FUTURE
OF GROCERY
INVESTING IN THE
SUPERMARKET INCOME REIT | ANNUAL REPORT 2024
WE ARE SECTOR
SPECIALISTS
INVESTING FOR INCOME AND CAPITAL GROWTH
WHO WE ARE
Supermarket Income REIT plc (LSE:SUPR) is dedicated to investing in
supermarket property forming a key part of the future model of grocery.
Our supermarkets are let to leading supermarket operators in the UK and
Europe, diversified by both tenant and geography. We are the largest
landlord of omnichannel supermarkets in the UK.
WHAT WE DO
We focus on grocery stores which are omnichannel, fulfilling online and
in-person sales. 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.
SUPERMARKET INCOME REIT | ANNUAL REPORT 2024
ANNUAL REPORT 2024 1
HIGHLIGHTS FOR THE YEAR
We aim to provide investors with a combination of sustainable, long-term and
growing income with potential for long-term capital growth.
CONTENTS
STRATEGIC REPORT
01 Highlights for the year
02 Chair’s Statement
04 Financial Highlights
06 Strategy at work
08 Omnichannel at work
10 Sustainability at work
12 Q&A with Justin King CBE
14 Investment Adviser’s Report
23 The Company’s Portfolio
25 The Grocery Market
34 Key Performance Indicators
35 EPRA Performance Indicators
36 Financial Overview
39 TCFD Compliant Report
52 Our Principal Risks
55 Section 172(1) Statement
56 Our Key Stakeholder Relationships
60 Going Concern and Viability Assessment
CORPORATE GOVERNANCE
63 Chair’s Letter on Corporate Governance
64 Board of Directors
66 The Investment Adviser
68 Leadership and Purpose
72 Board Activities during the year
73 Key Decisions of the Board during
the year
74 Corporate Governance Statement
76 Nomination Committee Report
79 Audit and Risk Committee Report
83 Management Engagement
Committee Report
85 ESG Committee Report
87 Remuneration Committee Report
91 Directors’ Report
93 Directors’ Responsibilities Statement
94 Alternative Investment Fund
Manager’s Report
FINANCIAL STATEMENTS
97 Independent Auditors’ Report to
the members of Supermarket
Income REIT PLC
104 Consolidated Financial Statements
108 Notes to the Consolidated
Financial Statements
138 Company Financial Statements
140 Notes to the Company
Financial Statements
142 Unaudited Supplementary Information
147 Glossary
148 Contacts Information
FINANCIAL HIGHLIGHTS
8.4
%
DIVIDEND YIELD
6.06p
DIVIDEND PER SHARE
14.7
%
EPRA COST RATIO
2
37
%
LOAN TO VALUE
OPERATING HIGHLIGHTS
5.9
%
PORTFOLIO NIY
12yrs
PORTFOLIO WAULT
75
%
OF RENTAL INCOME
FROM TESCO AND
SAINSBURY’S
100
%
OCCUPANCY AND RENT
COLLECTION SINCE IPO
3
SUSTAINABILITY HIGHLIGHTS
87
%
OF STORE EPC RATINGS
AT C OR ABOVE
NET ZERO BY
2050 TARGET
VALIDATED AND
APPROVED
30
%
OF SITES HAVE
EV CHARGING
4
20
%
OF STORES HAVE
SOLAR INSTALLED
4
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
SUPERMARKET INCOME REIT | HIGHLIGHTS FOR THE YEAR
. Using share price of . pence as at June
. Including direct vacancy costs
. Subject to rounding
. UK sites only
2 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | CHAIR’S STATEMENT
CHAIR’S STATEMENT
“We have a balance sheet and asset portfolio which will
enable us to deliver sustainable, long-term earnings
growth even at these new ‘normal’ interest rate levels.”
Nick Hewson, Chair
Dear Shareholder,
I am pleased to report another resilient year for the Company.
Occupancy on our portfolio of grocery stores was 100%,
as was rent collection, and indeed annualised passing rent
grew year on year by 12%, due to accretive acquisitions and
inflation protection in over 80% of our leases. Our vigilance
on our cost base was again notable and we have one of the
lowest EPRA cost ratios of our peers. We expect our cost ratio
to reduce over the next 12 months as we focus on further
operational efficiencies across the business. Once again, we
are benefitting from our interest rate hedging strategy and we
expect the interest rate backdrop to be more supportive from
this point in the cycle.
All of this is permitting us to recommend a further, if modest,
increase to our dividend for the coming year to 6.12 pence
per share (2024: 6.06 pence per share). This is in the context
of our stated aim to deliver sustainable, long-term, growing
income from the grocery real estate industry. The last three
years have seen some challenging macroeconomic headwinds
but we have weathered the storm and increased the dividend
every year. We believe we have now seen the worst of it. Our
job is to maximise our earnings and continue to increase the
dividend on a covered basis, and benefit from the inherent
affordability of the rents our grocery tenants pay us.
The background to the challenging nature of the last three
years has been the fact that we have all had to get used to
operating in a higher interest rate environment compared
to that in the 2010s. Those higher interest rates seem to
have peaked during the summer of 2023, with 5-year swap
rates exceeding 5% in July 2023. At that time, the Company
prudently paid down debt to run at a lower LTV of 33%. This
strategically conservative approach to leverage has, however,
meant that 2024 earnings growth has been modest. On the
other hand, we believe that property valuations reached
a floor in December 2023. Consequently, we have been
confident in 2024 to increase leverage, including through our
oversubscribed debut Private Placement debt issuance, to help
drive earnings growth through acquisitions which will benefit
future years.
In growing through acquisitions, the Investment Adviser’s
position as a sector specialist gives the Company unique
access to off-market opportunities to acquire these assets at
yields which are above the cost of our debt financing. We have
been highly selective in our acquisitions and maintain our
focus of investing in top trading omnichannel stores let to the
strongest grocery operators.
While continuing to pursue our core UK strategy, we have also
sought to broaden our investible universe and enhance the
diversity and covenant strength of our tenant base through a
highly selective expansion into Europe.
In April, we made our first investment into the €290 billion
French grocery sector with an off-market, direct sale and
leaseback of 17 omnichannel stores with Carrefour. The
transaction was the culmination of over 12 months of
discussions, leveraging the Investment Adviser’s deep grocery
expertise and long-standing sector relationships. This was
Carrefour’s first sale and leaseback in France in 12 years and
underlines the Company’s credentials as a trusted and expert
counterparty.
The transaction highlights the attractive opportunities to
acquire and finance omnichannel supermarkets let to high-
quality covenants with highly affordable rents in Europe.
The acquisition was made at a 6.3% net initial yield and
financed at an accretive 4.4% fixed cost of funding in Euros.
However, this was a tentative exploration into non-UK
property assets, representing some 4% of the portfolio.
We continue to see interesting opportunities such as
this and if we decide to increase further our exposure to
continental European grocery assets, we will first consult with
shareholders and seek shareholder approval to revise our
Investment Policy accordingly.
Our thesis at IPO in 2017 was focussed on the mission critical
nature of omnichannel stores as last mile fulfilment hubs and
the long-term attractiveness of owning these infrastructure-like
assets. This thesis is as valid as ever in 2024 in both the UK
and France.
The strong performance of the UK and French grocery sectors
and our omnichannel stores within them means our stores
benefit from higher sales densities. This ensures rents remain
affordable for our tenants. Rent to Turnover (“RTO”) at store
level is the key affordability measure in the sector.
The Company’s UK portfolio is at an average 4% RTO
which is in-line with the long-standing industry standard
level for high-quality stores.
The discount to EPRA NTA at which the Company’s shares
have traded through the year is a frustration for the Board
and closing this discount is a key focus for the Company.
We continually review how best to allocate our shareholders’
capital. The Board believes that over the medium term,
earnings growth and the sustainability of the dividend will
serve to narrow the discount. We are also focused on capital
recycling opportunities through the sale of individual stores or
larger JV opportunities.
We regularly assess the use of share buybacks and at a certain
price and in sufficient quantity they make mathematical
sense if one can achieve both at the same time. However, the
Board has given the Investment Adviser a mandate to achieve
growth, on the basis that growing earnings through a selective
approach to acquisitions will generate a higher return than
that offered by share buybacks over the medium to long term.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
This position has remained under continuous review over the
past year and will continue to be debated while our shares
trade at a discount to EPRA NTA.
I am particularly pleased this year with the progress being
made on the Company’s sustainability activities. A key
milestone has been achieved with the validation and approval
of the Company’s science-based targets by the Science Based
Target initiative (“SBTi”). We have also seen the continued
addition of EV charging and solar panels at a number of
our stores. Our tenants have also made ambitious net zero
commitments and a benefit of owning mission critical real
estate is the continuing capital expenditure our tenants make
into our stores to meet their own commitments particularly in
the area of refrigeration. Our Task Force on Climate-Related
Financial Disclosures (“TCFD”) compliant annual report
is accompanied by our second standalone sustainability
report published today. The Company has prepared EPRA
Sustainability Best Practices Recommendations (“sBPR”)
disclosures for the first time and is also currently preparing its
first net zero transition plan.
In the coming months we also expect to proceed with a
secondary listing on the Johannesburg Stock Exchange (“JSE”).
Based on positive investor feedback following a non-deal
roadshow undertaken in February 2024, we believe that the
secondary listing will help improve trading liquidity and
the diversity of our shareholder base. Such listings require
minimal additional reporting and have relatively low ongoing
costs to maintain. I look forward to welcoming South African
investors to the shareholder register and in time we hope that
these investors will grow to represent a strong and supportive
addition to the Company’s register.
As part of the Board’s succession planning, we appointed
Sapna Shah as head of the Nominations Committee and as
Senior Independent Director (“SID”). She, along with the other
members of the Nominations Committee, will be determining
the process for identifying and recruiting three new NEDs
over the coming two years including a new Audit Chair and
a new Chair. We thank Vince Prior for his service as Chair of
the Nominations Committee and SID.
Outlook
In the context of the recently challenging macro headwinds,
we can now begin to consider the possibility of a more
favourable interest rate environment. Market expectations of
modest interest rate cuts over the coming months, albeit not
returning to the levels of the 2010s, provide confidence that
we have now seen the floor in this current cycle. We have
a balance sheet and asset portfolio which will enable us to
deliver sustainable, long-term, earnings growth even at these
new ‘normal’ interest rate levels. I am hopeful that as the
equity markets re-focus on the attractiveness of real estate,
the quality of our assets and the secure nature of our growing
income stream will once again be recognised.
In the meantime, due to our sector specialism, we continue
to be able to selectively add attractive assets to our portfolio
to grow earnings and ultimately dividend. Due to the prudent
steps taken to run lower leverage throughout 2023, the
Company has had the balance sheet capacity during 2024 to
take advantage as these opportunities arise. Earnings will also
be enhanced through our programme of even stricter cost
control delivering a low EPRA cost ratio of 14.7% which we
expect to reduce further over the next 12 months, in search of
our goal to be the company with the lowest EPRA cost ratio
of our externally managed peers.
Nick Hewson
Chair
September
ANNUAL REPORT 2024 3
6.12p
FY25 DIVIDEND TARGET
14.7
%
EPRA COST RATIO
4 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
12 months to
30 June 24
12 months to
30 June 23 Change
Annualised passing rent
.m .m +%
Adjusted earnings per share
. pence . pence +%
IFRS earnings per share (.) pence (.) pence +%
Dividend per share declared . pence . pence +%
Dividend cover
.x .x n/a
EPRA cost ratio
.% .% n/a
30 June 24 30 June 23 Change
Portfolio valuation ,m ,m +%
Portfolio net initial yield
.% .% n/a
EPRA NTA per share
pence pence -%
IFRS NAV per share pence pence -%
Loan to value
% % n/a
. The alternative performance measures used by the Group have been defined and reconciled to the IFRS financial statements within the unaudited supplementary
information
. Calculated as Adjusted earnings divided by dividends paid during the year
STABLE VALUATIONS AND STRONG BALANCE SHEET UNDERPIN CAPACITY TO PURSUE ACCRETIVE ACQUISITIONS
AND DRIVE EARNINGS GROWTH
The Board of Directors of Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with secure,
inflation-linked, long-dated income from grocery property, reports its audited consolidated results for the Group for
the year ended June .
. IGD UK Grocery Market Value forecasts
. Kantar – UK Grocery Market Share Data ( weeks ending June )
. IGD France Grocery Market Value forecasts
. Kantar – France Grocery Market Share Data ( weeks ending July )
. Carrefour “Digital Retail ” strategy
. IGD Research, ““Strategic outlook for Carrefour” (April )
. Kantar – France Grocery Market Share Data (March )
Secure and growing income
• 12% increase in annualised passing rent to
£113.1 million, reflecting:
– 4% average like-for-like rental uplift
– Accretive acquisitions in the year
• 100% occupancy and 100% rent collection since IPO
– 75% of rental income from Tesco and Sainsbury’s
• 4.4% increase in adjusted EPS to 6.08 pence driven by
rental growth and accretive acquisitions
• Fully covered FY24 dividend
• FY25 target dividend increased to 6.12 pence per share
Earnings accretive acquisitions
• Acquired 20 assets in UK and France for £135.8 million
before costs at an average NIY of 6.7% (UK: 7.0%,
France: 6.3%)
• Earnings growth further supported through maintaining
tight control of costs, achieving an EPRA cost ratio of
14.7% with further cost efficiencies targeted in FY25
Strong grocery sector growth
• UK grocery market sales forecast to increase by 5.8% to
£251.6 billion in 2024
– Tesco and Sainsbury’s increased sales and market
share in the year with a combined 43% market share
– Online market share at 12% and growing following
post pandemic reset
• French grocery market sales forecast to increase by
2.1% to €290 billion in 2024
– Carrefour has a 19.6% market share in France
– Carrefour is targeting 3x online sales growth to
€10 billion by 2026 (base year: 2021) with its online
grocery channel forecast to grow 8.25% in 2024
– Online market share is currently at 10% and is one of
the fastest growing channels
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 5
Strategic transaction with Carrefour
• One of the largest grocery operators in the world
• Investment grade rated (BBB)
• Acquisition of 17 omnichannel Carrefour stores in
relationship led sale and leaseback transaction for
a consideration of €75.3 million before costs
• Acquired at a 6.3% NIY versus 4.4% funding cost
• Carrefour’s second ever sale and leaseback transaction
in France and first in 12 years
• Carrefour now represents 4% of portfolio GAV
• Highly affordable rents with uncapped inflation
linked uplifts
Supermarket property valuations stabilised
• Portfolio independently valued at £1.78 billion,
inclusive of acquisitions of £135.8 million
• Net Initial Yield (“NIY”) of 5.9% (30 June 2023: 5.6%)
• Following a decline in valuations in 2023, like-for-like
valuations were broadly flat in H2, up 0.1%
• Strong level of transactional activity across the sector
with return of traditional institutional participants to
the market
• Operator store buybacks, particularly Tesco,
demonstrating mission critical nature of large
format stores
Proactively managing balance sheet
• LTV of 37% as at 30 June 2024 (30 June 2023: 37%)
• Strong debt covenant headroom supporting acquisition
led growth
• 100% of drawn debt fixed or hedged at a weighted
average finance cost of 3.8%, including post balance
sheet events (30 June 2023: 3.1%)
• Fitch BBB+ investment grade rating reaffirmed providing
access to attractively priced long-dated debt
• New £104.5 million unsecured facility with SMBC at a
weighted average margin of 1.45% with a maturity of
three-years and two one-year extension options
• Post balance sheet:
– New £100 million unsecured facility with ING at a
margin of 1.55% over SONIA with a maturity of three
years and two one-year extension options
– Oversubscribed 7-year Euro private placement at
4.4% fixed all-in cost, providing natural currency
hedge for Carrefour portfolio acquisition
Further progress on key sustainability initiatives
• EV charging operational at 30% of sites and solar arrays
across 20% of stores
• Science Based Targets validated and approved by the
Science Based Targets initiative including a commitment
to reach net zero by 2050
• Strong tenant net zero commitments driving significant
tenant capital expenditure on stores
• Prepared and submitted EPRA Sustainability Best
Practices Recommendations disclosures for the first time
. Standard & Poor’s
. Annual ILC-linked rent reviews
“ 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.”
Nick Hewson
Chair of Supermarket Income REIT plc
6 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | STRATEGY AT WORK
OUR STRATEGY
We have handpicked a unique portfolio of supermarkets with attractive trading
fundamentals, making us the largest landlord of omnichannel grocery stores in the UK.
Our investment strategy is to capitalise on the long-term structural trend toward
omnichannel operations. These stores integrate online and offline fulfilment, providing
our tenants with economies of scale and operational efficiencies.
OUR INVESTMENT MODEL
We offer a combination of attractive, sustainable, long-term and growing income with
potential for long term capital growth by acquiring top-performing omnichannel
supermarkets. These stores not only support in-store shopping, but also operate as
last-mile online grocery fulfilment centres for both home delivery and click and collect,
providing our investors with exposure to leading future proofed stores in the growing UK
and French grocery markets.
DELIVERING OMNICHANNEL
The omnichannel model integrates three key delivery methods to serve consumers:
traditional in-store shopping, Click & Collect and home delivery. This combination of
in-store and online fulfilment helps to deliver increased sales and customer satisfaction.
OUR VISION
We are dedicated to investing
in supermarket property forming a
key part of the future model of grocery.
TRADITIONAL
IN-STORE
CLICK & COLLECT
AT STORE
HOME DELIVERY
FROM STORE
OUR STRATEGY FOR GROWTH
ANNUAL REPORT 2024 7
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
OUR STRATEGY AT WORK
Explore our key activities, tenant initiatives and research
insights within the supermarket real estate sector.
OPTIMISING OUR
SECTOR SPECIALISM
Supermarket rents
Explore an analysis which highlights the importance of rent-
to-turnover ratios and how recent supermarket regear
agreements reflect true affordability, demonstrating that our
UK portfolio’s average rent aligns closely with the key 4% rent
to turnover benchmark. More information on page 30 to 32.
EXPANDING INTO
NEW MARKETS
First acquisition in France: Carrefour sale & leaseback
Read about our landmark acquisition of a portfolio of 17
Carrefour stores in France through a strategic off-market
transaction, with a 6.3% net initial yield. With Carrefour’s
commitment to online growth, this earnings accretive
transaction diversifies our portfolio whilst retaining our
investment strategy. Read more on pages 20 to 22.
PROMOTING
SUSTAINABILITY
Tenant investment case study: Sainsbury’s, Cheltenham
Owning mission-critical properties on Full Repairing and
Insuring leases allows us to benefit from substantial tenant
investments in store upgrades and energy efficiency. Read
about the recent improvements made by Sainsbury’s at our
Cheltenham site on pages 26 to 27.
EXTENDING OUR
LEADING POSITION
Acquisition of Tesco, Stoke-on-Trent
Acquired in March 2024, this Tesco store strengthens our
portfolio with strong in-store and online demand and a
7.5% net initial yield. Discover how this acquisition enhances
our portfolio and how we assess potential acquisitions on
pages 16 to 17.
8 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | OMNICHANNEL AT WORK
OMNICHANNEL THE FUTURE OF GROCERY
We seek to own and actively manage a leading portfolio of handpicked, high-quality
supermarkets which deliver low-risk and growing income returns that are resilient through
economic cycles. This is achieved through a focus on omnichannel stores which are critical
to the operations of leading supermarket operators in the UK and Europe.
THE OMNICHANNEL VIRTUOUS CIRCLE
The combination of in-store and online
fulfilment help to deliver increased sales
and customer satisfaction.
INCREASED
PRODUCT
TURNOVER
BIGGER
BETTER
RANGE
MATERIAL
JUMP IN STORE
TURNOVER
INCREASED
IN-STORE
SALES
IMPROVED
CUSTOMER
EXPERIENCE
FRESHER
PRODUCT
THE OMNICHANNEL
VIRTUOUS CIRCLE
THE OMNICHANNEL MODEL
The seamless integration between online and
offline fulfilment provides our tenants with
economies of scale and operational efficiencies.
CONSUMERSOMNICHANNEL
SUPERMARKET
TRADITIONAL
IN-STORE
HOME DELIVERY
FROM STORE
CLICK & COLLECT
AT STORE
OMNICHANNEL THE FUTURE MODEL OF GROCERY
The grocery market is changing. The developing
online market adds a new dimension to the long
established, traditional grocery market.
For the operator: The economies of scale resulting
from a near doubling in online grocery penetration
has halved delivery costs from omnichannel stores.
For the customer: Adding online fulfilment to a store
also creates a better in-store experience for the
customer. This virtuous circle effect of an omnichannel
supermarket is driving the global convergence
towards omnichannel being the optimal future
model of grocery.
ANNUAL REPORT 2024 9
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
AN EXPANDING PORTFOLIO
We have built a unique portfolio of supermarkets, diversified both by geography
and tenant. Our properties are ‘mission critical’ to our grocery tenants, operating
as key online fulfilment hubs as well as generating in-store physical sales.
OUR PORTFOLIO IN NUMBERS
80% of the Portfolio benefits from upward only, index-linked rent reviews.
73
SUPERMARKETS
5.9
%
NET INITIAL YIELD
(“NIY”)
93
%
OMNICHANNEL
STORES
100
%
OCCUPANCY
SINCE IPO
16
100
%
RENT COLLECTION
SINCE IPO
Exposure by valuation
Tesco 48%
Sainsbury’s 29%
Morrisons 5%
Waitrose 4%
Carrefour 4%
Asda 2%
Aldi 1%
M&S 1%
Non-food 6%
Portfolio weighted by value
based on 30 June 2024
valuation.
Indexation
Income mix by
rent review type
RPI 70%
CPI 6%
ILC 4%
Fixed 2%
OMV 18%
Total 100%
. Subject to rounding
10 SUPERMARKET INCOME REIT PLC
INVESTING IN A SUSTAINABLE FUTURE
Environment, social and governance (ESG) is a key priority for the Company.
The Board is committed to delivering the Company’s ambitious sustainability goals.
1. CLIMATE AND
ENVIRONMENT
Reduce our emissions to achieve a
net zero carbon portfolio and
mitigate the environmental impacts
of our assets.
2. TENANT AND
COMMUNITY ENGAGEMENT
Partner with our tenants and
stakeholders to ensure our assets
enhance the communities in which
they are located.
3. RESPONSIBLE
BUSINESS
Strengthen ESG performance and
uphold responsible business
practices to deliver long-term value.
THE THREE PILLARS OF OUR SUSTAINABILITY STRATEGY
Our sustainability strategy is underpinned by three core pillars that reflect the most material
sustainability issues for our Company and the long-term nature of our investments. Our approach to
sustainability is grounded in our commitment to responsible investment and good stewardship, with the
aim to create and deliver long-term value for our stakeholders.
RESPONSIBLE
INVESTMENT FOR
LONG-TERM VALUE
PILLAR 1
CLIMATE AND
ENVIRONMENT
PILLAR 2
TENANT AND
COMMUNITY
ENGAGEMENT
PILLAR 3
RESPONSIBLE
BUSINESS
STRATEGIC REPORT | SUSTAINABILITY AT WORK
UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (SDGS) ALIGNMENT
Our Sustainability Strategy supports multiple UN Sustainable Development Goals (SDGs) and particularly
focuses on those goals which we consider most material to our business – namely, goals 8 – Decent work
and economic growth, 11 – Sustainable Cities and Communities, 12 – Responsible Consumption and
Production, and 13 – Climate Action, all of which are underpinned by goal 17 – Partnerships for the goals.
Refer to our standalone Sustainability Report for more information on our Sustainability Strategy
ANNUAL REPORT 2024 11
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
SUSTAINABILITY STRATEGY IN ACTION
The Company is committed to advancing our sustainability initiatives, supporting our tenants
to improve their ESG performance and upholding our responsible investment commitments.
EPC IMPROVEMENTS AT
SAINSBURY’S, CHELTENHAM
Tenant-led investments into building energy efficiency
improvements, including LED lighting installation, refrigeration
system upgrades and removal of fossil fuel heating and cooling
systems, not only help to reduce energy consumption and
associated emissions but also help to improve building EPC
ratings. This was seen at the Company’s Sainsbury’s,
Cheltenham site with a significant EPC improvement achieved
following a multimillion-pound investment into the store by
Sainsbury’s over 2023 – 2024.
EPC RATING IMPROVED FROM D TO B
MAKING A DIFFERENCE WITH THE
ATRATO FOUNDATION
The Company’s ability to have a positive impact in the
communities in which it operates is further enhanced by
charitable giving efforts. The Company approved a donation
of £120,000 to the Atrato Foundation, a registered charity
established by the Company’s Investment Adviser. This donation
will support a variety of charitable causes, with a focus on
charities that work in the areas in which the Company owns
assets and which align with priority charitable themes including
the alleviation of poverty and hunger, feeding the nation and
the ability to positively impact on nature and biodiversity.
£120,000 DONATION
CONTINUING TO ENHANCE
ESG REPORTING
The Company recognises the importance of transparent,
decision-useful sustainability reporting to improve its
accountability to stakeholders. The Company published its first
EPRA Sustainability Best Practices Recommendations (“sBPR”)
Report in June 2024 and has included updated sBPR disclosures
within its standalone Sustainability Report. The Company
voluntarily reports against the TCFD recommendations within
its Annual Report. In addition, the Company has for the first time
undertaken independent limited assurance over its location-
based Greenhouse Gas (“GHG”) inventory figures for FY24.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
12 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | Q&A WITH JUSTIN KING CBE
A CONVERSATION WITH JUSTIN KING
ABOUT THE FUTURE OF THE UK GROCERY SECTOR
“I believe the affordability of rent is one of the reasons that supermarket
property investment performance over the last 15 years has been a
stand-out positive performer relative to other asset classes despite
multiple periods of macro-economic uncertainty. Having said that, not all
supermarket property is equal and specialists like the Atrato Capital team
are essential to ensure the right asset selection for the long term.”
Justin King CBE, Senior Adviser
Justin King is a senior adviser to Atrato Capital, the Group’s
Investment Adviser. Justin is recognised as one of the UK’s
most successful grocery sector leaders, having served as
CEO of Sainsbury’s for over a decade and previously held
senior roles at Marks & Spencer, Asda, PepsiCo and Mars.
He is currently Non-Executive Director of Marks & Spencer
and Chairman of Allwyn Entertainment which operates the
National Lottery licence, Ovo Energy and Dexters, London’s
leading estate agent. Justin also advises a series of high-
profile consumer-focused companies including Itsu Grocery
and Snappy Shopper. Justin is an advocate for responsible
business, has been instrumental in launching several
charitable concerns including the charity Made by Sport, which
champions the power of sport to change young lives. Justin
brings an unrivalled wealth of grocery sector experience and a
deep understanding of grocery property strategy.
Q: The Carrefour sale and leaseback provided a unique
entry point into the French grocery market. Do you consider
this market to be very different to the UK market?
A: It’s less different than many think! It’s a significant
billion market
, with supermarkets being the most dominant
channel and the four top grocers holding over % of the
market. Just like the UK, this operator concentration has been
achieved through very well-located shops, great customer
service, well-developed supply chains and an increasing focus
on omnichannel business models.
Carrefour is one of the largest grocers in the world, has a .%
share of the French grocery market and provides an excellent
addition to SUPR’s portfolio, further diversifying its tenant
mix. So, taken all together, the transaction capitalises on the
opportunity to leverage the Company’s grocery specialism in
generating attractive investment prospects whilst also being
highly complementary to the existing portfolio and strategy.
Of course, entering any new market comes with risk. I believe
an essential component to managing that risk is through
developing strong partnerships with leading operators. It is
noteworthy that Atrato has entered this market via a direct sale
and leaseback with Carrefour, benefiting from the insights
derived from this relationship-based model which has always
been a core part of the Company’s strategy.
Q: You mention the benefits of leveraging sector
specialism. How important do you think Atrato’s deep
knowledge of the omnichannel model will be when
considering investing in grocery property markets
like France?
A: Firstly, it’s important to remember that the UK’s grocers
were early pioneers in online grocery, resulting in one
of the highest penetration rates for online grocery sales
globally. This success was driven by an early transition to
multi-channel stores which provide seamless integration
between online and offline channels. I think it’s fair to say
that operators across the world have long looked at the UK
as a template and we are seeing a global convergence to the
omnichannel model.
