REG - Supermarket Inc REIT - Interim Results for six months ended 31 Dec 2024
11/03/2025 07:15
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RNS Number : 0921A Supermarket Income REIT PLC 11 March 2025
Supermarket Income REIT plc
(the "Group" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2024
RESILIENT FINANCIAL PERFORMANCE - DELIVERING ON STRATEGIC OBJECTIVES
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 interim results for the Group for the six months
ended 31 December 2024 (the "Period").
FINANCIAL HIGHLIGHTS
Six months to Six months to Change
31-Dec-24 31-Dec-23 in Year
Annualised passing rent(1) £118.5m £104.7m +13%
Adjusted earnings per share(1) 3.0 pence 2.9 pence +3%
IFRS earnings per share 2.9 pence (4.4) pence +167%
Dividend per share (declared) 3.1 pence 3.0 pence +1%
Dividend cover(2) 0.99x 0.97x n/a
EPRA cost ratio(1) 13.6% 15.1% n/a
31-Dec-24 30-June-24 Change
in Period
Portfolio valuation(3) £1,833m £1,776m +3%
Portfolio net initial yield(1) 6.0% 5.9% n/a
EPRA NTA per share(1) 88 pence 87 pence +1%
IFRS NAV per share 90 pence 90 pence -
Loan to value(1) 39% 37% n/a
Nick Hewson, Chair of Supermarket Income REIT plc, commented:
"I am pleased with the progress we have made on the strategic initiatives
announced in November 2024, which are ultimately designed to enhance the
Company's earnings and close the discount to NAV. We have already delivered on
a number of these objectives with the sale of Tesco, Newmarket above book
value, the renewals of our three shortest lease assets at rental levels
materially ahead of our valuer's ERVs, and the acquisition of earnings
enhancing assets in the UK and France.
Delivering cost savings to enhance earnings is another important objective and
the recently announced proposed internalisation of the Company's management
function is part of this process, delivering material cost savings and
strengthening alignment with shareholders.
I look forward to another busy period focused on delivering on our strategic
objectives, which we believe will help encourage the market to assign
appropriate value to the quality of our portfolio."
Key highlights - delivering on strategic objectives
· Proposed internalisation of the Company's management function for a
consideration of £19.7 million (the "Internalisation"), enhancing alignment
with shareholders and delivering annual cost savings of at least £4
million(4)
· Capital recycling delivered through £63.5 million sale of Tesco, Newmarket at
a 7.4% premium to book value highlighting attractiveness of our assets and
conservative valuation of our portfolio(4)
· Completed three lease renewals at an average of 35% above MSCI's supermarket
benchmark index providing valuable evidence of achievable rent renewals on
high performing, large format, omnichannel stores at 4% rent to turnover(4)
· Earnings enhancing acquisitions, with £49.7 million in the UK and a further
€36.7 million(4) tranche of direct sale and leaseback with Carrefour in
France
· Continue to actively explore opportunities to recycle capital through
individual asset sales and potential joint ventures at attractive valuations
Proposed internalisation of the Company(4)
· Significant cost savings of at least £4 million per annum, equivalent to a
yield on cost of c.19%
· Delivering the highest return on capital of any capital allocation option,
whilst share buybacks and property acquisitions remain under consideration for
future capital recycling
· Opportunity to achieve a material enhancement in EPRA earnings and long-term
dividend cover, with the potential for higher future dividend growth
· New EPRA cost ratio target of below 9%, one of the lowest in the sector
· Enhancing the alignment between the Company, its management and shareholders
· Simplified management structure, securing the specialist supermarket fund
management team and platform through the transfer of the systems, know-how and
proprietary market knowledge that Atrato has developed since 2017
· Creating a structure that is more appropriate for a UK REIT of the scale of
SUPR, providing greater strategic flexibility improving shareholder returns
and broadening SUPR's potential investor universe
· Enabling the Company to pursue a transfer of its listing to the "equity shares
(commercial company)" category
· Improved access to capital and balance sheet flexibility
· Potential future fee generation opportunities for the Company, leveraging the
team's expertise through joint ventures
Proactive capital recycling and earnings enhancing acquisitions(4)
· £63.5 million sale of Tesco, Newmarket store to Tesco, 7.4% above prevailing
book value(5), highlighting the business critical nature of omnichannel stores
· Proceeds from the Tesco Newmarket sale used to fund the costs of
internalisation and to initially reduce debt
· Acquisition of an earnings enhancing portfolio of Carrefour supermarkets in
France
Lease extensions evidence affordable rent level underwriting of stores(4)
· Renewals agreed on three of SUPR's shortest lease stores at average rents 35%
above the MSCI's supermarket benchmark index and 13% above the Company's
valuer's estimated rental values ("ERV")(6)
· New leases with 15 year terms with annual RPI-linked uplifts (subject to a 4%
cap and 0% floor)
· Provides market evidence of 4% rent to turnover affordability underwrite,
in-line with Company portfolio average
· Valuation uplift on these regeared assets expected to be fully realised at
FY25
· Portfolio WAULT extended from 11 years to 12 years
· Next material lease renewal in 7 years(7)
Financial highlights for the six month period ended 31 December 2024
Resilient financial performance
· 12% growth in operating profit to £50.3 million, reflecting:
· 13% increase in annualised passing rent to £118.5 million
through acquisitions and contractual rental uplifts in the period
· The average annualised increase in rent from reviews performed
during the period was 3.0%
· EPRA NTA increased to 88 pence per share (30 June 2024: 87 pence per
share) from an increase in property valuations of 0.5% on a like-for-like
basis.
· EPRA cost ratio reduced to 13.6% (six months to 31 December 2023: 15.1%) with
further cost reductions expected at FY25 Results
· Adjusted EPS increased to 3.0 pence following earnings enhancing acquisitions
in the period
· On track to deliver full-year 2025 dividend target of 6.12 pence per share
Supermarket property valuations have troughed with valuations increasing
· Portfolio independently valued at £1.8 billion, inclusive of acquisitions of
£49.7 million, reflecting net initial yield ("NIY") of 6.0% (30 June 2024:
5.9%)
· Like-for-like valuation increase of 0.5%
· Positive valuation impact of post period lease renewals and capital recycling
expected to be fully reflected in the FY25 Results
Portfolio of business critical, future-proofed omnichannel supermarkets
· Portfolio of 74 mission critical omnichannel stores (82(8)( ) as at 10 March
2025)
· 11 years weighted average unexpired lease term ("WAULT") (12 years as at 10
March 2025)
· 81% of rental income inflation-linked (81% as at 10 March 2025)
· Strong performing investment-grade tenant covenants with 79% of income from
Sainsbury's, Tesco and Carrefour (79% as at 10 March 2025)
Earnings enhancing acquisitions and active portfolio management
· Acquired a Sainsbury's omnichannel supermarket in Huddersfield, West
Yorkshire, for £49.7 million (excluding acquisition costs), reflecting a NIY
of 7.6%(9)
· Post period acquisition of nine(8) omnichannel Carrefour stores in France for
€36.7 million (excluding acquisition costs), reflecting a net initial yield
of 6.8%(10)
· EV charging installations now operational at five sites
· Active asset management with terms being negotiated for the development of
three new discount food stores
Strong balance sheet with 93% of drawn debt hedged to fixed rate
· LTV of 39% as at 31 December 2024 (30 June 2024: 37%), reduced to 38% as at 10
March 2025
· 93% of drawn debt fixed or hedged at a weighted average finance cost of 4.0%
(30 June 2024: 3.8%)
· Proactive management of debt facilities including the Company's first private
placement issuance of €83 million new senior unsecured notes with a term of
seven years and a fixed rate coupon of 4.4%. This provides a natural hedge for
the Carrefour acquisitions in France
· Refinancing of the Deka facility with a new ING facility with a term of three
years and a margin of 1.55% over SONIA that remains hedged to January 2026
which caps the interest rate at an all-in cost of 3.0%
· Post period end private placement issuance of €39 million new senior
unsecured notes with a term of seven years and a fixed rate coupon of 4.1%
· Fitch Ratings Limited ("Fitch") reaffirmed the Company's Investment Grade
Credit Rating of BBB+ with a stable outlook
Continued progress on sustainability reporting
· EPRA Sustainability Best Practices Recommendations ("sBPR") Silver and Most
Improved Awards received in September 2024
· Climate Disclosure Project ("CDP") responses submitted for the first time in
October 2024
Completion of Secondary listing on the Johannesburg Stock Exchange ("JSE")
· In December 2024 the Company completed a secondary listing on the JSE
· The listing provides the Company exposure and an enhanced profile to a broader
investor base and the opportunity to diversify the share register
· From 24 March 2025 the Company will be included in a number of South African
indices, most notably the FTSE/JSE All Share Index ("ALSI") and FTSE/JSE All
Property Index ("ALPI")
PRESENTATION FOR ANALYSTS
The Company will be holding an in-person presentation for analysts at 08.30am
today at Stifel Nicolaus Europe Limited's offices, 150 Cheapside, City of
London, London, EC2V 6ET. To register to attend in-person, please contact FTI
Consulting: SupermarketIncomeREIT@fticonsulting.com. There will also be a
webcast available. To join the presentation via the webcast, please register
using the following link: Supermarket Income REIT - Half Year Results
Presentation 2025 | SparkLive | LSEG
(https://sparklive.lseg.com/SupermarketIncomeREIT/events/91cd2b69-7549-4432-851a-f5c44a1bbba0/supermarket-income-reit-half-year-results-presentation-2025)
The results presentation is available in the Investor Centre section of the
Group's website.
FOR FURTHER INFORMATION
Atrato Capital +44 (0)20 3790 8087
Limited
Rob Abraham / Mike Perkins / Chris McMahon ir@atratocapital.com
Stifel Nicolaus Europe Limited +44 (0)20 7710 7600
Mark Young / Rajpal Padam / Madison Kominski
Goldman Sachs International +44 (0)20 7774 1000
Tom Hartley / Luca Vincenzini
FTI +44 (0)20 3727 1000
Consulting
Dido Laurimore / Eve Kirmatzis / Andrew Davis SupermarketIncomeREIT@fticonsulting.com
NOTES TO EDITORS:
Supermarket Income REIT plc (LSE: SUPR, JSE: SRI) 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.
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.
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. The Company also has a secondary listing on the Main Board of the JSE
Limited in South Africa.
Atrato Capital Limited is the Company's Investment Adviser.
Further information is available on the Company's
website www.supermarketincomereit.com (http://www.supermarketincomereit.com/)
LEI: 2138007FOINJKAM7L537
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.
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.
CHAIR'S STATEMENT
Dear Shareholder,
The six months to 31 December 2024 has been another period of resilient
operational performance by the Company against a challenging market backdrop
for real estate. The share price has, however, failed to reflect the value
that we as a Board place on the Company. In November 2024 we announced a
series of strategic initiatives to underpin our NAV and the ERV of our rental
stream, and to reduce the overall cost of running the Company. The delivery of
these initiatives should lead to a fully covered dividend and to a positive
rerating of the shares. I am therefore delighted to be able to report on the
significant progress that we have made.
As part of our plan to provide market evidence for our property valuations and
our NAV, the Company successfully executed the sale of an omnichannel Tesco
store in Newmarket to the store's operator, Tesco plc, for £63.5 million, at
a 7.4% premium to the June 2024 valuation. This transaction was completed post
period end but was the culmination of many months of hard work during the
reporting period.
We have also been making earnings enhancing acquisitions, including the
purchase during the period of a top quartile Sainsbury's store in Huddersfield
for £49.7 million. Post period end, the Company acquired a portfolio of
nine(8) high-quality omnichannel Carrefour supermarkets in France for €36.7
million, through a direct sale and lease back transaction, making Carrefour
6%(11 )of the Group's portfolio by rental income.
Post period end, the Company announced that lease renewals had been agreed on
our three shortest leased Tesco stores. These new 15 year, inflation-linked
leases were agreed at rents 35% above the MSCI supermarket rental index and
13% higher than valuer ERVs. The renewals verify the underwrite that the
Company has made on the affordable rents and the next material lease renewal
is now over seven years away. The re-geared stores also benefit from a
valuation uplift which will be reflected in the full year report.
We more recently announced that the Board has decided to internalise the
management function of the Company for a consideration of £19.7 million,
subject to shareholder approval. There are a number of benefits to
internalisation with significant cost savings of at least £4 million per
annum, which should deliver a material enhancement in EPRA earnings and
long-term dividend cover, with the potential for higher future dividend
growth. The Board believes that the Company is of a scale and maturity for
internalisation to be the correct step and in Rob Abraham and Mike Perkins,
the Board is confident that we have the right individuals to lead the Company
into this new and exciting phase. A General Meeting has been scheduled at 2pm
on 20 March 2025, providing shareholders the opportunity to vote on the
proposed internalisation. The Board would like to extend our thanks to Ben
Green, Steve Windsor and the whole Atrato team for their contribution to the
Company which they have grown from a single supermarket in 2017, to a FTSE 250
Company and the largest UK based landlord of omnichannel supermarkets.
The Company completed its secondary listing on the JSE late in December 2024
and from 24 March 2025, will be included in a number of South African indices.
We continue to engage with South African institutional investors who have
expressed an interest in purchasing the Company's shares and we look forward
to welcoming them to the register.
The Company's continued progress against its refreshed sustainability strategy
has been recognised externally with the achievement of two EPRA Sustainability
Best Practices Recommendations ("sBPR") Awards; Silver and Most Improved.
