Rental income rises in 'transformational' year for Supermarket Income REIT

(Sharecast News) - Supermarket Income REIT reported a rise in annual rental income on Tuesday, as it hailed a "transformational" year marked by major strategic milestones, including the internalisation of its management team and a landmark joint venture, which it said had positioned the company for renewed earnings growth. Net rental income rose 6% to £113.2m in the year to 30 June, while EPRA earnings per share slipped 2% to 6.0p, reflecting temporary cash drag from asset disposals.

The FTSE 250 group posted IFRS earnings of 4.9p per share, reversing a 1.7p loss a year earlier, and declared a total dividend of 6.12p, up 1% year-on-year and 0.98 times covered.

Its portfolio was valued at £1.63bn, down 8% on the prior year, with the EPRA net tangible asset value steady at 87.1p per share and loan-to-value cut to 31% from 37%.

The real estate investment trust highlighted several strategic steps taken to underpin growth, including the internalisation of management, expected to save £4m annually, and the sale of eight stores into a £403m joint venture with Blue Owl Capital at a 3% premium to book value, releasing about £200m of capital.

It also issued a debut £250m sterling bond with a six-year term at a 5.125% coupon, fixed debt costs, and sold its Tesco Newmarket store for £63.5m at a 7.4% premium to valuation.

SUPR said it had renewed leases on its three shortest-let supermarkets for 15 years with RPI-linked uplifts and starting rents in line with its original underwriting, while making a series of acquisitions including a Sainsbury's store in Huddersfield, nine Carrefour assets in France, and post-year-end purchases of Tesco and Waitrose sites.

The company said it had cut its EPRA cost ratio to 13% from 14.7% and aimed to reduce that further below 9% in the coming year, while maintaining full occupancy and rent collection.

"This has been a transformational year for SUPR which has positioned the company to return to growth," said chief executive Robert Abraham.

"The team has delivered shareholder value through a number of key strategic milestones, most notably the Internalisation which will deliver significant cost savings and provides greater alignment with shareholders.

"We have proactively sought to deliver further shareholder value through establishing a £403m JV, issuing our debut £250m sterling bond, demonstrating the affordability of rents and validating asset valuations, whilst broadening our investor base through our secondary listing on the JSE.

"The investment case for supermarket real estate is as compelling as ever and our relationship led model combined with sector specialism allow us to unlock attractive opportunities for shareholders.

"Through this pipeline we expect to deliver a growing and fully covered dividend."

At 0834 BST, shares in Supermarket Income REIT were flat at 78.6p.

Reporting by Josh White for Sharecast.com.