SUPR is the largest landlord of omnichannel grocery stores
in the UK. That makes the Company an attractive property
partner for grocers looking to capitalise on the online
opportunity through transitioning toward omnichannel
trading strategies. It also provides a valuable pathway to
source attractive future investment opportunities.
Carrefour’s objective of growing its omnichannel customer
base to % and online sales to billion annually by
is a clear recognition of the additional value to be captured
through leveraging its supermarket estate and I know this
was a key consideration in Carrefour selecting SUPR as its
partner in the sale and leaseback transaction.
. IGD French Grocery Market ( forecast)
. Kantar France Grocery Market Share ( weeks ending July )
. Carrefour “Digital Retail ” strategy
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 13
Q: How should the market think about affordability of
rent on grocery property and how that impacts market
rents in particular?
A: For grocery operators, the key metric for determining
the affordability of rent is the ratio of rent to store turnover,
with c.% being the long-standing industry benchmark in
the UK. This equates to roughly two weeks of store sales and
is considered affordable by operators, comparing favourably
to other asset classes such as retail parks at c.%, hotels at
c.% and shopping centres at c.%.
Whilst it’s important to note that the grocery sector has lower
margins than some of these comparable retail or leisure
sectors, it is also important to note that typical EBITDAR
margins at the store level are around %. This provides
approximately x cover of rent at the market standard rent to
turnover, which makes rents highly sustainable at that level.
Currently, SUPR’s portfolio sits at c.% rent to turnover and
is therefore considered to be approximately rack rented from
a UK grocery property perspective.
I believe the affordability of rent is one of the reasons that
supermarket property investment performance over the last
years has been a stand-out positive performer relative to other
asset classes despite multiple periods of macro-economic
uncertainty. Having said that, not all supermarket property is
equal and specialists like the Atrato Capital team are essential
to ensure the right asset selection for the long term.
Q: Like-for-like sales growth in is lower than
with staffing costs rising, does this signal margin pressure
for the multichannel grocers?
A: A key point here is that disinflation rather than deflation
is taking effect across the grocery sector - prices are rising
more slowly, rather than falling. In the four weeks to July
, the rate was .%, the lowest rate since September
and far below the recent peak of .% seen in March
last year. Against that backdrop, like-for-like sales growth
will be naturally subdued verses the inflation-fuelled
comparatives.
However, living standards for the average customer are
gradually improving, with wage growth outpacing price
inflation for several quarters, which will in turn feed both
enhanced sales volumes and improved product mix for the
grocers. We are clearly seeing the benefits of that in the
latest grocery market share data with Tesco and Sainsbury’s
capturing a further bps combined market share over their
rivals and reaffirming their profit targets.
This is why traditional grocers carry an extensive range and
mix in their supermarkets to cater for the changing needs
and buying trends of the customers’ shopping basket and
that customer focus has sustained the success of the grocers
for the last years.
Justin King CBE,
Senior Adviser
14 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
INVESTMENT ADVISER’S REPORT
“The Company’s operational performance remains strong.
It has been another year in which SUPR has achieved 100% rent
collection and 100% occupancy from its tenant base of leading
supermarket operators.”
Ben Green, Principal of Atrato Capital
Robert Abraham, Fund Manager
Atrato is the Company’s Investment Adviser. Ben Green
(Principal) and Robert Abraham (Fund Manager) discuss SUPR’s
performance and the long-term outlook for the business.
SUPR’s performance remains strong at the operational level
The Company’s operational performance remains strong.
It has been another year in which SUPR has achieved 100%
rent collection and 100% occupancy from its tenant base
of leading supermarket operators. Coupled with this, the
Company has achieved 4.0% like-for-like rental growth on
leases that have been subject to review in the year, driven by
inflation-linked contractual uplifts.
Our key tenants continue to perform strongly with impressive
revenue growth. This is particularly true of the types of the
omnichannel stores that SUPR owns in the UK and France.
Sainsbury’s and Tesco, which represent 77% of the portfolio
by value have reported like-for-like sales growth of 10.3%
20
and 7.7%
21
respectively in their full year results. They reported
even higher sales growth figures from their large format
stores, like those owned by SUPR, up by 11.0%
20
and 8.2%
21
respectively. Importantly, such revenue growth remains ahead
of rental increases, which ensures that rents remain affordable.
Our newest tenant Carrefour has also performed strongly
in its home market in France with ROI margins up 6.2%
22
,
underpinned by accelerated price investments which have
been more than offset by cost discipline.
Proactively positioning SUPR for a higher interest rate world
Our strong operational performance has been largely offset
by higher financing costs due to the higher interest rate
environment and our decision to reduce leverage. This has
led to lower earnings growth and only a modest increase in
dividend as we and the Board seek to position SUPR with a
sustainable, long-term, progressive dividend.
We took two key steps to position the Company for a higher
interest rate world. First, we fixed SUPR’s cost of debt through
the period of highest expected interest rates. Second, we
recycled the proceeds from the final tranche of the Sainsbury’s
Reversion Portfolio disposal in July 2023 into reducing debt.
Through the second half of the year, as debt costs reduced,
we had the opportunity to grow earnings through accretive
acquisitions. As a result of the prudent actions taken to
protect the balance sheet the Company has been in a strong
position to take advantage of these opportunities.
Taken together with our contracted rental growth and
rigorous cost control, we have positioned SUPR to deliver a
sustainable, progressive dividend in the new higher interest
rate environment.
In our view, valuations have bottomed out
We saw a valuation decline as at the December balance
sheet date due to the impact on the grocery property market
of higher interest rate expectations. The sterling 5-year swap
rate peaked in July 2023 and this negatively impacted the
investment market in the first half of our financial year.
Valuations held flat over the second half of the year with the
market now having adjusted to expectations of a long-term
UK base rate of around 3.5%. Investment returns at current
market yields look attractive, particularly when considering
the defensive characteristics of grocery.
We have observed a similar dynamic in the French market
with reducing interest rate pressure and valuations at the
bottom of the cycle.
. Tesco FY/ Results
. Sainsbury’s FY/ Results
. Carrefour Q/H Sales and Results
KEY ACHIEVEMENTS
• ACQUISITION OF 17 CARREFOUR
SUPERMARKETS THROUGH AN
OFF-MARKET SALE AND LEASEBACK
TRANSACTION
• OVERSUBSCRIBED 7-YEAR
EURO PRIVATE PLACEMENT
• 100% OCCUPANCY AND 100% RENT
COLLECTION SINCE IPO IN 2017
KEY FIGURES
• 5.9% NIY
• GREW PORTFOLIO TO 73 STORES
• £24 PER SQ.FT. PORTFOLIO AVERAGE
RENT, WITH 4% RENT TO TURNOVER
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
We are of the view that the next movement in valuations,
when it comes, should be positive.
Supermarket rents, affordability and ERVs
Within the UK supermarket sector, 4% rent to turnover is
seen as the affordable rental level that operators are willing to
pay to secure long-term occupation for strong trading stores.
Increasing store turnover has improved the affordability
of supermarket rents and has resulted in SUPR’s portfolio
having a ratio of 4% RTO.
Our view is that the valuers systematically underestimate
the rents that UK grocers are willing to pay to secure
trading from a site. This is important for two reasons.
First, it provides us with value opportunities at the point
of acquisition because vendors often underestimate rental
potential. Second, we believe that there is significant
embedded value in the Portfolio which is not reflected in the
valuation or the NAV.
A detailed case study on this topic is available on pages 30 to 32.
Valuation yield metrics for the SUPR portfolio
Measure June-23 Dec-23 June-24
Portfolio
NIY .% .% .%
UK supermarkets
NIY .% .% .%
NRY .% .% .%
NEY .% .% .%
The Net Reversionary Yield (“NRY”) provided by our valuer
for our UK supermarkets applies an average ERV of £22 per
square foot (“per sq.ft.”) to SUPR’s portfolio which is broadly
in-line with the UK average.
In practice we expect our leases to be extended (regeared)
prior to expiry and at a level which would be higher than
this average, due to the strong performing nature of the
stores owned by SUPR.
Assuming UK supermarket rents regeared to 4% of turnover
it would produce an NRY closer to the 5.9% current NIY
on the portfolio, demonstrating the potential reversionary
upside that can be achieved on the portfolio.
As an off-market sale and leaseback transaction, our
Carrefour rents are set at 2.1% RTO, versus the average of
2.5% in France.
Attractiveness of French grocery market and Carrefour
The Company’s entry into the €290 billion French grocery
market
23
was the most strategically significant development
of the year.
The European grocery property market provides the
Company the opportunity to benefit from a diversification
of the portfolio, an increased exposure to investment grade
tenant covenants and lower cost of financing. Due to the
size of the European market, we can be highly selective in
assessing investment opportunities.
The French market has attractive similarities to the UK.
Supermarkets are the primary grocery sales channel and the
French market is dominated by a small number of operators.
France also has Europe’s largest online grocery market,
which is primarily serviced by an omnichannel store
network and is growing rapidly.
ANNUAL REPORT 2024 15
Ben Green
Principal of
Atrato Capital
Robert Abraham
Fund Manager
. IGD French Grocery Market Value ( forecast)
16 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | INVESTMENT ACTIVITY
EXTENDING OUR
LEADING POSITION
ANNUAL REPORT 2024 17
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
MILLION ACQUISITION OF TESCO,
STOKE-ON-TRENT
The standalone Tesco
supermarket was acquired
in March . The ,
sq.ft. store was constructed
in and is situated on a
-acre, out of town site. At
acquisition, the store had an
unexpired lease term of
years, subject to annual
RPI linked rent reviews
(%-%).
The property has a -minute
catchment population of over
,. Competition is low
relative to this catchment
population with . sq.ft.
of total supermarket Net
Sales Area per capita, which
is below the Company’s
portfolio average. The
property’s location next to
major road infrastructure is
supportive of the purpose
built home delivery
operation with five vans and
a Click & Collect operation in
the car park.
Over a -minute drive time
the catchment population
rises to over , due to
its proximity to Stoke-on-
Trent, providing additional
demand for online grocery.
Additionally, there are no
alternative Tesco online
operations to the north and
east, increasing the store’s
serviceable catchment
through home delivery.
The mission critical store
increases the Group’s
weighting towards annual,
inflation-linked income and
the acquisition is accretive to
earnings with a yield of .%
which provides an attractive
spread to the Company’s cost
of debt.
Tesco
LOCATION:
Stoke-on-Trent
ACQUISITION DATE:
March 2024
GROSS AREA:
81,000 ft
ACRE SITE
.
%
NET INITIAL YIELD
18 SUPERMARKET INCOME REIT PLC
A tale of two halves for the UK investment market, while
operator activity across both sale and leaseback and store
buybacks has been prominent
Investment market volumes for the 12 months remained
broadly in line with the £1.7 billion average since the
Company’s IPO, as liquidity for the asset class remains
strong. Unlike other sectors which have seen volumes fall
away in a higher interest rate environment, through rapid
repricing and continued investor demand, supermarket
volumes have remained consistent. Supermarkets are a
defensive asset class with investment appetite from a broad
range of purchasers from institutions through to high net
worth individuals.
0.0
0.5
1.0
1.5
2.0
2.5
20242023202220212020
£1.7bn
Supermarket investment volumes
£2.1bn
£1.6bn
£1.8bn
£2.0bn
5 yearly supermarket investment volumes
27
We are however beginning to see more limited supply –
particularly of stock in the UK which is suitable for SUPR in
terms of being accretive to the cost of debt and therefore to
earnings, whilst maintaining tenant quality.
transactions breakdown
Vendors Value £m
Asda
Morrisons
Abrdn
Lothbury IM
Waitrose
Other
Total ,
Purchasers Value £m
Realty Income Corporation
Tesco Plc
M&G
ICG
MDSR
Other
Total ,
Carrefour is one of the largest grocery operators in the world
with forecast annual global sales of €100.4 billion in 2024
24
.
In France, Carrefour holds a similar position to Sainsbury’s
in the UK as the second largest operator with 19.6% of
grocery sales
25
. As part of its 2026 strategic plan outlined in
2022, Carrefour has set ambitious online growth targets to
increase online sales to 30% of total sales by 2026, and its
online channel is forecast to grow by 8.25% in 2024
26
.
Growing earnings through highly selective, accretive
acquisitions
) First international acquisition via a sale and leaseback
transaction with Carrefour
In April 2024, SUPR acquired a sale and leaseback portfolio
of 17 strong trading omnichannel stores in France through a
direct transaction with Carrefour.
The stores were selected based on a detailed analysis
including trading performance, local demographics and
competition. The stores have highly affordable rents and
were acquired at an attractive 6.3% NIY.
The transaction was financed through an existing revolving
credit facility with HSBC, and post period end was
refinanced via a Euro denominated private placement at
a cost of 4.4%. The positive cash yield is accretive to the
portfolio and supportive of earnings growth through long-
term, index-linked leases. A case study on the transaction is
provided on pages 20 to 22.
We were able to leverage our deep sector relationships
and reputation as a trusted counterparty to leading grocery
operators, to work with Carrefour on this off-market transaction.
This was only the second ever sale and leaseback transaction
conducted by Carrefour in France, and the first in 12 years.
) The continued attractiveness of the UK, albeit a reduced
addressable market
With the UK grocery market continuing to perform strongly,
we see attractive opportunities in the UK supermarket
space, albeit now focused on Tesco and Sainsbury’s due to
comparatively less attractive covenants of the more highly
leveraged multichannel operators, Asda and Morrisons.
In the UK we have focused on shorter lease assets,
particularly those which we view as being mispriced by
the market due to an underestimation of affordable market
rent. The target assets are let to strong tenant covenants (i.e.,
Tesco or Sainsbury’s), with an attractive yield providing
an accretive spread to the current cost of debt. These
opportunities are currently more accretive to earnings
than longer lease, rack rented assets, which are currently
pricing more keenly. An example transaction is Tesco Stoke,
acquired in March 2024 and on which there is a case study
on pages 16 to 17.
. IGD Research , Strategic outlook for Carrefour
. Kantar France Grocery Market Share ( weeks to July )
. IGD Research
. Years ending June Source: Knight Frank, Savills, MSCI, operator
announcements Atrato Capital research
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 19
Defensive nature of supermarket real estate continues to
prove attractive to debt markets
During the year we agreed new debt facilities with SMBC
of £104.5 million. Post balance sheet we agreed a new
£100 million unsecured facility with ING and a private
placement of €83 million loan notes at an all in fixed
cost of 4.4% for seven years.
Both of the bank facilities are attractively priced at an
average margin of 1.5% over SONIA. We have fully fixed
the cost of these financings through hedging.
The cost of the private placement is fixed at 4.4% and is
highly attractive when compared to the yield on our French
supermarket assets. In addition, the Euro denomination
provides a natural hedge for the Company’s investment in
the Carrefour portfolio acquisition in France.
These transactions, along with our BBB+ Fitch rating,
underscore the Company’s strong balance sheet, high-
quality assets and tenants and our ongoing ability to secure
debt from financially strong international lenders.
The ability to raise debt has allowed the Company to
cautiously increase leverage up to 37% to enable it to take
advantage of attractive acquisition opportunities, while
maintaining significant headroom in debt covenants.
Including post balance sheet events, the Company has 100%
of drawn debt fixed or hedged at a weighted average finance
cost of 3.8% (30 June 2023: 3.1%).
Continued progress on sustainability reporting
Investing responsibly for long-term value creation
remains at the heart of the Company’s business model.
The Company has continued to refine its approach this
year improving ESG data processes and setting long-term
targets for the Company.
The Company’s refreshed sustainability strategy
consists of three key pillars:
1. Climate and Environment
2. Tenant and Community Engagement
3. Responsible Business
These pillars are underpinned by the UN Sustainable
Development Goals the Company has identified as most
material to the business, and by the Investment Adviser’s
ongoing responsible investment commitments including in
respect of the Net Zero Asset Managers initiative, UN Global
Compact and UN Principles for Responsible Investment.
The Company has published its second standalone
Sustainability Report which details its sustainability
performance and progress against the three pillars of the
sustainability strategy and plans for the year ahead. Highlights
from the Sustainability Report, beyond the Company’s
science-based target setting, include the Company’s first
donation to the Atrato Foundation, improvements in ESG
data sharing with tenants and further environmental asset
management initiatives to benefit occupiers and communities.
For the first time the Company has also undertaken external
assurance over its reported location-based Scope 1, 2 and 3
GHG figures for FY24. The Assurance Report is available on
the Sustainability section of the Company’s website.
In the UK, the two largest sellers of assets during the year
were operators. Asda (£650 million) and Morrisons (£196
million) both sold stores to Realty Income, subject to
20-year inflation linked leases. Waitrose also undertook
a £125 million sale & leaseback with M&G. Each of these
transactions attracted a lot of institutional interest. Asda and
Morrisons also separately sold off their petrol forecourts to
reduce leverage. We believe that the capital raised in these
processes makes further significant sale and leaseback
activity from these operators unlikely.
Tesco spent c. £127 million during the year buying back
stores, including a 111,000 sq.ft. store in Sutton Coldfield
for c.£40 million – a large format omnichannel store,
highlighting the strategic importance of such assets.
We continue to see Tesco selectively participate in the
investment market, depending on capital made available to
the property team at any given time. Our tenants’ competing
demands for capital dictate their level of activity in the
buyback market – this means that we continue to be able
to buy some of Tesco’s best performing stores. However,
we do have the risk of a shrinking opportunity, as each
store bought back by an operator is unlikely to return to the
leasehold market in the future.
In addition to M&G, this year has also seen the return of
other traditional institutional supermarket landlords as
buyers in L&G (£46 million), Abrdn (£18 million), and DTZ
Investors (£56 million).
Investment volumes in France were below average in
2023 totalling €320 million. However, volumes in H1 2024
reached €306 million which is a 135% increase year-on-
year and 13% ahead of average since H1 2014. New retail
development is at a 20-year low, a trend which we think will
continue due to the net artificialisation (ZAN) of land by
2050. We expect a shift towards redevelopment of existing
assets into mixed-use spaces rather than new developments.
This will therefore reduce the amount of retail space making
existing assets more valuable.
Tight control of costs delivering one of the lowest EPRA
cost ratios in the sector
In seeking to drive earnings growth we also maintain a tight
control of costs. The Company’s cost base is already one of
the lowest across FTSE 350-listed REITs, with an EPRA cost
ratio of 14.7% and is targeting a lower EPRA cost ratio in the
coming year, in line with our goal of having the lowest cost
ratio amongst the externally managed FTSE 350-listed REITs.
Peer 15Peer 14Peer 13Peer 12Peer 11Peer 10Peer 9Peer 8Peer 7Peer 6Peer 5SUPR
current
Peer 4Peer 3Peer 2Peer 1
14.7%
Internally managed Externally managed
EPRA cost ratios (including direct vacancy costs):
FTSE 350-listed REITs
28
EPRA cost ratio
. Based on most recent company accounts where disclosed
20 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | INVESTMENT ACTIVITY
EXPANDING INTO
NEW MARKETS
❝ This accretive transaction is complementary to
our existing portfolio, providing further tenant
diversification and continuing our strategy of
investing in the future model of grocery.
❞
Ben Green
Principal of Atrato Capital Limited
ANNUAL REPORT 2024 21
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
FIRST ACQUISITION IN FRANCE:
CARREFOUR SALE & LEASEBACK
The billion French
grocery market shares many
characteristics with the
UK, with a small number
of dominant players, and
supermarkets being the
largest grocery fulfilment
channel. Stringent planning
and licensing regulations
limit the opening of new
large-format stores. Online
grocery shopping is a rapidly
growing segment in France
and currently the largest
online grocery market in
continental Europe with
expectations for continued
growth.
In April , the Company
announced the acquisition
of a handpicked portfolio of
Carrefour supermarkets
in France though an
off-market sale and
leaseback transaction.
Having initially considered
a portfolio of stores, the
stores acquired as part
of the transaction were
carefully selected based on
detailed analysis including
trading performance,
local demographics and
competition. The Company
sought to mitigate the risk
of entering a new market
through low rents, smaller
lot sizes and identifying
stores with a long and
strong trading history. With
a NIY of .% and financed
at a cost of debt of .%, the
transaction is immediately
earnings accretive. The
portfolio which benefits
from uncapped, ILC-linked
rent reviews, also has strong
reversion potential.
STORES
.
%
NET INITIAL YIELD
Carrefour
LOCATION:
France
ACQUISITION DATE:
Apr-24
22 SUPERMARKET INCOME REIT PLC
The transaction was the
culmination of around
months of discussions
between SUPR and
Carrefour. Key to this
transaction was the
Company’s reputation as
a respected and credible
partner for major grocery
operators due to its track
record in the UK market.
The Company’s expansion
into France broadens its
investable universe. While
the Company continues to
deliver on accretive pipeline
opportunities in the UK, the
pool of suitable assets is
narrowing. Firstly, due to
the weakening covenants
of Asda and Morrisons, the
Company is not seeking
to materially increase its
exposure to these names.
Secondly, buybacks by the
strongest covenants of
Tesco and Sainsbury’s are
reducing the availability
of assets. These operators
have been two of the largest
buyers of supermarket
real estate in recent years.
We do not expect to see
these assets again in the
investment market once
they have returned to the
operators’ balance sheets.
Investing in this portfolio
of omnichannel stores
in France continues the
Company’s investment
strategy of accretive
acquisitions with
investment-grade
operators. The lower cost of
financing in Euros enables
the Company to generate
earnings accretion from
stores leased to strong
operators on inflation-
linked leases.
Carrefour is a high-quality
grocery operator, occupying a
market position in Europe
comparable to that of
Sainsbury’s in the UK. As the
seventh largest grocery
operator globally and the
third largest in Europe,
Carrefour enhances the
Group’s exposure to
investment-grade tenants
with a BBB rating
. Operating
across countries, Carrefour
also holds a dominant
position as the second-
largest grocer in France,
commanding a substantial
.%
market share.
Carrefour’s strategic focus
on online and omnichannel
retailing, particularly
through its “Drive” online
grocery fulfilment network,
is strongly aligned with the
strategies pursued by the
Company’s supermarket
tenants in the UK. By ,
Carrefour is planning to
invest billion into online
capex
with an objective
for omnichannel customers
to represent % of all
Carrefour shoppers
.
0
10
20
30
40
50
60
70
80
90
100
€bn
HypermarketsSupermarkets Traditional Discount Convenience Online
French grocery market by channel (sales, €bn)
29
2023 2024
Omnichannel supermarkets
combine the largest and one of
the fastest growing channels
80
86
73
78
64
70
36
44
22
25
14
18
. IGD France channel data ( and
forecasts)
. Standard & Poor’s
. Kantar France Grocery Market Share
( weeks ending July )
. Carrefour “Digital Retail ” strategy
. “Strategic outlook for
Carrefour” IGD,
STRATEGIC REPORT | INVESTMENT ACTIVITY
EXPANDING INTO NEW MARKETS CONTINUED
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 23
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
and JV opportunities which present capital recycling
opportunities, the benefit of which comes both through
proving the portfolio NAV in the open market and through
opportunities to redeploy sales proceeds in the most
earnings accretive manner for shareholders at that time.
We currently consider that the Company’s debt finance
capacity is best deployed into accretive acquisitions to
grow earnings. However, the option of share buybacks is
continuously under review by the Investment Adviser and
the Board.
In summary, we are focused on delivering earnings
accretion through a rigorous approach to capital allocation.
This, combined with tight cost controls in the business, as
evidenced through the Company’s continually decreasing
EPRA cost ratio, should deliver efficient earnings growth
and increased returns to shareholders.
THE COMPANY’S PORTFOLIO
The Company has built a portfolio of strong trading,
‘mission critical’ omnichannel supermarkets backed by
leading grocery operators.
The central pillar of the Company’s investment policy is to
acquire omnichannel supermarkets that form a key part of
our tenants’ last mile fulfilment networks. These stores offer
both an online provision and in-store shopping, helping to
capture a greater share of the grocery market. Currently 93%
of our supermarket assets are omnichannel, by value.
The portfolio benefits from long unexpired lease terms with
predominantly upwards only, index linked leases, helping to
provide long-term income with contractional rental growth.
Within the UK, operators typically look at the affordability
of rent based on a benchmark of c.4% rent to turnover,
simply seen as two weeks of trade. The Group’s UK
supermarkets average rent to turnover is 4%, which equates
to £24 per sq.ft. We have highly secure income with 100%
rent collection during the year and Tesco and Sainsbury’s
accounting for 75% of the Company’s rent roll.
During the year, the Group acquired a hand-picked portfolio
of Carrefour supermarkets in an off market, direct sale and
leaseback with the operator. The assets form a key part of
Carrefour’s omnichannel operation with 15 stores operating
Drive “Click & Collect”. This channel accounts for 80% of
online grocery in France.
The standalone stores are subject to annual, uncapped
inflation-linked rent reviews with 12 year unexpired lease
terms (tenant only break at year 10) and are let on low and
affordable rents of €7 per sq.ft. with an average RTO of 2.1%,
below the RTO average of 2.5% in France. The rents produce
a low capital value of €110 per sq.ft. The transaction helps
to increase the Group’s exposure to strong tenant covenants,
further diversifies the portfolio and promotes further income
growth through index-linked rent reviews.
As part of the Company’s investment strategy to acquire
high-quality, strong trading supermarkets, it is sometimes
necessary to acquire complementary non-grocery units that
are co-located with the store. These units often create
In addition to the Company’s Sustainability Report,
disclosures in line with the TCFD recommended disclosures
and the Company’s Streamlined Energy and Carbon
Reporting (“SECR”), have been included within the Annual
Report on pages 39 to 51.
Secondary listing on the Johannesburg Stock Exchange
(“JSE”)
The Company is in the process of applying for a secondary
inward listing on the Main Board of the Johannesburg Stock
Exchange by introduction. The listing of the Company on
the JSE is expected to become effective by the end of the
calendar year, subject to various regulatory approvals in
South Africa.
The Company will not place or issue any new shares in
connection with its application for a secondary listing on the
JSE and will remain listed on the Closed-ended investment
funds category of the FCA’s Official List and traded on the
LSE’s Main Market. PSG Capital Proprietary Limited has been
appointed as Corporate Advisor and Sponsor in South Africa.
The Company believes that admission to trading of the
shares on the JSE will be beneficial to the Company and its
shareholders. The secondary listing should contribute to
liquidity in the Group’s shares through its increased profile
and improved accessibility in the South African market,
where a number of investors have already shown strong
interest in investing in the Company, driven by its high-
quality portfolio of omnichannel supermarkets and secure
income providing an attractive dividend.
Outlook
We remain resolutely focused on delivering sustainable
earnings growth for the Company in our role as Investment
Adviser. Whilst acknowledging the ongoing impact of macro
factors such as interest rates which are ultimately outside of
our control, we continue to drive strong performance at an
operational level. We believe this will translate into positive
momentum for the Company.
In the Company’s core UK market we see accretive
opportunities that meet our disciplined approach to capital
deployment, albeit in a reduced addressable market.
France offers an extension of this strategy and an attractive
potential further source of earnings growth. Opportunities
in geographies outside of the UK will only be considered
where asset quality can be maintained and where we
see attractive relative value. Should we look to further
increase the Company’s exposure to this market, we would
first consult with shareholders and revisit the Company’s
Investment Policy.
Following receipt of the final portion of the Sainsbury’s
Reversion Portfolio disposal proceeds received at the
beginning of the year, the most prudent decision was to pay
down debt rather than deploy that capital into new assets
and expose the Company to higher leverage and potential
valuation decline. As valuations have stabilised and market
sentiment has improved, we are more comfortable in
gradually normalising leverage levels.
We continue to consider all options for the Company to
achieve earnings growth. We are also exploring disposal
24 SUPERMARKET INCOME REIT PLC
The Portfolio’s weighting towards upwards only, inflation-
linked rent reviews is 80% with 58% of the Portfolio being
reviewed annually.