Engagement with our tenants on sustainability has remained a key focus of the
Company during the period. In January 2025, in line with the Board's
succession plan, we welcomed Roger Blundell as an independent non-executive
director of the Company. Roger will succeed Jon Austen as Chair of the Audit
and Risk Committee.
OUTLOOK
The key strategic objectives that we outlined in November 2024 are focused on
delivering earnings growth which we believe will help to close the share price
discount to NAV. I am very pleased with the progress that we have made against
these objectives as I have outlined above, however, there is more work to do
and I look forward to updating you on continued progress.
Nick Hewson
Chair
10 March 2025
KEY PERFORMANCE INDICATORS
Our objective is to provide secure, inflation-linked, long-dated income from
grocery property. Set out below are the key performance indicators we use to
track our progress.
KPI Definition Performance
1. Total Shareholder Return Shareholder return is one of the Group's principal measures of performance. -1.8% for the six months ended 31 December 2024
(Six months ended
Total Shareholder Return ("TSR") is measured by reference to the growth in the
31 December 2023: 23.2%)
Group's share price over a period, plus dividends declared for that period.
2. WAULT WAULT measures the average unexpired lease term of the Property Portfolio, 11 years WAULT as at 31 December 2024 (As at 30 June 2024: 12 years)
weighted by the Portfolio valuations.
3. EPRA NTA per share The value of our assets (based on an independent valuation) less the book 88 pence per share as at 31 December 2024 (As at 30 June 2024: 87 pence per
value of our liabilities, attributable to Shareholders and calculated in share)
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 24
for more information.
4. Net Loan to Value The proportion of our Direct Portfolio gross asset value that is funded by 39% as at 31 December 2024 (As at 30 June 2024: 37%)
borrowings calculated as balance sheet borrowings less cash balances divided
by total investment properties valuation.
5. Adjusted EPS EPRA earnings adjusted for company specific items to reflect the underlying 3.0 pence per share for the six months ended 31 December 2024 (Six months
profitability of the business. ended
31 December 2023: 2.9 pence per share)
The Company has also included an additional earnings measure called "Adjusted
earnings" and "Adjusted EPS". 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. Adjusted earnings is considered a better reflection
of the measure over which the Board assesses the Group's trading performance
and dividend cover.
Following the updated September 2024 EPRA best practice recommendations
guidelines, the specific adjustment to EPRA earnings in relation to finance
income received on interest rate derivatives is now included within the EPRA
earnings calculation. As such the comparative period calculations in the table
below have been adjusted to reflect the new guidelines retrospectively. Debt
restructuring costs relate to the acceleration of unamortised arrangement fees
following the refinancing of the Group's debt facilities during the period.
Adjusted EPS reflects the adjusted earnings defined above attributable to each
shareholder.
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
interim financial statements 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.
Reconciliations between EPRA measures and the IFRS financial statements can be
found in Notes 11 and 24 to the interim financial statements.
EPRA PERFORMANCE INDICATORS
The table below shows additional performance measures, calculated in
accordance with the Best Practices Recommendations of the European Public Real
Estate Association (EPRA). We provide these measures to aid comparison with
other European real estate businesses.
For a full reconciliation of all EPRA performance indicators, please see the
Notes to EPRA measures within the supplementary section of the interim
financial statements.
Measure Definition Performance
1. EPRA EPS A measure of EPS designed by EPRA to present underlying earnings from core 3.0 pence per share for the
operating activities.
six months ended 31 December 2024 (Six months ended 31 December 2023:
2.9 pence per share)
2. EPRA Net Reinstatement Value (NRV) per share An EPRA NAV per share metric which assumes that entities never sell assets and 98 pence per share as at
aims to represent the value required to rebuild the entity.
31 December 2024 (As at
30 June 2024: 97 pence per share)
3. EPRA Net Tangible Assets (NTA) per share An EPRA NAV per share metric which assumes entities buy and sell assets, 88 pence per share as at
thereby crystallising certain levels of unavoidable deferred tax.
31 December 2024 (As at
30 June 2024: 87 pence per share)
4. EPRA Net Disposal Value (NDV) per share An EPRA NAV per share metric which represents the Shareholders' value under a 89 pence per share as at
disposal scenario, where deferred tax, financial instruments and certain other
31 December 2024 (As at
adjustments are calculated to the full extent of their liability, net of any
30 June 2024: 90 pence
resulting tax.
per share)
5. EPRA Net Initial Yield (NIY) & EPRA "Topped-Up" Net Initial Yield Annualised rental income based on the cash rents passing at the balance sheet 6.0% as at 31 December 2024 (As at 30 June 2024: 5.9%)
date, less non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchasers' costs.
6. EPRA Vacancy Rate Estimated Market Rental Value (ERV) of vacant space divided by ERV of the 0.3% as at 31 December 2024 (As at 30 June 2024: 0.5%)
whole portfolio.
7. EPRA Cost Ratio (Including direct vacancy costs) Administrative & operating costs (including costs of direct vacancy) 13.6% for the six months ended 31 December 2024
divided by gross rental income.
(Six months ended
31 December 2023: 15.1%)
8. EPRA Cost Ratio (Excluding direct vacancy costs) Administrative & operating costs (excluding costs of direct vacancy) 13.3% for the six months ended 31 December 2024
divided by gross rental income.
(Six months ended
31 December 2023: 14.9%)
9. EPRA LTV Net debt divided by total property portfolio and other eligible assets. 40.4% for the six months ended 31 December 2024 (As at 30 June 2024: 38.8%)
10. EPRA Like-for-like Rental Growth Changes in net rental income for those properties held for the duration of Rental income increase of 2.1% for the six months to 31 December 2024 versus
both the current and comparative reporting period. six months to 31 December 2023
11. EPRA Capital Expenditure Amounts spent for the purchase and development of investment properties £50.9 million for the six months ended 31 December 2024 (Six months ended
(including any capitalised transaction costs).
31 December 2023: £38.5 million)
INVESTMENT ADVISER'S REPORT
Atrato Capital Limited, the Investment Adviser to the Group (the "Investment
Adviser"), is pleased to report on the operations of the Group for the Period.
Since 30 June 2024, the Company has made significant progress delivering on
several of its key strategic objectives set out in the announcement of 18
November 2024: capital recycling through the sale of a large omnichannel
supermarket above book value, the earnings enhancing acquisition of a
portfolio of Carrefour supermarkets, and renewing and extending leases with
starting rents significantly higher than market and valuer expectations. The
Company has also proposed to internalise its management function to further
reduce costs and better align itself with shareholders. The Company continues
to work hard to deliver against its remaining strategic initiatives. Delivery
on these key objectives combined with our exposure to investment grade tenants
in the non-discretionary grocery sector means that the Company is well
positioned for the future.
Overview
SUPR's key tenants continue to gain market share
In the six months to December 31 2024, Tesco and Sainsbury's combined YoY
sales grew 4.9%(12) which is above UK grocery sales growth of 2.5%(13) and
2024 UK GDP growth of 0.9%(14). The relative outperformance has been apparent
in the period because supermarkets tend to perform well during economic
downturns due to the essential nature of grocery and household items, which
remain a priority regardless of economic conditions. Unlike discretionary
spending, consumers cannot cut back significantly on everyday necessities,
ensuring steady demand for supermarkets.
SUPR's key tenants, Tesco and Sainsbury's, gained significant market share,
driven by strategic investments in pricing, product offerings and customer
experience. Both retailers focused on enhancing their value propositions to
meet the growing demand for affordable options amidst economic pressures.
Tesco, with its loyalty program, and Sainsbury's, through its focus on quality
and sustainability, successfully attracted budget conscious shoppers while
maintaining premium offerings. Their ability to balance convenience, variety,
and competitive pricing helped solidify their positions at the forefront of
the UK grocery market.
Focus on best-in-class operators in recession proof grocery sector continues
to deliver
SUPR has highly secure income and has achieved 100% rent collection since IPO.
The portfolio has an 79% weighting towards the investment grade covenants of
Tesco, Sainsbury's and Carrefour (79% as at 10 March 2025). These operators
can maintain their dominance in the grocery market due to their scale and the
strategic strength of their store estate, ensuring extensive customer reach,
operational efficiency, and strong supplier relationships.
Grocery spending remains essential regardless of economic conditions, ensuring
stable footfall and resilient trading performance. This underpins secure,
long-term rental income, making supermarkets a defensive and attractive asset
class.
Operators continue to invest in their online platforms
A key pillar of the Group's investment strategy is to invest in
'future-proofed' omnichannel supermarkets. UK operators continue to invest in
enhancing their online platforms to cater to growing consumer demand for
convenience and digital shopping. Our tenants have expanded their e-commerce
capabilities by improving website functionality, increasing delivery slots,
and offering more personalised shopping experiences. They focus on utilising
their existing store estate to ensure quicker and more reliable delivery
services. This push into online sales not only helped supermarkets retain
customers seeking flexibility but also allowed them to tap into the growing
trend of hybrid shopping, where customers combine online and in-store
channels.
Proposed internalisation of the Company
In March 2025, the Company announced that following a collaborative process
between the Investment Adviser and the Board, the Board has decided to
internalise the Company's management function.
The Board has agreed that on completion of the proposed internalisation it
will pay a £19.7 million termination fee to the Investment Adviser, with an
additional £0.3 million for the termination of its AIFM agreement and, to
ensure continuity of operations, Atrato will receive £0.8 million for the
provision of transitionary services for up to nine months post completion.
As part of the internalisation process Rob Abraham, Fund Manager,
Supermarkets, at Atrato Group and Mike Perkins, Finance Director,
Supermarkets, at Atrato Group will join the Board as Chief Executive Officer
and Chief Financial Officer respectively and a further 12 members of Atrato
staff will transfer as employees of the Company.
The Board believes that the proposed internalisation provides a number of
compelling financial and strategic benefits including; providing significant
cost savings, conservatively estimated at £4 million annually; greater
alignment with shareholders; a simplified management structure, securing the
specialised and experienced fund team for the longer term; and the opportunity
to appeal to a wider group of investors which would not otherwise invest in
externally managed vehicles.
Furthermore, if the proposed Internalisation becomes effective, the Company
will explore a transfer of its listing from the "closed-ended investment
funds" category to the "equity shares (commercial companies)" category. The
Board expects that such a transfer of listing may remove administrative
burden, provide greater operational flexibility, and potentially attract a
wider range of research analysts and potential investors.
The Board has decided that the proposed internalisation should be put to a
voluntary vote, and therefore a Circular was sent to shareholders on 4 March
2025 convening a General Meeting scheduled for 20 March 2025. Subject to
shareholder approval, the internalisation is expected to take effect on or
around 25 March 2025.
Growing earnings through capital recycling and opportunistic acquisitions
Post-period end, SUPR disposed of Tesco, Newmarket for a consideration of
£63.5 million, a 7.4% premium to book value. The store was acquired by Tesco
Plc, underlining the strategic importance of large format, omnichannel stores
with strong trading performance to the supermarket operators.
By recycling lower-return assets into high-yielding opportunities SUPR can
grow earnings and improve income generation and capital efficiency. In
November, SUPR acquired Sainsbury's, Huddersfield (7.6% NIY) and completed a
second sale and leaseback portfolio acquisition with Carrefour in France (6.8%
NIY). Both acquisitions were completed at highly attractive margins above the
cost of debt.
By targeting top performing, omnichannel supermarkets, leased to strong
tenants, SUPR operates with strong conviction that the leases on its stores
will be renewed. Robust trading performance and the strategic importance to
the operators make these stores highly valuable assets for the tenants,
reinforcing their commitment to long-term occupation, as evidenced by Tesco
repurchasing its store in Newmarket.
Lease renewals evidence affordable rental levels for UK operators
SUPR has agreed three new leases on its shortest unexpired leases with Tesco.
These leases on stores in Bracknell, Bristol and Thetford have been extended
to 15 years at rents 35% above the MSCI supermarket benchmark index and 13%
above the valuer's ERV, and will benefit from annual RPI -linked rent reviews
(subject to a 4% cap and a 0% floor). The new leases will extend the portfolio
WAULT from 11 years to 12 years, with the next material lease renewal in seven
years' time.
The lease renewals support SUPR's thesis that 4% rent to turnover is a
sustainable rental level for UK grocers. It also proves that top performing,
large format omnichannel stores are likely to regear materially above the MSCI
supermarket benchmark index and valuer ERVs. Lease regears at these levels
unlock potential higher reversionary values and capital growth across the SUPR
portfolio.
Valuations remaining stable with modest growth
The UK investment property market has shown signs of recovery with the benefit
of declining inflation and falling interest rates which historically have had
a positive impact on property values. The supermarket sector has experienced a
high level of investor demand which has been curtailed by a limited supply of
strong trading, omnichannel supermarkets, reaffirming the importance of the
Company's existing portfolio.
Cushman & Wakefield valued the Portfolio as at 31 December 2024 in
accordance with RICS Valuation Global Standards. The properties were valued
individually without any premium/discount applied to the Portfolio as a whole.
The Portfolio value was £1,833 million, with the valuation reflecting a net
initial yield of 6.0% and like-for-like valuation growth of 0.5% for the
period. The increase in valuations translated to a 0.7 pence improvement in
NTA.
The growth in valuations reflects the benefit of contractual inflation-linked
rental uplifts along with improved market sentiment towards supermarket real
estate. The average rental increase from rent reviews in the period was 3.0%
on an annualised basis. 83% of the Company's leases benefit from contractual
rental uplifts, with 81% linked to inflation and 2% fixed uplifts(15). We
expect to see the full benefit of the Tesco regears in the June 2025
valuation.
