Supermarket Income REIT (SUPR) said that property values stabilised over the first half of 2024, however falls in 2023 contributed to a decline in EPRA net tangible assets (NTA) of 6.3% in annual results to 30 June 2024.
The value of its portfolio of omnichannel supermarkets fell on a like-for-like basis by 3.2% over the 12 month period, but was up marginally (0.1%) in the final six months of the period.
Having acquired 20 assets for £135.8m in the year, the portfolio value was £1,776m (2023: £1,693m). EPRA NTA was 87p per share, down from 93p at June 2023.
Annualised passing rent grew 12% to £113.1m, reflecting a 4% like-for-like uplift in rents and the acquisitions. As a result of this (and lowering costs with EPRA cost ratio falling to 14.7% from 15.5%), adjusted earnings was up 4.4% to 6.08p per share fully covering dividends for the year of 6.06p.
The company has raised its dividend target for the full year 2025 to 6.12p.
The standout transaction during the year was its acquisition of 17 Carrefour stores in France in a sale-and-leaseback deal for €75.3m at a 6.3% net initial yield (the transaction was funded with a Euro private placement at an all-in cost of 4.4%). The rents on the stores increase annually by inflation (uncapped). Carrefour now makes up 4% of the portfolio by value.
The vast majority of the portfolio is in the UK, where grocery market sales are forecast to grow by 5.8% this year. Tesco and Sainsbury’s (which make up 75% of SUPR’s income) have a combined market share of 43%.
The company stressed the importance of its omnichannel stores in future proofing the portfolio, with online sales now accounting for 12% of grocery sales in the UK, while Carrefour is targeting a tripling of online sales by 2026.
The group’s LTV was maintained at 37%, with 100% of drawn debt fixed or hedged at a weighted average finance cost of 3.8% (30 June 2023: 3.1%).
During the year the company arranged a new £104.5m unsecured facility with SMBC at a weighted average margin of 1.45% with a maturity of three-years and two one-year extension options. Post period end, the company secured a new £100m facility with ING at a margin of 1.55% over SONIA with a maturity of three years and two one-year extension options.
Nick Hewson, chair, commented: “The company’s operational performance has been resilient with 100% occupancy and 100% rent collection despite the broader market and macro-economic challenges of the past years. We have taken a disciplined approach to capital deployment and have recently begun to see opportunities to add accretive acquisitions in the UK and France. We continue to monitor opportunities to recycle capital via asset sales and joint ventures.
“Looking ahead, we remain optimistic that the improving interest rate environment should provide positive tailwinds for the company. We are pleased to recommend another increased dividend of 6.12 pence per share for FY25 and remain focused on delivering a progressive dividend for shareholders.”