Indexation Income mix by rent review type
RPI %
CPI %
ILC %
Fixed %
OMV %
Total %
Rent review
Income mix by
rent review type
Annual %
yearly %
yearly %
Total %
UK rental caps
% of UK supermarket
index-linked portfolio
- % %
- % %
- % %
- % %
- % %
Total %
The rent profile of the supermarkets is broadly in line with
the market at 4% RTO. The rental maturity profile is well
dispersed with the first material regear in 2029.
WAULT
WAULT
breakdown
WAULT
rental breakdown
WAULT
count breakdown
- yrs .% -
- yrs .% -
- yrs .% .
- yrs .% -
- yrs .% -
- yrs .% .
- yrs .% .
- yrs .% .
- yrs .% .
- yrs .% .
+ yrs .% .
Total .% .
a retail destination helping to drive further footfall into
the supermarket. Non-grocery assets represent 6% of the
Portfolio by value.
During the year, the Company selectively strengthened
its Portfolio with the addition of 20 supermarkets for a
combined total of £135.8 million
34
.
July 2023: A Sainsbury’s in Gloucester, for £17.4 million
34
.
The store has a 15-year unexpired lease term
35
and is subject
to 5-yearly upwards only, open market rent reviews.
July 2023: A Sainsbury’s in Derby, for £19.0 million
34
. The
store has a 15-year unexpired lease term
35
and is subject to
5-yearly upwards only, open market rent reviews.
March 2024: A Tesco in Stoke-on-Trent, for £34.7 million
34
.
The store has a 11-year unexpired lease term and is subject
to annual upwards only RPI-linked rent reviews.
April 2024: A portfolio of 17 Carrefour supermarkets
located in north and north west France, for £64.7 million
34
.
The portfolio was a direct sale and leaseback with Carrefour
with 12-year unexpired lease terms
35
and subject to annual,
uncapped inflation-linked, rent review.
The acquisitions during the year were purchased at an
average net initial yield of 6.7% (7.0% UK, 6.3% EUR)
providing an attractive spread to the Group’s incremental
cost of debt and were immediately accretive to earnings.
The increased exposure to index-linked income also
generates further contractual earnings growth underpinned
by strong tenants.
Acquisitions during the year were financed using existing
headroom within our debt facilities and subsequently
through the €83 million private placement which was
announced in July 2024.
For more information on financing arrangements refer to
note 19 of the financial information.
Tenant
Exposure by
rent roll
Exposure by
Valuation
Tesco % %
Sainsbury’s % %
Morrisons % %
Waitrose % %
Carrefour % %
Asda % %
Aldi % %
M&S % %
Non-food % %
Total % %
The Portfolio’s weighting towards investment grade tenants
provides secure long-term income with a weighted average
unexpired lease term of 12 years. In addition, the portfolio
is heavily weighted towards upwards only inflation-linked
rent reviews. The average cap on our inflation-linked leases’
rental uplifts is 4%.
. Excluding acquisition costs
. With a break option at year
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 25
Portfolio valuation
Cushman & Wakefield valued the Portfolio as at 30 June
2024, in accordance with the RICS Valuation – Global
Standards which incorporate the International Valuation
Standards and the RICS UK Valuation Standards edition
current at the valuation date.
The properties were valued individually without any
premium/discount applying to the Portfolio as a whole. The
Portfolio market value was £1,775.7 million, an increase of
£82.8 million reflecting a valuation decline of £53.0 million
(including currency exchange movements), which was
offset by new acquisitions of £135.8 million pre acquisition
costs. This valuation reflects a net initial yield of 5.9% and
a like-for-like valuation decline of 3.2% since 30 June 2023.
The benchmark MSCI All Property Capital Index during the
same period was down 4.5%.
The decline in valuation reflects the outward shift
in property yields applied by valuers across the real
estate sector as a result of higher interest rates and the
macroeconomic environment. This was largely recognised
in the first half of the year, with a like-for-like valuation
decline of 3.2% reported in the Company’s valuation as at
31 December 2023. Valuations remained broadly flat in the
second half of the year.
The valuation decline in the year has however been partially
mitigated by our contractual inflation-linked rental uplifts.
The average annualised increase in rent from rent reviews
performed during the year was 4.0%. 82% of the Company’s
leases benefit from contractual rental uplifts, with 80%
linked to inflation and 2% with fixed uplifts.
THE GROCERY MARKET
UK
Non-discretionary grocery market continuing to
experience strong growth
The UK grocery market has highlighted its defensive, non-
discretionary characteristics this year with sales growth of
5.8% against a very strong inflation-led comparator of 9.2%
for 2023. Total grocery market sales are forecast to be £251.6
billion in 2024, an increase of £59.6 billion or 31% since pre-
pandemic levels in 2019.
While the sector growth will continue to ease as inflation
moderates in 2025 in year-on-year percentage terms, IGD
projects continued healthy absolute sales growth in the
coming years. With forecast annual growth of around 3%
to 2029, the UK grocery market is expected to reach £296
billion in the same year.
The growth from 2019 out to IGD’s projected total sales
figure would represent a 4.4% compound annual growth
rate. The future projected growth is in line with long run
RPI/CPI projections and underlines the grocers’ ability
to efficiently pass through inflation to consumers. The
increased sales revenue at the store level will support higher
rents over the medium term.
The environmental efficiency of our stores continues to be
a key priority for our asset management initiatives, selective
acquisitions and is supported by the ongoing investment by
grocery tenants into respective store estates. A breakdown of
our supermarket EPC ratings can be seen below:
EPC rating
% of UK supermarket
Portfolio by value
A %
B %
C %
D %
Total %
Active asset management delivering additional value and
improving sustainability of sites
The Company continues to seek sustainability and value
creation initiatives at our larger sites which are not fully
demised to the core supermarket tenants and therefore
benefit from greater landlord control.
Alongside our tenants, we are looking at ways to increase
the number of Electric Vehicle (“EV”) charging points at
larger sites. We now have 58 EV charging bays across five
sites, all completed at zero capex cost to the Company.
Current EV sites:
• Morrisons, Workington
• Morrisons, Wisbech
• Tesco, Bradley Stoke
• Tesco, Chineham
• Tesco, Beaumont Leys
Works were completed at Tesco, Thetford in partnership
with Atrato Onsite Energy plc where Tesco entered into a
20-year Power Purchase Agreement (“PPA”) for a new solar
installation on the rooftop at the store. The EPC rating was
re-assessed post installation and improved from a C to a B.
Opportunities to add complementary discount grocery
operators continue to progress. At Tesco, Chineham, the
existing planning consent was successfully implemented
and terms are agreed with a discount grocery retailer. We
have had three additional offers for new discount food
stores across the portfolio.
At Tesco, Chineham, McDonald’s has commenced fit out
works of a unit with a new 25-year lease. In addition to this,
Pets Corner is upsizing into a new unit. At Tesco, Bradley
Stoke, works are currently being undertaken to amalgamate
two units, one of which was vacant at acquisition and the
other let on a concessionary basis, with B&M committing to
a new 10-year lease, rendering the site 100% let.
Other developments are being considered at Sainsbury’s,
Newcastle, Morrisons, Workington and Tesco, Bradley
Stoke and various negotiations are ongoing with potential
tenants for those sites.
26 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | INVESTMENT ACTIVITY
PROMOTING
SUSTAINABILITY
ANNUAL REPORT 2024 27
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
TENANT INVESTMENT CASE STUDY:
SAINSBURY’S, CHELTENHAM
A benefit of owning mission
critical real estate is that our
tenants make significant
investments in maintaining
and improving the store estate
themselves. This investment is
made regardless of whether a
store is owned by the operator
freehold or occupied as a
tenant. Coupled with this are
the ambitious net zero targets
of Tesco and Sainsbury’s,
which also drive improvements
in energy consumption at the
store level. We are therefore
seeing an improvement in
EPC scores across the SUPR
portfolio as tenants undertake
programmes of store
maintenance and upgrades.
Sainsbury’s has been operating
at our Cheltenham site since
the s, with the store acting
as an omnichannel hub with
eight home delivery vans.
During -, Sainsbury’s
made a multimillion-pound
investment into the store.
The works included upgrading
the store’s refrigeration and
removing the gas power
source, reducing the store’s
dependence on fossil fuels.
The new electric refrigeration
system will store residual
heat output and use it to heat
the store. As a result of these
works, the EPC rating of the
store has been upgraded from
a D to a B, all at no cost to the
Company.
There are eight years
remaining on the Sainsbury’s
Cheltenham lease and this
material level of investment is
representative of our tenant’s
long-term commitment to
the site, providing confidence
on lease renewal prospects
ahead of expiry.
Full repairing and insuring (or
‘triple net’) lease structures are
standard across the Company’s
UK portfolio and we therefore
expect our tenants to
invest in modernising and
decarbonising our stores at
their own expense.
Sainsbury’s
LOCATION:
Cheltenham, Glos
ACQUISITION DATE:
Oct-19
GROSS AREA:
98,724 ft
NET SALES AREA:
61,964 ft
FY24/25FY23/24FY22/23FY24/25FY23/24FY22/23
Annual capital expenditure (£m)
36
717
814
920
Forecast
Forecast
1235
1400
1314
. Sainsbury’s / full year results and Tesco / full year results.
Excluding store buybacks. Sainsbury’s FY/ forecast includes a range
from m to m (inclusive of m of EV charging investment)
EPC UPGRADE FROM D TO B
28 SUPERMARKET INCOME REIT PLC
2026202520242023202220212020201920182017
9.8
10.6
12.5
22.3
20.9
22.0
23.1
24.4
25.2
26.4
Online grocery market spend (£bn)
Pandemic
peak
Return to
growth
Online grocery spend (UK) (2017 to 2023 actual,
2024 to 2026 forecasted)
Omnichannel stores capture the largest share of growth
Large format omnichannel stores, such as those which the
Company targets, have captured the largest share of sales
growth in the sector since 2019
38
. In that time the total UK
grocery sector has increased from £192 billion in 2019 to
£252 billion, with omnichannel supermarkets accounting for
£20 billion of that growth.
Importantly, this growth is being generated from existing
store estates meaning this is like-for-like sales growth,
resulting in improved sales densities and enhanced
profitability at the store level. From a landlord perspective,
this ensures that rents remain affordable for tenants,
particularly as sales growth has been running ahead of
capped rental uplifts. It also provides a strong backdrop for
higher rents in the future.
Large format stores have the scale to offer the full product
range giving customers the widest product choice, whilst
also offering the best value to customers through in-store
only and loyalty scheme product offers. In the current
inflationary environment shoppers are looking to achieve
best value on their purchases. Tesco and Sainsbury’s loyalty
schemes which offer attractive discounts to members,
have been very successful with Sainsbury’s reporting that
nine out of ten £80+ weekly shopping baskets are sold to
customers using their Nectar loyalty card.
Tesco and Sainsbury’s maintained market share whilst
discounter growth begins to slow
The UK grocery market is highly consolidated with the
six leading operators accounting for 83% of the market.
These operators can be divided into two groups: the
four multichannel (in-store and online) operators, Tesco,
Sainsbury’s, Asda and Morrisons, and two limited range
in-store only discounters, Aldi and Lidl.
0
50
100
150
200
250
300
350
20292028202720262025202420232022202120202019
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
192
208
210
217
238
252
259
270
278
287
296
Market value (£bn) YOY% Change
Institute of Grocery Distribution (“IGD”)
UK Grocery Market Value 2019-2029 (forecast)
This track record of strong growth in the sector has
attracted new institutional investors into the grocery real
estate investment market and has also seen a continued
programme of store buybacks by Tesco with four stores
purchased by the grocery operator in the year.
Online grocery channel returned to growth following a
rebase post pandemic
Online grocery now accounts for 12% of the total market.
Online market share has fallen back from the pandemic
peak of 15%, but having rebased to 12%, it is still one of
the fastest growing channels according to Kantar. The
online channel was permanently enlarged throughout the
pandemic – over 50% of online grocery shoppers during
2020 were new to the channel
37
and much of this change in
consumer behaviour has been sticky.
Omnichannel stores are optimally placed to benefit from
the combined growth of both in store sales and online.
Operators are able to increase online capacity at low cost
and benefit from shorter drive times due to their existing
omnichannel stores’ proximity to customers. This results
in a greater number of deliveries per hour and drives
greater profitability than the centralised fulfilment (or ‘dark
store’) model. Tesco recently announced that online sales
participation is stable at 13% of UK sales with basket sizes
up 4.2% and online sales up 10%. The return to growth
of the online channel is evident in the latest IGD forecast
which predicts growth of 27% (£6 billion) by 2029.
. “Winning in Grocery during and after Covid”, OC&C, Nectar . IGD Grocery Market channel data ( actual, forecast)
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 29
The challenge for the discounters will be achieving further
growth whilst maintaining profitability. 98% of the Company’s
UK portfolio already has a discounter present within a
10-minute drivetime. We expect new store opening by the
discounters to cannibalise existing discounter trade and
therefore the marginal profit of new stores will be diluted.
Lower inflation expected to drive grocery profitability
Grocery price inflation has driven significantly higher
revenues for supermarkets in recent years. Whilst the ability
for supermarkets to pass through inflation to consumers
highlights the non-discretionary nature of grocery, there
has of course been an impact on consumers’ shopping
habits. Cost of living pressures have decreased consumer
purchasing power, which has resulted in a trading down
to supermarkets’ own brand and value ranges. Through
investment in cost reduction programmes and improved
efficiency, coupled with product price increases, operators
have largely been able to preserve squeezed margins.
As food price inflation begins to moderate, we expect
consumers to again adjust their behaviour, driving volume
growth. However, the operators will continue to benefit
from the cost efficiencies the high inflation rates of recent
years have required and therefore we see volume growth in
the coming years being a driver of increased profitability.
The highly competitive and ultra-low margin nature of
the Discount market has meant Aldi and Lidl have had to
increase prices faster than other operators in order to protect
thin margins of 1-2%. Whilst the Discount channel has seen
increasing market share, this has primarily been driven by
increasing prices with Lidl and Aldi inflating prices by 25.7%
and 23.1% respectively over the three months to April 2023
40
.
ONS food and non-alcoholic beverages inflation (%)
-5%
0%
5%
10%
15%
20%
25%
ONS: Grocery inflation (Jun 2020 - Jun 2024)
Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23
Jun-24
With inflation beginning to moderate, grocery volumes are
expected to increase as household cost pressures reduce,
encouraging higher spending and purchasing a broader range
of products, including non-essentials and premium items.
Tesco and Sainsbury’s have both recently announced a
return to volume growth with increased basket sizes.
0
5
10
15
20
25
30
28%
15%
13%
10%
9%
8%
5%
27%
15%
15%
10%
8%
6%
5%
June
2019
June
2020
June
2021
June
2022
June
2023
June
2024
5-year operator market share (UK)
(June 2019 – June 2024)
39
Tesco Sainsbury’s Asda Morrisons Aldi Lidl Waitrose
Tesco and Sainsbury’s, the Company’s key tenants, continue
to be the leading players in the UK grocery space with 27.7%
and 15.2% market share respectively. Both operators have
increased market share in the last 12 months and are seeing
the benefit of investments in their stores, product ranges and
loyalty schemes. Asda and Morrisons (12.8% and 8.7% market
share respectively) have continued to lose market share
following their highly leveraged takeovers in 2020 and in the
face of competition from the limited range discounters.
2017
1,521
1,662
1,713
1,818
1,902
1,993
2,022
2 018 2019 2020 2021 2022 2023
2017 2018 2019 2020 2021 2022 2023
121
111
81
105
84
91
29
Aldi Lidl
Discounter portfolio size (UK), 2017-2023
Discounters – Number of stores
New store openings
0
500
1000
1500
2000
0
20
40
60
80
100
120
140
While Aldi and Lidl achieved impressive growth which
accelerated in the period from 2020 to 2023, with Aldi’s
market share growing from 7.5% to 10.2% and Lidl’s
growing from 5.8% to 8.1% in the period, this growth
appears to have slowed. In the case of Aldi, this growth
reversed in 2024 with market share marginally declining to
10.0% while Lidl increased market share at a lower annual
rate to 8.1%. This lower growth can be linked to several
factors including a reduced rate of store openings which had
previously been the key driver of market share growth.
. Which? Supermarket food price inflation tracker, June . Kantar UK Grocery Market Share ( weeks ending June )
30 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | INVESTMENT ACTIVITY
OPTIMISING OUR
SECTOR SPECIALISM
ANNUAL REPORT 2024 31
UK SUPERMARKET RENTS
Over the year, we have seen
further dislocation between
perceived market rents and
levels that are affordable for
UK operators, typically at the
long-standing industry ratio
of % rent to turnover.
Rent to turnover is widely
utilised by the operators to
establish an acceptable
level of affordable starting
rent, with % RTO simply
seen as two weeks of trade.
A factor which is often
misunderstood is that stores
vary in size. As a result, rent
per sq.ft. for two strong
trading stores can be
very different and can
be misleading when
viewed in isolation.
Both stores within the
example above are strong
trading and would be
strategically important for
the operator taking annual
turnover of million.
However, the operator of
the larger store would be
unwilling to pay for additional
space if it is not generating
additional turnover. This
results in the rent per sq.ft.
being materially different
between the two stores.
Operators are typically willing
to commit to new stores on
long lease terms as long as
the initial rent is set at an
acceptable level of RTO.
Adjustments:
Another common error when
assessing grocery rents is
simply dividing the rental
income by the GIA to produce
a rent per sq.ft. figure. Within
supermarket leases it is
standard that there will be
adjustments to store size to
take into account additional
rental income payable on
fixtures and fittings (.%)
and petrol filling stations
(.%). These adjustments
are usually defined within
the lease.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
Worked example:
Store weekly turnover ,,
Annual turnover ,,
Affordable rent (% RTO) ,,
Store A Store B
Gross Internal Area (sq.ft.) , ,
Rent per sq.ft. () . .
Adjustments (%) .% .%
Net rent per sq.ft. () . .
32 SUPERMARKET INCOME REIT PLC
Market rents:
Market rent is often linked
to indexes from providers
such as MSCI who publish an
average rent per sq.ft. figure
for the UK grocery market.
Whilst these indexes can be
a useful proxy for the total
market, they also include
weaker stores and smaller
format discounters which
naturally produce lower rent
per sq.ft.
Another key factor impacting
market rent is the exclusion
of bilaterally negotiated
rents on regears as they
are not deemed to be arm’s
length transactions and are
as such not treated as open
market evidence. Given rents
are a function of a store’s
turnover, operators are more
willing to pay higher rents for
stronger performing stores.
This has been confirmed by
recent regear rents being
agreed above the MSCI ERV
but in line with 4% RTO.
Additionally, we have seen
a limited number of new
large format store openings,
further adding to the lack of
open market rental evidence.
We therefore view regears
to be a highly important
proxy for affordable rent
as operators look to secure
long-term occupation of
strong trading stores.
The Portfolio is broadly in line
with market rent with a rent
per sq.ft. of £24 per sq.ft. and
a rent to turnover of 4%.
OPTIMISING OUR SECTOR SPECIALISM CONTINUED
STRATEGIC REPORT | INVESTMENT ACTIVITY
Worked example:
Store rent () ,,
Gross Internal Area (sq.ft.) ,
Rent per sq.ft. () .
Adjustments .%
Adj. Gross Internal Area ,
Adj. rent per sq.ft. () .
Store rent () ,,
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 33
0%
5%
10%
15%
20%
25%
30%
OtherLidlAuchan Systéme UIntermarcheCarrefourE. Leclerc
+0.3%
increase
19.6%
French grocery market share (July 2024)
42
The French grocery market is highly consolidated with 60%
of total market share controlled by three grocery operators;
E.Leclerc, Carrefour and Intermarche. Over the last 6 months
Carrefour has increased market share by 0.3% to 19.6%. It
has accelerated its price investment programme, the effect
of which has been to increase market share in the face of
competition from cheaper alternative grocers, while preserving
profitability. Carrefour’s increase in market share was also
driven by volume growth as consumers return to traditional
shopping habits and the effects of inflation subside.
2026202520242023202220212020201920182017
6.8
7.4
8.5
11.9
13.3
12.9
14.0
14.3
15.1
16.0
French online grocery market spend (£bn)
French Online grocery spend (2017 to 2023 actual,
2024 to 2026 forecasted)
Online market share in France has been permanently
enlarged due to an increase in take up throughout the
pandemic. The channel has grown by 93% between 2018
and 2024. The channel has been further strengthened by
investment programmes by operators such as Carrefour
which, across the group, is planning to invest €3 billion in
the online channel
43
and for omnichannel customers to
represent 30% of all customers by 2026
44
.
Due to geographic differences between the UK and France,
80% of online sales are fulfilled via Click & Collect vs 20% in
the UK. Operators will use large fulfilment centres ‘hubs’ to
pick and pack dry goods which are then delivered to stores
which operate as ‘spokes’. These stores are responsible for
picking fresh goods with the combined order collected by
the customer in the car park.
Whilst the French online model is different, it is built
around mission critical omnichannel stores, in strong
locations which provide last mile fulfilment to consumers.
FRANCE
FRANCE
0
50
100
150
200
250
300
350
2028202720262025202420232022202120202019
246
255
261
275
284
290
297
305
312
321
French grocery market size (£bn)
France Grocery Market Value (2019-2023, 2024-2028
(forecast))
41
The French grocery market, one of the largest in the
world by total value, has shown consistent growth over a
prolonged period. The defensive and non-discretionary
sector has experienced YoY sales growth of 2.1% against a
strong average inflation-led comparator of 5.6% for 2023.
Total market sales are forecasted to be €290 billion in 2024,
an increase of €44 billion or 18% since 2019. The French
grocery sector is expected to reach €321 billion by 2028
representing an annual increase of c.3%.
Insee: Grocery inflation (Jun 2020 - Jun 2024)
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jun 20
Dec 20
Jun 21
Dec 21
Jun 22
Dec 22
Jun 23
Dec 23
Jun 24
Price index in large and predominantly food stores (%)
Similar to the UK, France has seen significant inflation
pressure in recent years, helping to drive revenue growth at
the expense of volumes as consumers changed purchasing
habits to manage budgets. Grocery inflation increased to an
all-time high of over 15% in 2023, up from 0.8% in 2020. As
inflationary pressures ease, we expect to see volumes increase
and consumers return to more traditional shopping habits.
. Kantar France Grocery Market Share ( weeks ending July )
. Carrefour “Digital Day - Digital Acceleration for Retail & Ecommerce”
. “Carrefour ” Strategic Plan. IGD
STRATEGIC REPORT | INVESTMENT ADVISER’S REPORT
34 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | KEY PERFORMANCE INDICATORS
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 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 27 to the
financial statements.
Adjusted earnings is a performance measure used by the
Board to assess the Group’s financial performance and
dividend payments. The metric adjusts EPRA earnings by
deducting one-off items such as debt restructuring costs
and adding back finance income on derivatives held at
fair value through profit and loss. Adjusted Earnings is
considered a better reflection of the measure over which
the Board assesses the Group’s trading performance and
dividend cover. Finance income received from derivatives
held at fair value through profit and loss are added back
to EPRA earnings as this reflects the cash received from
the derivative hedges in the period and therefore gives
a better reflection of the Group’s net finance costs. Debt
restructuring costs relate to the acceleration of unamortised
arrangement fees following the refinancing of the Group’s
debt facilities during the year.
We set out below our key performance indicators for the Company.
KPI Definition Performance
1. Total Shareholder
Return
Shareholder return is one of the Group’s principal measures
of performance.
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.
8% for the year to 30 June 2024
(Six months ended
31 December 2023: 23.2%,
30 June 2023: -34%)
2. WAULT WAULT measures the average unexpired lease term of the
Property Portfolio, weighted by the Portfolio valuations.
12 years WAULT as at 30 June 2024
(31 December 2023: 13 years,
30 June 2023: 14 years)
3. EPRA NTA per share The value of our assets (based on an independent valuation)
less the book value of our liabilities, attributable to
Shareholders and calculated in accordance with EPRA
guidelines. EPRA states three measures of NAV to be used;
of which the Group deem EPRA NTA as the most meaningful
measure. See Note 27 for more information.
87 pence per share as at 30 June
2024 (31 December 2023: 88p,
30 June 2023: 93p)
4. Net Loan to Value The proportion of our Portfolio gross asset value
that is funded by borrowings calculated as balance sheet
borrowings less cash balances divided by total investment
properties valuation.
37% as at 30 June 2024
(31 December 2023: 33%,
30 June 2023: 37%)
5. Adjusted EPS* EPRA earnings adjusted for company specific items to reflect
the underlying profitability of the business.
6.1 pence per share for the year
ended 30 June 2024 (31 December
2023: 2.9p, 30 June 2023: 5.8p)
KEY PERFORMANCE INDICATORS
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 35
STRATEGIC REPORT | EPRA PERFORMANCE INDICATORS
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. 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 financial statements.
Measure Definition Performance
1. EPRA EPS A measure of EPS designed by EPRA to present underlying
earnings from core operating activities.
4.3 pence per share for the
year ended 30 June 2024
(30 June 2023: 4.6p)
2. EPRA Net Reinstatement
Value (NRV) per share
An EPRA NAV per share metric which assumes that entities
never sell assets and aims to represent the value required
to rebuild the entity.
97 pence per share
as at 30 June 2024
(30 June 2023: 103p)
3. EPRA Net Tangible Assets
(NTA) per share
An EPRA NAV per share metric which assumes entities buy
and sell assets, thereby crystallising certain levels of
unavoidable deferred tax.
87 pence per share as
at 30 June 2024
(30 June 2023: 93p)
4. EPRA Net Disposal Value
(NDV) per share
An EPRA NAV per share metric which represents the
Shareholders’ value under a disposal scenario, where
deferred tax, financial instruments and certain other
adjustments are calculated to the full extent of their
liability, net of any resulting tax.
90 pence per share
as at 30 June 2024
(30 June 2023: 98p)
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 date, less non-recoverable property
operating expenses, divided by the market value of the
property, increased with (estimated) purchasers’ costs.
5.9% as at 30 June 2024
(30 June 2023: 5.5%)
6. EPRA Vacancy Rate Estimated Market Rental Value (“ERV”) of vacant space
divided by ERV of the whole portfolio.
0.5% as at 30 June 2024
(30 June 2023: 0.4%)
7. EPRA Cost Ratio
(Including direct vacancy
costs)
Administrative & operating costs (including costs of direct
vacancy) divided by gross rental income.
14.7% for the year
ended 30 June 2024
(30 June 2023: 15.5%)
8. EPRA Cost Ratio
(Excluding direct vacancy
costs)
Administrative & operating costs (excluding costs of direct
vacancy) divided by gross rental income.
14.4% for the year ended
30 June 2024 (30 June 2023:
15.2%)
9. EPRA LTV Net debt divided by total property portfolio and other
eligible assets.
38.8% as at 30 June 2024
(30 June 2023: 35.2%)
10. 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.
Rental increase of 2.1% for
the year ended 30 June 2024
(30 June 2023: 2.7%)
11. EPRA Capital
Expenditure
Amounts spent for the purchase and development
of investment properties (including any capitalised
transaction costs).
£146.2 million for the year
ended 30 June 2024
(30 June 2023: £377.3 million)
36 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | FINANCIAL OVERVIEW
Administrative and other expenses and EPRA cost ratio
Administrative and other expenses, which include all
operational costs of running the business, decreased by
£0.2 million to £15.2 million (30 June 2023: £15.4 million).
We continue to monitor the operational efficiency of the
Group through its EPRA cost ratio, which is among the
lowest in the sector, and improved by 80bps to 14.7%.
30 June 2024 30 June 2023
EPRA cost ratio including direct
vacancy costs .% .%
EPRA cost ratio excluding direct
vacancy costs .% .%
Net finance expenses
During the year, the Group received £134.9 million
following the divestment of its interest in the Sainsbury’s
Reversion Portfolio Joint Venture. Part of the proceeds were
utilised to pay down debt, subsequent to which the Group
increased its debt facilities with a new SMBC facility.
Net finance expenses reduced by £3.0 million to £16.2
million compared to the prior year, primarily due to the
short-term loan in relation to the Joint Venture in the prior
year and a lower average debt cost.
Adjusted earnings
The Directors consider adjusted earnings a key measure of
the Company’s underlying operating results, and a reference
through which the Board measures dividend cover.