Completion of JSE listing
Following positive feedback from South African institutional investors, the
Company decided to pursue a secondary listing on the JSE to enhance its
profile with a broader investor base, improve trading liquidity and diversify
its shareholder register. The Company successfully completed a secondary
listing on the JSE in December 2024 and is engaging with South African
institutional investors who have expressed an interest in purchasing the
Company's shares. From 24 March 2025 the Company will be included in a number
of South African indices, most notably the FTSE/JSE All Share Index ("ALSI")
and FTSE/JSE All Property Index ("ALPI"), which is expected to increase
liquidity in the stock.
Delivering on our sustainability strategy
The Company's sustainability strategy is underpinned by three core pillars
that reflect the most material sustainability issues for the Company and the
long-term nature of its investments:
Pillar 1: Climate and Environment - Reduce emissions to achieve a net zero
carbon portfolio and mitigate the environmental impacts of our assets.
Pillar 2: Tenant and Community Engagement - Partner with tenants and
stakeholders to ensure assets enhance the communities in which they are
located
Pillar 3: Responsible Business - Strengthen ESG performance and uphold
responsible business practices to deliver long-term value.
The Company continues to deliver on this strategy and underlying targets, as
outlined in its most recent Sustainability Report. The Company's efforts to
improve its ESG performance have been recognised externally with EPRA
Sustainability Best Practices Recommendations (sBPR) Silver and Most Improved
Awards achieved in September 2024.
Understanding the sustainability performance of tenants, particularly with
respect to energy consumption, continues to be a key focus of the Company.
This is reflected in the Company's efforts to proactively engage and
collaborate with tenants and property managers on asset-level ESG enhancement
activities (including in relation to nature and biodiversity) and the
Company's underlying sustainability target to improve the amount of actual ESG
data collected from tenants year-on-year.
The Annual Report and Accounts for the year ended 30 June 2024 included the
Company's Task Force on Climate-Related Financial Disclosures ("TCFD") report,
with disclosures made across all 11 TCFD recommendations. Included within this
report was the Company's GHG Inventory disclosures, across Scope 1, 2 and 3
emissions which for the first time were independently assured. The Company is
currently working with external sustainability advisers, Anthesis, to prepare
its first high-level Transition Plan which links to the Company's
science-based Net Zero and near-term emission reduction targets.
The Company's approach to sustainability is underpinned by the Board's
commitment to good stewardship and creating long-term value for our
stakeholders. The Company continues to support the responsible investment
activities of its Investment Adviser including as a signatory to the United
Nations Principles for Responsible Investment ("UN PRI") and participant in
the UN Global Compact ("UN GC").
The Company is currently out of scope of the UK Sustainability Disclosure
Requirements ("SDR") investment labelling regime as the regime does not apply
to non-UK AIFs. However, the Company's communications and marketing materials
are reviewed against the SDR's anti-greenwashing rules, to ensure that any
sustainability claims are fair, clear, and not misleading.
The Company's next annual Sustainability Report will be published alongside
the Company's Full Year Results, providing an overview of progress against the
Company's Sustainability Strategy.
Financial results
Net rental income
In the period, the portfolio generated net rental income of £57.8 million
(six months to 31 December 2023: £52.6 million), representing an increase of
£5.2 million or 10.0% compared to the prior period.
On a like-for-like basis, EPRA net rental income increased by 2.1%. During the
period, we successfully completed 15 rent reviews generating £1.6 million of
additional rental income, representing an increase of 4.2% (or 3.0% on an
annualised basis).
The second half of the year will benefit both from a full period of rental
income from the recent Huddersfield acquisition, and further still from the
Carrefour portfolio acquired post period end. In addition, contractual uplifts
across 29% of the portfolio subject to a review in the six months to 30 June
2025.
Direct property expenditure decreased marginally to £0.3 million (six months
to 31 December 2023: £0.4 million), and our gross to net margin continues to
be among the highest in the sector at 99.4% (six months to 31 December 2023:
99.3%), reflecting the strength of our core single-let strategy and further
highlighting the covenant quality of our tenant base.
Rent collection rates were 100%(16) for the six months to 31 December 2024
(six months to 31 December 2023: 100%), as our focus on top trading stores and
covenant quality provided exceptional income security.
Administrative and other expenses and EPRA cost ratio
Administrative and other expenses, which include all operational costs of
running the business, remained flat period-on-period at £7.6 million (six
months to 31 December 2023: £7.6 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 150bps to 13.6%.
6 months to 6 months to
31 December 31 December
2024 2023
EPRA cost ratio including direct vacancy costs 13.6% 15.1%
EPRA cost ratio excluding direct vacancy costs 13.3% 14.9%
Net finance costs
Net finance costs increased by £4.0 million primarily due to an increase in
leverage compared to the prior period as we continued to deploy capital into
earnings enhancing acquisitions.
Adjusted earnings
The Directors consider adjusted earnings a key measure of the Company's
underlying operating results and therefore excludes items which are
non-recurring in nature; in the prior period this included finance income on
derivatives held at fair value through profit on loss, however this is now
included within the EPRA earnings following the update to the EPRA BPR
guidelines in September 2024. EPRA earnings for the six months to 31 December
2024, also includes an adjustment for costs related to the Company's secondary
listing on the Johannesburg Stock Exchange during the period. This means that
EPRA and adjusted earnings are the same for the period being £37.4 million
(six months to 31 December 2023: £36.3 million). On a per share basis, EPRA
and adjusted earnings increased in the period to 3.0 pence (six months to 31
December 2024: 2.9 pence) per share.
A full reconciliation between IFRS and Adjusted earnings can be found in Note
11 of the interim financial statements.
Dividend
In August 2024, the Company paid a fourth interim dividend in respect of the
period from 1 April 2024 to 30 June 2024 of 1.515 pence per share, taking
total dividends paid and declared in respect of the financial year ended 30
June 2024 to 6.06 pence per share.
In November 2024, the Company paid a first interim dividend in respect of the
period from 1 July 2024 to 30 September 2024 of 1.53 pence per share and in
January 2025 approved a second interim dividend of 1.53 pence per share for
the period from 1 October 2024 to 31 December 2024.
The Company is continuing to target a dividend of 6.12 pence per share in
respect of the year ending 30 June 2025.
EPRA net tangible assets and IFRS net asset
Unaudited Unaudited Audited
31 Dec 2024 31 Dec 2023 30 Jun 2024
£'000 £'000 £'000
Investment property 1,763,040 1,667,910 1,768,216
Assets held for sale 62,950 - -
Bank and other borrowings (744,608) (583,893) (694,168)
Cash 40,631 37,068 38,691
Other net liabilities (30,895) (27,191) (28,207)
EPRA net tangible assets 1,091,118 1,093,894 1,084,532
Fair value of interest rate derivatives 22,398 27,364 31,449
Fair value adjustment for financial assets held at amortised cost 3,930 3,631 3,493
IFRS net assets 1,117,446 1,124,889 1,119,474
EPRA net tangible assets ("EPRA NTA") is considered to be the most relevant
measure for the Group, and includes both income and capital returns, but
excludes fair value of interest rate derivatives and revaluation to fair value
of investment properties held at amortised cost.
At 31 December 2024, EPRA NTA was £1,091 million (30 June 2024: £1,085
million), representing an EPRA NTA per share of 88 pence, an increase of 1%
since 30 June 2024 and together with dividends paid, resulted in a Total
Accounting Return ("TAR") of 4.1%.
Portfolio Valuation
The value of the portfolio at 31 December 2024, including the fair value of
investment properties held at amortised cost and assets held for sale was
£1,833 million (30 June 2024: £1,776 million). During the period, the Group
invested £49.7 million in one omnichannel supermarket (excluding transaction
costs). On a like-for-like basis, the portfolio recognised a revaluation gain
of £8.4 million, or 0.5%.
Cash Flow and Net Debt
Cash flows from operating activities before changes in working capital
increased by £5.3 million to £49.0 million, primarily due to increased
rental income received from rent reviews and property acquisitions.
Net debt increased by £48.5 million over the six-months to 31 December 2024,
to £704.0 million, and represents a loan to value of 39% (30 June 2024: 37%).
The Group continues to maintain a conservative leverage policy, with a
medium-term target LTV of 30-40%.
Financing
Unaudited Unaudited Audited
31 Dec 2024 31 Dec 2023 30 Jun 2024
Undrawn facilities(17) £125m £177m £104m
Loan to value 39% 33% 37%
Net debt / EBITDA ratio (period end) 7.0x 6.1x 7.1x
Weighted average cost of debt(18) 4.0% 3.1% 3.8%
Interest cover 4.1x 5.8x 6.2x
Average debt maturity(19) 3.7 years 4.1 years 4.0 years
% of drawn debt which is fixed/hedged 93% 100% 100%
During the period, the Group announced the completion of a £170 million
refinancing through its first private placement issuance and a new unsecured
bank facility. As part of the refinancing, the Group 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 seven years and a
fixed rate coupon of 4.44%. 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 margin of 1.55% over SONIA and maturity of three
years and has two one-year extension options. This is capped with an interest
rate hedge at an all-in rate of 2.95% until January 2026.
Post period end, the Group completed a €39 million private placement
issuance with a maturity of seven years and a fixed rate coupon of 4.10%. The
Group also used the proceeds of the Newmarket sale to pay down £31.5 million
of debt from existing facilities.
Following the refinancing, as at the date of this report the Group has a
weighted average debt maturity of 3.7 years, a weighted average debt cost of
4.0% and net LTV of 38%.
The Group's interest rate risk is mitigated through a combination of fixed
debt and derivative interest rate swaps and caps. As at 31 December 2024, 93%
of the Group's debt was hedged which provides stability of interest costs in
the current uncertain macro-economic environment.
The Group continues to monitor its banking covenants and maintains significant
headroom on its LTV and ICR covenants. As at 31 December 2024, at a Group
level property values would need to fall by around 36% before breaching the
gearing covenant. Similarly, operating income would need to fall by 57% before
breaching the interest cover covenant.
Fitch Ratings, as part of its annual review, reaffirmed the Group's BBB+
rating with a stable outlook.
Atrato Capital Limited
Investment Adviser
10 March 2025
PRINCIPAL RISKS AND UNCERTAINTIES
The Audit and Risk Committee, which assists the Board with its
responsibilities for managing risk, regularly considers changes to the
principal risk and uncertainties for the Group. The risk management process
including the identification, consideration and assessment of those emerging
risks which may impact the Group, remain as described in the 2024 Annual
Report.
In the period, the risk that the use of floating rate debt will expose the
business to underlying interest rate movements, entered the principal risks
and uncertainties for the Company. As at 31 December 2024, 93% of the Group's
drawn debt is fixed or hedged via interest rate derivatives. There has been a
significant increase in the forward rate expectations since 30 June 2024, due
in part to the inflationary impact of the October 2024 budget, and as a result
the risk score has increased from sustainable to moderate in the period. The
Company is actively exploring alternative funding solutions that will reduce
the Group's reliance on floating rate debt.
Full details of the principal risks and uncertainties faced by the Company,
which otherwise remain unchanged, can be found on pages 52 to 54 of the 2024
Annual Report. A summary of those principal risks and uncertainties is
provided below:
· There can be no guarantee that the dividend will grow in line with
inflation;
· The lower-than-expected performance of the property portfolio
leading to a significant fall in property valuations;
· Shareholders may not be able to realise their shares at a price
above or the same as they paid for the shares or at all;
· The default of one or more of our grocery tenants would reduce
revenue and may affect our ability to pay dividends;
· Inflationary pressure on the valuation of the portfolio;
· Ability to source assets may be affected by competition for
investment properties in the supermarket sector;
· The Company is reliant on the continuance of the Investment Adviser
· Impact of geopolitical conflict / major events;
· Changes in regulatory policy could lead to our assets becoming
unlettable;
· We operate as a UK REIT and have a tax-efficient corporate
structure. Loss of REIT status could have adverse tax consequences for UK
shareholders.
If the proposed internalisation of the Company's management function proceeds
as intended, a full review of the risk register will be undertaken. Any
changes to the principal risks, as well as the risk management framework, will
be reported upon in the annual report for the financial year ending 30 June
2025.
ALTERNATIVE INVESTMENT FUND MANAGER (the "AIFM")
The AIFM was appointed with effect from 15 June 2017 as the Company's
alternative investment fund manager under the terms of a Management Agreement
between the Company and the AIFM, in accordance with the Alternative
Investment Fund Manager's Directive and the Alternative Investment Fund
Managers Regulations 2013. The AIFM is licensed and regulated by the Guernsey
Financial Services Commission.
The AIFM is responsible for the day-to-day management of the Company's
investments, subject to the investment objective and investment policy and the
overall supervision of the Directors. The AIFM is also required to comply with
on-going capital, reporting and transparency obligations and a range of
organisational requirements and conduct of business rules. The AIFM must also,
as the AIFM for the Company, adopt a range of policies and procedures
addressing areas such as risk management, liquidity management, conflicts of
interest, valuations, compliance, internal audit and remuneration.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge, this condensed set
of consolidated financial statements has been prepared in accordance with IAS
34 as adopted by the United Kingdom and that the operating and financial
review included herein provides a fair review of the information required by
DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority, namely:
· an indication of important events that have occurred during the period
and their impact on the condensed financial statements and a description of
the principal risks and uncertainties for the remaining months of the Group's
financial year; and
· disclosures of any material related party transactions in the
period. These are included in Note 23.
