931 tCO 2 e (1% decrease) for this reporting year due to improved estimation methods. Overall, total Scope 1, 2 and 3 emissions have decreased from 87,537 tCO 2 e in the previous reporting year to 84,281 tCO 2 e (4% reduction) in the current reporting year. \n An error in the supermarket refrigerant emission calculation was found for the previous reporting year (2022-2023), resulting in missing Scope 3 downstream leased asset emissions reported last year. This has now been rectified and restated figures are included in the table below. The correction has resulted in an 8% increase in total emissions for the reporting year 2022-2023. In April 2024, the Company acquired a portfolio of Carrefour omnichannel supermarkets in France through a sale and leaseback transaction. Given the timing of this transaction, full year energy and carbon data has not yet been collected for these French assets. Therefore, the disclosures in this SECR Report focus on the energy and carbon performance of the Company's UK portfolio only. However, the Company intends to collect the required energy and carbon performance data from these French assets over the next reporting period to ensure the Company's next SECR Report covers both UK and French assets. \n \n \n \n \n \n Report \n \n \n Previous reporting year: \n 1 st July 2022 - 30 th June 2023 \n \n \n As restated: 1 st July 2022 - 30 th June 2023 \n \n \n \n Current reporting year: \n 1 st July 2023 - 30 th June 2024 \n \n \n \n \n Location \n \n \n UK \n \n \n UK \n \n \n UK \n \n \n \n \n Emissions from the combustion of fuel and operation of facilities (tCO 2 e) (Scope 1) \n \n \n 10 \n \n \n 10 \n \n \n 11 \n \n \n \n \n Emissions from purchase of electricity (location-based) (tCO 2 e) (Scope 2) \n \n \n 101 \n \n \n 101 \n \n \n 92 \n \n \n \n \n Emissions from business travel in rental cars or employee-owned vehicles where company is responsible for purchasing the fuel (tCO 2 e) (Scope 3) 41 \n \n \n N/A \n \n \n N/A \n \n \n N/A \n \n \n \n \n Total mandatory emissions (tCO 2 e) 42 \n \n \n 111 \n \n \n 111 \n \n \n 103 \n \n \n \n \n Voluntary: Emissions from Fuel and Energy related activity (location-based) (tCO 2 e) (Scope 3) \n \n \n 37 \n \n \n 37 \n \n \n 32 \n \n \n \n \n Voluntary: Emissions from Purchased Goods and Services (tCO 2 e) (Scope 3) \n \n \n 3,132 \n \n \n 3,132 \n \n \n 2,215 \n \n \n \n \n Voluntary: Emissions from Capital Goods (tCO 2 e) (Scope 3) \n \n \n 463 \n \n \n 463 \n \n \n N/A \n \n \n \n \n Voluntary: Emissions from Downstream Leased Assets (tCO 2 e) (Scope 3) 43 \n \n \n 77,274 \n \n \n 83,794 \n \n \n 81,931 \n \n \n \n \n Total gross emissions (tCO 2 e) 44   \n \n \n 81,017 \n \n \n 87,537 \n \n \n 84,281 \n \n \n \n \n Energy consumption used to calculate Scope 1 emissions (kWh) \n \n \n  606,629 \n \n \n 52,726 \n \n \n 56,568 \n \n \n \n \n Energy consumption used to calculate Scope 2 emissions (kWh) \n \n \n 521,321 \n \n \n 521,321 \n \n \n 443,555 \n \n \n \n \n Energy consumption used to calculate Scope 3 emissions (kWh) 45 \n \n \n   186,704,059 \n \n \n 187,756,005 \n \n \n 174,876,336 \n \n \n \n \n Total energy consumption (kWh) \n \n \n  187,832,009 \n \n \n 188,330,052 \n \n \n 175,376,459 \n \n \n \n \n Intensity ratio: tCO 2 e (gross Scope 1 + 2) per m 2 of floor area 46 \n \n \n 0.00045 \n \n \n 0.00045 \n \n \n 0.00037 \n \n \n \n \n Intensity ratio: tCO 2 e (gross Scope 1, 2 + 3) per m 2 of floor area 47 \n \n \n 0.14 \n \n \n 0.14 \n \n \n 0.10 \n \n \n \n \n   \n Methodology \n The 2023/24 footprint within the scope of SECR reporting is equivalent to 84,281 tCO 2 e, including voluntary emissions, with the largest portion being made up of emissions from downstream leased assets at 81,931 tCO 2 e. \n Anthesis has calculated the above GHG emissions to cover all material sources of emissions for which the Company is responsible. The methodology used was that of the GHG Protocol: A Corporate Accounting and Reporting Standard (revised edition, 2015). Responsibility for emissions sources was determined using the operational control approach. All emissions sources required under The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 are included. \n Raw data captured in spreadsheets including energy spend and consumption data has been collected by the Company. Where actual consumption data was available for natural gas and electricity use, this was used. To address data gaps, the most appropriate proxy was applied by using either previous year's data, actual data to calculate average monthly consumption, or by applying the average floor area intensity from sites with actual data. Fuel oil was estimated by applying the average 2023 UK fuel oil price to the budgeted spend for fuel oil. Energy was then converted to GHG emissions using the UK Government's GHG Conversion Factors for Company Reporting 2023. Scope 3 emissions have been calculated for relevant material categories using consumption data, spend data, floor area and EPC data. Fuel and Energy related activities includes well-to-tank (\"WTT\") and transmission and distribution (\"T&D\") upstream emissions from Scope 1&2. For Purchased Goods and Services, Environmentally Extended Input Output (\"EEIO\") has been used. Spend data was provided per supplier and mapped to 2023 DEFRA Input/Output (\"IO\") categories. No newly built sites were acquired during this reporting year, therefore there were no Capital Goods this year. Where actual data was not avai...

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