Adjusted earnings therefore excludes one-off items which
are non-recurring in nature and includes finance income on
derivatives held at fair value through profit on loss. Adjusted
earnings for the year to 30 June 2024 were £75.8 million
(30 June 2023: £72.4 million). On a per share basis, adjusted
earnings increased by 0.3 pence per share to 6.1 pence for
the year to 30 June 2024, an increase of 4% (30 June 2023:
5.8 pence).
A full reconciliation between IFRS and Adjusted earnings
can be found in note 11 of the Financial Statements.
Atrato Capital Limited, the Investment Adviser to the Group,
is pleased to report the financial results of the Group for the
12 months ended 30 June 2024.
Financial results
30 June 2024
£’000
30 June 2023
£’000
Net rental income , ,
Administrative expenses (,) (,)
Net income from joint ventures – ,
Net finance expenses
(,) (,)
Adjusted earnings , ,
Net rental income
In the year, the portfolio generated net rental income of
£107.2 million (30 June 2023: £95.2 million), representing
an increase of £12.0 million or 12.6% compared to the prior
year. The growth in net rental income was driven by a full
period of rental income from property acquisitions and the
effect of contracted rent reviews.
On a like-for-like basis, EPRA net rental income increased
by 2.1%. During the year we successfully completed 22 rent
reviews increasing annualised passing rent by £2.9 million,
with the reviews being settled on average 4.8% ahead of
previous passing rent (or 4.0% on an annualised basis).
Net service charge expenditure remained broadly flat at £0.6
million (30 June 2023: £0.6 million), however our gross to
net margin continues to be among the highest in the sector
at 99.4% (30 June 2023: 99.4%), reflecting the strength of our
core single-let strategy and further highlighting the covenant
quality of our tenant base.
Rent collection rates were 100% for the year to 30 June 2024
(30 June 2023: 100%), as our focus on top trading stores and
covenant quality provided exceptional income security.
FINANCIAL OVERVIEW
. Net finance expense is adjusted for finance income from derivatives
held at fair value through profit and loss and non-recurring debt
restructuring costs.
Michael Perkins
Finance Director
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 37
Portfolio Valuation
The value of the portfolio at 30 June 2024, including the fair
value of investment properties held at amortised cost, was
£1,776 million (30 June 2023: £1,693 million). During the
Year, the Group invested £135.8 million in 20 omnichannel
supermarkets (excluding transaction costs). On a like-for-like
basis, the portfolio recognised a revaluation deficit of
£53.8 million, or 3.2%, which reflects the outward shift
in property yields applied by valuers across the real
estate sector as a result of higher interest rates and the
macroeconomic environment.
Cash Flow and Net Debt
Cash flows from operating activities before changes in
working capital increased by £12.6 million to £89.6 million,
primarily due to increased rental income received from rent
reviews and property acquisitions.
During the year, the Group received £134.9 million
following the disposal of its interest in the Sainsbury’s
Reversion Portfolio Joint Venture. Part of the proceeds
were used to acquire two omnichannel supermarkets with
a combined acquisition cost of £36.4 million (excluding
transaction costs), providing earnings growth in line with
the Group’s strategy, with the remaining proceeds used to
reduce drawn debt.
In the second half of the year, the Group drew down £106.8
million from facilities with existing lenders, to fund the
acquisition of 18 supermarkets.
Net debt increased by £25.5 million over the year to 30 June
2024, to £655.5 million, and represents a loan to value of
37% (30 June 2023: 37%). The Group continues to maintain
a conservative leverage policy, with a medium-term target
LTV of 30-40%.
Financing
30 June 2024 30 June 2023
Undrawn facilities
m m
Loan to value % %
Net debt / EBITDA ratio .x .x
Weighted average cost of debt
,
.% .%
Interest cover .x .x
Average debt maturity
,
. years . years
% of drawn debt which is
fixed/hedged
% %
Dividend
In the financial year ended 30 June 2024, the Company paid
the following interim dividends:
Declared
Amount
pence per
share
In respect of
the financial
year ended
Paid/
to be paid
July .p June August
October .p June November
January .p June February
April .p June May
Post period end, the Company declared an interim dividend
in respect of the financial year ended 30 June 2024 of
1.515 pence per Ordinary Share (the “Fourth Quarterly
Dividend”). The Fourth Quarterly Dividend was paid on
16 August 2024 as a Property Income Distribution (“PID”)
to shareholders on the register as of 12 July 2024. The
Company has now declared four quarterly dividends
totalling 6.06 pence per Ordinary Share in respect of the
financial year ended 30 June 2024.
EPRA net tangible assets and IFRS net asset
30 June 2024
£’000
30 June 2023
£’000
Investment property ,, ,,
Bank and other borrowings (,) (,)
Cash , ,
Other net (liabilities)/assets (,) ,
EPRA net tangible assets ,, ,,
Fair value of interest rate
derivatives , ,
Fair value adjustment for financial
assets held at amortised cost , ,
IFRS net assets ,, ,,
EPRA net tangible assets (“EPRA NTA”) is considered to be
the most relevant asset measure for the Group, and includes
both income and capital returns, but excludes the fair value
of interest rate derivatives and includes a revaluation to fair
value of investment properties held at amortised cost.
At 30 June 2024, EPRA NTA was £1,085 million (30 June
2023: £1,157 million), representing an EPRA NTA per share
of 87 pence, a decrease of 6.3% since 30 June 2023 primarily
due to the portfolio revaluation deficit of £65.8 million or
5 pence per share.
. Undrawn facilities for June includes a million
accordion option
. Including post balance sheet events
. Includes rates fixed through interest rate derivatives
. Including extension options at lenders’ discretion
38 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | FINANCIAL OVERVIEW
In addition, the Group also refinanced its existing £97
million secured debt facility with Deka through a new £100
million unsecured debt facility with ING Bank N.V., London
Branch. The facility comprises a £75 million term loan and
a £25 million revolving credit facility, which has a maturity
of three years and has two one-year extension options.
Following the refinancing, the Company has a weighted
average debt maturity of 4 years, a weighted average debt
cost of 3.8% and available undrawn facilities of £176 million
(including £50 million accordion).
The Group’s interest rate risk is mitigated through a
combination of fixed debt and derivative interest rate swaps
and caps. During the year, the Group utilised the value of its
existing in-the-money interest rate hedges to extend the term
of its hedging arrangements by 12 months through terminating
existing derivatives and acquiring new instruments that aligned
with the expiry of the Group’s debt portfolio. This exercise was
performed at no additional cost to the Company.
The Group maintains good long-term relationships with all
lenders and is currently in discussions regarding refinancing
requirements over the next financial year.
The Group continues to monitor its banking covenants
and maintains significant headroom on its LTV and ICR
covenants. As at 30 June 2024, property values would need to
fall by around 38% before breaching the unsecured gearing
covenant. Similarly, net rental income would need to fall by
72% before breaching the unsecured interest cover covenant.
Fitch Ratings, as part of its annual review, reaffirmed the
Group’s BBB+ rating with a stable outlook.
In the first half of the year, the Group completed a
comprehensive debt refinancing exercise, completing a
new £67 million unsecured facility with Sumitomo Mitsui
Banking Corporation, at the same time reducing its HSBC
facility from £150 million to £50 million and cancelling its
Barclays/RBC facility of £77.5 million.
In the second half of the year, the Group increased
its unsecured facility with Sumitomo Mitsui Banking
Corporation by £37.5 million to £104.5 million, to facilitate
the acquisition of a Tesco omnichannel supermarket in
Stoke-on-Trent.
In April 2024, the Group drew down €81.7 million from
its existing HSBC revolving credit facility, having also
increased the total size of the facility by £25 million. The
funds were used to acquire a portfolio of 17 supermarket
stores from Carrefour.
At 30 June 2024, the Group has gross borrowings of £698
million diversified across eight lenders, including £415
million of unsecured borrowings and £283 million of
secured borrowings. In addition, the Group has available
undrawn facilities of £104 million (which includes a £50
million accordion) and plenty of headroom under banking
covenants, providing the capacity to execute opportunistic
transactions as they arise.
Post year end, the Group announced the completion of a
£170 million refinancing through its first private placement
issuance and a new unsecured bank facility.
As part of the refinancing, the Company completed an
agreement with a group of institutional investors for a
private placement of €83 million new senior unsecured
notes, which have a maturity of 7 years and a fixed rate
coupon of 4.44%.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 39
STRATEGIC REPORT | TCFD COMPLIANT REPORT
Due to this overall decrease in the Company’s Scope 1 and 2
emissions, emissions from Fuel and Energy related activities
(“FERA”) (Scope 3 category 3) have also decreased from
37 to 32 tCO
2
e (14% reduction) for this reporting year.
50
Emissions from Purchased Goods and Services (Scope
3 category 1) have decreased from 3,132 to 2,215 tCO
2
e
(30% reduction) for this reporting year, due to a decrease
in total included spend as exclusions were more rigorous
this year. This year exclusions from spend include service
charge costs and costs that are recharged to tenants in full.
This is due to a spend-based approach being used for the
Scope 3 Purchased Goods and Services, which supports the
Company in prioritising its suppliers for engagement on
decarbonisation. This year no newly built properties have
been added to the portfolio; therefore, no emissions are
attributed to Capital Goods (Scope 3 category 2) this year.
Two new supermarket sites have been acquired by the
Company in this reporting year. Even with the two new
sites acquired, Scope 3 energy consumption and resultant
emissions from Downstream Leased Assets (Scope 3 category
13), which includes tenant Scope 1 and 2 emissions, have
decreased from 83,794 to 81,931 tCO
2
e (1% decrease) for this
reporting year due to improved estimation methods. Overall,
total Scope 1, 2 and 3 emissions have decreased from 87,537
tCO
2
e in the previous reporting year to 84,281 tCO
2
e
(4% reduction) in the current reporting year.
An error in the supermarket refrigerant emission calculation
was found for the previous reporting year (2022-2023),
resulting in missing Scope 3 downstream leased asset
emissions reported last year. This has now been rectified
and restated figures are included in the table below. The
correction has resulted in an 8% increase in total emissions
for the reporting year 2022-2023. In April 2024, the
Company acquired a portfolio of Carrefour omnichannel
supermarkets in France through a sale and leaseback
transaction. Given the timing of this transaction, full year
energy and carbon data has not yet been collected for these
French assets. Therefore, the disclosures in this SECR
Report focus on the energy and carbon performance of
the Company’s UK portfolio only. However, the Company
intends to collect the required energy and carbon
performance data from these French assets over the next
reporting period to ensure the Company’s next SECR Report
covers both UK and French assets.
Energy and Carbon Foreword
The Company recognises the urgent need to address
climate change and is committed to supporting the required
transition to a net zero economy.
This year, the Company reached a significant milestone
with the Climate and Environment pillar of its Sustainability
Strategy, with the setting of a formalised 2050 net-zero
commitment and associated GHG emissions reduction
targets. These targets were approved by the SBTi in March
2024, and include a commitment by the Company to reduce
Scope 1 and 2 emissions 42% by 2030 and to reduce Scope
1, 2 and 3 emissions 90% by 2050 (from a FY23 base year).
The Company’s Board and the Investment Adviser recognise
the importance of transparent, decision-useful sustainability
reporting to improve our accountability to stakeholders. As
such, the Company’s SECR and TCFD Report can be found
below on pages 39 to 51. In addition, the Company has
published a standalone Sustainability Report covering its
wider ESG performance.
The Company remains committed to further progressing
its climate-related strategy and emissions reductions
activities, as it continues to identify opportunities to reduce
operational carbon and energy use and contribute towards a
net zero future.
Streamlined Energy and Carbon Reporting
The below table and supporting narrative summarise
the SECR disclosure. As a listed entity, Supermarket
Income REIT plc is required to comply with the SECR
regulations under the Companies (Directors’ Report) and
Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018. Data for the year 2022-2023 and
2023-2024 is included as this is the Company’s second
year of SECR.
Compared to the previous reporting year (2022-2023), there
has been a slight increase in Scope 1 fuel consumption and
a decrease in Scope 2 purchased electricity consumption.
Overall, this has resulted in a decrease in total Scope 1 and
2 emissions from 111 tCO
2
e in the previous reporting year to
103 tCO
2
e (7% reduction) in the current reporting year.
TCFD COMPLIANT REPORT
. FERA emissions includes the well-to-tank (WTT) and transmission and
distribution (T&D) upstream emissions from Scope and .
40 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
Report
Previous reporting year:
1 July 2022 – 30 June 2023
As restated:
1 July 2022 – 30 June 2023
Current reporting year:
1 July 2023 – 30 June 2024
Location UK UK UK
Emissions from the combustion of fuel and
operation of facilities (tCO
e) (Scope )
Emissions from purchase of electricity
(location-based) (tCO
e) (Scope )
Emissions from business travel in rental cars
or employee-owned vehicles where company
is responsible for purchasing the fuel (tCO
e)
(Scope 3)
N/A N/A N/A
Total mandatory emissions (tCO
e)
Voluntary: Emissions from Fuel and
Energy related activity (location-based)
(tCO
e) (Scope )
Voluntary: Emissions from Purchased Goods
and Services (tCO
e) (Scope )
, , ,
Voluntary: Emissions from Capital Goods
(tCOe) (Scope )
N/A
Voluntary: Emissions from Downstream Leased
Assets (tCO
e) (Scope )
, , ,
Total gross emissions (tCO
e)
, , ,
Energy consumption used to calculate Scope
emissions (kWh)
, , ,
Energy consumption used to calculate Scope
emissions (kWh)
, , ,
Energy consumption used to calculate Scope
emissions (kWh)
,, ,, ,,
Total energy consumption (kWh) ,, ,, ,,
Intensity ratio: tCO
e (gross Scope + ) per m
of floor area
. . .
Intensity ratio: tCO
e (gross Scope , + )
per m
of floor area
. . .
. Emissions not calculated due to lack of data and immateriality (<% of total emissions). SUPR does not have an office or employees. The only travel is quarterly travel
by non-exec directors, the majority of which is local travel in London.
. Values have been rounded.
. Emissions in downstream leased assets includes emission from tenant electricity, fuel and refrigerant consumption. FERA emissions associated with leased assets
are included in Scope : Downstream Leased Assets
. Values have been rounded.
. Tenant energy consumption from fuels and electricity only.
. Normalised to Scope + floor area: , m
FY
. Normalised to Scope floor area: , m
FY
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 41
Methodology
The 2023/24 footprint within the scope of SECR reporting is
equivalent to 84,281 tCO
2
e, including voluntary emissions,
with the largest portion being made up of emissions from
downstream leased assets at 81,931 tCO
2
e.
Anthesis has calculated the above GHG emissions to cover
all material sources of emissions for which the Company
is responsible. The methodology used was that of the GHG
Protocol: A Corporate Accounting and Reporting Standard
(revised edition, 2015). Responsibility for emissions sources
was determined using the operational control approach.
All emissions sources required under The Companies
(Directors’ Report) and Limited Liability Partnerships
(Energy and Carbon Report) Regulations 2018 are included.
Raw data captured in spreadsheets including energy spend
and consumption data has been collected by the Company.
Where actual consumption data was available for natural gas
and electricity use, this was used. To address data gaps, the
most appropriate proxy was applied by using either previous
year’s data, actual data to calculate average monthly
consumption, or by applying the average floor area intensity
from sites with actual data. Fuel oil was estimated by
applying the average 2023 UK fuel oil price to the budgeted
spend for fuel oil. Energy was then converted to GHG
emissions using the UK Government’s GHG Conversion
Factors for Company Reporting 2023. Scope 3 emissions
have been calculated for relevant material categories using
consumption data, spend data, floor area and EPC data. Fuel
and Energy related activities includes well-to-tank (“WTT”)
and transmission and distribution (“T&D”) upstream
emissions from Scope 1&2. For Purchased Goods and
Services, Environmentally Extended Input Output (“EEIO”)
has been used. Spend data was provided per supplier and
mapped to 2023 DEFRA Input/Output (“IO”) categories. No
newly built sites were acquired during this reporting year,
therefore there were no Capital Goods this year. Where
actual data was not available for Downstream Leased
Assets, a combination of CIBSE benchmarks were used
against EPC data on energy use and heating type. Publicly
available air conditioning (“AC”) certificates were used to
determine the type and amount of refrigerants. Where this
was not available, other similar sites were used as proxies.
As per EPA data, the size of the air conditioning equipment
used was dependent on the amount of refrigerant used and
the floor area. Supermarket refrigeration and non-food air
conditioning was estimated using an intensity estimate from
EPA data as no activity data was available. Refrigerant loss
rate for refrigeration was taken from Direct Emissions from
Use of Refrigeration, Air Conditioning Equipment and Heat
Pumps from DEFRA. The Company continued its efforts
to improve energy efficiency across landlord-controlled
areas and to support tenant-led energy efficiency measures
between 1 July 2023 and 30 June 2024. A number of sites
have been identified for LED lighting upgrades across
car park and communal areas which will have a positive
impact on the Company’s Scope 2 emissions. Tenant-led
investments in store upgrades have also focused on energy
efficiency and resulted in EPC rating improvements, as
discussed in the Sainsbury’s Cheltenham case study above.
Approach to GHG emissions restatements
To improve its GHG reporting, the Company may restate
previously reported data to provide a more accurate
representation of previous performance and its
decarbonisation journey, should a significant change or
error be identified, such as:
• Significant changes in company structure and activities
• Methodology changes such as improvements in emissions
factors, data access and calculation methodologies
• Discovery of significant error(s) in previously reported data
The Company will restate the baseline used for its Scope 1,
2 and 3 emissions reductions targets if any of the changes
above result in a change of 5% or more, in line with the
requirements of the SBTi. The Company will review the
impact of the Carrefour portfolio acquisition on its SBT
baseline once full year energy and carbon data is collected
for these French assets.
Taskforce on Climate-Related Financial Disclosures
(TCFD)
Introduction
The following report contains the Company’s voluntary
climate-related financial disclosures for the reporting
period 1 July 2023 - 30 June 2024 in relation to governance,
strategy, risk management and metrics and targets. It
addresses all four core elements and 11 Recommended
Disclosures as detailed in “Recommendations of the Task
Force on Climate-Related Financial Disclosures”
58
.
Governance
Describe how the board exercises oversight
of climate-related risks and opportunities:
The Board is responsible for setting the Company’s
sustainability strategy and overseeing the Company’s
approach to climate-related risks and opportunities affecting
the business.
Both the Board and JTC Global AIFM Solutions Limited, the
Company’s Alternative Investment Fund Manager (the “AIFM”),
are responsible for the investment decisions of the Company
and directing the delivery of services by the Investment Adviser
to ensure that climate-related priorities are incorporated into the
execution of the investment strategy. In support of this objective,
the Board established its ESG Committee in May 2022, whose
role helps to ensure that sustainability issues, including climate
change, are discussed in sufficient detail and given appropriate
focus at the Board level. The ESG Committee, which is Chaired
by Frances Davies and attended by all of the Company’s
Directors, meets at least four times a year and has responsibility
for overseeing the delivery of the Company’s Sustainability
Strategy, including identification and management of climate-
related risks. The Board is primarily informed of climate-related
issues by the Investment Adviser through the meetings of the
ESG Committee. The Board also considers climate-related
issues when making decisions on acquisitions and this process
is described below under the managing climate-related risks
section of this report. See Figure 1 for an overview of the
Company’s governance structure related to climate-related risks
and opportunities.
. Task Force on Climate-related Financial Disclosures, “Final Report:
Recommendations of the Task Force on Climate-related Financial
Disclosures” (June ). https://assets.bbhub.io/company/sites////
FINAL--TCFD-Report.pdf
42 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
The Board reviewed and approved a refreshed
Sustainability Strategy for the Company in March 2024,
of which “Climate and Environment” is one of three key
pillars. The ESG Committee receives a report and verbal
update from the Investment Adviser at every quarterly
meeting in relation to this aspect of the strategy, and
the other two pillars (namely, Tenant and Community
Engagement and Responsible Business). The ESG
Committee update includes the Company’s quarterly
performance against environmental measures outlined
in the Company’s last TCFD Report (reporting period 1
July 2022 to 30 June 2023). The update also covers the
broader delivery of the Company’s sustainability strategy,
including activities such as the roll-out of rooftop solar
photovoltaic (“PV”) and EV charging, improvement of
Energy Performance Certificate (“EPC”) ratings, ESG-related
investor engagement and climate transition planning. These
updates allow the ESG Committee to oversee the Investment
Adviser’s performance against the agreed deliverables under
the sustainability strategy, as well as holding it to account
for non-performance. In addition, at the annual Board
strategy day event, sustainability strategy is included as a
core agenda item. The ESG Committee is also involved in
the review process and ultimate approval of the Company’s
TCFD Report. The Investment Adviser’s Managing Director,
ESG, is responsible for leading the delivery of these services
to the ESG Committee on behalf of the Investment Adviser.
The Board is committed to ongoing improvement of the
Company’s climate-related disclosures. During the reporting
year, sustainability consultancy Anthesis was again engaged
to provide external support to help shape the Company’s
response and alignment to the TCFD recommendations. As
part of this support, Anthesis conducted an independent
peer review. In addition, they provided analysis of and
recommendations on the Company’s final disclosures to
further advance its progress against best practice approaches
and identify focus areas for the Company to address in
upcoming disclosures. The Board is invested in enhancing
the Company’s understanding of climate risks and
opportunities and, as part of this, approved budget allocation
for ongoing climate-related activities, for the next reporting
year. This facilitates forward planning and preparation of
ESG matters targeted for the next reporting year.
The Board recognises that appropriate training
and upskilling is a key enabler to ensure successful
implementation of the Company’s sustainability strategy
and, specifically, the integration of sustainability factors
into the investment process. In 2023 and 2024, Climate Risk
training was delivered to the Investment Adviser and the
Board respectively, to improve understanding of climate-
related risks and opportunities and their tracking and
oversight in order to support the management of these issues
in the Company’s activities.
Describe management’s role in assessing and managing
climate-related risks and opportunities:
Investment Adviser
The Investment Adviser is responsible for the day-to-day
delivery of the sustainability strategy as approved by the
Board on behalf of the Company, including the assessment,
management and reporting of climate-related risks and
opportunities.
Steve Windsor, Principal and Sustainability Champion
at the Investment Adviser, is responsible for oversight,
monitoring and management of sustainability risks and
opportunities including those related to climate change.
Company
Audit
and Risk
Committee
Company
ESG
Committee
Managing
Director, ESG
Atrato Capital Atrato Partners JTC Company
Investment
Committee
Investment
Committee
Risk
Commitee
ESG
Committee
Audit and Risk
Committee
Develops and
executes the
sustainability
strategy, risk
indentification
and oversight
Ensures
sustainability
considerations
and risk
management
are embedded
in IA systems
and controls
Ensures
sustainability
risks and
opportunities
are reflected
in investment
advice
Oversight of JTC
sustainability
and policies
including as
they apply to
AIF clients
Ensures
sustainability
risks and
opportunities
are reflected
in investment
proposals
Oversees and
executes the
sustainability
strategy.
Develops and
executes risk
identification
and oversight
Climate risk
monitoring
strategy
recommendations
and oversight
Climate risk
monitoring
and mitigation
recommendations
in the context
of overall risk
management
Approval of
sustainability
strategy
and joint
responsibility
for company
risk
management
Board
Figure 1 – Governance structure related to climate-related risks and opportunities
Atrato Partners Board
Atrato Partners
Investment Committee
Atrato Capital
Investment Adviser
JTC
Investment
Committee
JTC
Risk
Committee
JTC AIFMBoard
AIFM Board
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 43
The Investment Adviser’s Managing Director, ESG, is
responsible for the operational delivery of climate-related
risks and opportunities measures within the Investment
Adviser’s operations and leads the provision of climate risk
advice to the Company.
The Investment Adviser’s Managing Director, ESG, and
Fund Management team meet fortnightly to discuss ESG
issues impacting the Company, and climate risk is a standing
agenda item as part of these meetings. The Managing
Director, ESG is also a standing attendee at the Investment
Adviser’s Investment Committee, assuming responsibility for
implementation and alignment with the Investment Adviser’s
sustainability systems and controls, co-ordination of third-
party service providers, and management of the Company’s
sustainability activities including climate-related reporting.
Where the Company has appointed a third-party service
provider, the Investment Adviser will require and hold
regular project progress meetings with the service provider,
where delivery is tracked against an agreed project timeline.
The results of the progress will be communicated to the ESG
Committee by the Investment Adviser in the context of its
progress against the agreed sustainability strategy.
In order to formalise oversight of the TCFD reporting
process, the Investment Adviser plans to formally establish
a dedicated Climate Risk and TCFD Working Group in
the next reporting period. This Working Group will be led
by the Investment Adviser’s Managing Director, ESG, and
consist of members of the wider Investment Adviser team,
including from fund management and finance, to ensure
appropriate assignment of climate-related responsibilities
and monitoring of climate-related issues.
Strategy
Describe the climate-related risks and opportunities the
organization has identified over the short, medium, and
long term.
In accordance with TCFD recommended disclosures,
the Company has identified climate-related risks and
opportunities across two key categories: (1) physical risks
related to the physical impacts of climate change (acute and
chronic) and (2) transition risks related to the transition to a
low carbon economy (policy, legal, technology, and market).
The Company considered these risks over three key time
periods: from now until 2030 (near-term), from 2030 to 2050
(medium-term) and 2050 to 2100 (long-term).
Time Horizon Details
Near-term (until 2030) The near-term time horizon (-) aligns to both the Company’s near-term
Science Based Target () and the anticipated compliance deadline for the
proposed Minimum Energy Efficiency Standards (“MEES”) regulation. The
Investment Adviser anticipates as the target year for a minimum B EPC
ratings. Due to the -year weighted average unexpired lease term (“WAULT”)
of its portfolio, the Company expects that there will be a limited number of lease
renewals and few changes to its existing leases during this time period.
Medium-term (from 2030 to 2050) The medium-term time horizon (from ) aligns with a period of current lease
renewals for the majority of the Company’s assets, during which physical and
transition risks associated with the Company’s portfolio may have greater influence
on lease agreements with existing and new tenants.
Long-term (2050 to 2100) The long-term time horizon aligns with both the Company’s long-term / net-zero
Science Based Target and with a potential increase in the likelihood and severity
of physical climate risks impacting the Company’s portfolio. This allows for the
creation of long-term strategies and planning regarding portfolio management in
response to these risks.
The Company considered two key temperature scenarios as part of its scenario analysis conducted this year:
Scenario Details
1.5°C / REMIND / SSP2 / Orderly (“1.5°C
Net Zero”)
Net Zero is an ambitious scenario that limits global warming to .°C through
stringent climate policies and innovation, reaching net zero CO₂ emissions
around .
3°C / REMIND / SSP2 / “3°C: Current Policies” Current Policies Scenario. No additional climate policies are applied leading
to significant global warming (exceeding °C) with severe physical risks and
irreversible impacts like sea-level rise.
44 SUPERMARKET INCOME REIT PLC
Further details on the hazard level model and data sets used
as part of the Company’s scenario analysis is included in the
appendix of this TCFD Report.
The Company has utilised the MSCI Real Assets (Real Estate)
Climate Risk Tool (the “MSCI tool”) and associated Climate
Value at Risk (“Climate VaR”) outputs to quantify the physical
risks across the post-2050 (long-term) time horizon.
59
The outputs
provide a qualitative risk assessment using set Financial Risk
Categories determined based on the asset’s Climate VaR. For
each hazard and for the transition risk, the Climate VaR is
classified into one of seven buckets as shown in Figure 2 below
60
:
+. %
%
-.%
-%
-%
Climate VaR
Source: MSCI ESG Research
Risk Reduction
Negligible Risk Reduction
No Identifiable Risk
Severe Risk
Significant Risk
Moderate Risk
Negligible Risk
Figure 2 – Financial Risk Category
Climate
Value-at-
Risk
Assets Location Hazard Costs
Physical Risk
The Company recognises the MSCI tool is only one of
many different scenario analysis tools currently available
on the market. In addition, such tools and the underlying
data models and inputs they utilise are constantly evolving
as climate research and available data sets continue to
advance. Therefore, the Company has adopted this method
of scenario analysis as an efficient way to review its
portfolio, but any findings will require further investigation
to establish their accuracy. The Company’s plans in this
respect are outlined in more detail under the 3°C (Current
Policies) temperature scenario results shared below on
page 45. The Company also intends to collaborate with
MSCI, and other data providers that may be used in future,
to provide feedback on the tools and data inputs and to
challenge assumptions and outputs when necessary.