A full list of Directors of the Company can be found at the end of this
interim report. Shareholder information is as disclosed on the Supermarket
Income REIT plc website.
For and on behalf of the Board
Nick Hewson
Chair
10 March 2025
INDEPENDENT REVIEW REPORT TO SUPERMARKET INCOME REIT PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2024 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2024 which comprises the Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Financial Position,
Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated
Cash Flow Statement and the related notes.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion. As disclosed in Note 1, the annual
financial statements of the Group are prepared in accordance with UK adopted
international accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with UK adopted International Accounting Standard 34, "Interim Financial
Reporting. "
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
10 March 2025
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six month period ended 31 December 2024
Notes Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Gross rental income 5 58,171 52,924 107,851
Service charge income 5 4,266 3,309 6,822
Service charge expense 6 (4,608) (3,672) (7,441)
Net Rental Income 57,829 52,561 107,232
Administrative and other expenses 7 (7,575) (7,608) (15,218)
Operating profit before changes in fair value of investment properties 50,254 44,953 92,014
Changes in fair value of investment properties 13 7,202 (57,940) (65,825)
Operating profit/(loss) 57,456 (12,987) 26,189
Finance income 9 10,536 10,967 23,781
Finance expense 9 (23,516) (19,928) (40,043)
Changes in fair value of interest rate derivatives (8,320) (32,272)
18 (31,251)
Profit/(Loss) before taxation 36,156 (54,220) (21,324)
Tax credit for the period 10 374 - 140
Profit/(loss) for the period 36,530 (54,220) (21,184)
Items to be reclassified to profit or loss in subsequent periods
Fair value movements of interest rate derivatives 18 (730) (1,043) (1,765)
Foreign exchange movement 120 - 32
Total comprehensive income/(loss) for the period 35,920 (55,263) (22,917)
Total comprehensive income/(loss) for the period attributable to ordinary 35,920 (55,263) (22,917)
shareholders
Earnings per share - basic and diluted (pence) 11 2.9p (4.4p) (1.7p)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2024
Notes Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Non-current assets
Investment properties 13 1,763,040 1,768,216 1,667,910
Financial asset arising from sale and leaseback transactions 15 11,130 11,023 10,921
Interest rate derivatives 18 9,327 15,741 13,670
Total non-current assets 1,783,497 1,794,980 1,692,501
Current assets
Asset held for sale 14 62,950 - -
Interest rate derivatives 18 13,071 15,708 13,694
Trade and other receivables 16 11,244 11,900 8,901
Deferred tax asset 514 140 -
Cash and cash equivalents 40,631 38,691 37,068
Total current assets 128,410 66,439 59,663
Total assets 1,911,907 1,861,419 1,752,164
Non-current liabilities
Bank borrowings 19 664,700 597,652 487,527
Trade and other payables 17 1,118 1,045 -
Total non-current liabilities 665,818 598,697 487,527
Current liabilities
Bank borrowings due within one year 19 79,908 96,516 96,366
Deferred rental income 23,713 24,759 22,352
Trade and other payables 17 25,022 21,973 21,030
Total current liabilities 128,643 143,248 139,748
Total liabilities 794,461 741,945 627,275
Total net assets 1,117,446 1,119,474 1,124,889
Equity
Share capital 20 12,462 12,462 12,462
Share premium reserve 20 500,386 500,386 500,386
Capital reduction reserve 20 591,248 629,196 666,957
Retained earnings 12,389 (24,141) (57,177)
Cash flow hedge reserve 21 809 1,539 2,261
Other reserves 152 32 -
Total equity 1,117,446 1,119,474 1,124,889
Net asset value per share - basic and diluted 24 90p 90p 90p
EPRA net tangible asset per share - basic 24 88p 87p 88p
and diluted
These unaudited condensed consolidated financial statements were approved and
authorised for issue by the Board of Directors on 10 March 2025 and were
signed on its behalf by: Nick Hewson, Chair.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six month period ended 31 December 2024 (unaudited)
Share capital Share premium reserve Cash flow hedge reserve Other reserve Capital reduction reserve Retained Total
£'000 £'000 £'000 £'000 £'000 earnings £'000
£'000
As at 1 July 2024 12,462 500,386 1,539 32 629,196 (24,141) 1,119,474
Comprehensive income for
the period
Profit for the period - - - - - 36,530 36,530
Recycled comprehensive loss to profit and loss - - (730) - - - (730)
Other comprehensive income - - - 120
120 - -
Total comprehensive income for the period - - (730) 120 - 36,530 35,920
Transactions with owners
Interim dividends paid - - - - (37,948) - (37,948)
As at 31 December 2024 12,462 500,386 809 152 591,248 12,389 1,117,446
For the year from 1 July 2023 to 30 June 2024 (audited)
Share capital Share premium reserve Cash flow hedge reserve Other reserve Capital reduction reserve Retained Total
£'000 £'000 £'000 £'000 £'000 earnings £'000
£'000
As at 1 July 2023 12,462 500,386 3,304 704,531 (2,957) 1,217,726
Comprehensive loss for
the period:
Loss for the period - - - - - (21,184) (21,184)
Recycled from comprehensive loss to profit and loss - - (1,154) - - - (1,154)
Other comprehensive loss - - (611) 32 - - (579)
Total comprehensive loss for - - (1,765) 32 - (21,184) (22,917)
the period
Transactions with owners
Interim dividends paid - - - - (75,335) - (75,335)
As at 30 June 2024 12,462 500,386 1,539 32 629,196 (24,141) 1,119,474
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six month period ended 31 December 2023 (unaudited)
Share capital Share premium reserve Cash flow hedge reserve Capital reduction reserve Retained Total
£'000 £'000 £'000 £'000 Earnings £'000
£'000
As at 1 July 2023 12,462 500,386 3,304 704,531 (2,957) 1,217,726
Comprehensive loss for
the period:
Loss for the period - - - - (54,220) (54,220)
Recycled comprehensive loss to profit and loss - - (432) - - (432)
Other comprehensive loss - - (611) - - (611)
Total comprehensive loss - - (1,043) - (54,220) (55,263)
for the period
Transactions with owners:
Interim dividends paid - - - (37,574) - (37,574)
As at 31 December 2023 12,462 500,386 2,261 666,957 (57,177) 1,124,889
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the six month period ended 31 December 2024
Notes Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Operating activities
Proft/(loss) attributable to ordinary shareholders 36,530 (54,220) (21,184)
Adjustments for:
Tax credit 10 (374) - (140)
Changes in fair value of interest rate derivatives measured at fair value 18 8,320 32,272 31,251
through profit and loss
Changes in fair value of Investment properties 13 (7,202) 57,940 65,825
Movement in rent smoothing and lease incentive adjustments 5 (1,283) (1,315) (2,434)
Amortisation of leasing fees 20 4 18
Finance income 9 (10,536) (10,967) (23,781)
Finance expense 9 23,516 19,928 40,043
Foreign exchange movement (40) - -
Cash flows from operating activities before changes in working capital 48,951 43,642 89,598
Increase in trade and other receivables (420) (1,363) (2,996)
(Decrease)/Increase in deferred rental income (1,046) 793 3,202
(Decrease)/Increase in trade and other payables (699) (1,015) 2,252
Net cash flows from operating activities 46,786 42,057 92,056
Investing activities
Acquisition of investment properties 13 (49,700) (36,350) (136,184)
Capitalised acquisition costs (1,289) (2,151) (10,266)
Receipts from other financial assets 15 145 145 290
Bank interest received 9 48 42 78
Settlement of Joint Venture carried interest - - (7,500)
Proceeds from disposal of Joint Venture - 135,107 134,912
Net cash flows (used in)/from investing activities (50,796) 96,793 (18,670)
Financing activities
Bank borrowings drawn 217,843 70,000 217,560
Bank borrowings repaid (165,187) (154,386) (191,077)
Loan arrangement fees paid (1,418) (846) (1,318)
Bank interest paid (20,489) (17,270) (35,275)
Settlement of interest rate derivatives 11,312 9,801 21,182
Settlement of Joint Venture carried Interest - (7,500) -
Sale of interest rate derivatives - 38,481 38,482
Purchase of interest rate derivative - (41,578) (45,364)
Bank commitment fees paid (356) (669) (1,031)
Dividends paid to equity holders (35,755) (35,296) (75,335)
Net cash flows from/(used in) financing activities 5,950 (139,263) (72,176)
Net movement in cash and cash equivalents for the period 1,940 (413) 1,210
Cash and cash equivalents at the beginning of the period 38,691 37,481 37,481
Cash and cash equivalents at the end of 40,631 37,068 38,691
the period
Notes to the condensed set of financial statements for the six months ended 31
December 2024
1. Basis of preparation
General information
Supermarket Income REIT plc is a company registered in England & Wales
with its registered office at 3(rd) Floor, 10 Bishops Square, London, E1 6EG.
The principal activity of the Company and its subsidiaries (the "Group") is to
provide its shareholders with an attractive level of income together with the
potential for capital growth by investing in a diversified portfolio of
supermarket real estate assets in the UK and Europe.
The financial information set out in this report covers the six months to 31
December 2024, with comparative numbers amounts shown for the year to 30 June
2024 and the six months to 31 December 2023. These condensed financial
statements are unaudited and the financial information for the year ended 2024
contained herein does not constitute statutory accounts for as defined in
section 434 of the Companies Act 2006. The statutory accounts for the year
ended 30 June 2024 have been delivered to the Registrar of Companies. The
independent auditor's report on those accounts was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a statement
under sections 498(2) or 498(3) of the Companies Act 2006.
At 31 December 2024 the Group comprised of the Company and its wholly-owned
subsidiaries. The subsidiaries are incorporations are across England &
Wales, Guernsey, Jersey and France.
The condensed consolidated financial statements have been prepared in
accordance with IAS 34 'Interim Financial Reporting' and also in accordance
with the measurement and recognition principles of UK-adopted international
accounting standards. The accounting policies adopted in this report are
consistent with those applied in the Group's audited financial statements for
the year ended 30 June 2024. The only additional accounting policy is as
follows:
Assets held for sale
An asset will be classified as held for sale, in line with IFRS 5 'Non-Current
Assets Held for Sale and Discontinued Operations', where the asset is
available for immediate sale in its present condition and the sale is highly
probable. Fair value movement on initial classification as held for sale and
subsequent gains and losses on remeasurement are recognised in profit or loss.
The accounting policies applied in the preparation of this financial
information are expected to be consistently applied in the financial
statements for the year to 30 June 2025.
Accounting convention and currency
The condensed consolidated financial statements ("the financial statements")
have been prepared on a historical cost basis, except that investment
properties, assets held for sale and interest rate derivatives are measured at
fair value.
The financial statements are presented in Pounds Sterling and all values are
rounded to the nearest thousand (£'000), except where otherwise indicated.
Pounds Sterling is the functional currency of the Group and the presentation
currency of the Group.
Euro denominated results of the French operation have been converted to
Sterling at the average exchange rate for the period of €1:£0.84, which is
considered not to produce materially different results from using the actual
rates at the date of the transactions. Year end balances have been converted
to sterling at the 31 December 2024 exchange rate of €1:£0.83.
The Directors are of the opinion that the Group is currently engaged in a
single segment business, being investment in supermarket property assets.
1. Basis of preparation (continued)
Going concern
In light of the current macroeconomic backdrop, the Directors have placed a
particular focus on the appropriateness of adopting the going concern basis in
preparing the Group's interim results for the six months ended 31 December
2024. In assessing the going concern basis of accounting the Directors have
had regard to the guidance issued by the Financial Reporting Council.
Liquidity
At 31 December 2024, the Group generated net cash flow from operating
activities of £46.8 million, held cash of £40.6 million and undrawn
committed facilities totalling £75.4 million with no capital commitments or
contingent liabilities.
After the period end, the Group issued new private placement debt and repaid
existing debt with the proceeds of the sale of a Tesco supermarket in
Newmarket. Excluding the Wells facility that expires in July 2025, the undrawn
committed facilities were £66.4 million, there is also an accordion in one of
the facilities for an additional £50.0 million if required.
The Directors are of the belief that the Group continues to be well funded
during the going concern period with no concerns over its liquidity.
Refinancing events
At the date of signing the financial statements, the Wells Fargo facility and
£50 million of the syndicate unsecured term loan fall due for repayment
during the going concern period. The current drawn balance of £30 million on
the Wells Fargo facility is expected to repaid. It is intended that the £50
million syndicated loan will be refinanced prior to maturity, or if required,
paid down in full utilising the Group's available cash balances and undrawn
committed facilities of over £66 million (including post balance sheet
events). The Group's lenders have been supportive during the period and have
expressed commitment to the long-term relationship they wish to build with the
Company.
Covenants
The Group's debt facilities include covenants in respect of LTV and interest
cover, both projected and historic. All debt facilities, except for the
unsecured facilities, are ring-fenced with each specific lender.
The Directors have evaluated a number of scenarios as part of the Group's
going concern assessment and considered the impact of these scenarios on the
Group's continued compliance with debt covenants. The key assumptions that
have been sensitised within these scenarios are falls in rental income and
increases in administrative cost inflation.
As at the date of issuance of this consolidated financial information 100% of
contractual rent for the period has been collected. The Group benefits from a
secure income stream from its property assets that are let to tenants with
excellent covenant strength under long leases that are subject to upward only
rent reviews.
The list of scenarios is below and are all on top of the base case model which
includes prudent assumptions on valuations and cost inflation.
Scenario Rental Income Costs
Base case scenario (Scenario 1) 100% contractual rent received when due and rent reviews based on forward Investment Adviser fee based on terms of the signed agreement (percentage of
looking inflation curve, capped at the contractual rate of the individual NAV or market cap as per Note 23), other costs in line with contractual terms.
leases.
Scenario 2 Rental income to fall by 20%. Costs expected to remain the same as the base case, with an allowance for
vacancy costs.
Scenario 3 Rental income expected to remain the same as the base case. 10% increases on base case costs to all administrative expenses.
1. Basis of preparation (continued)
The Group continues to maintain covenant compliance for its LTV and ICR
thresholds throughout the going concern assessment period under each of the
scenarios modelled. The lowest amount of ICR headroom experienced in the
worst-case stress scenarios was 57% on one of the secured lender covenants.
Based on the latest bank commissioned valuations, secured property values
would in aggregate have to fall by 54% before LTV covenants are breached. The
lowest fall is within the BLB facility where a fall of more than 13% would
lead to an LTV breach. Similarly, the strictest interest cover covenant within
each of the ring-fenced banking groups is 225%, where the portfolio is
forecast to have an average group interest cover ratio of 351% during the
going concern period.
Having reviewed and considered three modelled scenarios, the Directors
consider that the Group has adequate resources in place for at least 12 months
from the date these interim results have been authorised for issue and have
therefore adopted the going concern basis of accounting in preparing the
interim financial statements.
2. Significant accounting judgements, estimates and assumptions
There have been no new or material revisions to the nature and amount of
judgements and estimates reported in the Annual Report 2024, other than
changes to certain assumptions applied in the valuation of properties. Details
of the key assumptions applied at 31 December 2024 are set out in Note 13. For
the acquisition during the period the concentration test (as defined in the
Annual Report 2024) was applied and met resulting it being accounted for as an
asset purchase.
3. Summary of material accounting policies
The principal accounting policies adopted in this report are consistent with
those applied in the Group's audited financial statements for the year ended
30 June 2024 and are expected to be consistently applied during the year
ending 30 June 2025.
3.1. New standards issued and effective
There were a number of new standards and amendments to existing standards
which are required for the Group's accounting period beginning on 1 July 2024.
The following amendments are effective for the period beginning 1 July 2024:
- Supplier Finance Arrangements (Amendments to IAS 7 & IFRS 7);
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);
- Classification of Liabilities as Current or Non-Current (Amendments
to IAS 1);and
- Non-current Liabilities with Covenants (Amendments to IAS 1).
There was no material effect from the adoption of the above-mentioned
amendments to IFRS effective in the period. They have no significant impact to
the Group as they are either not relevant to the Group's activities or require
accounting which is already consistent with the Group's current accounting
policies.
3.2. New standards issued but not yet effective
A number of new standards and amendments to standards and interpretations have
been issued but are not yet effective for the current accounting period. None
of these are expected to have a material impact on the consolidated financial
statements of the Group.
4. Operating Segments
Operating segments are identified on the basis of internal financial reports
about components of the Group that are regularly reviewed by the chief
operating decision maker (which in the Group's case is the Board, comprising
the Non-Executive Directors, and the Investment Adviser) in order to allocate
resources to the segments and to assess their performance.
The internal financial reports contain financial information at a Group level
as a whole and there are no reconciling items between the results contained in
these reports and the amounts reported in the consolidated financial
statements.
The Group's property portfolio comprises investment property. The Board
considers that all the properties have similar economic characteristics.
Therefore, in the view of the Board, there is one reportable segment.
The geographical split of revenue and material applicable non-current assets
was:
Revenue Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
UK 56,034 52,924 107,063
France 2,137 - 788
58,171 52,924 107,851
Investment Properties
UK 1,700,700 1,667,910 1,704,280
France 62,340 - 63,936
1,763,040 1,667,910 1,768,216
Assets held for sale
UK 62,950 - -
France - - -
62,950 - -
5. Gross rental income
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Rental income - freehold property 32,348 28,488 58,345
Rental income - long leasehold property 25,823 23,993 49,063
Surrender premiums - 443 443
Gross rental income 58,171 52,924 107,851
Property insurance recoverable 514 306 621
Property tax recoverable 285 - -
Service charge recoverable 3,467 3,003 6,201
Total property insurance and service 4,266 3,309 6,822
charge income
Total property income 62,437 56,233 114,673
5. Gross rental income (continued)
Included within rental income is a £960,000 (six months to 31 December 2023:
£1,099,000; year to 30 June 2024: £2,197,000) rent smoothing adjustment that
arises as a result of IFRS 16 'Leases' requiring that rental income in respect
of leases with rents increasing by a fixed percentage be accounted for on
straight-line basis over the lease term. During the period this resulted in an
increase in rental income and an offsetting entry being recognised in profit
or loss as an adjustment to the investment property revaluation.
Also included in rental income is a £323,000 (six months to 31 December 2023:
£216,000; year to 30 June 2024 £237,000) adjustment for lease incentives.
Tenant lease incentives are recognised on a straight line basis over the lease
term as an adjustment to rental income. During the period this resulted in an
increase in rental income and an offsetting entry being recognised in profit
or loss as an adjustment to the investment property revaluation.
On an annualised basis, rental income comprises £55,096,000 relating to the
Group's largest tenant and £34,510,000 relating to the Group's second largest
tenant. There were no further tenants representing more than 10% of annualised
gross rental income during either year.
6. Service charge expense
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Property insurance expenses 566 354 714
Property tax expense 285 - -
Service charge expenses 3,757 3,318 6,727
Total property insurance and service 4,608 3,672 7,441
charge expenses
7. Administrative and other expenses
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Investment Adviser fees (Note 23) 4,636 4,829 9,472
Directors' remuneration (Note 8) 235 222 410
Corporate administration fees 591 500 1,049
Legal and professional fees 900 817 1,475
Other administrative expenses 1,213 1,240 2,812
Total administrative and other expenses 7,575 7,608 15,218
8. Directors' remuneration
The Group has no employees. The Directors, who are the key management
personnel of the Group, are appointed under letters of appointment for
services. Directors' remuneration, all of which represents fees for services
provided, was as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Directors' fees 211 199 371
Employer's National Insurance Contribution 24 23 39
Total Directors' remuneration 235 222 410
( )
( )
9. Finance Income and expense
Finance income
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Interest received on bank deposits 48 42 306
Income from financial assets held at amortised cost 252 247 494
Finance income on unwinding of discounted receivable - 202 203
Finance income on settlement of interest rate derivatives 10,236 10,476 22,778
Total finance income 10,536 10,967 23,781
Finance expense
Interest payable on bank borrowings 22,040 17,731 36,823
Commitment fees payable on bank borrowings 433 536 817
Amortisation of loan arrangement fees* 1,043 1,661 2,403
Total finance expense 23,516 19,928 40,043
*This includes a non-recurring exceptional charge of £nil (six months to 31
December 2023: £281,000, year to 30 June 2024: £70,000), relating to the
acceleration of unamortised arrangement fees in respect of the modification of
loan facilities under IFRS 9.
The above finance expense includes the following in respect of liabilities not
classified as fair value through profit or loss:
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Total interest expense on financial liabilities held at amortised cost 23,083 19,392 39,226
Fee expense not part of effective interest rate for financial liabilities held 433 536 817
at amortised cost
Total finance expense 23,516 19,928 40,043
10. Taxation
a) Tax credit in profit or loss Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
UK corporation tax - - -
France corporation tax - - -
UK deferred tax - - -
France deferred tax (374) - (140)
(374) - (140)
b) Total tax credit
Tax credited in profit and loss as per the above (374) - (140)
Total tax credit (374) - (140)
10. Taxation continued
The Company and its subsidiaries operate as a UK Group REIT. Subject to
continuing compliance with certain rules, the UK REIT rules exempt the profits
of the Group's property rental business from UK corporation tax. To operate as
a UK Group REIT a number of conditions had to be satisfied in respect of the
Company, the Group's qualifying activity and the Group's balance of business.
Since 21 December 2017 the Group has met all such applicable conditions.
The reconciliation of the profit before tax multiplied by the standard rate of
corporation tax for the period of 25% (30 June 2024: 25% 31 December 2023:
25%) to the total tax (credited) is as follows:
c) Reconciliation of the tax credited for the period Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Profit/(loss) on ordinary activities before taxation 36,156 (54,220) (21,324)
Theoretical tax at UK standard corporation tax rate Effects of: 9,039 (13,555) (5,331)
Investment property revaluation not subject (1,801) 14,485 24,269
to taxation
Financial instruments revaluation not taxable 2,080 8,068 -
Disposal of interest rate derivative - - -
Residual business losses (13) 1,721 2,481
French subsidiary allowable expenses (374) - (140)
Other non-taxable items - - -
REIT exempt income (9,305) (10,719) (21,419)
Total tax credit for the period (374) - (140)
11. Earnings per share
Earnings per share ("EPS") amounts are calculated by dividing the profit or
loss for the period attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares in issue during the period. As
there are no dilutive instruments outstanding, basic and diluted earnings per
share are identical.
The European Public Real Estate Association ("EPRA") publishes guidelines for
calculating adjusted earnings on a comparable basis. EPRA EPS is a measure of
EPS designed by EPRA to enable entities to present underlying earnings from
core operating activities, which excludes fair value movements on investment
properties and derivatives.
The Company has also included an additional earnings measure called "Adjusted
Earnings" and "Adjusted EPS". 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. Adjusted Earnings is considered a better reflection
of the measure over which the Board assesses the Group's trading performance
and dividend cover.
Following the updated September 2024 EPRA best practice recommendations
guidelines, the specific adjustment to EPRA earnings in relation to finance
income received on interest rate derivatives is now included within the EPRA
earnings calculation. While the result is that there is no impact to the
Adjusted earnings in any prior period, the EPRA earnings was previously
reported as £25,825,000 for the six months ended 31 December 2023 and
£53,283,000 for the year ended 30 June 2024. As such the comparative period
calculations in the table below have been adjusted to reflect the new
guidelines retrospectively.
In the current period, the costs in relation to the secondary listing on the
JSE have been included as an exceptional item under EPRA earnings and adjusted
for as per the new guidance.
The reconciliation of IFRS Earnings, EPRA Earnings and Adjusted Earnings is
shown below:
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
restated Restated
Net income/(loss) attributable to ordinary shareholders 36,530 (54,220) (21,184)
EPRA adjustments:
Changes in fair value of investment properties (7,202) 57,940 65,825
Changes in interest rate derivatives measured at fair value through profit and 8,320 32,272 31,251
loss
Deferred tax credit (374) - (140)
Fees for listing on the JSE 113 - -
EPRA earnings 37,387 35,992 75,752
Adjustments for:
Non-cash write down of loan arrangement fees in respect of loan restructuring - 281 70
Adjusted Earnings 37,387 36,273 75,822
Number(1) Number(1) Number(1)
Weighted average number of ordinary shares 1,246,239,185 1,246,239,185 1,246,239,185
(1) Based on the weighted average number of ordinary shares in issue
11. Earnings per share (continued)
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
Pence per share Pence per share Pence per share
Basic and Diluted EPS 2.9 (4.4) (1.7)
EPRA adjustments:
Changes in fair value of investment properties (0.6) 4.7 5.3
Changes in fair value of interest rate derivatives measured at fair value 0.7 2.6 2.5
through profit and loss
Deferred tax credit - - -
Fees for listing on the JSE - - -
EPRA EPS 3.0 2.9 6.1
Adjustments for:
Non-cash write down of loan arrangement fees in respect of loan restructuring - - -
Adjusted EPS 3.0 2.9 6.1
Headline Earnings per share
The JSE listing requirements mandate the calculation of headline earnings (In
accordance with Circular 1/2023 issued by the South African Institute of
Chartered Accountants) and disclosure of a detailed reconciliation of headline
earnings to the earnings numbers used in the calculation of basic earnings per
share in accordance with the requirements of IAS 33 Earnings per share.
Disclosure of headline earnings is not a requirement of IFRS.
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Net income/(loss) attributable to ordinary shareholders 36,530 (54,220) (21,184)
Headline earnings adjustments:
Changes in fair value of investment properties (7,202) 57,940 65,825
Headline earnings 29,328 3,720 44,641
Changes in interest rate derivatives measured at fair value through profit and 8,320 32,272 31,251
loss
Deferred tax credit (374) - (140)
Fees for listing on the JSE 113 - -
EPRA earnings 37,387 35,992 75,752
Non-cash write down of loan arrangement fees in respect of loan restructuring - 281 70
Adjusted earnings 37,387 36,273 75,822
Number(1) Number(1) Number(1)
Weighted average number of ordinary shares 1,246,239,185 1,246,239,185 1,246,239,185
Basic earnings per share 2.9 (4.4) (1.7)
Headline earnings per share 2.4 0.3 3.6
EPRA earnings per share 3.0 2.9 6.1
Adjusted earnings per share 3.0 2.9 6.1
12. Dividends
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Amounts recognised as a distribution to ordinary Shareholders in the period:
Dividends 37,948 37,574 75,335
On 4 July 2024, the Board declared a fourth interim dividend for the year
ended 30 June 2024 of 1.515 pence per share, which was paid on 16 August 2024
to shareholders on the register on 12 July 2024. This was not included as a
liability as at 30 June 2024.
On 3 October 2024 the Board declared a first interim dividend for the year
ending 30 June 2025 of 1.53 pence per share, which was paid on 15 November
2024 to shareholders on the register on 11 October 2024. The withholding tax
element of the dividend of £2.3 million was settled in January 2025.