In FY23 the sustainability consultancy, Anthesis, was
engaged to conduct a preliminary climate risk assessment
and qualitative scenario analysis as part of preparing the
Company’s 2023 TCFD Report. During this assessment,
the following risks were considered as potentially most
material to the Company determined based on their relative
likelihood and potential financial impact:
1. Physical Risk:
a. Flooding (Acute & Chronic): Increased insurance
premiums and increased capital expenditure required
on adaptative or remediation measures.
b. Extreme Heat (Acute): Increasing operating costs for
tenants through increased energy demand required
for cooling; supply chain disruption, stock damage and
write off. This may increase capital expenditure, repairs
and maintenance, and reduc tenant demand and/or
rent premiums for less energy efficient buildings.
2. Transition Risk
a. Policy and Legal Risk: Currently represented by the
proposed MEES regulation, but could include new or
additional regulations. Any properties not compliant
with MEES could reduce tenant demand, reduce rent
premiums or result in fines.
b. Market: Energy costs may increase for tenants, shifting
preferences for more energy efficient buildings and
renewables.
c. Reputation: Tenants demand preferences may shift to
lower carbon, highly energy efficient buildings, due to
Net Zero commitments and their customer demands,
reducing tenant demand and/or rent premiums.
This initial analysis has been expanded on in this reporting
year with further qualitative and quantitative analysis
undertaken over three potential risks, namely:
• Physical risk of flooding (both coastal and pluvial);
• Extreme heat; and
• Transition risks related to MEES, as discussed in the
Strategy section above
These risks were selected due to their potential impact
over different time horizons, with the proposed MEES
regulations identified as a key near-term risk and flooding
and extreme heat identified as potential longer-term risks,
allowing a broader assessment of the Company’s strategic
response and resilience. The Company will look to further
explore market and reputation related transition risks (both
longer term transition risks) in the next reporting period.
In FY23, the Company also identified the following climate-
related opportunity:
1. Climate-related opportunities:
a. Market: By accelerating deployment of energy efficient
measures, setting a Science Based Target (“SBT”) and
better aligning with tenant preferences, the Company
could gain a competitive advantage relative to other
commercial landlords who are not as progressive in their
climate and sustainability related ambitions. This could
enable increased tenant demand and rent premiums.
During the reporting period, the Company has acted on both
the opportunity to set a SBT and continued deployment of
energy efficient measures – including progressing roll out of
rooftop solar PV and installation of EV across the portfolio.
These measures and the Company’s targets in relation to
climate-related opportunities are discussed in more detail
under the Metrics and Targets section of this report, in
Tables B and E.
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
. Physical Climate VaR is defined as the net present value of the future costs
attached to physical risk (cost of damage due to extreme weather), expressed
as a % of the asset’s Capital Value. Calculated for a given carbon emissions
reduction scenario or climate change scenario, with a given scenario outcome
(aggressive or average) in case of physical risk. Discount rate of .% rate
(average long-term total return of MSCI Global Property Index).
. Financial Risk Categories include: Severe Risk (VaR<-%), Significant
Risk (VaR<-%), Moderate Risk (VaR<-.%), Negligible Risk (VaR<%),
No Identifiable Risk (VaR=%), Negligible Risk Reduction (VaR>%), Risk
Reduction (VaR>.%).
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 45
As identified above, a key progress milestone in the maturity
of the Company’s climate risk processes achieved in this
reporting period is the adoption of the MSCI tool. The
Company has used this tool to assist with quantitative
scenario analysis and an assessment of the portfolio’s
exposure to climate-related physical risks and associated
value at risk. The Physical Risk model integrated within
the MSCI tool assesses the cost of physical risks on
buildings, using climate data for the given locations of assets
incorporating the hazards of extreme heat, extreme cold,
fluvial and coastal flooding, tropical cyclones and wildfire
(see Figure 3). A summary of the key climate data sets
integrated into the MSCI Physical Risk model is included in
the appendix of this TCFD Report.
Source: MSCI ESG Research
Extreme Heat
(Climate Models)
Number of days/year with
temperature above C
Coastal Flooding
(Climate Models)
Flood height in metres
for a -yr return period
Tropical Cyclones
(Probabilistic Models)
Wind speeds in metres/second
for a -yr return period
Fluvial Flooding
(Climate Models)
Flood height in metres
for a -yr return period
Wildfires
(Climate Models)
Fire probability in %
for a -yr return period
Extreme Cold
(Climate Models)
Number of days/year with
temperature below C
Chronic Risks
operational cost
Acute Risks
asset damage
Figure 3 | Physical Risk Hazards:
In addition to other result outputs considered, the MSCI
tool was also used to conduct a physical risk assessment,
identifying the percentage of the Company’s assets at above
negligible risk
61
. The assessment was undertaken against the
two key physical risks that were qualitatively analysed in
the Company’s 2023 TCFD analysis, namely flood risk and
extreme heat.
This is the first stage in the Company’s project to develop
plans to mitigate any material climate risks at an asset level.
The outputs of this assessment under the high emissions
3°C (Current Policies) temperature scenario (aggressive
outcome)
62
highlighted the following results for the portfolio
63
:
• When considering both flood and extreme heat
independently, the majority of the Company’s portfolio
properties are exposed to negligible (>0 to 0.5% VaR) or no
identifiable risk. The same can be said when considering
aggregate physical risk overall.
• In terms of coastal flood risk, 89% of the portfolio
properties has either no identifiable or negligible exposure
to coastal flooding risk.
• In terms of fluvial flood risk, 83% of the portfolio
properties has either no identifiable or negligible exposure
to fluvial flooding risk.
• In terms of extreme heat risk, the results showed that
no assets in the portfolio face more than negligible
exposure to extreme heat under this scenario. Therefore,
highlighting flood risk rather than extreme heat as a
priority for further analysis. This is in line with the
benchmark of MSCI UK Quarterly Supermarket Index
which also identifies extreme heat as a negligible risk
under this scenario.
These risks reduce under an Average Outcome 3°C
(Current Policies) temperature scenario, and further reduce
under a 1.5°C (Orderly) temperature scenario (under both
an Aggressive and Average Outcome).
Over the next reporting cycle, the Company will undertake
the next phase of its risk mitigation project and look
to conduct further analysis over the outputs from this
assessment. This will involve specific review into the assets
identified from this assessment as being at above negligible
exposure to flooding, including:
• Further investigation into the results through review of
any historic flood or extreme heat events;
• Comparison against UK GOV flood risk scores and other
publicly available research; and
• Review of any existing tenant or local government
adaptation plans.
Through this ongoing work, the Company will aim to
validate the results and to determine an appropriate
strategic response and any planning required to address
any identified risks, for example, the development of site-
specific flood management plans or engagement of further
environmental surveys.
While the outputs from the MSCI tool in terms of heat risk
showed that this risk is financially immaterial at a direct
asset level, the Company recognises that extreme heat still
poses a potential indirect risk to the Company through the
potential impact on its tenants and their supply chains.
In terms of transition risk, policy and legal risk related to
the proposed MEES regulation was chosen as the key risk
for the Company’s transition risk analysis. Over the next
reporting period, the Company intends to conduct a high-
level assessment of the cost to retrofit our current portfolio
to achieve compliance with the proposed MEES regulations
in lieu of expected tenant-led investment. The Company
also has a project underway to develop its first Transition
Plan which will further outline the Company’s actions
and resources associated with its transition to net zero and
. The exposure assessment adopted the Climate VaR financial risk thresholds
of negligible, moderate, significant and severe risk, with severe the highest
financial risk category.
. °C | REMIND | Current Policies (default) by time horizon. The
Aggressive Outcome reflects the severe downside physical risk of a
given climate change scenario and is computed from the
th
percentile
of the distribution of Discounted Costs reflecting uncertainty about the
climate system and modelling assumptions. The Aggressive Outcome
(or worst case/
th
percentile) was selected to better stress test the
Company’s strategy.
. Percentages by count of total properties in the portfolio. Three assets were
excluded from the MSCI tool to avoid distorting the results. This was due to
their acquisition dates meaning no full year energy consumption data from
prior year was available to upload into the tool and available proxy data within
the tool was deemed inconsistent with the actual data results.
46 SUPERMARKET INCOME REIT PLC
actions to reduce the Company’s GHG emissions in line
with its science-based emissions reductions targets.
Going forward, the Company intends to take an iterative
approach to scenario analysis as a strategic planning tool
over time, as external tools and analytical choices evolve
and the Company’s analysis further matures.
Describe the impact of climate-related risks and
opportunities on the organization’s businesses,
strategy, and financial planning.
The Company has identified two material risks, one per
transition and physical, from the outputs of the scenario
analysis conducted over this reporting period. The impact of
each risk is likely to vary in magnitude across different time
horizons and climate scenarios (as listed in Table A), and
so the Company will continue to monitor and analyse these
risks to better understand how they may unfold.
Table A below provides a description of each risk and
the Company’s assessment of potential impact and risk
management strategy (including mitigating actions).
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
Table A | Climate-related risks summary
TCFD Risk
Category
Risk
Description
Time
Horizon Potential Impact and Strategy (including mitigating actions)
Transition
Risk: Policy
and Legal
Proposed MEES
regulation
requiring
portfolio assets
to achieve a
minimum of EPC
B rating by 2030.
Near-term
(from now until
2030)
1.5°C scenario (Net Zero): higher risk
3°C (Current Policies) scenario: lower risk
The proposed MEES regulation is expected to require all commercial property to be a
minimum EPC B by 2030. 56% of the Company’s portfolio is currently rated B or above.
This risk (and other policy and legal risks) is higher under a 1.5°C scenario which assumes
the implementation of stringent climate policies required to reach net zero.
The direct impact of the proposed regulation is reduced given the Full Repairing and
Insuring (“FRI”) nature of the leases
64
, and the ambitious emissions reduction and
associated energy efficiency targets of the Company’s major tenants. 75% of the UK
portfolio is leased to Tesco and Sainsbury’s, with both these tenants having set net zero
by 2050 science-based targets, supported by commitments to retrofit their stores to
improve energy efficiency over the near and medium-term. This tenant-led investment
in energy efficiency measures (including upgrades to heating and cooling systems and
refrigeration units) not reduces energy consumption but has also led to EPC rating
improvements at no cost to the Company.
In addition, SUPR has introduced a policy under which no asset with an EPC below C
can be acquired unless a demonstrable EPC improvement plan is developed, the cost of
which is reflected in the investment case for the asset acquisition. Opportunities for the
installation of energy efficiency and renewable technology in support of the Net Zero
transition (such as rooftop solar PV and EV charging) are also considered as part of the
investment case.
Physical Risk:
Flooding
Impact of acute
physical risk
of fluvial and
coastal flooding.
Long-term
(2050 to 2100)
1.5°C scenario (Net Zero): lower risk
3°C (Current Policies) scenario: higher risk
The key potential impact of fluvial and coastal flooding is asset damage (building damage
costs). This risk is higher under a 3°C scenario which assumes no additional climate
policies are applied leading to significant global warming (exceeding 3°C) with severe
physical risks including from sea-level rise, intense rainfall and associated flooding.
The direct impact of flooding risk on the Company is reduced given the majority of the
assets are on FRI leases, meaning the tenants have full insurance obligations.
Flood risk is a key risk assessed as part of the Company’s acquisition due diligence
process. The Company has expanded upon its assessment of flood risk from initial UK
Government online Flood Risk tool assessments to also utilise the flood risk assessment
within the MSCI tool. If flood risk is identified in an acquisition opportunity further due
diligence will be undertaken, for example additional site surveys and analysis, and
consideration of any adaptation measures.
The Company has identified the assets exposed to above negligible risk of flooding under
different scenarios. The Company will explore how further changes to its strategy and
financial planning may be required in light of this information, over the next reporting
period. The Company’s focus on investing in strong performing stores and the long-dated
nature of the Company’s leases already creates an incentive for the Company’s tenants to
build physical climate-resilience considerations into their own long-term management
strategies for the stores they occupy. As the Company continues to enhance its climate-
related engagement with tenants, it will also look to engage further on adaptation
planning and tenants’ plans in this respect.
. The nature of FRI leases means the tenants have responsibility for the maintenance and operation of
the assets (including the heating and cooling of the building) during the term of the lease.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 47
Describe the resilience of the organisation’s strategy,
taking into consideration different climate-related
scenarios, including a °C or lower scenario.
The Company’s scenario analysis outputs have highlighted
the following findings:
• Overall, the current portfolio is not highly exposed to
physical risks given the location of the assets.
• Of the physical risks assessed, flood risk is the most
material risk for the portfolio.
• The impact of climate-related physical risks to the
portfolio is expected to become more relevant in the
long term under a high emissions scenario.
• Transitional risks are expected to be higher in the short
term under a 1.5°C scenario driven by policy and legal
changes, such as minimum EPC rating requirements,
whereas under a 3°C scenario transition risks remain low
over the short to medium-term until the point whereby
policy and legal changes (particularly adaptation measures)
are required to address increasing physical impacts.
The Company recognises that its strategy and financial
planning regarding climate related risks and opportunities,
will need to continue to evolve over the long term,
particularly under a high emissions climate scenario.
However, a benefit of owning mission critical real estate is
that the Company’s tenants make significant investments
in maintaining, upgrading and decarbonising the
Company’s store estate. These investments are linked to the
ambitious net zero targets and associated energy efficiency
commitments of the Company’s largest tenants. Not
only do these investments drive improvements in energy
consumption at the store level, they have also helped the
Company to see an improvement in EPC ratings, supporting
the Company with progress against its EPC-related
improvement targets. In addition to acting as a transition
risk mitigant, these decarbonisation investments and the
long-dated nature of the Company’s leases also create
an incentive for the Company’s tenants to build physical
climate-resilience considerations into their own long-term
management strategies for the stores they occupy.
During the reporting period, the Company has undertaken
a range of initiatives aimed at enhancing its resilience to
climate-related risks and capitalising on climate-related
opportunities. This includes an ESG data sharing initiative,
focused on gaining a better understanding of the energy
consumption performance of the Company’s tenants. For
the first time, as outlined above, the Company has also
conducted quantitative climate scenario analysis as part of
the Company’s efforts to better understand and manage the
portfolio’s exposure to climate-related risks and opportunities.
A key climate-related milestone for the Company has been
the development of science-based emissions reduction
targets. These targets were approved and validated by the
SBTi at the beginning of 2024, they include a commitment
to reduce our Scope 1 and 2 emissions by 42% by 2030 and
to reduce Scope 1, 2 and 3 emissions 90% by 2050 (from a
FY23 baseline). More details on the Company’s SBTs are
provided under the Metrics & Targets section of this report
on page 48. As part of the development of the targets, the
Company engaged external consultants, Anthesis, to prepare
a high-level decarbonisation plan. The Company is currently
building upon this initial plan through the development
of its first Transition Plan. During the reporting period,
the Company continued to seek out other opportunities
to enhance the environmental performance of its assets
and contribute to the net zero transition. This includes the
continued roll out of EV charging and rooftop solar across
the portfolio and the Company’s efforts to encourage energy
efficiency improvements by its tenants.
Risk Management
Describe the organisation’s processes for identifying and
assessing climate-related risks.
The Company’s approach to risk assessment is as set out in
the Our Principal Risks Section on 52 to 54.
The Board and the AIFM together have joint overall
responsibility for the Company’s risk management and
internal controls, with the Audit and Risk Committee
reviewing the effectiveness of the Board’s risk management
processes on its behalf. The ESG Committee is responsible
under the delegated authority of the Board for the
identification and monitoring of climate-related risks which
are incorporated into the risk management process.
The ESG Committee considers both physical and transition
climate-related risks, including existing and emerging
regulatory requirements related to climate change.
The climate-related risks included in SUPR’s Risk Register
have since been updated to reflect the findings from this
climate risk assessment.
Climate risk is also a standing agenda item at the fortnightly
ESG meetings held between the Investment Adviser’s
Managing Director, ESG, and its Fund Management team.
Additionally, the Investment Adviser seeks to ensure
climate-related issues are a standing item when engaging
with the Company’s tenants. This includes discussion on
topics such as any planned tenant-led investments in store
refurbishments and energy efficiency upgrades, energy
consumption data sharing and improvements to EPC
ratings. Such engagement occurs multiple times per year
and more frequently with larger site tenants.
Describe the organisation’s processes for managing
climate-related risks.
As part of the acquisition due diligence process, the
Investment Adviser undertakes an assessment of each
asset against a set of sustainability criteria. This includes
consideration of climate-related risk, such as flood risk
(using both the UK Government online Flood Risk tool
and the MSCI tool) and assessing the emissions reduction
targets of tenants to assess alignment with SUPR’s own
targets, as part of each transition review. The Company also
obtains external environmental surveys on all acquisitions,
which address the short-term risk of climate related damage
to group properties. A summary of the climate-related
risk assessments undertaken is included as part of each
Investment Committee paper.
The Company will not recommend the acquisition of
assets with an EPC of below a C unless a deliverable EPC
improvement plan is prepared to improve an asset to an
48 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
EPC rating of C or better. The cost of delivering the EPC
Improvement plan forms part of the acquisition investment
case. EPC rating assessments for existing assets in the
portfolio are conducted on a rolling basis when there are
known sustainable improvements to assets, on expiry or
following a change to EPC calculation methodology. These
ratings, as the Company’s responsibility, are undertaken by
the Company’s consultants when required.
Both physical and transition climate risks associated with
the Company’s portfolio are assessed and included in the
risk register. Materiality and prioritisation determinations
are made through impact, likelihood, and risk scoring as a
part of the risk register. Inherent and residual probabilities
are assigned to each risk, from which a risk score is derived.
Mitigating actions are described in detail in the risk register,
laying out governance structure and processes in place
aimed at mitigating each risk. Finally, actions taken to
mitigate risks are tracked and recorded in the register.
Describe how processes for identifying, assessing, and
managing climate-related risks are integrated into the
organization’s overall risk management.
The Company’s approach to risk assessment is as set out
in the Our Principal Risks Section on pages 52 to 54.
The Company manages its risk related to its emissions,
and associated regulatory risk, by monitoring, measuring,
and disclosing its Scope 1, 2, and 3 GHG emissions, and
identifying available decarbonisation levers. This includes
the preparation of the Company’s first Transition Plan,
currently under development, which builds off the
decarbonisation analysis completed to prepare the
Company’s SBTs.
Tenant engagement is a core pillar of the Company’s
Sustainability Strategy and includes engagement on
energy efficiency measures and support of tenants’ own
decarbonisation efforts and targets. As part of Scope 3
emissions initiatives over the last reporting period the
Company has undertaken increased engagement efforts
with tenants on energy consumption and other ESG
performance data.
Should there be an incidence of flood, it is anticipated that
a flooding report would be submitted by the tenants to the
Investment Adviser. These can be consulted to inform the
Company’s risk and investment strategy.
Metrics and Targets
Disclose the metrics used by the organization to assess
climate-related risks and opportunities in line with its
strategy and risk management process.
To better understand and manage its climate-related
risks and opportunities in line with its strategy and risk
management process, the Company measures a number of
climate-related metrics, see Table B below.
Table B | Climate-related metrics
Metric category Metric FY FY
Transition risks % EPCs of UK supermarkets B or above (by valuations) 50%
65
56%
% EPCs of UK ancillary units B or above (by valuations) 35%
65
53%
% of actual energy consumption data from UK supermarket tenants
used for GHG Inventory (vs estimated data)
14% 26%
66
Physical risks % of UK supermarket assets in the portfolio screened for physical
climate hazards
Screening only at
acquisition
95%
67
Climate-related
opportunities
% of UK supermarket assets with on-site renewable energy
generation
20%
65
20%
% of UK supermarket assets with on-site EV charging 20% 30%
. As at June including post balance sheet events
. The majority of estimates are attributed to refrigerant gasses which were
% estimated. % of purchased electricity emissions and % of natural
gas emissions were calculated based on actual data in FY, an improvement
from % and % actual data respectively in FY.
. Three assets were excluded from the MSCI tool to avoid distorting the
results. This was due to their acquisition dates meaning no full year energy
consumption data from prior year was available to upload into the tool and
available proxy data within the tool was deemed inconsistent with the actual
data results.
The Company has set ambitious climate-related targets,
including both near-term and long-term/net zero emissions
reduction targets. The Company is committed to ongoing
reporting of progress against these targets as a means
of transparency and accountability. A summary of the
Company’s science based targets and other core climate-
related targets is provided in Table D and E.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 49
Disclose Scope , Scope , and, if appropriate, Scope GHG
emissions, and the related risks.
The Company engaged external consultants, Anthesis, to
prepare its GHG inventory for FY24, covering Scope 1, 2 and
3 emissions. The Company’s full GHG inventory, prepared
in line with the GHG Protocol methodology is disclosed
below in Table C (see Appendix A for further details of the
methodology).
Table C |GHG Inventory
FY (as restated) FY
Location-based
tCO
e
Location-based
tCO
e
Market-based
tCO
e
Market-based (S& & DLA)
tCO
e
Scope Total . . . .
Scope Total . . . .
1: Purchased Goods and Services 3,131.50 2,214.70 2,214.70 2,214.70
2: Capital Goods 463.49 0 0 0
3: Fuel- and Energy-Related
Activities
37.46 32.15 45.16 45.16
13: Downstream Leased Assets
(“DLA”)
72,902.93 72,030.53 72,030.53 67,008.85
Scope Total ,. ,. ,. ,.
Scope ,, Total ,. ,. ,. ,.
Intensity ratio: tCO
2
e (gross
Scope 1 & 2) per m
2
of floor area
0.00047 0.00037 0.00062 0.00062
Intensity ratio: tCO
2
e (gross
Scope 1, 2 & 3) per m
2
of floor area
0.09201 0.08345 0.08355 0.07791
The Company’s scope 1, 2 and 3 emissions total 74,381
tCO
2
e (location-based) in its FY24 reporting year. Scope 3
accounts for the vast majority of the Company’s emissions
at more than 99%, totalling 74,277 tCO
2
e (location-based).
This is to be expected as the Company’s scope 1 and
2 emissions from the communal spaces of its assets is
relatively immaterial, producing 103 tCO
2
e (location-based)
collectively. The majority of the Company’s emissions
come from their leased properties which sit under scope 3,
category 13 downstream leased assets.
The GHG Inventory figures have removed FERA emissions
that are categorised under Scope 3 category 13: Downstream
Leased Assets (“DLA”) to align with the SBTi minimum
boundary alignment. These FERA emissions are associated
with the tenants Scope 1 and 2 emissions that are also
categorised under Scope 3 DLA. The figures reported
in SECR Report above account for a fuller view of DLA
emissions by including FERA emissions under Scope 3 DLA.
Therefore, Scope 3 DLA and consequentially, total Scope 3
figures reported in the SECR Report are higher than figures
reported for TCFD due to the exclusion of Scope 3 FERA
under DLA in TCFD.
The Company engaged Grant Thornton UK LLP to provide
independent limited assurance over the Company’s location-
based GHG emission data disclosed in the table above, using
the assurance standard ISAE 3000 (Revised) and ISAE 3410,
for the year ending 30 June 2024. Grant Thornton has issued
an unqualified opinion over the selected data and the full
assurance report is available on the Sustainability page
of the Company’s website: Sustainability - Supermarket
Income REIT.
Improving the quantity of actual (vs. estimated) energy
consumption data, has been a priority for the Company over
the reporting period. As a result, the amount of estimated
data has reduced, from 84% estimated in FY23 to 71%
estimated data for this reporting period. The majority of
the Company’s emissions from downstream leased assets
come from assets leased out to supermarkets. Therefore, the
Company has prioritised engagement on data sharing with
its supermarket tenants. As a result of these engagement
efforts with supermarket tenants specifically the following
improvements have been made:
• The amount of actual purchased electricity data in FY23
was 23%, improving to 52% actual data in FY24;
• The amount of actual natural gas consumption data in
FY23 was 27%, improving to 70% actual data in FY24.
This has subsequently improved the overall accuracy of the
Company’s emissions disclosures on prior year. This is a
marked improvement from FY22 where 100% of emissions
were estimated. This was achieved through a combination
of measures including the development of new tenant data
request template, aligned to the reporting requirements of
EPRA sBPR and the Sustainability Accounting Standards
Board (“SASB”) real estate standard. The Company has
identified engagement with supermarket tenants on
refrigeration gas data, which is currently 100% estimated,
. FERA emissions associated with tenant activities under Scope downstream
leased assets are not included in the figures reported.
50 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | TCFD COMPLIANT REPORT CONTINUED
as a key priority over the next reporting year. Details of
the remaining assumptions and proxies used to complete
the Company’s GHG inventory where actual data was not
available, are outlined in the Appendix A.
During the reporting period, the Company worked with
external consultants, Anthesis, to prepare and submit
science-based emissions reductions targets to the SBTi, see
Table D below. These targets were validated and approved
by the SBTi at the beginning of 2024.
Table D | - Science Based Targets
Target Description
Near-term The Company commits to reduce Scope 1 and Scope 2
emissions 42% by 2030 from a FY23 baseline.
Long-term The Company commits to reduce Scope 1, 2 and 3
emissions 90% by 2050 from a FY23 baseline.
Net Zero The Company commits to reach net-zero by 2050.
Describe the targets used by the organization to manage
climate-related risks and opportunities and performance
against targets.
In addition to the Company’s science-based targets, a
number of other climate-related targets are used by the
Company to manage climate-related risks and opportunities,
see Table E below. These targets have been developed to
link to the transition and physical risks identified as part of
the Company’s TCFD reporting.
Table E | - Climate-related targets linked to metrics
Metric
category Metric Target
Transition
risks
% EPCs of UK
supermarkets B or above
(by valuations)
All UK supermarkets
69
B
or above by 2030
% EPCs of UK ancillary
units B or above (by
valuations)
All UK ancillary units
70
B
or above by 2030
% of actual energy
consumption data from
UK supermarket tenants
used for GHG Inventory
(vs estimated data)
YoY increase in % actual
energy consumption
data from UK
supermarket tenants
used for GHG Inventory
Physical
risks
% of UK supermarket
assets in the portfolio
screened for physical
climate hazards
All assets included in
annual portfolio climate
risk analysis
Climate-
related
opportunities
% of UK supermarket
assets with on-site
renewable energy
generation
YoY increase in % of
supermarket assets
with on-site renewable
energy generation
% of UK supermarket
assets with on-site EV
charging
YoY increase in % of
supermarket assets with
on-site EV charging
Given the FRI nature of the majority of the Company’s lease
arrangements and associated limitations to site control, the
Company has not yet set further specific targets with regards
to the percentage of on-site solar PV installed and on-site EV
charging. However, the Company is committed to increasing
the number of assets with both on-site solar PV installed and
on-site EV charging and continues to actively engage with
tenants on such opportunities and to support installations
wherever feasible.
During the reporting year, the Company achieved the
following two climate-related targets that were included in
its FY23 TCFD Report:
Target Metric Status
100% of Investment
Adviser staff
receive training on
climate risks and
opportunities by end
of 2023
Percentage of staff
trained
100%. Target
achieved.
Five sites with
Company-owned
and managed car
parks with electronic
vehicle charging
Number of EV
charging stations
5 of 5. Target
achieved.
Additional climate-related training will continue be rolled
out on an ad-hoc basis to the Investment Adviser team and
to new joiners. Most recently, this has covered topics such
as quantitative scenario analysis and transition planning
fundamentals. The Company will review its selection of
climate-related metrics and targets over the next reporting
period to ensure that it continues to measure and manage
its climate-related risks and evolve its approach to meet best
practice guidance and stakeholder expectations.
Appendix A: Methodology notes for GHG inventory
Methodology and Assumptions
The 2022 Conversion Factors published by the UK
Department for Energy Security and Net Zero (“DESNZ”)
and Department for Business, Energy, and Industrial
Strategy (“BEIS”) was the main source used for emission
factors. All relevant categories have been included and any
exclusions are described below.
Scope 1 & 2
For electricity and natural gas, some actual consumption
data was provided for communal areas where energy
consumption is controlled by SUPR. Where there were gaps,
estimations were made using the data from previous year
or floor area intensities (based on similar sites within the
portfolio) as proxies. For fuel oil, spend was used as a proxy
due to a lack of activity data.
. Excludes supermarkets located in Scotland, due to differing EPC calculation
methodology used, making the sites non-comparable.
. Excludes ancillary units located in Scotland, due to differing EPC calculation
methodology used, making the sites non-comparable.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 51
Scope 3 (1. Purchased Goods & Services)
This category was estimated using spend as a proxy and
applying Department for Environment, Food & Rural Affairs
(“DEFRA”) input-output factors kgCO
2
/GBP) to expenditure.
Scope 3 (13. Downstream Leased Assets)
The majority of emissions relate to tenant energy use,
particularly for supermarket branches. Some supermarket
tenants, including Tesco, Sainsbury’s and M&S provided
actual consumption data for electricity and heating. Where no
consumption data was available, estimations were made using
benchmark intensity data based on floor area. The majority of
refrigerant consumption was estimated for all sites.
A smaller amount of emissions arises from the communal
areas of sites where the Company owns the land but is not
responsible for paying for the energy. These emissions were
estimated using the floor area intensities of similar sites with
actual data.
MSCI Physical Risk Model Data Inputs
Hazard Level Main Models and Datasets:
Hazard Type Severity Resolution Main Models and Datasets
Extreme Cold Chronic Number of days <0°C and
<-10°C
56km v 42km • CMIP6 climate models: GFDL-ESM4, IPSL-CM6A-
LR, MPI-ESM1-2-HR, MRI-ESM2-0, UKESM1-0-LL
• Climate projections are bias-adjusted
Extreme Heat Chronic Number of days >30°C and
>35°C
56km v 42km
Coastal Flooding Acute Inundation depth (metres)
Flood distribution from 1yr
to >10,000yr event
90m x 70m • Regional sea level rise projections from
Integrated Climate Data Center
• Elevation data from Coastal DEM (upgraded
Digital Elevation Model – Climate Central / NASA)
Fluvial Flooding Acute Inundation depth (metres)
Flood distribution from 1yr
to >10,000yr event
90m x 70m • Dailing fluvial flooding timeseries provided by
Potsdam Institute for Climate Impact Research
• Elevation data from Coastal DEM from Climate
Central which is complemented by data from
SRTM
Tropical Cyclones Acute Wind speed (metres/
second)
Cyclone distribution from
1yr to >10,000yr event
11km x 9km • CLIMADA
• International Best Track Archive for Climate
Stewardship (IBTRaCS)
Wildfire Acute Fire probability (% annual) 460m x 355m • 4 components: fire weather, fire ignition, fire
spread and fire intensity
• Fire weather & ignition: Canadian Forest Fire
Weather Index (FWI)
• Fire spread: Global Land Cover 2000 dataset;
Elevation is derived from the GMTED2010 dataset
• Fire intensity: Global Fire Atlas
52 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | OUR PRINCIPAL RISKS
Principal Risks and Uncertainties
The Board and JTC Global AIFM Solutions Limited, the
Company’s Alternative Investment Fund Manager (the
“AIFM”), together have joint overall responsibility for the
Company’s risk management and internal controls, with the
Audit and Risk Committee reviewing the effectiveness of the
Board’s risk management process on its behalf.
To ensure that risks are recognised and appropriately
managed, the Board has agreed a formal risk management
framework. This framework sets out the mechanisms
through which the Board identifies, evaluates and monitors
its principal risks and the effectiveness of the controls in
place to mitigate them.
The Board and the AIFM recognise that effective
risk management is key to the Group’s success. Risk
management ensures a defined approach to decision
making that seeks to decrease the uncertainty surrounding
anticipated outcomes, balanced against the objective of
creating value for shareholders.
The Board determines the level of risk it will accept in
achieving its business objectives and this has not changed
during the year. We have no appetite for risk in relation to
regulatory compliance or the health, safety and welfare of
our tenants, service providers and the wider community in
which we work. We continue to have a moderate appetite
for risk in relation to activities which drive revenues and
increase financial returns for our investors.
There are a number of potential risks and uncertainties
which could have a material impact on the Company’s
performance over the forthcoming financial year and could
cause actual results to differ materially from expected and
historical results.
The risk management process includes the Board’s
identification, consideration and assessment of those
emerging risks which may impact the Group.
Emerging risks are specifically covered in the risk
framework, with assessments made both during the regular
risk review and as potential significant risks arise. The
assessment includes input from the Investment Adviser and
review of information by the AIFM prior to consideration by
the Audit and Risk Committee.
During the year, the Audit and Risk Committee, together
with the AIFM and Investment Adviser, undertook a review
of the risk management reporting framework. As a result
of this exercise, the Board reviewed all risks and decided to
rationalise the principal risks from 17 risks, as set out in the
2023 Annual Report, to 10 risks.
The matrix below illustrates our assessment of the impact
and the probability of the principal risks identified. The
rationale for the perceived increases and decreases in the
risks identified is contained in the commentary for each
risk category.
Key
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.
OUR PRINCIPAL RISKS
Probability
Low High
Low High
Impact
10
9
8
6 5
3
1
2
4
7
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 53
Risk Impact Mitigation Change in Year
1. There can be no
guarantee that the
dividend will grow in
line with inflation.
The Company has a stated ambition to grow its
dividend progressively and its prospectus refers
to providing investors with inflation protection.
Although the Company has received 100% of
rent demanded, has increased rents in line with
its contractual rent reviews and has one of the
lowest EPRA cost ratios in the sector, it has been
unable to increase its earnings and dividend in
line with inflation.
This has been caused primarily by the cap on
rental uplifts in the majority of the Company’s
leases and the increase in cost of debt due to
higher interest rates.
Increases in interest rates result in higher cost
ofdebt and lower earnings.
The Company has entered into interest rate
swaps and caps to manage its exposure to further
increases in interest rates.
Interest rates have started to decline from their
highs last year which, if continued, would be
supportive of earnings and dividend growth over
the long term beyond expiry of current interest rate
hedges.
The Company is proactively pursuing a number
of measures to grow earnings, such as accretive
acquisitions and cost reductions.
2. The lower-than-
expected
performance
of the property
portfolio leading to
a significant fall in
property valuations.
An adverse change in our property valuations
may lead to a breach of our banking covenants.
Market conditions may also reduce the revenues
we earn from our property assets, which affect
our ability to pay dividends to shareholders.
A severe fall in values may result in us selling
assets to repay our loan commitments, resulting
in a fall in our net asset value.
Our portfolio is 99.5% let (100% of supermarket
units are let) with long weighted unexpired lease
terms and let to institutional-grade tenants.
We own a portfolio of handpicked, high-quality
supermarkets which deliver low-risk and growing
income returns that are resilient through economic
cycles.
We manage our activities to operate within our
banking covenants and constantly monitor our
covenant headroom on loan to value and interest
cover.
3. 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 Company’s ordinary shares have continued
to be traded at a discount to net tangible assets
(“NTA”). This is largely a function of supply and
demand for the ordinary shares in the market
and cannot therefore be controlled by the
Board.
The Company may seek to address any significant
discount to NTA at which its ordinary shares may be
trading by purchasing its own ordinary shares in the
market on an ad-hoc basis.
Ordinary shares will be repurchased only at prices
below the prevailing NTA per Ordinary share, which
should have the effect of increasing the NTA per
Ordinary share for remaining shareholders.
Investors should note that the repurchase of
Ordinary shares is entirely at the discretion of the
Board and no expectation or reliance should be
placed on such discretion being exercised on any
one or more occasions or as to the proportion of
Ordinary shares that may be repurchased.
4. The default of one or
more of our grocery
tenants would
reduce revenue and
may affect our ability
to pay dividends.
Our focus on supermarket property means we
directly rely on the performance of supermarket
operators. Insolvencies could affect our
revenues earned and property valuations.
Our investment policy requires the Group to derive
at least 60% of its rental income from a portfolio
let to the largest four supermarket operators in the
UK by market share. Focusing our investments on
assets let to tenants with strong financial covenants
and limiting exposure to smaller operators in the
sector decreases the probability of a tenant default.
At 30 June 2024, 75% of SUPR’s income was from
assets let to Tesco and Sainsbury’s who are deemed
investment grade credit quality. The portfolio
continues to be geographically diversified with no
individual tenant operating within more than 10-15
minutes of one of the Group’s assets in any single
geographical area.
Our investment strategy is to acquire assets in
strong trading grocery locations, which in many
cases have been supermarkets for between 30
and 50 years. Our investment underwriting targets
strong tenants with strong property fundamentals
(good location, large sites with low site cover) and
which should be attractive to other occupiers or
have strong alternative use value should the current
occupier fail.
5. Inflationary pressure
on the valuation of
the portfolio.
Continued high inflation may cause rents to
exceed market levels and result in the softening
of valuation yields. Where leases have capped
rental uplifts, high inflation may cause rent
reviews to cap out at maximum values, causing
rental uplifts to fall behind inflation.
Inflation is monitored closely by the Investment
Adviser. The Group’s portfolio rent reviews include
a mixture of fixed, upward only capped as well
as open market rent reviews, to hedge against a
variety of inflationary outcomes.
54 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | OUR PRINCIPAL RISKS CONTINUED
Risk Impact Mitigation Change in Year
6. Ability to source
assets may be
affected by
competition
for investment
properties in the
supermarket sector.
The Company faces competition from other
property investors. Competitors may have
greater financial resources than the Company
and a greater ability to borrow funds to
acquire properties.
The supermarket investment market continues
to be considered a safe asset class for investors
seeking long-term secure cash flows which
is maintaining competition for quality
assets. This has led to increased demand for
supermarket assets without a comparable
increase in supply, which potentially increases
prices and makes it more difficult to deploy
capital.
The investment Adviser has extensive contacts in
the sector and we often benefit from off-market
transactions. They also maintain close relationships
with a number of investors and agents in the sector,
giving us the best possible opportunity to secure
future acquisitions for the Group.
The Company has acquired assets which are
anchored by supermarket properties but which
also have ancillary retail on site, and these
acquisitions allow the Company to access quality
supermarket assets whilst providing additional
asset management opportunities.
We are not exclusively reliant on acquisitions to
grow the portfolio. Our leases contain upward-only
rent review clauses, which mean we can generate
additional income and value from the current
portfolio. We also have the potential to add value
through active asset management and we are
actively exploring opportunities for all our sites.
We maintain a disciplined approach to appraising
and acquiring assets, engaging in detailed due
diligence and do not engage in bidding wars which
drive up prices in excess of underwriting.
7. The Company
is reliant on the
continuance of the
Investment Adviser.
We rely on the Investment Adviser’s services and
reputation to execute our investment strategy.
Our performance will depend to some extent
on the Investment Adviser’s ability and the
retention of its key staff.
The interests of the Company and the Investment
Adviser are aligned due to (a) key staff of the
Investment Adviser having personal equity
investments in the Company and (b) any fees
paid to the Investment Adviser in shares of the
Company are due to be held for a minimum period
of 12 months. The Board can pay up to 25% of the
Investment Adviser’s fee in shares of the Company.
The Management Engagement Committee
assesses the performance of the Investment
Adviser and ensures the Company maintains a
positive working relationship.
The AIFM receives and reviews regular reporting
from the Investment Adviser and reports
to the Board on the Investment Adviser’s
performance. The AIFM also reviews and makes
recommendations to the Board on any investments
or significant asset management initiatives
proposed by the Investment Adviser.
8. Impact of
geopolitical conflict /
major events.
Global, regional and national events, such as
terrorism, pandemics, and geopolitical conflict
could adversely impact the Company, and
present challenges to our tenants resulting in
impairment of asset values and/or a reduction
in revenue.
Supermarket operators have historically been
able to successfully pass on inflationary increases
through price increases to the end consumer.
Whilst sales volumes may fall in a recessionary
environment, the nature of food means that
demand is relatively inelastic.
Our tenants have strong balance sheets with
robust and diversified supply chains. The tenants
are therefore well positioned to deal with any
disruption that may occur.
9. Changes in
regulatory policy
could lead to our
assets becoming
unlettable.
Changes in regulations (currently represented
by Minimum Energy Efficiency Standards
(MEES)) could lead to the possibility of our
assets becoming unlettable. Any properties
not compliant with MEES could attract reduced
tenant demand, reduced rental income and/or
be subject to fines.
The ESG committee stays informed about
changes in legislation by working closely with the
Investment Adviser and seeks input from specialist
ESG experts where necessary.
Proposed updates to MEES, together with updates
on businesses to develop Net Zero transition plans
are being closely monitored.
10. We operate as a
UK REIT and have
a tax-efficient
corporate structure,
with advantageous
consequences for
UK shareholders.
If the Company fails to remain a REIT for UK tax
purposes, our profits and gains will be subject to
UK corporation tax.
The Board takes direct responsibility for ensuring
we adhere to the UK REIT regime by monitoring
REIT compliance. The Board has also engaged
third-party tax advisers to help monitor REIT
compliance requirements and the AIFM monitors
compliance by the Company with the REIT regime.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 55
SECTION 172(1) STATEMENT
SECTION 172(1) STATEMENT
The Directors consider that in conducting the business of
the Company over the course of the year ended 30 June
2024, they have acted to promote the long-term success of
the Company for the benefit of shareholders, whilst having
regard to the matters set out in section 172(1)(a-f) of the
Companies Act 2006 (the “Act”).
Details of our key stakeholders and how the Board engages
with them can be found on pages 56 to 59. Further details
of the Board activities and principal decisions are set out on
pages 72 to 73 providing insight into how the Board makes
decisions and their link to strategy.
Other disclosures relating to our consideration of the matters
set out in s172(1)(a-f) of the Act have been noted as follows:
s.172 Factor Our approach Relevant disclosures
A The likely
consequences
of any decision
in the long-term
The Board has regard to its wider obligations under Section 172 of the
Act. As such strategic discussions involve careful considerations of the
longer-term consequences of any decisions and their implications on
shareholders and other stakeholders and the risk to the longer-term
success of the business. Any recommendation is supported by detailed
cash flow projections based on various scenarios, which include:
availability of funding; borrowing; as well as the wider economic
conditions and market performance.
Key decisions of the Board during the
year on page 73.
Our Key Stakeholder Relationships on
pages 56 to 59.
Board Activities during the year on
pages 72.
B The interests of
the Company’s
employees
The Group does not have any employees as a result of its external
management structure.
The Board’s main working relationship is with the Investment Adviser.
Consequently, the Directors have regard to the interests of the
individuals who are responsible for delivery of the investment advisory
services to the Company to the extent that they are able to do so.
Our Key Stakeholder Relationships on
pages 56 to 59.
Culture on page 69.
C The need to
foster the
Company’s
business
relationships
with suppliers,
customers and
others
The Company’s key service providers and customers include the
Investment Adviser, professional firms such as lenders, property
agents, accounting and law firms, tenants with which we have
longstanding relationships and transaction counterparties which are
generally large and sophisticated businesses or institutions.
Our Key Stakeholder Relationships on
pages 56 to 59.
D The impact of
the Company's
operations on
the community
and the
environment
As an owner of assets located in communities across the UK and France,
we aim to ensure that our buildings and their surroundings provide safe
and comfortable environments for all users.
The Board and the Investment Adviser have committed to limiting the
impact of the business on the environment where possible and engage
with tenants to seek to improve the ESG credentials of the properties
owned by the Company.
Our Key Stakeholder Relationships on
pages 56 to 59.
Details of the ESG policy and strategy
are included on pages 39 to 51.
The Board’s approach to sustainability
is also explained in the Company’s
standalone sustainability report
available on the Company website.
E The desirability
of the Company
maintaining
a reputation for
high standards
of business
conduct
The Board is mindful that the ability of the Company to continue to
conduct its investment business and to finance its activities depends
in part on the reputation of the Board, the Investment Adviser and
Investment Advisory Team.
The risk of falling short of the high standards expected and thereby risking
business reputation is included in the Audit and Risk Committee’s review of
the Company’s risk register, which is conducted at least annually.
Chair’s Letter on Corporate
Governance on page 63.
Our Principal Risks and Uncertainties
on pages 52 to 54.
Our Culture on page 69.
F The need to act
fairly as between
members of
the Company
The Board recognises the importance of treating all members fairly and
oversees investor relations initiatives to ensure that views and opinions
of shareholders can be considered when setting strategy.
Chair’s Letter on Corporate
Governance on pages 63.
Our Key Stakeholder Relationships on
pages 56 to 59.
56 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | OUR KEY STAKEHOLDER RELATIONSHIPS
OUR KEY STAKEHOLDER RELATIONSHIPS
Building strong relationships with our key stakeholders is a critical element to our success. The Board recognises that
the foundation underpinning effective corporate governance is determined on how it aligns the strategic decisions of
the Company with the views of its various stakeholders. We aim to build long lasting relationships with all of our key
stakeholders based on professionalism and integrity.
The Board regularly consults with the Investment Adviser, who in turn manage and foster the relationships with our
tenants, key partners and advisers.
Stakeholder Shareholders
Why is it important to engage? The Company’s shareholders are an incredibly important stakeholder group and the ultimate owners
of the business. In order to deliver our strategy, it is vital that shareholders continue to understand and
support the Company’s performance and investment thesis, as well as the wider market in which we
operate. The Board aims to be open with shareholders and available to them, subject to compliance with
relevant securities and laws.
How did we engage? The way in which the Board engages with the Company’s shareholders is detailed on this page of the
Corporate Governance Report.
The Board oversees the Investment Adviser’s formal investor relations programme, which is designed to
promote engagement with major investors (generally defined as those holding more than approximately
1% of the shares in the Company). Major investors are offered meetings after each results announcement
or other significant announcements.
All shareholders are encouraged to attend the AGM and engage with all Board members.
Our website contains comprehensive information about our business, regulatory news and press releases
alongside information about our approach to ESG issues. Additionally, recordings of our interim and
annual results presentations are available on the website.
What were the key topics
discussed?
The key topics of discussion included: the Company’s financial performance, macroeconomic themes, the
acquisition of a portfolio of Carrefour supermarkets in France, capital allocation decisions, refinancing,
the performance of the Investment Adviser and the Company’s ESG efforts.
What was the feedback obtained
and/or the outcome of the
engagement?
Feedback from investor meetings has played an important role in shaping Company disclosures at Interim
Results, Full Year results and other regulatory disclosures.
Following the Carrefour acquisition, the Company’s first international acquisition, the Company has
provided additional information in this Annual Report on the French grocery sector, the acquired portfolio
and strategic rationale for an acquisition outside the UK.
The Company has also increased the detail of disclosure on tenant rent renewals following investor
interest in long-term earnings.
Capital allocation strategy is, understandably, important to investors and it is addressed in Full and Half
Year reports and is monitored on an ongoing basis by the Board.
Increasing investor interest in sustainability has informed the publication of the Company’s first TCFD
compliant Annual Report and Accounts and accompanying Sustainability Report in the 2023 Full Year
Results and the setting of net zero targets which have been ratified by SBTi. Further details on our
sustainability strategy can be found on pages 39 to 51 and in the Company’s first standalone sustainability
report available on the Company website.
The use of virtual meetings has improved accessibility to our international and regional based
shareholders. We anticipate that on-line engagement will continue to play an important part in
engagement with our shareholders. In addition to this the Investment Adviser has visited a number of
regional cities around the UK, Scotland, Ireland and South Africa to meet investors and potential investors
face to face.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 57
Stakeholder Lenders
Why is it important to engage? We have strong working relationships with our lender group who in turn help provide financing to
facilitate our continued growth.
As part of this, we are in regular dialogue with our banks to ensure they understand the Company’s
strategy and long-term ambition.
How did we engage? The Investment Adviser has regular meetings with both existing and prospective lenders to ensure that
they are kept up to date with business strategy, developments and performance.
Debt structure and future debt requirements are considered by the Board at a minimum on a quarterly
basis as part of the Investment Adviser’s review.
What were the key topics
discussed?
During the year, the Company, aided by the Investment Adviser, discussed with the lenders various
refinancing options and future borrowing needs to ensure the appropriate financing for the Group was put
in place.
What was the feedback obtained
and/or the outcome of the
engagement?
In September 2023, the Company announced it had completed a comprehensive debt refinancing
exercise. This involved the cancellation of two shorter-dated debt facilities, the reduction and extension
of an existing debt facility and the completion of a new unsecured debt facility with a new lender. In
addition, the Company utilised its existing in-the-money interest rate hedges to extend the term of its
hedging arrangements to match the maturity of its debt facilities at no additional cost.
Stakeholder Investment Adviser
Why is it important to engage? The Board’s main working relationship is with the Investment Adviser. The Investment Adviser brings a
depth of experience in the Supermarket Property sector. This gives the Company a competitive advantage
through its knowledge, specialist focus and network of industry and occupier contacts. The Investment
Adviser has a crucial role in the performance and long-term success of the Company.
How did we engage? It is important for the Board and Investment Adviser to maintain a positive and transparent relationship to
ensure alignment of values and business objectives.
The Board engage with the Investment Adviser at the scheduled quarterly Board meetings as a minimum.
Ad-hoc Board meetings are held to approve matters including acquisitions and disposals, asset
management opportunities, new financing arrangements and appointment of advisers. The Management
Engagement Committee is responsible for reviewing the performance of the Investment Adviser.
What were the key topics
discussed?
During the year the Management Engagement Committee discussed and agreed upon changes to the
investment advisory agreement with Atrato.
Key topics discussed between the Investment Adviser and the Board were strategic decisions which
included the acquisition of a portfolio of Carrefour supermarkets in France, a comprehensive debt
restructuring and operational efficiencies to achieve a reduction in EPRA cost ratio for FY25.
What was the feedback obtained
and/or the outcome of the
engagement?
The investment advisory agreement was amended and restated to provide clarification to all parties in the
event of a takeover, delisting or liquidation and seek to reflect the original commercial intentions of the
agreement.
58 SUPERMARKET INCOME REIT PLC
STRATEGIC REPORT | OUR KEY STAKEHOLDER RELATIONSHIPS CONTINUED
Stakeholder Tenants
Why is it important to engage? We recognise that the success of the Company relies on the continued success of our operators, who in
turn rely on quality stores in order to help them succeed. This is why we place particular onus on having
a strong relationship with the grocery operators to better understand the challenges and opportunities
facing their business.
How did we engage? Regular meetings are held between the Investment Adviser and our key occupiers to understand their
future needs, including views on market sentiment, performance and sustainability initiatives. Any
potential opportunities or risks facing the Company are fed back to the Board to inform future strategy.
The Investment Adviser will visit every site within the Portfolio at least once a year, with feedback
reported to the Board of any material issues.
We conduct a review of published operator data, such as annual accounts, trading updates and analysts’
reports to identify mutually beneficial opportunities. Engagement efforts from an ESG front also focused
heavily on improving ESG data sharing. A new ESG data request template was developed to assist with
this engagement, which outlines the ESG consumption data points needed for the purposes of the
Company’s own GHG inventory.
What were the key topics
discussed?
During the year, key topics included trading performance, site queries and asset performance
enhancement. A number of ESG topics were also the focus of discussion with the tenants, aimed at
improving the Company’s understanding of tenant ESG performance and ways in which the Company
could further enhance the sustainability of its buildings and communal areas. This included topics such
as improving ESG data sharing, EV charging roll-out and rooftop solar opportunities, energy efficiency
improvement plans, updating EPC assessments, biodiversity and nature-related opportunities and
charitable giving.
What was the feedback obtained
and/or the outcome of the
engagement?
The Company significantly improved the amount of actual data it was able to source from tenants,
compared to prior years, as a result of engagement efforts on ESG data sharing. In addition, the
Investment Adviser continued to roll out its green lease rider in all new lease negotiations and agreed the
clauses in as many leases as possible. The riders, among other things, enable us to request that tenants
provide environmental performance data.
Stakeholder Service Providers
Why is it important to engage? As an externally managed Company, we are reliant upon our service providers to conduct our core
activities. We recognise the importance of partnering with service providers who share our values and
ethos and work to secure the best people with an established track record and, where possible, retain key
partners on successive transactions and workstreams.
Having strong relationships with our service providers promotes the overall success of the Company.
How did we engage? The Board maintains regular contact with the Company’s service providers, at its quarterly Board
meetings, and otherwise as required. For example, the Company’s brokers and property agent attend the
Board meetings to keep the Company informed of the current market within which we operate.
The Management Engagement Committee met in the year to review the performance of the Company’s
service providers.
What were the key topics
discussed?
At the Management Engagement Committee, a review of the Company’s service providers was
undertaken, considering the fees charged in the year and the quality of service received.
What was the feedback obtained
and/or the outcome of the
engagement?
The Management Engagement Committee were content with the quality of service received from the
Company’s service providers and the fees were considered appropriate.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 59
Stakeholder Communities
Why is it important to engage? As an owner of assets which provide essential services to local communities, we intend to support
initiatives that enhance the lives of the people close to our assets and to be good neighbours to our
communities.
How did we engage? Ongoing tenant engagement provides the opportunity to discuss how the Company can support our
tenants on community initiatives, as well as their own efforts to mitigate the impact of their operations.
Supermarket anchor tenants are heavily involved in their local communities and many stores have a
community champion with whom to engage.
On schemes where we have communal area control (on assets we manage that are not solely occupied
by one tenant), the Company is engaging with the communities it services in a number of ways through
initiatives such as pop-up community events (often involving local schools and community groups),
holiday-related celebrations, fundraisers and charity drives.
What were the key topics
discussed?
During the year, the key topics of discussion regarded the way in which the Company could enhance its
involvement within local communities and support local charities of significance to our sites, through
the Company’s grant to the Atrato Foundation. This included seeking recommendations of charities from
Centre Managers to put forward to the Atrato Foundation.
What was the feedback obtained
and/or the outcome of the
engagement?
Improving the Company’s understanding of the different types of community engagement initiatives
occurring at its sites and gaining recommendations on local charities for the Atrato Foundation to
consider supporting.
60 SUPERMARKET INCOME REIT PLC
SUPERMARKET INCOME REIT | GOING CONCERN AND VIABILITY STATEMENT
The Directors have considered on the appropriateness of
adopting the going concern basis in preparing the Group’s
and Company’s financial statements for the year ended
30 June 2024. In assessing the going concern basis of
accounting, the Directors have considered the prospects of
the Group over the period up to 30 September 2025.
Liquidity
At 30 June 2024, the Group generated net cash flow from
operating activities of £92.1 million, held cash of £38.7
million and undrawn committed facilities totalling £104.2
million (including £50 million accordion) with no capital
commitments or contingent liabilities.
After the year end, the Group also increased its debt capacity
from £752.0 million to £825.4 million (see Note 19 for more
information), leaving undrawn committed facilities of £176.0
million available (including £50 million accordion).
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 £39 million loan facility (of which £30 million is
drawn) and £50 million of the syndicate unsecured term
loan fall due for repayment during the going concern period.
It is intended that the facilities 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 £117 million (including post balance
sheet events). All lenders have been supportive during the
year 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 Annual Report 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 are below and are all on top of the
base case model which includes prudent assumptions on
valuations and cost inflation. The Group is 100% fixed
or hedged (including post period end refinancings). No
sensitivity for movements in interest rates have been
modelled for the hedged debt during the going concern
assessment period.
Scenario Rental Income Costs
Base case
scenario
(Scenario )
% contractual
rent received when
due and rent reviews
based on forward
looking inflation
curve, capped at the
contractual rate of the
individual leases.
Investment adviser
fee based on terms of
the signed agreement
(percentage of NAV
as per note ), other
costs in line with
contractual terms.
Scenario Rental income to
fall by %
Costs expected to
remain the same as
the base case.
Scenario Rental Income
expected to remain
the same as the
base case.
% increases on
base case costs to
all administrative
expenses
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 42%. Based on the latest
bank commissioned valuations, property values would
have to fall by more than 26% before LTV covenants
are breached, and 19% against 30 June 2024 Company
valuations. 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 interest
cover ratio of 425% during the going concern period.