On 9 January 2025, the Board declared a second interim dividend for the year
ending 30 June 2025 of 1.53 pence per share, which was paid on 28 February
2025 to shareholders on the register on 31 January 2024. This has not been
included as a liability as at 31 December 2024.
13. Investment Properties
In accordance with IAS 40 'Investment Property', the Group's investment
properties have been independently valued at fair value by Cushman &
Wakefield, an accredited independent valuer with a recognised and relevant
professional qualification and with recent experience in the locations and
categories of the investment properties being valued. The valuations have been
prepared in accordance with the RICS Valuation - Global Standards (the 'Red
Book') and incorporate the recommendations of the International Valuation
Standards Committee which are consistent with the principles set out in IFRS
13.
The independent valuer in forming its opinion on valuation makes a series of
assumptions. All the valuations of the Group's investment property at 31
December 2024 are classified as 'level 3' in the fair value hierarchy defined
in IFRS 13. The valuations are ultimately the responsibility of the Directors.
Accordingly, the critical assumptions used in establishing the independent
valuation are reviewed by the Board.
Freehold Long Leasehold £'000 Total
£'000
£'000
At 1 July 2024 972,016 796,200 1,768,216
Transfer from Leasehold to Freehold 23,030 (23,030) -
Property additions - 49,700 49,700
Capitalised acquisition costs 15 1,148 1,163
Currency exchange movement (1,680) - (1,680)
Revaluation movement 8,369 222 8,591
Transfers to assets held for sale (62,950) - (62,950)
Valuation at 31 December 2024 938,800 824,240 1,763,040
At 1 July 2023 899,440 786,250 1,685,690
Property additions 101,104 34,700 135,804
Capitalised acquisition costs 8,093 2,317 10,410
Currency exchange movement (874) - (874)
Revaluation movement (35,747) (27,067) (62,814)
Valuation at 30 June 2024 972,016 796,200 1,768,216
At 1 July 2023 899,440 786,250 1,685,690
Property additions 36,350 - 36,350
Capitalised acquisition costs 2,108 38 2,146
Revaluation movement (29,688) (26,588) (56,276)
Valuation at 31 December 2023 908,210 759,700 1,667,910
13. Investment Properties (continued)
Reconciliation of Investment Property to Independent Property Valuation Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Investment Property at fair value per Group Statement of Financial Position 1,763,040 1,667,910 1,768,216
Market Value of Property classified as Financial Assets held at amortised cost 7,200 7,290 7,530
(Note 15)
Market value of property held as Asset held for sale (Note 14) 62,950 - -
Total Independent Property Valuation 1,833,190 1,675,200 1,775,746
Of the nineteen properties held under long leaseholds, the years unexpired on
the headleases are as follows: five properties with between 114 and 155 years,
and fourteen properties with between 966 and 986 years. The Group has no
material liabilities in respect of these headleases.
Included within the carrying values of investment properties at 31 December
2024 is £11,880,000 (six months to 31 December 2023: £9,822,000, year to 30
June 2024: £10,920,000) in respect of the smoothing of fixed contractual rent
uplifts as described in Note 5. The difference between rents on a
straight-line basis and rents receivable is included within the carrying value
of the investment properties but does not increase that carrying value over
fair value.
Included within the carrying values of investment properties at 31 December
2024 is £1,462,000 (six months to 31 December 2023: £816,000, year to 30
June 2024: £1,033,000) in respect of the lease incentives with tenants in the
form of rent free debtors as described in Note 5 and capitalised letting fees.
The effect of these adjustments on the revaluation movement for the period is
as follows:
Unaudited Unaudited Audited
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Revaluation movement per above 8,591 (56,276) (62,814)
Rent smoothing adjustment (Note 5) (960) (1,099) (2,197)
Lease Incentive adjustment (323) (565) (564)
Movements in capitalised letting fees (106) - (218)
Foreign exchange movement through OCI - - (32)
Change in fair value recognised in profit or loss 7,202 (57,940) (65,825)
Valuation techniques and key unobservable inputs
Valuation techniques used to derive fair values
The valuations have been prepared on the basis of market value which is
defined in the RICS Valuation Standards as 'the estimated amount for which an
asset or liability should exchange on the date of the valuation between a
willing buyer and a willing seller in an arm's length transaction after proper
marketing wherein the parties had each acted knowledgeably, prudently and
without compulsion'. Market value as defined in the RICS Valuation Standards
is the equivalent of fair value under IFRS.
Unobservable inputs
Significant unobservable inputs include: the estimated rental value ("ERV")
based on market conditions prevailing at the valuation date and the equivalent
yield (defined as the weighted average of the net initial yield and
reversionary yield). Other unobservable inputs include but are not limited to
the future rental growth - the
13. Investment Properties (continued)
estimated average increase in rent based on both market estimations and
contractual situations and the physical condition of the individual properties
determined by inspection.
A decrease in ERV would decrease fair value. A decrease in the equivalent
yield would increase the fair value.
Sensitivity of measurement of significant unobservable inputs
The determination of the valuation of the Group's investment property
portfolio is open to judgements and is inherently subjective by nature.
Sensitivity analysis - impact of changes in net initial yields and rental
values
Six months to 31 December 2024 UK France
Total
Fair value* 1,763.7m £62.3m
£1,826.0m
Range of Net Initial Yields 4.5%-8.3% 5.9% - 6.6% 4.5% - 8.3%
Range of Rental values (passing rents or ERV as relevant) of Group's £0.3m - £5.3m £0.6m - £0.8m £0.3m - £5.3m
Investment Properties
Weighted average of Net Initial Yields 6.0% 6.3% 6.0%
Weighted average of Rental values (passing rents or ERV as relevant) of £2.9m £0.7m £2.9m
Group's Investment Properties
*Inclusive of asset held for sale
Year ended 30 June 2024 UK France
Total
Fair value £1,704.3m £63.9m
£1,768.2m
Range of Net Initial Yields 4.6% - 8.0% 5.2% - 6.8% 4.6% - 8.0%
Range of Rental values (passing rents or ERV as relevant) of Group's £0.3m - £5.1m £0.6m - £0.8m £0.3m - £5.1m
Investment Properties
Weighted average of Net Initial Yields 5.9% 6.3% 5.9%
Weighted average of Rental values (passing rents or ERV as relevant) of £2.9m £0.7m £2.9m
Group's Investment Properties
Six months to 31 December 2023 UK France
Total
Fair value £1,667.9m -
£1,667.9m
Range of Net Initial Yields 4.6% - 8.1% - 4.6% - 8.0%
Range of Rental values (passing rents or ERV as relevant) of Group's £0.3m - £5.2m - £0.3m - £5.2m
Investment Properties
Weighted average of Net Initial Yields 5.8% - 6.0%
Weighted average of Rental values (passing rents or ERV as relevant) of £2.9m - £2.9m
Group's Investment Properties
13. Investment Properties (continued)
The table below analyses the sensitivity on the fair value of investment
properties for changes in rental values and net initial yields:
+2% -2% +0.5% Net Initial Yield -0.5% Net Initial Yield
Rental value £m Rental value £m £m £m
Increase/(decrease) in the fair value of investment properties as at 31 36.5 (36.5) (141.3) 167.6
December 2024
Increase/(decrease) in the fair value of investment properties as at 31 33.4 (33.4) (132.7) 158.2
December 2023
Increase/(decrease) in the fair value of investment properties as at 30 June 35.4 (35.4) (138.1) 164.1
2024
14. Asset held for sale
One of the Group's Investment properties is considered to meet the conditions
relating to assets held for sale, as per IFRS 5: Non-current Assets Held for
Sale and Discontinued Operations. The property was sold post period end as
shown in Note 25. Assets held for sale are disclosed at their fair value.
The fair value of the properties, and its comparative value, is disclosed in
the table below along with associated assets and liabilities:
Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Asset held for sale 62,950 - -
62,950 - -
15. Financial asset arising from sale and leaseback transactions
Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
At start of period 11,023 10,819 10,819
Interest income recognised in profit and loss 252 494 247
Lease payments received during the period (145) (290) (145)
At end of period 11,130 11,023 10,921
On 8 June 2022, the Group acquired an Asda store in Carcroft, via a sale and
leaseback transaction for £10.6 million, this has been recognised in the
Statement of Financial Position as a Financial asset in accordance with IFRS
9. The financial asset is measured using the amortised cost model, which
recognises the rental payments as financial income and reductions of the asset
value based on the implicit interest rate in the lease. As at 31 December 2024
the market value of the property was estimated at £7.2 million (30 June 24:
£7.5 million and 31 December 23: £7.3 million).
Assets held at amortised cost are assessed annually for impairment with any
impairment recognised as an allowance for expected credit losses measured at
an amount equal to the lifetime expected credit losses. The Group considers
historic, current and forward-looking information to determine expected credit
losses arising from either a change in the interest rate implicit in the lease
or factors impacting the customer's ability to make lease payments. Based on
the information currently available the Group does not expect any credit
losses and the asset has not been impaired in the period.
16. Trade and other receivables
Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Interest receivable on settlement derivatives 3,870 4,946 -
Trade and other receivables 6,405 6,077 6,116
Prepayments 969 877 1,310
Receivable from joint venture disposal - - 1,475
Total trade and other receivables 11,244 11,900 8,901
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing. The expected loss rates are
based on the Group's historical credit losses experienced over the period from
incorporation to 31 December 2024. The historical loss rates are then adjusted
for current and forward-looking information on macroeconomic factors affecting
the Group's tenants. Both the expected credit loss provision and the incurred
loss provision in the current and prior year are immaterial. No reasonable
possible changes in the assumptions underpinning the expected credit loss
provision would give rise to a material expected credit loss.
17. Trade and other payables
Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Accrued interest payable 9,623 8,072 6,984
Corporate accruals 11,221 10,561 9,684
VAT payable 5,296 4,385 4,362
Total trade and other payables 26,140 23,018 21,030
18. Interest rate derivatives
Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Non-current asset: Interest rate swaps 8,048 12,499 10,369
Non-current asset: Interest rate caps 1,279 3,242 3,301
Current asset: Interest rate swaps 10,045 13,456 13,150
Current asset: Interest rate caps 3,026 2,252 544
Total 22,398 31,449 27,364
The interest rate cap and interest rate swap is remeasured to fair value by
the counterparty bank on a quarterly basis.
18. Interest rate derivatives (continued)
The fair value at the end of the period comprises: Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
At start of the period 31,449 57,583 57,583
Interest rate derivative premium paid on inception - 47,494 43,708
Disposal of interest rate derivatives - (40,612) (40,612)
Changes in fair value of interest rate derivative 1,915 (8,782) (22,105)
in the period (P&L)
Changes in fair value of interest rate derivative in the period (OCI) (730) (1,456) (734)
Credit to the income statement (P&L) (10,236) (22,469) (10,167)
Credit to the income statement (OCI) - (309) (309)
As at the end of the period 22,398 31,449 27,364
To partially mitigate the interest rate risk that arises as a result of
entering into the floating rate debt facilities referred to in Note 19, the
Group has entered into derivative interest rate swaps and caps.
A summary of these derivatives as at 31 December 2024 is shown in the table
below:
Issuer Derivative Type Notional amount £m Mark to Market 31 December 2024 £m Average Strike Rate Effective Date Maturity Date
Premium Paid £m
BLB Interest Rate Swap £37.3 £1.7 £0.5 2.64% Mar-23 Mar-26
BLB Interest Rate Swap £22.2 £1.0 £0.8 2.64% Mar-23 Mar-26
BLB Interest Rate Swap £27.4 £1.2 £0.5 2.64% Mar-23 Mar-26
Wells Fargo Interest Rate Swap £30.0 £2.3 £0.5 1.40% Sep-23 Jul-25
SMBC Interest Rate Swap £50.0 £3.7 £0.8 1.40% Sep-23 Jul-25
SMBC Interest Rate Swap £67.0 £6.5 £2.6 1.87% Sep-23 Sep-26
Barclays Interest Rate Cap £96.6 £2.9 £1.6 1.40% Aug-24 Jul-25
Wells Fargo Interest Rate Swap £204.3 £22.2 £9.9 2.10% Sep-23 Jul-27
Wells Fargo Interest Rate Swap £50.0 £4.8 £1.8 1.79% Sep-23 Jul-26
Wells Fargo Interest Rate Swap £3.2 £0.4 £0.3 0.00% Feb -24 Jul-27
SMBC Interest Rate Cap £96.6 £1.4 £1.3 1.40% Jul-25 Jan-26
SMBC Interest Rate Cap £30.0 £0.4 £0.4 1.40% Jul-25 Jan-26
SMBC Interest Rate Cap £50.0 £0.8 £0.8 1.40% Jul-25 Jan-26
SMBC Interest Rate Cap £3.0 £0.4 £0.2 1.46% Nov-23 Jun-27
SMBC Interest Rate Swap £37.5 £0.6 £0.4 3.61% Mar-24 Sep-26
Total £805.1 £50.3 £22.4
18. Interest rate derivatives (continued)
93% of the Group's outstanding debt as at 31 December 2024 was hedged through
the use of fixed rate debt or financial instruments (30 June 2024: 90%). It is
the Group's target to hedge at least 50% of the Group's total debt at any time
using fixed rate loans or interest rate derivatives.
Movements in the Group's fair value derivatives are recognised in the profit
and loss. There was one derivative terminated in the prior year that hedged
the Wells facility and was accounted for under hedge accounting; on
derecognition of hedge accounting, the cash flow hedge reserve is recycled to
the profit and loss over the remaining term of the Wells Fargo facility.