Having reviewed and considered the scenarios, the Directors
consider that the Group has adequate resources in place for
at least 12 months from the date of these results and have
therefore adopted the going concern basis of accounting in
preparing the Annual Report.
Assessment of viability
The period over which the Directors consider it feasible and
appropriate to report on the Group’s viability is the five-year
period to 30 June 2029. This period has been selected because
it is the period that is used for the Group’s medium-term
business plans and individual asset performance forecasts.
The assumptions underpinning these forecast cash flows
and covenant compliance forecasts were sensitised to explore
the resilience of the Group to the potential impact of the
Group’s significant risks, or a combination of those risks.
The principal risks on pages 52 to 54 summarise those matters
that could prevent the Group from delivering on its strategy.
GOING CONCERN AND VIABILITY STATEMENT
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 61
A number of these principal risks, because of their nature
or potential impact, could also threaten the Group’s ability
to continue in business in its current form if they were to
occur. The Directors paid particular attention to the risk of
a deterioration in economic outlook which could impact
property fundamentals, including investor and occupier
demand which would have a negative impact on valuations,
and give rise to a reduction in the availability of finance.
The sensitivities performed were designed to be severe
but plausible; and to take full account of the availability of
mitigating actions that could be taken to avoid or reduce the
impact or occurrence of the underlying risks.
Viability Statement
The Board has assessed the prospects of the Group over
the five years from the balance sheet date to 30 June 2029,
which is the period covered by the Group’s medium-term
financial projections.
The Board considers the resilience of projected liquidity,
as well as compliance with secured debt covenants and
UK REIT rules, under a range of inflation and property
valuation assumptions.
The principal risks and the key assumptions that were
relevant to this assessment are as follows:
Risk Assumption
Borrowing risk The Group continues to comply with
all relevant loan covenants. The Group
is able to refinance all debt falling due
within the viability assessment period on
acceptable terms.
Interest Rate risk The increase in variable interest rates are
managed by reduction of variable debt
from cash inflows and utilising interest
rate derivatives to limit the exposure to
variable debt.
Liquidity risk The Group continues to generate sufficient
cash to cover its costs while retaining the
ability to make distributions.
Tenant risk Tenants (or guarantors where relevant)
comply with their rental obligations over
the term of their leases and no key tenant
suffers an insolvency event over the term of
the review.
Based on the work performed, the Board has a reasonable
expectation that the Group will be able to continue in
business over the five-year period of its assessment.
Other disclosures
Disclosures in relation to the Company’s business model
and strategy have been included within the Investment
Adviser’s Report on pages 14 to 22. Disclosures in relation
to the main industry trends and factors that are likely to
affect the future performance and position of the business
have been included within The UK Grocery Market on
pages 25 to 33. Disclosures in relation to environmental and
social issues have been included within the TCFD Report
on pages 39 to 51. Employee diversity disclosures have not
been included as the Directors do not consider these to be
relevant to the Company.
Key Performance Indicators (KPIs)
The KPIs and EPRA performance measures used by the
Group in assessing its strategic progress have been included
on pages 34 to 35.
The Strategic Report was approved by the Board and signed
on its behalf by:
Nick Hewson
Chair
September
62 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE
CONTENTS
CORPORATE GOVERNANCE
63 Chair’s Letter on Corporate Governance
64 Board of Directors
66 The Investment Adviser
68 Leadership and Purpose
72 Board Activities during the year
73 Key Decisions of the Board during
the year
74 Corporate Governance Statement
76 Nomination Committee Report
79 Audit and Risk Committee Report
83 Management Engagement
Committee Report
85 ESG Committee Report
87 Remuneration Committee Report
91 Directors’ Report
93 Directors’ Responsibilities Statement
94 Alternative Investment Fund
Manager’s Report
CORPORATE
GOVERNANCE
REPORT
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 63
CORPORATE GOVERNANCE | CHAIR’S LETTER ON CORPORATE GOVERNANCE
Nick Hewson
Chair
CHAIR’S LETTER ON
CORPORATE GOVERNANCE
Dear Shareholders
I have pleasure in introducing this year’s Corporate
Governance report for the financial year ended
30 June 2024. The Board recognises that the way in which
we conduct our business is just as important as what we do.
A strong governance framework with an appropriate tone
from the Board, is a key factor in being able to deliver
sustainable business performance, whilst at the same time
being able to deliver value for our shareholders.
Board priorities
A key part of the Board’s focus during the year was to
oversee the successful implementation of the Company’s
strategy and ensure it is positioned for long-term success.
In February 2024, the Board held its annual strategy day
which provided the opportunity to focus in more detail on
the strategic opportunities of the Company. The Board
attended a site visit at Sainsbury’s, Ashford which we found
insightful and we intend to plan further visits across the
Portfolio in the future.
The Company continued to grow throughout the year by
making a first investment into the €290 billion French
grocery sector with an off-market direct sale and leaseback
of 17 omnichannel stores operated by Carrefour. In the first
half of the year, the Company also successfully paid down
debt to run at a lower LTV of 33%. The Company also
intends to proceed with a secondary listing on the
Johannesburg Stock Exchange with the intention to improve
trading liquidity and diversify our shareholder base.
At a time of considerable macroeconomic uncertainty, we
believe our exposure to the defensive nature of grocery real
estate will allow us to continue delivering stable and
long-term income to our shareholders.
Sustainability continues to remain an important focus for
the Board, and with the support of the Investment Adviser,
we continue to make good progress in implementing this
within our overall strategy. During the year, the SBTi
validated and approved the Company’s near-term and
long-term science-based emissions reduction targets. Further
information on our sustainability strategy can be found on
pages 39 to 51 and in the Company’s sustainability report,
available on the Company website.
Succession planning
The Board comprises six Non-Executive Directors with
a breadth of experience and the externally facilitated Board
evaluation concluded that the Board worked collegiately
and collaboratively to achieve its outcomes.
This year, developing a succession plan has been a key focus
for the Nomination Committee, to ensure the progressive
refreshment of the Board as Nick Hewson, Jon Austen and
Vince Prior near their nine-year term. The Director skills
matrix was refreshed during the year and has been utilised
in forming the succession plan identifying the skills and
experience which will need to be replaced. Further detail on
succession planning can be found on page 77.
AIC Code of Corporate Governance (2019)
This report demonstrates how we have applied the
principles and complied with the provisions of the AIC Code
of Corporate Governance (February 2019) (“AIC Code”)
during the year, as well as our approach to corporate
governance in practice. The AIC Code addresses the
Principles and Provisions set out in the UK Corporate
Governance Code (July 2018) (the “UK Code”), as well as
setting out additional Provisions on issues that are of
specific relevance to the Company. The Board considers that
reporting against the Principles and Provisions of the AIC
Code, which has been endorsed by the Financial Reporting
Council provides more relevant information to shareholders.
Details of how the Board has discharged its duty under the
AIC Code can be found on pages 74 to 75.
The Board and Company Secretary note that the FRC
published an updated version of the UK Code in January 2024
and the AIC published an updated version of the AIC Code in
August 2024, which we will report against in the next
annual report.
Shareholder engagement
We very much look forward to welcoming shareholders to
our 2024 AGM due to be held on 3 December 2024. The
Board attend the Company’s AGM to answer any shareholder
questions and I and other Board members make ourselves
available as necessary outside those meetings to speak
with shareholders.
The Board oversees the Investment Adviser’s formal
investor relations programme, which is designed to
promote engagement.
Priorities for 2025
Looking ahead to 2025, the Board is focused on continuing
to maintain the highest standards of corporate governance
with a focus on progressing its succession plan, as well as
continuing to progress the Company’s sustainability strategy,
whilst ensuring the delivery of strong financial performance.
Nick Hewson
Chair
September
64 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | THE BOARD OF DIRECTORS
BOARD OF DIRECTORS
NICK HEWSON
N
ESG
ME
Independent Non-Executive Chair
Date of appointment: June 2017
Committee memberships: Nomination, ESG,
Management Engagement
Relevant skills and experience:
• Over 35 years’ experience as a property
developer and investor
• Founded a UK retail
warehousing business
• Invested in businesses covering bio-tech,
digital imaging, geo-thermal ground
source energy and corporate finance and
fund management
• Experienced Non-Executive Director for
both listed and private businesses
• Fellow of the Institute of Chartered
Accountants of England and Wales
Career Highlights:
• Co-Founder, CEO and then Chair of
Grantchester Holdings plc, a specialist
LSE listed developer of and investor in UK
retail warehouse property assets, where
he worked from 1990 until 2002
• Senior Independent Director at Redrow
plc, a FTSE 250 company and one of the
UK’s leading housebuilders until 2022
• Chair of the Executive Committee of
Pradera AM plc, a European retail
property fund management business,
managing significant portfolios of retail
properties located in Europe and
the Near East
• Co-Founder, Investor and Non-Executive
Director of Going Green Limited for
10 years to 2012, a firm founded with the
mission to minimise the effects of carbon
emissions in cities by encouraging electric
vehicle commuting, pioneering the G-Wiz
electric vehicle
• Founding partner of City Centre Partners
LP, a business specialising in converting
office properties to residential in
Central London
SAPNA SHAH
N
AR
ME
Senior Independent
Non-Executive Director
Date of appointment: March 2023
Committee memberships: Nomination
(Chair), Audit and Risk,
Management Engagement
Relevant skills and experience
• Over 20 years investment banking
experience advising global companies,
including REITs and
investment companies
• Extensive experience advising companies
on mergers and acquisitions, IPOs, equity
capital market transactions and
corporate strategy
• Previously served on the advisory
committee for a private solar
energy company
Career Highlights
• Deputy Chair of the Association of
Investment Companies and
Non-executive Director of Biopharma
Credit plc and BlackRock Greater Europe
Investment Trust plc
• Senior Adviser at Panmure
Liberum Limited
• Previously held senior investment banking
roles at UBS AG, Oriel Securities (now
Stifel Nicolaus Europe) and
Cenkos Securities
JON AUSTEN
AR
R
ME
Independent Non-Executive Director
Date of appointment: June 2017
Committee memberships:
Audit and Risk (Chair), Remuneration,
Management Engagement
Relevant skills and experience:
• Over 30 years’ experience in the UK
property sector
• Chair of privately owned business, which
specialises in land development and
promotion, and renewable energy
• Fellow of the Institute of Chartered
Accountants of England and Wales
Career Highlights:
• Chief Financial Officer at Audley Group
Limited, which develops retirement
villages in the UK
• Senior Independent Director and Chair of
the Audit Committee of McKay Securities
plc, a listed REIT specialising in office and
industrial property, until its takeover by
Workspace plc in May 2022
• Group Finance Director at Urban&Civic
plc, the UK’s leading Master Developer
• Also held senior finance roles at London
and Edinburgh Trust plc, Pricoa Property
plc and Goodman Limited
KEY TO COMMITTEES
AR
Audit and Risk Committee
ESG
Environmental, Social and
Governance Committee
ME
Management Engagement
N
Nomination Committee
R
Remuneration Committee
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 65
FRANCES DAVIES
ESG
R
ME
Independent Non-Executive Director
Date of appointment: June 2022
Committee memberships: ESG (Chair),
Remuneration, Management Engagement
Relevant skills and experience:
• Over 30 years’ experience in corporate
finance and asset management
• Partner at Opus Corporate
Finance since 2007
• Non-Executive Director at Aegon UK plc
and HICL Infrastructure plc
• Chair of the Appointments Committee of
Federated Hermes Property Unit Trust
Career Highlights
• Head of Global Institutional Business at
Gartmore Investment Management
• Previously held directorships at SG
Warburg, Morgan Grenfell Asset
Management, Dalton Strategic
Partnership and J.P Morgan UK Small Cap
Growth & Income plc
VINCE PRIOR
ME
AR
N
Independent Non-Executive Director
Date of appointment: June 2017
Committee memberships: Management
Engagement (Chair), Audit and
Risk, Nomination
Relevant skills and experience:
• Over 35 years’ experience in the retail
property sector; over 20 years as a senior
adviser and consultant
• Key areas of expertise include
supermarket real estate, business
strategy, investment property financing
and real estate development
• Experienced Executive and
Non-Executive Director
Career Highlights:
• Head of Property Investment at
Sainsbury’s. Over a five-year period to
2014, the property portfolio grew from
£7.5 billion to £12 billion
• Head of Retail Advisory Services at Jones
Lang LaSalle (“JLL”) providing strategic
advice to a range of high-profile
supermarket and retail operators
• COO of European Retail Group at Jones
Lang LaSalle, overseeing growth and
development of JLL’s retail business
across Europe
• Corporate Planning and Manager of Site
Research Unit for Tesco Stores, involved
in set up of the location planning team and
developing the group’s first five-year
strategic plan
CATHRYN VANDERSPAR
R
ESG
ME
Independent Non-Executive Director
Date of appointment: February 2020
Committee memberships: Remuneration
(Chair), ESG, Management Engagement
Relevant skills and experience:
• Lawyer with over 30 years’ experience
(over 20 of these as a tax partner),
including active participation in HMRC and
HMT working groups
• Specialist in direct and indirect real estate
structuring, including REITs
• Author of the tax chapter on REITs in
Tolleys Taxation of Collective Investment
Career Highlights:
• Head of Real Estate Tax at
Travers Smith LLP
• Non-Executive Director of CBRE
Investment Management (UK Funds)
Limited (formerly CBRE Global Investors
(UK Funds) Limited)
• Head of London Tax at
Eversheds Sutherland
• Tax Partner at Berwin Leighton
Paisner (now BCLP)
BOARD GENDER
Male Female
Sapna Shah
Frances Davies
Cathryn Vanderspar
Jon Austen
Vince Prior
Nick Hewson
BOARD TENURE – YEARS
66 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | THE INVESTMENT ADVISER
THE INVESTMENT ADVISER
BEN GREEN
Principal
Date of appointment: Nov 2016
Ben is a principal at Atrato and is responsible
for leading the development and execution
of the firm’s long-term strategy. Ben is a
member of the Atrato Group Leadership
Team and a member of the firm’s Investment
Committee.
Relevant skills and experience:
• Over 20 years’ experience structuring and
executing real estate transactions
• Completed more than £3.5 billion of sale
and leaseback transactions, with major
occupiers including Tesco,
Barclays and the BBC
• Expert in executing transactions for
grocery real estate and real estate
corporate finance
• Qualified Lawyer
Career Highlights:
• Co-founded Atrato and led the IPO of
Supermarket Income REIT
• Managing Director Lloyds Bank
Commercial Banking, where he ran the
team providing corporate finance services
to corporates, infrastructure and real
estate clients
• Managing Director and Head of European
Structured Finance at Goldman Sachs
from 2007 to 2013
• Director Barclays Capital
STEVE WINDSOR
Principal
Date of appointment: Jan 2017
Steve is a principal at Atrato and is
responsible for leading the development and
execution of the firm’s long-term strategy.
Steve is a member of the Atrato Group
Leadership Team and a member of the firm’s
Investment Committee.
Relevant skills and experience:
• Over 20 years’ experience specialising in
finance and risk management
• Expert in capital markets, risk
management and financing
• Highly experienced in senior
management positions
Career Highlights:
• Co-founded Atrato and led the IPO of
Supermarket Income REIT
• Partner and Head of EMEA Debt Capital
Markets and Risk Solutions at
Goldman Sachs
• Held various roles across both Trading
and Banking divisions at Goldman Sachs
from 2000 to 2016
• Member of Goldman Sachs Investment
Banking Risk Committee
• Advised numerous FTSE 100 firms on
managing risk and financing
their business
NATALIE MARKHAM
Chief Financial Officer
Date of appointment: Nov 2017
Natalie is responsible for the management
of the finance function for Atrato Group,
including the supermarkets investment fund.
Natalie is a member of the Atrato Group
Leadership Team and a member of the firm’s
the Investment Committee.
Relevant skills and experience:
• Over 20 years’ experience in finance,
specialising in real estate
investment funds
• Experienced in senior management
positions and financial management
positions of real estate
investment companies
• Leading the SUPR ESG project with
the Atrato COO
• Fellow of the Chartered Institute of
Accountants
Career Highlights:
• European CFO Macquarie Global Property
Advisors, member of MGPA European
Management Team and Director of the
MGPA European advisory business
• Manager RSM Robson Rhodes, audit
and assurance
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 67
ROBERT ABRAHAM
Fund Manager
Date of appointment: May 2019
Robert is responsible for managing the
supermarkets investment fund for the Group.
Relevant skills and experience:
• Over 10 years of real estate investment
and loan
origination/syndication experience
• Key areas of expertise include property
investment, commercial
banking, and loans
• Chartered Financial Analyst
Career Highlights:
• Origination of over £1 billion of
supermarket acquisitions
• Execution of over £750 million of debt
facilities for the group
• Coordination and execution of debt
facilities whilst in the Loan Markets team
at Lloyds Bank
MICHAEL PERKINS
Finance Director
Date of appointment: Nov 2023
Michael is the Finance Director at Atrato
and is responsible for the finance, tax
and operations of the supermarkets
investment fund.
Relevant skills and experience:
• Over 13 years’ experience within the
investment management industry with
a sector focus on real estate
• Fellow of the Association of Chartered
Certified Accountants
Career Highlights:
• Chief Financial Officer, Logistics Asset
Management, Investment Adviser to
Urban Logistics REIT plc
68 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | LEADERSHIP AND PURPOSE
Role of the Board
The Board has a duty to promote the long-term sustainable
success of the Company for its shareholders. The Board is
responsible for the overall leadership of the Company,
setting its values and standards, including approval of the
Group’s strategic aims and objectives and oversight of its
operations.
The Board currently comprises the Chair and five
independent Non-Executive Directors and is supported by
Hanway Advisory Limited who act as the Company
Secretary. Nick Hewson is the Chair of the Company and is
responsible for leading the Board and for setting the tone in
respect of the Company’s purpose, values and culture.
As part of his role in leading the Board, he ensures that the
Board provides constructive input into the development of
strategy, understands the views of the Company’s key
stakeholders and provides appropriate oversight, challenge
and support.
Sapna Shah was appointed the Senior Independent Director
(“SID”) on 22 May 2024, succeeding Vince Prior. In this role,
Sapna acts as a sounding board for the Chair as well as an
intermediary to the other Directors and shareholders as
required. In addition to her role as the SID, Sapna serves as
Chair of the Nomination Committee.
The Board is well balanced and possesses a sufficient
breadth of skills, variety of backgrounds, relevant
experience and knowledge to ensure it functions effectively
and promotes the long-term sustainable success of the
Company. All Directors have access to the advice and
services of the Company Secretary, who are responsible to
the Chair on matters of corporate governance. Further
details of each Director’s experience can be found in the
biographies on pages 64 to 65.
How we operate
The Company’s business model and strategy were
established at the time of the IPO in July 2017. Whilst the
business has grown materially since the Company’s listing,
its strategy and operations have not changed. The business
continues to generate long-term income with inflation
protection from key operating real estate assets, with
additional potential for capital growth over the medium to
long term. Acquisition opportunities and any related debt
finance are examined by the Board with a view to ensuring
the long-term sustainability of the business. The security
and longevity of returns is fundamental to the Company’s
strategy, as summarised in the outline of the Group’s
business model on page 6 and on the Company’s website:
www.supermarketincomereit.com, and the Company’s
investment strategy is described in the Strategic
Report on page 6.
The Company has an outsourced operating model. JTC
Global AIFM Solutions Limited has been appointed by the
Group, pursuant to the AIFM Agreement, to be the Group’s
Alternative Investment Fund Manager (the AIFM or the
“Investment Manager”), under which it is responsible for
overall portfolio management and compliance with the
Group’s investment policy, ensuring compliance with the
requirements of the Alternative Investment Fund Managers
Directive (“AIFMD”) that apply to the Group and
undertaking risk management. The AIFM has delegated
certain services in relation to the Group and its Portfolio,
which include advising in relation to financing and asset
management opportunities, to the Investment Adviser. The
Investment Adviser advises the Group and the AIFM on the
acquisition of its investment portfolio and on the
development, management and disposal of UK commercial
assets in its portfolio pursuant to the Investment
Advisory Agreement.
The Management Engagement Committee keeps the
appropriateness of the Investment Adviser and AIFM’s
appointment under review. In doing so the Committee
considers the past investment performance of the Group
and the capability and resources of the Investment Adviser
to deliver satisfactory investment performance in the future.
It also reviews the fees payable to the Investment Adviser
and AIFM, together with the standard of services provided
by key suppliers to the Company.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 69
Conflicts of interest
All the Directors are considered by the Board to be
independent of the AIFM and of the Investment Adviser.
As such, they are considered to be free from any business or
other relationships that could interfere with the exercise of
their judgements.
Each Director has a duty to avoid a situation in which he or
she has a direct or indirect interest that may conflict with
the interests of the Company. The Board may authorise any
potential conflicts, where appropriate, in accordance with
the Articles of Association. Where a potential conflict of
interest arises, a Director will declare their interest at the
relevant Board meeting and not participate in the decision
making in respect of the relevant business.
Culture
The culture and ethos of the Company are integral to its
success. The Board promotes open dialogue and frequent,
honest and open communication between the Investment
Adviser and other key advisers to the Company. Whilst the
Company has no employees, the Board pays close attention
to the culture of the Investment Adviser and its employees
and believes that its forward thinking and entrepreneurial
approach, combined with its rigour and discipline, is the
right fit for delivering our strategy and purpose.
The Board believes that its positive engagement and
working relationship with the Investment Adviser helps the
business achieve its objectives by creating an open and
collaborative culture, whilst allowing for constructive
challenge. The Non-Executive Directors speak regularly with
members of the Investment Adviser outside of Board
meetings to discuss various key issues relating to Company
matters. The Company’s success is based upon the effective
implementation of its strategy by the Investment Adviser
and third-party providers under the leadership of the Board.
The Board’s culture provides a forum for constructive and
robust debate, and the Board believes that this has been
fundamental to the success of the Company to date.
Investment Advisory Agreement
In March 2024, the Company entered into an amended and
restated Investment Advisory Agreement (“IAA”) with the
Investment Adviser. The principal amendments to the
existing IAA relate to the termination provisions of the
agreement and seek to reflect the original commercial
intentions of the Board and Investment Adviser. The Board
has agreed to make these amendments to provide
clarification for all parties in the event of a takeover,
delisting or liquidation (a “Relevant Event”).
In particular, the Revised IAA:
• clarifies that fees relating to the period following
a Relevant Event are calculated on the basis of the last
available net asset value prior to the Relevant Event;
• gives the Company the right, in addition to its existing
right to terminate on two years’ written notice (where
notice would be required to be worked), to terminate the
agreement following the announcement of a takeover,
a possible takeover or a delisting. Such termination would
take effect upon the Relevant Event becoming effective
and the Investment Adviser would, on that date, receive
a payment in lieu of written notice (such that notice would
not be required to be worked) equal to fees for a period of
two years less the time since the notice was given or (if
earlier) since the date on which any earlier termination
notice was given; and
• clarifies that if there is a liquidation or similar event in
relation to the Company, and the Investment Adviser
terminates the agreement with immediate effect (as it has
always been entitled to do), the Investment Adviser would
immediately receive a payment in lieu of written notice
(such that notice would not be required to be worked)
equal to fees for a period of two years less (if applicable)
the time since any earlier termination notice was given.
70 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | LEADERSHIP AND PURPOSE CONTINUED
Oversee the
development of the
Company’s ESG strategy
Monitor impact of
current and emerging
ESG trends on the
Company
Oversee engagement
with the broader
stakeholder community
on ESG matters.
Environmental, Social &
Governance Committee
Nominations Committee
Audit and Risk
Committee
Management
Engagement Committee
Remuneration
Committee
Reviews Board
composition
Succession planning
requirements of the
Group
Board and Committee
evaluations.
Monitors the
effectiveness of the audit
process
Monitors Group’s risk
management processes
Reviews integrity of
the Group’s financial
statements.
Overseeing new tenders
and appointments
Reviewing performance
of key suppliers
including the Investment
Adviser.
Implements
remuneration policy of
the Group
Ensures Directors‘
remuneration is set so
as to continue to attract,
retain and motivate
Agree the policy for
authorising claims
for expenses for the
Directors.
Atrato Capital (The “Investment Adviser”)
The Investment Adviser’s activities comprise of sourcing opportunities,
conducting due diligence, providing investment recommendations,
assisting with carrying out transactions and reporting on the
management of the investments. The Investment Adviser will also make
recommendations on financing decisions and strategy which is approved
by the Investment Manager and Board.
Delegated responsibilities
Acquisitions & Disposals
Marketing Asset Management
Funding
JTC Global AIFM Solutions Limited (The “AIFM”)
The AIFM, together with the Board, makes investment decisions following
recommendations from the Investment Adviser. The AIFM is responsible
for the oversight of the portfolio management activities and undertakes
the risk management function of the Company.
Responsibilities
Portfolio
Marketing
Risk Management
The Supermarket Income REIT PLC Board (The “Board”)
The Board is responsible for promoting the long-term sustainable
success of the Company, working towards strategic objectives and
generating value for Shareholders and other stakeholders.
Our operating model
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 71
The Board’s attendance in 2023/2024
All Directors are expected to devote sufficient time to the
Company’s affairs to fulfil their duties as Directors and to
attend all scheduled meetings of the Board and of the
Committees on which they serve. Where Directors are
unable to attend a meeting, they will provide their
comments on the Board papers received in advance of the
meeting to the Chair, who will share such input with the rest
of the Board and the AIFM. The Nomination Committee is
satisfied that all the Directors, including the Chair, have
sufficient time to meet their commitments.
Attendance at scheduled Board and Committee meetings
during the year was as follows:
Quarterly
Board meetings
Audit and
Risk Committee
Nominations
Committee
Remuneration
Committee
Management
Engagement
Committee ESG Committee
Scheduled
meetings
Scheduled
meetings
Scheduled
meetings
Scheduled
meetings
Scheduled
meeting
Scheduled
meetings
% attendance % attendance % attendance % attendance % attendance % attendance
Nick Hewson 4/4 2/2 1/1 4/4
Sapna Shah 4/4 3/3 2/2 1/1
Jon Austen 4/4 3/3 2/2 1/1
Frances Davies 4/4 2/2 1/1 4/4
Vince Prior 4/4 3/3 2/2 1/1
Cathryn
Vanderspar
4/4 2/2 1/1 4/4
72 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | BOARD ACTIVITIES DURING THE YEAR
The Board typically meets for scheduled Board meetings
four times a year in addition to an annual strategy day. The
Board will also have separate unscheduled Board meetings
to approve matters including, but not limited to:
• All potential acquisitions and disposals, including
appointment of principal advisers and cost budgets
• Asset management initiatives
• New financing or refinancing arrangements
• Hedging strategy
• Equity raises
Board meetings
The quarterly Board meetings follow a formal agenda,
which is approved by the Chair and circulated by the
Company Secretary in advance of the meeting. The Chair
leads the Board by presiding over Board meetings; agreeing
the agendas, ensuring, among other matters, that
appropriate weight is given to topics such as strategy, asset
allocation and financial performance. The Chair ensures
that Board debates are balanced, open and inclusive and
promotes behaviours and attributes that make up
the culture.
The Chair ensures that the Board is provided with
information of appropriate quality and form, in a timely
manner. The Board is kept fully informed of potential
investment opportunities, along with wider property market
intelligence, through a comprehensive set of Board papers
prepared by the Investment Adviser prior to each meeting.
Representatives of the Investment Adviser are invited to
attend the Board meetings, as are representatives of the
Company’s other advisers as required, particularly
representatives from the Company’s property agent, external
legal counsel and brokers.