The derivatives have been valued in accordance with IFRS 13 by reference to
interbank bid market rates as at the close of business on the last working day
prior to each balance sheet date. The fair values are calculated using the
present values of future cash flows, based on market forecasts of interest
rates and adjusted for the credit risk of the counterparties. The amounts and
timing of future cash flows are projected on the basis of the contractual
terms.
All interest rate derivatives are classified as level 2 in the fair value
hierarchy as defined under IFRS 13 and there were no transfers to or from
other levels of the fair value hierarchy during the period.
19. Bank borrowings
Amounts falling due within one year: Unaudited Audited Unaudited
31 December 2024 30 June 2024 31 December 2023
£'000 £'000 £'000
Secured debt 30,000 96,560 96,560
Unsecured debt 50,000 - -
Less: Unamortised finance costs (92) (44) (194)
79,908 96,516 96,366
Amounts falling due after more than one year:
Secured debt 97,982 186,225 116,903
Unsecured debt 570,600 414,981 374,299
Less: Unamortised finance costs (3,882) (3,554) (3,675)
664,700 597,652 487,527
Bank borrowing per consolidated statement of financial position 744,608 694,168 583,893
During the period, the Group's Deka facility of £96.6m matured and was
refinanced with a new £100 million facility with ING bank at a margin of
1.55% over SONIA. The facility comprises a £75.0 million term loan and a
£25.0 million revolving credit facility. The term of the loan is for three
years with two further one-year extension options.
The Group also announced the completion of an agreement with a group of
institutional investors for a private placement of €83.0 million new senior
unsecured notes. The notes have a term of seven years and a fixed rate coupon
of 4.4%.
19. Bank borrowings (continued)
A summary of the Group's borrowing facilities as at 31 December 2024 are shown
below:
Lender Facility Expiry(20) (#_ftn20) Credit Variable/ hedged Loan Amount drawn
Margin commitment 31 December 2024
£m £m
Expiry
HSBC Revolving credit facility Sep 2026 Sep 2028 1.70% SONIA - 4.70% £75.0 £11.1
BLB Term Loan Mar 2026 Mar 2026 1.65% HEDGE - 2.64% £86.9 £86.9
Wells Fargo Revolving credit facility Jul 2025 Jul 2027 2.00% HEDGE - 1.40% £30.0 £30.0
Wells Fargo Revolving credit facility Jul 2025 Jul 2027 2.00% SONIA - 4.70% £9.0 £-
ING Term Loan and revolving credit facility Jul 2027 Jul 2029 1.55% HEDGE - 2.88% £99.1 £96.6
ING Term Loan and revolving credit facility Jul 2027 Jul 2029 1.55% SONIA - 4.70% £0.9 £0.9
Syndicate Revolving credit facility Jul 2027 Jul 2029 1.50% HEDGE - 2.06% £210.5 £210.5
Syndicate Revolving credit facility Jul 2027 Jul 2029 1.50% HEDGE - 4.70% £39.5 £39.5
Syndicate Term Loan Jul 2025 Jul 2026 1.50% HEDGE - 1.40% £50.0 £50.0
Syndicate Term Loan Jul 2026 Jul 2027 1.50% HEDGE - 1.79% £50.0 £50.0
SMBC Term Loan Sep 2026 Sept 2028 1.40% HEDGE - 1.87% £67.0 £67.0
SMBC Term Loan Sep 2026 Sept 2028 1.55% HEDGE - 3.61% £37.5 £37.5
Private placement Notes July 2031 July 2031 1.72% HEDGE - 2.72% £68.6 £68.6
Total £824.0 £748.6
The Group has been in compliance with all of the financial covenants across
the Group's bank facilities as applicable throughout the periods covered by
these financial statements.
Any associated fees in arranging the bank borrowings that are unamortised as
at the end of the period are offset against amounts drawn under the facilities
as shown in the table above. Some debt facilities are secured by charges over
the Group's investment properties and by charges over the shares of certain
group companies, not including the Company itself. There have been no defaults
of breaches of any loan covenants during the current or any prior period.
The Group's borrowings carried at amortised cost are considered to be
approximate to their fair value.
20. Share capital
Six months to 31 December 2024 (unaudited) Ordinary shares Share Share Capital Total
of 1 pence capital premium reduction £'000
Number £'000 reserve reserve
£'000 £'000
As at 1 July 2024 1,246,239,185 12,462 500,386 629,196 1,142,044
Dividends paid in the period - - - (37,948) (37,948)
As at 31 December 2024 1,246,239,185 12,462 500,386 591,248 1,104,096
Year to 30 June 2024 (audited)
As at 1 July 2023 1,246,239,185 12,462 500,386 704,531 1,217,379
Dividend paid in the year - - - (75,335) (75,335)
As at 30 June 2024 1,246,239,185 12,462 500,386 629,196 1,142,044
Six months to 31 December 2023 (unaudited)
As at 1 July 2023 1,246,239,185 12,462 500,386 704,531 1,217,379
Dividends paid in the period - - - (37,574) (37,574)
As at 31 December 2023 1,246,239,185 12,462 500,386 666,957 1,179,805
Ordinary shareholders are entitled to all dividends declared by the Company
and to all of the Company's assets after repayment of its borrowings and
ordinary creditors. Ordinary shareholders have the right to vote at meetings
of the Company. All ordinary shares carry equal voting rights. The aggregate
ordinary shares in issue at 31 December 2024 total was 1.246 billion.
21. Cash flow hedge reserve
Unaudited Audited Unaudited
Six months to Year to Six months to
31 December 2024 30 June 2024 31 December 2023
£'000 £'000
£'000
At start of the period 1,539 3,304 3,304
Recycled comprehensive loss to profit and loss (730) (1,154) (432)
Fair value movement of interest rate derivatives in effective hedges - (611) (611)
At the end of the period 809 1,539 2,261
A previously hedge accounted derivative in relation to the Wells Fargo
facility was terminated in the prior year. The residual balance of the
derivative is recycled to the income statement over the remaining period of
the Wells Fargo loan to July 2025.
22. Capital commitments
The Group had no capital commitments outstanding as at 31 December 2024 (30
June 2024: none; 31 December 2023: none).
23. Transactions with related parties
Details of the related parties to the Group in the period and the transactions
with these related parties were as follows:
a. Directors
Directors' fees
The table below shows the fees per annum for the roles performed by the Board
for the year ending 30 June 2025:
Role Jon Austen Frances Vince Prior Sapna Cathryn Vanderspar
Davies Shah
Nick Hewson
Chair of Board of Directors - - £78,000 - - -
Director £54,500 £54,500 - £54,500 £54,500 £54,500
Audit and Risk Committee Chair £10,000 - - - - -
Nomination Committee Chair* - - - - £5,000 -
Senior Independent Director* - - - £5,000 £5,000 -
Remuneration Committee Chair - - - - - £5,000
ESG Committee Chair - £5,000 - - - -
Management Engagement Committee Chair* - - - £5,000 - -
*Post period end, Roger Blundell was appointed as a non-executive director
from 15 January 2025 with a salary of £54,500 per annum.
Directors' interests
Details of the direct and indirect interests of the Directors and their close
families in the ordinary shares of one pence each in the Company at 31
December 2024 were as follows:
· Nick Hewson: 1,405,609 shares (0.11% of issued share capital)
· Sapna Shah: 118,862 (0.01% of issued share capital)
· Jon Austen: 305,339 shares (0.02% of issued share capital)
· Frances Davies: 36,774 (0.00% of issued share capital)
· Vince Prior: 213,432 shares (0.02% of issued share capital)
· Cathryn Vanderspar: 125,802 shares (0.01% of issued share capital)
23. Transactions with related parties (continued)
b. Investment Adviser
Investment advisory and accounting fees
The investment adviser to the Group, Atrato Capital Limited, is entitled to
certain advisory fees under the terms of the Investment Advisory Agreement
(the "Agreement") dated 14 July 2021.
The entitlement of the Investment Adviser to advisory fees is by way of what
are termed 'Monthly Management Fees' and 'Semi-Annual Management Fees' both of
which are calculated by reference to the net asset value of the Group at
particular dates, as adjusted for the financial impact of certain investment
events and after deducting any un-invested proceeds from share issues up to
the date of the calculation of the relevant fee (these adjusted amounts are
referred to as 'Adjusted Net Asset Value' for the purpose of calculation of
the fees in accordance with the Agreement).
Until the Adjusted Net Value of the Group exceeds £1,500 million, the
entitlements to advisory fees can be summarised as follows:
· Monthly Management Fee payable monthly in arrears: 1/12th of 0.7125% per
calendar month of Adjusted Net Asset Value up to or equal to £500 million,
1/12th of 0.5625% per calendar month of Adjusted Net Asset Value above £500
million and up to or equal to £1,000 million and 1/12th of 0.4875% per
calendar month of Adjusted Net Asset Value above £1,000 million and up to or
equal to £1,500 million.
· Semi-Annual Management Fee payable semi-annually in arrears: 0.11875% of
Adjusted Net Asset Value up to or equal to £500 million, 0.09375% of Adjusted
Net Asset Value above £500 million and up to or equal to £1,000 million and
0.08125% of Adjusted Net Asset Value above £1,000 million and up to or equal
to £1,500 million.
For the six month period to 31 December 2024 the total advisory fees payable
to the Investment Adviser were £4,636,435 (six months to 31 December 2023:
£4,829,236; year to 30 June 2024: £9,472,218) of which £1,739,567 (30 June
2024: £1,745,960; 31 December 2023: £1,859,105) is included in trade and
other payables in the consolidated statement of financial position.
During the period the Group agreed with the investment advisor to move the
basis of the management fee calculation from net asset value to market
capitalisation, effective from 1 July 2025. The current fee thresholds and
rates applied to the net asset value are retained in the new agreement. The
new agreement provides that 100% of the management fee will be paid monthly
such that there is no semi-annual management fee.
The Investment Adviser will also provide the following services as part of the
new agreement:
Service Fees per annum
Payment services £150,000
AIFM £135,000
Company Secretarial £250,000
If the proposed internalisation becomes effective, the Investment Adviser will
no longer provide services or receive fees in respect of AIFM and payment
services.
The Investment Adviser is also entitled to an annual accounting and
administration service fee equal to: £55,460; plus (i) £4,496 for any
indirect subsidiary of the Company and (ii) £1,745 for each direct subsidiary
of the Company.
For the six month period to 31 December 2024 the total accounting and
administration service fee payable to the Investment Adviser was £165,041
(six months to 31 December 2023: £160,124, year to 30 June 2024: £363,869)
of which £113,024 (six months to 31 December 2023: £80,353; year to 30 June
2024: £91,950) is included in trade and other payables in the consolidated
statement of financial position.
23. Transactions with related parties (continued)
Introducer Services
Atrato Partners, an affiliate of the Investment Adviser, is entitled to fees
in relation to the successful introduction of prospective investors in
connection with subscriptions for ordinary share capital in the Company. The
entitlement of the Investment Adviser to introducer fees is by fees and/or
commission which can be summarised as follows:
· Commission basis: one per cent of total subscription in respect of
ordinary shares subscribed for by any prospective investor introduced by
Atrato Partners.
For the six month period to 31 December 2024 the total introducer fees payable
to the affiliate of the Investment Adviser were £Nil (six months to 31
December 2023: £Nil; year to 30 June 2024: £Nil)
Interest in shares of the Company
Details of the direct and indirect interests of persons discharged with
managerial responsibility of the Investment Adviser and their close families
in the ordinary shares of one pence each in the Company at 31 December 2024
were as follows:
· Ben Green: 2,788,162 shares (0.22% of issued share capital)
· Steve Windsor: 2,031,132 shares (0.16% of issued share capital)
· Natalie Markham: 71,039 shares (0.01% of issued share capital)
24. Net asset value per share
NAV per share is calculated by dividing the Group's net assets as shown in the
consolidated statement of financial position, by the number of ordinary shares
outstanding at the end of the period. As there are no dilutive instruments
outstanding, basic and diluted NAV per share are identical.
The Group uses EPRA Net Tangible Assets ("EPRA NTA") as the most meaningful
measure of long-term performance and the measure which is being adopted by the
majority of UK REITs, establishing it as the industry standard benchmark. It
excludes items that are considered to have no impact in the long term, such as
the fair value of derivatives.
The EPRA NTA per share calculation are as follows:
Unaudited Unaudited Audited
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Net assets per the consolidated statement of financial position 1,117,446 1,124,889 1,119,474
Fair value adjustment for financial assets at amortised cost (3,930) (3,631) (3,493)
Fair value of interest rate derivatives (22,398) (27,364) (31,449)
EPRA NTA 1,091,118 1,093,894 1,084,532
Ordinary shares in issue 1,246,239,185 1,246,239,185 1,246,239,185
NAV per share - Basic and diluted (pence) 90p 90p 90p
EPRA NTA per share (pence) 88p 88p 87p
25. Subsequent events
In January 2025 the Group acquired a further nine omnichannel Carrefour
supermarkets in France via a sale and leaseback with Carrefour. The purchase
price was €36.7 million (excluding acquisition costs) at a net initial yield
of 6.8%, a weighted average lease term of 12 years and annual uncapped
inflation-linked rent reviews.
In February 2025 the Group completed the sale of a Tesco supermarket in
Newmarket for £63.5m at a 7.4% premium to the 30 June 2024 valuation. Part of
the proceeds were used to repay £31.5 million of the £86.9 million BLB
facility.
In February 2025 the Group completed a private placement with an institutional
investor for €39.0 million of new senior unsecured notes. The notes have a
maturity of seven years and a fixed rate coupon of 4.1%.
In March 2025 the Group announced it had reached an agreement with Atrato
Group to internalise its management function for £19.7 million, with a
further £0.3 million for the termination of its AIFM agreement and £0.8
million for the provision of transitionary services for up to nine months post
completion. This is subject to a shareholder vote on 20 March 2025 and is
expected to take effect from 25 March 2025.
Notes to EPRA and other Key Performance Indicators
This appendix does not form part of the notes to the condensed set of
consolidated financial statements.
1. EPRA Earnings and Adjusted Earnings per Share
EPRA EPS is a measure of EPS designed by EPRA to present underlying earnings
from core operating activities. Adjusted earnings is EPRA earnings adjusted
for company specific items to reflect the underlying profitability of the
business.
Following the updated September 2024 EPRA best practice recommendations
guidelines, the previous company specific adjustment to EPRA earnings in
relation to adding back finance income received on interest rate derivatives
is now included within the EPRA earnings calculation. As such the comparative
period calculations in the table below have been adjusted to reflect the new
guidelines retrospectively.
While the result is that there is no impact to the Adjusted earnings in any
prior period, the EPRA earnings was previously reported as £25,825,000 for
the six months ended 31 December 2023 and £53,283,000 for the year ended 30
June 2024.
Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Profit/(Loss) for the period 36,530 (54,220) (21,184)
Adjustments to remove:
Changes in fair value of interest rate derivatives measured at FVTPL 8,320 32,272 31,251
Changes in fair value of investment properties (7,202) 57,940 65,825
Deferred Tax (374) - (140)
JSE listing fees 113 - -
EPRA Earnings 37,387 35,992 75,752
EPRA EPS 3.0p 2.9p 6.1p
Non-cash write down of loan arrangement fees in respect of loan restructuring - 281 70
Adjusted Earnings 37,387 36,273 75,822
Weighted average number of ordinary shares₁ 1,246,239,185 1,246,239,185 1,246,239,185
Adjusted EPS 3.0p 2.9p 6.1p
(1) Based on the weighted average number of ordinary shares in issue for the
six months to 31 December 2024.
Notes to EPRA and other Key Performance Indicators continued
2. EPRA NTA per share
EPRA NTA is considered to be the most relevant measure for the Group and is
now the primary measure of net assets, replacing the previously reported EPRA
Net Asset Value metric. For the current period EPRA NTA is calculated as net
assets per the consolidated statement of financial position excluding the fair
value of interest rate derivatives and includes a revaluation to fair value of
investment properties held at amortised cost.
31 December 2024 EPRA NTA EPRA NRV EPRA NDV
£'000 £'000 £'000
IFRS NAV attributable to ordinary shareholders 1,117,446 1,117,446 1,117,446
Fair value of interest rate derivatives (22,398) (22,398) -
Fair value of financial assets held at amortised cost (3,930) (3,930) (3,930)
Purchasers' costs - 124,167 -
Fair value of debt - - (5,947)
EPRA metric 1,091,118 1,215,285 1,107,569
EPRA metric per share 88p 98p 89p
30 June 2024
IFRS NAV attributable to ordinary shareholders 1,119,474 1,119,474 1,119,474
Fair value of interest rate derivatives (31,449) (31,449) -
Fair value of financial assets held at amortised cost (3,493) (3,493) (3,493)
Purchasers' costs - 120,239 -
Fair value of debt - - 149
EPRA metric 1,084,532 1,204,771 1,116,130
EPRA metric per share 87p 97p 90p
31 December 2023 EPRA NTA EPRA NRV EPRA NDV
£'000 £'000 £'000
IFRS NAV attributable to ordinary shareholders 1,124,889 1,124,889 1,124,889
Fair value of interest rate derivatives (27,364) (27,364) -
Fair value of financial assets held at amortised cost (3,631) (3,631) (3,631)
Purchasers' costs - 113,418 -
Fair value of debt - - 1,538
EPRA metric 1,093,894 1,207,312 1,122,796
EPRA metric per share 88p 97p 90p
Notes to EPRA and other Key Performance Indicators continued
3. EPRA Net Initial Yield (NIY) and EPRA "topped up" NIY
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.
Six months to Six month to Year to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Investment Property - wholly owned 1,825,990 1,667,910 1,768,216
Completed Property Portfolio 1,825,990 1,667,910 1,768,216
Allowance for estimated purchasers' costs 124,167 113,418 120,239
Grossed up completed property portfolio valuation (B) 1,950,157 1,781,328 1,888,455
Annualised passing rental income - wholly owned 117,771 104,201 112,338
Annualised non-recoverable property outgoings (1,590) (897) (1,116)
Annualised net rents (A) 116,181 103,304 111,222
Rent expiration of rent-free periods and fixed uplifts 390 233 440
Topped up annualised net rents (C) 116,571 103,537 111,662
EPRA NIY (A/B) 5.96% 5.80% 5.89%
EPRA "topped up" NIY (C/B) 5.98% 5.81% 5.91%
All rent free periods expire within the year to 30 June 2025
4. EPRA Vacancy Rate
As at As at As at
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Estimated rental value of vacant space 406 648 591
Estimated rental value of the whole portfolio 118,858 105,371 113,660
EPRA Vacancy Rate 0.3% 0.6% 0.5%
The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space
as a proportion of the total rental value of the direct Investment Property
portfolio. This is expected to continue to be a highly immaterial percentage
as the majority of the portfolio is let to the largest supermarket operators
in the UK.
Notes to EPRA and other Key Performance Indicators continued
5. EPRA Cost Ratio
Administrative & operating costs (both including and excluding costs of
direct vacancy) divided by gross rental income.
Six months to Six months to Year to to
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Administration expenses per IFRS 7,575 7,608 15,218
Service charge income (4,266) (3,309) (6,822)
Service charge costs 4,608 3,672 7,441
Net Service charge costs 342 363 619
Total costs (including direct vacant property 7,917 7,971 15,837
costs) (A)
Vacant property costs (198) (85) (331)
Total costs (excluding direct vacant property 7,719 7,886 15,506
costs) (B)
Gross rental income per IFRS 58,171 52,924 107,851
Less: service charge components of gross rental income - - -
Add: Share of Gross rental income from Joint Ventures - - -
Gross rental income (C) 58,171 52,924 107,851
EPRA Cost ratio (including direct vacant property costs) (A/C) 13.6% 15.1% 14.7%
EPRA Cost ratio (excluding vacant property 13.3% 14.9% 14.4%
costs) (B/C)
1. Property operating expenses are net of costs capitalised in accordance with
IFRS of £nil (2023: £0.1 million). Capitalised costs relate to development
expenditure on the property portfolio.
Notes to EPRA and other Key Performance Indicators continued
6. EPRA LTV
Net debt divided by total property portfolio and other eligible assets.
As at As at As at
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Group Net Debt
Borrowings from financial institutions 744,608 583,893 694,168
Net payables 37,491 34,481 34,832
Less: Cash and cash equivalents (40,631) (37,068) (38,691)
Group Net Debt Total (A) 741,468 581,306 690,309
Group Property Value
Investment properties at fair value 1,763,040 1,667,910 1,768,216
Asset held for sale 62,950
Intangibles - - -
Net receivables - - -
Financial assets 11,130 10,921 11,023
Total Group Property Value (B) 1,837,120 1,678,831 1,779,239
Group LTV (A/B) 40.36% 34.63% 38.80%
Share of Joint Ventures Debt
Bond loans - - -
Net payables - - -
JV Net Debt Total (A) - - -
Group Property Value - - -
Owner-occupied property - - -
Investment properties at fair value - - -
Total JV Property Value (B) - - -
JV LTV (A/B) 0.00% 0.00% 0.00%
Combined Net Debt (A) 741,468 581,306 690,309
Combined Property Value (B) 1,837,120 1,678,831 1,779,239
Combined LTV (A/B) 40.36% 34.63% 38.80%
7. EPRA Like-for-Like Rental Growth
Changes in net rental income for those properties held for the duration of
both the current and comparative reporting period.
Sector Six months to Six months to Like-for-Like rental growth
31 December 2024 31 December 2023 %
£'000 £'000
UK 52,518 51,439 2.1%
The like-for-like rental growth is based on changes in net rental income for
those properties which have been held for the duration of both the current and
comparative reporting. This represents a portfolio valuation, as assessed by
the valuer of £1.6 bn (31 December 2023: £1.3 bn).
Notes to EPRA and other Key Performance Indicators continued
8. EPRA Property Related Capital Expenditure
Amounts spent for the purchase and development of investment properties
(including any capitalised transaction costs).
As at As at As at
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Group
Acquisitions 50,861 38,391 145,834
Development 2 110 380
Investment properties - - -
Group Total CapEx 50,863 38,501 146,214
Joint Venture
Acquisitions - - -
Development - - -
Investment properties - - -
Joint Venture Total CapEx - - -
Total CapEx 50,863 38,501 146,214
Acquisitions relate to purchase of investment properties in the year and
includes capitalised acquisition costs. Development relates to capitalised
costs in relation to development expenditure on the property portfolio.
9. Total Shareholder Return
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.
Total Shareholder Return Six months to Six months to Year to
31 December 2024 31 December 2023 30 June 2024
Pence per share Pence per share Pence per share
Share price at start of the period / year 72.50 73.00 73.00
Share price at the end of the period / year 68.10 86.90 72.50
(Decrease)/Increase in share price (4.40) 13.90 (0.50)
Dividends declared for the period 3.06 3.03 6.06
(Decrease)/Increase in share price plus dividends (1.34) 16.93 5.56
Share price at start of period 72.50 73.00 73.00
Total Shareholder Return (2%) 23% 8%
10. Net loan to value ratio
The proportion of our gross asset value that is funded by borrowings
calculated as statement of financial position borrowings less cash balances
divided by total investment properties valuation.
Net loan to value As at As at As at
31 December 2024 31 December 2023 30 June 2024
£'000 £'000 £'000
Bank borrowings 744,608 583,893 694,168
Less cash and cash equivalents (40,631) (37,068) (38,691)
Net borrowings 703,977 546,825 655,477
Investment properties and asset held for sale 1,825,990 1,667,910 1,768,216
Net loan to value ratio 39% 33% 37%
11. Annualised passing rent
Annualised passing rent is the annualised cash rental income being received as
at the stated date.
COMPANY INFORMATION
Directors Nick Hewson (Non-Executive Chair)
Sapna Shah (Senior Independent Director & Chair of Nomination Committee)
Jon Austen (Chair of Audit Committee)
Roger Blundell (Non-Executive Director)
Frances Davies (Chair of ESG Committee)
Vince Prior (Chair of Management Engagement Committee)
Cathryn Vanderspar (Chair of Remuneration Committee)
Company Secretary Atrato Partners Limited
c/o Hillier Hopkins,
First Floor, Radius House,
51 Clarendon Road
Watford
WD17 1HP
Registrar MUFG Corporate Markets
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
AIFM JTC Global AIFM Solutions Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
Channel Islands
GY21 2HT
Investment Adviser Atrato Capital Limited
10 Bishops Square
London
E1 6EG
Financial Adviser and Joint Corporate Broker Stifel Nicolaus Europe Limited
150 Cheapside
London
EC2V 6ET
Joint Corporate Broker Goldman Sachs International
Plumtree Court
25 Shoe Lane
London
EC4A 4AU
JSE Sponsor PSG Capital Proprietary Limited
1st Floor,
Ou Kollege Building
35 Kerk Street
Stellenbosch 7600
Auditors BDO LLP
55 Baker Street
London
W1U 7EU
Property Valuers Cushman & Wakefield
125 Old Broad Street
London
EC2N 1AR
Financial PR Advisers FTI
200 Aldersgate Street
London
EC1A 4HD
Website www.supermarketincomereit.com (http://www.supermarketincomereit.com)
Registered Office 3(rd) Floor
10 Bishops Square
London
E1 6EG
LSE Share Code SUPR
JSE Share Code SRI
ISIN GB00BF345X11
LEI 2138007FOINJKAM7L537
This report will be available on the Company's website.
END
1 The alternative performance measures used by the Group have been defined
and reconciled to the IFRS financial statements within the unaudited
supplementary information (see Notes to EPRA and other Key Performance
Indicators)
2 Calculated as Adjusted earnings divided by dividends paid during the year
3 Includes assets held for sale at fair value as at 31 December 2024 (see
Note 13)
4 Post 31 December 2024
5 As at 30 June 2024
6 "ERV" as at 31 December 2024
7 Excludes leases where passing rent is <0.3% of annual rent roll
8 Includes one store for which the Company has signed a conditional purchase
to buy
9 NIY achieved on actual transaction costs of 2.3% due to the acquisition of
a corporate entity. Acquisition NIY based on standard purchase costs of 6.8%
is 7.3%.
10 Based on 7.3% standard purchaser's costs in France
11 Includes one store for which the Company has singed a conditional
purchase to buy
12 Source: Kantar data for Tesco and Sainsbury's grocery sales
13 Source: Kantar data for total grocery sales
14 Source: ONS GDP 2024
15 As at 10 March 2025 (including post balance sheet events)
16 Subject to rounding
17 Undrawn facilities include accordion options
18 Includes post balance sheet events and rates fixed through interest rate
derivatives
19 (Includes extension options at lenders' discretion)
20 Including extension options that can be utilised following approval from
all parties
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