A summary of typical matters discussed by the Board at
each quarterly Board meeting are noted below:
Discussion
Strategy and
operational
• Update by the Company’s joint brokers on the
public markets and capital market activity of the
Company’s peers
• Supermarket property sector update by the
Company’s property agent
• Review of movements within the Portfolio,
including recent acquisitions and rent-reviews
which have taken place during the year
• Grocery sector overview, including financial
update on key tenants
• Leasing activity, major developments and
longer-term pipeline
• Future asset management initiatives
• EPC summary of the Portfolio
Finance and
financing
• Quarterly financial statements review
• Actuals vs budgets analysis
• Review of the Company’s key
performance indicators
• Analysis of current debt facilities, including any
impending facility renewals
• Review of current cost of capital
• Approval of the financial budget (annual basis)
Governance • Update by the Company’s external legal counsel
on matters which have been actioned
during the year
• Committee chairs will report on items discussed
at the Board Committees
• Review and discussion of the quarterly AIFM
report presented by the AIFM
• The Company Secretary will report on corporate
governance developments including any changes
required to Company policies and Committee
Terms of References
• Stakeholder feedback from shareholders and
research analysts
• Review of significant shareholdings at
the year end
In addition to formal Board meetings, there is also an
ongoing informal interaction between the Directors, the
AIFM and the Investment Adviser.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 73
CORPORATE GOVERNANCE | KEY DECISIONS OF THE BOARD DURING THE YEAR
Some examples of how the Board has considered stakeholder interests and s.172(1) matters in its decision making in
2023/24 are set out below and in “Board Activities during the year” on page 72. Further details on our stakeholder
engagement, and our response, can also be found on pages 56 to 59.
Decision Stakeholders
Board rationale and
considerations Impact Long-term effects of decision
Acquisition of Carrefour
portfolio in France
Shareholders
Investment Adviser
An opportunity to diversify
the portfolio both from
a geographic and tenant
perspective. Accretive
transaction and
complementary to the
existing portfolio.
€75.3 million (excluding
acquisition costs)
acquisition of a portfolio of
Carrefour supermarkets in
France through a sale and
leaseback transaction.
Diversification of the
portfolio and furthers the
strategy of investing in the
future model of grocery.
Debt refinancing
and hedging
Shareholders
Investment Adviser
Given the current
macroeconomic
environment the Board
viewed it prudent to
maintain a lower LTV and
used hedging to protect
the Company from
earnings volatility risk.
Debt refinancing exercise
undertaken involving the
cancellation of two
shorter-dated debt
facilities, the reduction and
extension of an existing
facility and the completion
of a new unsecured debt
facility with a new lender.
The Company also
extended the term of its
hedging arrangements to
match the maturity of its
debt facilities at no
addition cost to
the Company.
Building strong
relationships with lenders
allowing the Company to
access debt financing at
attractive margins and
100% of the Company’s
drawn debt is either fixed
rate or hedged to a fixed
rate until January 2026.
SBTi targets Shareholders
Communities
Demonstrates the
Company’s commitment to
ESG and provides clear
targets to work towards.
The SBTi validated the
Company’s targets to:
• being net zero by 2050.
• reduce its Scope 1 and
Scope 2 emissions by
42% by FY2030
• reduce its Scope 1, 2 and
3 emissions by
90% by FY2050
Provides measurable
objectives which the
Company can measure its
progress against.
.
74 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | CORPORATE GOVERNANCE STATEMENT
KEY BOARD STATEMENTS
Statement of Compliance
The Board has considered the Principles and Provisions of
the AIC Code of Corporate Governance (February 2019) and
that these provide the most appropriate framework for the
Company’s governance and reporting to shareholders.
The AIC Code addresses the Principles and Provisions set
out in the UK Corporate Governance Code (July 2018), as
well as setting out additional Provisions on issues that are of
specific relevance to the Company.
The Board considers that reporting against the Principles
and Provisions of the AIC Code, which has been endorsed
by the Financial Reporting Council, provides more relevant
information to shareholders.
The Company has complied with all the Principles and
Provisions of the AIC Code throughout the year.
A copy of the AIC Code (2019) can be obtained via the AIC’s website, www.theaic.co.uk. It includes an explanation of how
the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant to investment companies.
This Corporate Governance Statement forms part of the Directors’ Report.
AIC
Code Principle
Evidence of compliance /
explanation of departure from the AIC Code
A A successful company is led by an effective board, whose role is to promote
the long-term sustainable success of the Company, generating value for
shareholders and contributing to wider society.
Section 172(1) Statement on page 55.
Leadership and Purpose on pages 68 to 71.
Strategic Report on pages 1 to 61.
B The Board should establish the Company’s purpose, values and strategy,
and satisfy itself that these and its culture are aligned. All Directors must
act with integrity, lead by example and promote the desired culture.
Strategic Report on pages 1 to 61.
Leadership and Purpose on pages 68 to 71.
C The Board should ensure that the necessary resources are in place for the
Company to meet its objectives and measure performance against them.
The Board should also establish a framework of prudent and effective
controls, which enable risk to be assessed and managed.
Our Principal Risks on pages 52 to 54.
Audit and Risk Committee Report on pages 79 to 82.
Nomination Committee Report on pages 76 to 78.
Management Engagement Committee Report on
pages 83 to 84.
ESG Committee Report on pages 85 to 86.
Directors’ Report on pages 91 to 92.
D In order for the Company to meet its responsibilities to shareholders and
stakeholders, the Board should ensure effective engagement with, and
encourage participation from, these parties.
Section 172 Statement on page 55.
Our Key Stakeholder Relationships on pages 56 to 59.
F The Chair leads the Board and is responsible for its overall effectiveness in
directing the Company. They should demonstrate objective judgement
throughout their tenure and promote a culture of openness and debate.
In addition, the chair facilitates constructive board relations and the
effective contribution of all Non-Executive Directors, and ensures that
Directors receive accurate, timely and clear information.
Board Activities during the year on page 72.
G The Board should consist of an appropriate combination of directors (and,
in particular, independent Non-Executive Directors) such that no one
individual or small group of individuals dominates the Board’s
decision making.
Leadership and Purpose on pages 68 to 71.
Nomination Committee Report on pages 76 to 78.
H Non-Executive Directors should have sufficient time to meet their Board
responsibilities. They should provide constructive challenge, strategic
guidance, offer specialist advice and hold third party service
providers to account.
Leadership and Purpose on pages 68 to 71.
Nomination Committee Report on pages 76 to 78.
I The Board, supported by the Company Secretary, should ensure that it has
the policies, processes, information, time and resources it needs in order to
function effectively and efficiently.
Nomination Committee Report on pages 76 to 78.
Board Activities during the year on page 72.
Leadership and Purpose on pages 68 to 71.
J Appointments to the Board should be subject to a formal, rigorous and
transparent procedure, and an effective succession plan should be
maintained. Both appointments and succession plans should be based on
merit and objective criteria and, within this context, should promote
diversity of gender, social and ethnic backgrounds, cognitive and
personal strengths.
Nomination Committee Report on pages 76 to 78.
K The Board and its committees should have a combination of skills,
experience and knowledge. Consideration should be given to the length of
service of the Board as a whole and membership regularly refreshed.
Board of Directors Biographies on pages 64 to 65.
Nomination Committee Report on pages 76 to 78.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 75
AIC
Code Principle
Evidence of compliance /
explanation of departure from the AIC Code
L Annual evaluation of the Board should consider its composition, diversity
and how effectively members work together to achieve objectives.
Individual evaluation should demonstrate whether each Director continues
to contribute effectively.
Nomination Committee Report on pages 76 to 78.
M The Board should establish formal and transparent policies and
procedures to ensure the independence and effectiveness of external
audit functions and satisfy itself on the integrity of financial and
narrative statements.
Audit and Risk Committee Report on pages 79 to 82.
N The Board should present a fair, balanced and understandable assessment
of the Company’s position and prospects.
Audit and Risk Committee Report on pages 79 to 82.
O The Board should establish procedures to manage risk, oversee the
internal control framework, and determine the nature and extent of the
principal risks the Company is willing to take in order to achieve its
long-term strategic objectives.
Audit and Risk Committee Report on pages 79 to 82.
Alternative Investment Fund Manager’s Report on
pages 94 to 95.
P Remuneration policies and practices should be designed to support
strategy and promote long-term sustainable success.
Remuneration Committee Report on pages 87 to 90.
Q A formal and transparent procedure for developing a remuneration policy
should be established. No Director should be involved in deciding their
own remuneration outcome.
Remuneration Committee Report on pages 87 to 90.
R Directors should exercise independent judgement and discretion when
authorising remuneration outcomes, taking account of company and
individual performance, and wider circumstances.
Remuneration Committee Report on pages 87 to 90.
Requirement Board statement Where to find further information
Going concern basis The Board is of the opinion that the going concern basis adopted in
the preparation of the Annual Report is appropriate.
Further details are set out on page
60 of the Strategic Report.
Viability Statement The Board is of the opinion that the viability statement made in the
Annual Report is appropriate.
Further details are set out on page
61 of the Strategic Report.
Annual review of systems of risk
management and internal control
A continuing process for identifying, evaluating and managing the
risks the Company faces has been established and the Board has
reviewed the effectiveness of the internal control systems.
Further details are set out in the
Audit and Risk Committee Report
on pages 79 to 82 of this
Governance Report.
Robust assessment of the
Company’s emerging and principal
risks to the business model, future
performance, solvency and liquidity
of the Company.
The Audit and Risk Committee and the Board undertake a full risk
review annually where all the emerging, principal risks and
uncertainties facing the Company and the Group are considered.
Further details can be found in Our
Principal Risks on pages 52 to 54 of
the Strategic Report.
Fair, balanced and understandable The Directors confirm that to the best of their knowledge the
Annual Report and Accounts taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
Further details of the fair, balanced
and understandable statement can
be found in the Audit and Risk
Committee Report on page 79 to 82.
Appointment of the
Investment Adviser
The Directors consider the continuing appointment of the
Investment Adviser on the terms agreed in the Investment
Advisory Agreement dated 14 September 2020, the subsequent
renewal dated 14 July 2021 and the amendment and restatement
dated 21 March 2024 to be in the best interests of the Company.
Further details are set out in Note 28
to the Consolidated Financial
Statements.
s.172 The Directors have considered the requirements of s.172 when
making strategic decisions.
Section 172 Statement on page 55.
76 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | NOMINATION COMMITTEE REPORT
Sapna Shah
Nomination Committee
Chair
NOMINATION
COMMITTEE REPORT
Dear Shareholders
I am pleased to present the Nomination Committee report
for the year ended 30 June 2024. The main focus of the
Committee over the past year has been on succession
planning and the Board’s externally facilitated evaluation.
How the Committee operates
The Nomination Committee Terms of Reference are
available on the Company’s website and on request from
the Company’s registered office.
During the period to 30 June 2024, the Committee
comprised of three Independent Non-Executive Directors of
the Company, none of which are connected to the AIFM or
Investment Adviser.
Committee Members
Sapna Shah: Committee Chair
Vince Prior
Nick Hewson
All the Committee members served for the full year, unless
otherwise stated.
On 22 May 2024 the Company announced that I had been
appointed Chair of the Nomination Committee, replacing
Vince Prior, who remains a member of the Committee.
During the year the Nomination Committee held two formal
meetings. The Company Secretary and I ensure that the
meetings are of sufficient length to allow the Committee to
consider all important matters and the Committee is
satisfied that it receives full information in a timely manner
to allow it to fulfil its obligations. The Committee held one
additional ad-hoc meeting to discuss succession planning
and the appointment of an external recruitment agency.
Frances Davies, Cathryn Vanderspar and Jon Austen, and
members of the Investment Adviser were invited to attend
the Committee meetings. The Company Secretary, Hanway
Advisory Limited, acts as secretary to the Committee.
Committee Responsibilities
The role of the Committee is to ensure that there is a formal,
rigorous and transparent procedure for appointments to the
Board, to lead the process for Board appointments and make
recommendations to the Board; assist the Board in ensuring
its composition is regularly reviewed and refreshed so that it
is effective and able to operate in the best interests of
shareholders; and ensure plans are in place for orderly
succession to positions on the Board. Specifically, the
Committee is required to review, discuss and make
recommendations (where relevant) to the Board concerning:
• Plans for succession for Non-Executive Directors, in
particular for the key roles of Chair and the Senior
Independent Director
• Membership of the Audit and Risk, Remuneration,
Management Engagement and ESG Committees, in
consultation with the Chairs of those committees
• The reappointment of any Director at the conclusion of
their specified term of office, having given due regard to
their performance and ability to continue to contribute to
the Board in the light of knowledge, skills and experience
as well as time commitment required
• Any matters relating to the continuation in office of any
Director at any time
• Annual review of the Board’s diversity & inclusion policy
and tenure policy
• Recruitment process for appointments to the Board
• The annual performance evaluation process, ensuring it is
externally facilitated once every three years, and any
actions to be taken from the results
Board Independence and Tenure
The Board currently comprises six Non-Executive Directors
all of whom are deemed independent. In accordance with
the provisions of the AIC Code, all Directors offer
themselves for annual re-election by shareholders at the
AGM. We considered whether this was appropriate having
due regard to each Director’s performance and ability to
continue to contribute to the Board in the light of the
knowledge, skills and experience required. We also
considered other external appointments held by Directors
and the amount of time each Director has devoted to
the Company.
Directors are appointed for an initial term of three years
with an expectation that they will serve at least two
three-year terms, but they may be invited to serve for an
additional period. The Board’s tenure policy does not
require a Director to be mandatorily replaced after a fixed
term, but recognised that a Director’s tenure exceeding nine
years may impair their independence and recognises the
importance of progressive Board refreshment and renewal
and Compliance with UK Corporate Governance Standards.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 77
Director Re-election
The Committee is wholly satisfied the Directors devoted
sufficient time to their duties over the past year and that the
Board comprised the necessary skills and experience to
discharge its obligations to the Company’s shareholders and
other stakeholders. Following the advice of the Committee,
and in line with the AIC Code, the Board recommends the
re-election of each Director at the forthcoming AGM.
Activities during the year
Succession planning
The Committee is responsible for considering succession
planning for the Directors, taking into account the
challenges and opportunities facing the Company, and the
skills and expertise expected to be needed in the future.
The Committee evaluated the current skills, experience
and tenure of the Directors and have developed a succession
plan to ensure the orderly refreshing of the Board given
that Nick Hewson, Jon Austen and Vince Prior were all
appointed at IPO and in May 2023 the Committee approved
a third three-year term for each of them, subject to annual
re-election at the Company’s AGM.
In August 2024, having met with four firms, the Board
engaged with Sapphire Partners, the external search
consultancy, to assist with succession planning in line with
provision 25 of the AIC Code. Over the next two years the
Committee will seek to progressively refresh the Board,
looking to replace the skills and experience that may be lost
by the Directors due to retire and allowing sufficient time to
ensure an orderly handover can take place.
Committee membership
With effect from 1 July 2023, the composition of the Board’s
committees were amended to improve efficiency.
Additionally, with effect from 22 May 2024, I was appointed
Chair of the Nomination Committee and Vince Prior was
appointed Chair of the Management Engagement
Committee. This decision was taken such that the Chair of
the Nomination Committee was not the subject of the
ongoing succession planning discussions. Details of
Committee membership can be found on pages 64 to 65.
Director training programme
The Chair is responsible for ensuring that any ongoing
training and development needs of the Directors that are
relevant for their role in the Company are met. All Directors
are provided with an appropriate induction at the time of
appointment. The remit of the Nomination Committee
includes monitoring the skills and knowledge of the
Directors and, where necessary, training programmes are
arranged as and when the need arises.
In February 2024, the Board attended a site visit at
Sainsbury’s, Ashford. The visit provided informative insights
to the Board regarding the operation of the site, its role in
fulfilment of online grocery orders and environmental
considerations of the building. The Directors intend to
conduct further site visits in the coming year.
In March 2024, the Investment Adviser provided ESG
training sessions to the Directors to keep them abreast of the
latest ESG related issues. Further ESG training sessions have
been scheduled for the coming year.
In addition to the bespoke training sessions, each Director is
expected to maintain their individual professional skills and
is responsible for identifying any training needs to help
them ensure that they maintain the requisite knowledge to
be able to consider and understand the Company’s
responsibilities, business and strategy. All Directors have
access to the advice and services of the Investment Adviser,
Company Secretary, corporate brokers and other service
providers. The Directors are also entitled to take
independent advice at the Company’s reasonable expense
at any time.
Performance Evaluation
The Directors recognise that an evaluation process is
a significant opportunity to review the practices and
performance of the Board, its Committees and its individual
Directors in order to implement actions to improve the
Board’s effectiveness and contribute to its overall success.
During the year the Committee, having considered four
proposals, selected Trust Associates to conduct the Board’s
externally facilitated evaluation. Trust Associates (then
called Board Alpha) conducted the last external Board
evaluation in 2021. Trust Associates does not have any
connection with the Company apart from conducting the
Board evaluation. The process was led by Richard Clarke
and Victoria Clarke who conducted individual, structured,
in-depth interviews with each of the Directors, as well as key
staff at the Investment Adviser, Company Secretary, Brokers
and five substantial shareholders. Trust Associates also
observed meetings of the Board, Audit and Risk Committee
and ESG Committee to further inform the assessment.
As well as evaluating the Board as a whole, the process also
considered the effectiveness of individual Directors and
Trust Associates provided individual Director performance
reports. The review concluded that the Board, its
Committees and individual Directors continue to operate
effectively. Some of the key strengths identified included:
• The Board has a strong, respectful and collegiate
relationship with the Investment Adviser whilst also
appropriately challenging and scrutinising information
provided by them
• Efficient Board and Committee meetings with effective
leadership from their respective Chairs and a focus on
maintaining good governance
• Directors have an appropriate mix of skills and experience
and work well together as a Board, with a good level of
interaction and debate
78 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | NOMINATION COMMITTEE REPORT CONTINUED
The evaluation identified several recommendations for
2024/25, which are being progressed.
Recommendation How this is being addressed
1 Strengthen risk
management processes
Following the year end, a wholesale
in-depth review of the risk register
was conducted, incorporating a new
risk weighting analysis. The updated
risk register and matrix will continue
to be reviewed by the Audit and Risk
Committee, at least annually, in
conjunction with the Investment
Adviser and AIFM.
2 Succession planning As described on page 77 the
Nomination Committee is progressing
a succession plan which will ensure
the progressive renewal of the Board,
allowing for orderly handovers and
a smooth transition.
3 Board-only discussions A Board-only session has been added
as a standing agenda item at quarterly
Board meetings. In May 2024 the
Directors held a Directors-only dinner
and going forwards will arrange
bi-annual dinners to discuss topics in
an informal and more open-ended
environment.
Up to the date of this report, the Board
have held Director only discussions
specifically focused on the
Company’s strategy.
4 Shareholder engagement The Chair will seek to engage more
proactively with shareholders and the
Company is seeking to arrange
a Capital Markets Day early in the new
calendar year.
Board diversity and inclusion
The Company does not have any employees. In respect of
appointments to the Board, we consider that each candidate
should be appointed on merit to make sure that the best
candidate for the role is appointed every time. The Board
supports diversity and inclusion and as such recruitment
processes promote diversity of all kinds including gender,
ethnicity, sexual orientation, disability or educational,
professional and socioeconomic backgrounds and
neurodiversity. This will ensure that any such appointment
will develop and enhance the operation of the Board to best
serve the Company’s strategy.
The Company’s Diversity Policy is reviewed regularly and it
is believed that the Board has a balance of skills,
qualifications and experience which are relevant to
the Company.
The Board supports the recommendations set out in the
Hampton-Alexander Review on gender diversity and the
Parker Review on ethnic diversity and recognise the value
and importance of cognitive diversity in the boardroom.
As at the date of this report, the Board consisted of three
male and three female members, meaning we have
exceeded the 33% female Board representation target
as set out by the Hampton-Alexander initiative, and the
40% female Board representation target as set out in the
FCA listing rules on diversity. The Board is committed to
maintaining that the Board, as a whole, will have at least
40% representation of either gender. The Board is also
committed to maintaining at least one female member on
each of its Committees.
FCA Listing Rule requirements
The following table sets out the gender and ethnic diversity
of the Board as at 30 June 2024 in accordance with the
FCA’s Listing Rules, the disclosure of which in this report
having been approved by each of the Directors:
Gender Diversity
Number
of Board
Members
Percentage
of the Board
Number
of Senior
Positions on
the Board*
Men 3 50% 1
Women 3 50% 1
Prefer not to say - - -
Ethnic Diversity
White British or other White
(including minority
white groups)
5 83% 1
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British 1 17% 1
Black/African/Caribbean/
Black British
- - -
Other ethnic group,
including Arab
- - -
*In accordance with the Listing Rules, as an externally
managed investment Company, we do not have any
executive management, including the roles of CEO or CFO,
who are Directors of the Company. The Company considers
the SID and Chair to be the only applicable roles with the
business and have reported against these.
The Company has reported against the Listing Rules on
diversity and has complied with all the targets.
Committee effectiveness
Details of the performance evaluation conducted during the
year can be found on pages 77 to 78.
Signed on behalf of the Nomination Committee by:
Sapna Shah
Nomination Committee Chair
September
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 79
CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT
Dear Shareholders,
I am pleased to present the Audit and Risk Committee
Report for the year ended 30 June 2024. The Audit and Risk
Committee’s role is to oversee the Group’s financial
reporting process, including the risk management and
internal financial controls in place within the AIFM and the
Investment Adviser, the valuation of the property portfolio,
the Group’s compliance with accepted accounting standards
and other regulatory requirements, as well as the activities
of the Group’s Auditor.
How the Committee operates
The Audit and Risk Committee Terms of Reference are
available on the Company’s website and on request from
the Company’s registered office.
During the period to 30 June 2024, the Committee
comprised of three Independent Non-Executive Directors of
the Company, none of which are connected to the AIFM or
Investment Adviser.
Committee Members
Jon Austen: Committee Chair
Vince Prior
Sapna Shah
All the Committee members served for the full year, unless
otherwise stated.
The Committee believes that its members have the right
balance of skills and experience within the real estate sector
to be able to function effectively. The Board considers that
I have recent and relevant financial expertise to chair the
Audit and Risk Committee. Further details of each Director’s
experience can be found in the biographies on pages 64 to 65.
During the year, the Audit and Risk Committee held three
formal meetings following the Company’s corporate
calendar, which ensures that the meetings are aligned to the
Company’s financial reporting timetable. The Company
Secretary and I ensure that the meetings are of sufficient
length to allow the Committee to consider all important
matters and the Committee is satisfied it receives full
information in a timely manner to allow it to fulfil its
obligations.
Members of the Investment Adviser and the Group’s Auditor
were invited to attend the Committee meetings. Hanway
Advisory Limited, as Company Secretary, acts as secretary
to the Committee. Nick Hewson, Frances Davies and
Cathryn Vanderspar, whilst not members of the Audit and
Risk Committee attend meetings during the year
by invitation.
As the Committee Chair, I have had regular communications
with the Auditor and senior members of the Investment
Adviser. In addition, the Committee has discussions
throughout the year outside of the formal
Committee meetings.
The Committee is aware of the requirements of the Audit
Committees and External Audit: Minimum Standards
(the “Minimum Standards”) as published by the FRC in
May 2023. The Committee have reviewed the Minimum
Standards, amended its terms of reference accordingly and
will seek to meet the requirements of the Minimum
Standards as soon as practicable.
Activities
Relationship with the Auditor
The Committee has primary responsibility for managing
the relationship with the Auditor, including assessing their
performance, effectiveness and independence annually as
well as recommending to the Board their
reappointment or removal.
BDO LLP (“BDO”) were appointed as the Group’s Auditor in
2017 and we are recommending they are re-appointed at the
forthcoming AGM. Under the Company’s interpretation of
the transitional arrangements for mandatory audit rotation,
the Company will be required to put the external audit out
for tender no later than the financial year ended
30 June 2028.
Charles Ellis is the audit partner and, in line with the policy
on lead partner rotation, is expected to rotate off the audit
ahead of the 2028 audit.
The Committee has met with the key members of the audit
team over the course of the year and BDO has formally
confirmed its independence as part of the reporting process.
As Chair of the Committee, I regularly speak with the
external audit partner without the Investment Adviser
present to ascertain if there are any concerns, to discuss the
audit reports and to ensure that the Auditor has received the
support and information requested from management.
There have been no concerns identified to date.
Jon Austen
Audit and Risk
Committee Chair
AUDIT AND RISK
COMMITTEE REPORT
80 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT CONTINUED
The Company became a constituent of the FTSE 350 on
20 June 2022 and confirms that it has complied with the
terms of The Statutory Audit Services for Large Companies
Market Investigation (Mandatory User of Competitive
Tender Processes and Audit and Risk Committee
Responsibilities) Order 2014 (the “Order”)
throughout the year.
The Audit and Risk Committee noted that the FRC’s latest
review of BDO’s audit performance, published in July 2024,
was disappointing. I spoke to Charles Ellis, our audit
partner, on the key findings raised in the FRC’s review of
individual audits within section 2 of their report. The Audit
and Risk Committee considered the impact of these areas on
the audit of the Company and specifically discussed the
areas related to these findings, being the challenge of
management estimates and rental income. The Audit and
Risk Committee understood BDO’s approach taken in both
areas as well as the findings from the current year audit.
I look forward to BDO achieving better results from their
next FRC review.
Effectiveness and independence
We meet with the Auditor and the Investment Adviser
before the preparation of the Annual Results, to plan and
discuss the scope of the audit, and challenge where
necessary to ensure its rigour. At these meetings, the Auditor
prepares a detailed audit plan which is discussed and
questioned by us and the Investment Adviser to ensure that
all areas of the business are adequately reviewed, and the
materiality thresholds are set at the appropriate level, which
varies depending on the matter in question. We also discuss
with the Auditor its views over significant risk areas and
why it considers these to be risk areas.
The Audit and Risk Committee, where appropriate,
continues to challenge and seek comfort from the Auditor
over those areas that drive audit quality. The timescale for
the delivery of the audit or review is also set at these
meetings. We meet with the Auditor again prior to the
conclusion of the audit or review to consider, challenge and
evaluate findings in depth.
We have considered the objectivity and effectiveness of the
Auditor and we consider that the audit team assigned to the
Company by BDO has the necessary experience,
qualifications and understanding of the business to enable it
to produce a detailed, high-quality, in-depth audit and
permits the team to scrutinise and challenge the Company’s
financial procedures and significant judgements. We ask the
Auditor to explain the key audit risks and how these have
been addressed. We also considered BDO’s internal quality
control procedures and transparency report and found them
to be sufficient. Overall, the Committee is satisfied that the
audit process is transparent and of good quality and the
Auditor has met the agreed audit plan.
Audit and non-audit fees
We continue to believe that, in some circumstances, the
external Auditor’s understanding of the Company’s business
can be beneficial in improving the efficiency and
effectiveness of advisory work. For this reason, we continue
to engage BDO as reporting accountants on the Company’s
issues of equity and debt capital in the normal course of the
Company’s business. Other reputable firms have been
engaged during the year to assist with financial and tax due
diligence on corporate acquisitions as well as general tax
compliance advice.
The Non-Audit Services Policy requires approval by the
Committee above a certain threshold before the external
Auditor is engaged to provide any permitted non-audit
services. The Company paid £42,000 in fees to the Auditor
for non-audit services during the year ended 30 June 2024.
These fees are set out below.
Service Fee (£)
Interim Review 42,000
Total 42,000
The ratio of non-audit fees to audit fees for the year ended
30 June 2024 was 9%.
The Committee periodically monitors the ratio to ensure
that any fees for permissible non-audit services do not
exceed 70% of the average audit fees paid in the last
three years.
In addition to ensuring compliance with the Group’s policy
in respect of non-audit services, the Committee also receives
confirmation from BDO that it remains independent and has
maintained internal safeguards to ensure its objectivity.
Financial reporting and significant judgements
During the year, the Financial Reporting Council (“FRC”)
carried out a review of the Company’s annual report and
accounts for the year ended 30 June 2023 in accordance
with Part 2 of the FRC Corporate Reporting Review
Operating Procedures. I am pleased to report that no
substantive questions were raised as a result of this review,
and any suggested improvements to the Company’s
accounts have been incorporated into this annual report
and accounts.
We monitor the integrity of the financial information
published in the Interim and Annual Reports and any other
formal announcement relating to financial performance.
We consider whether suitable and appropriate estimates
and judgements have been made in respect of areas that
could have a material impact on the financial statements.
We review changes in accounting policies and other
relevant matters related to the Consolidated and Company
Financial Statements. The application of these accounting
policies can be found in the Notes to the Consolidated
Financial Statements and Notes to the Company Financial
Statements on pages 108 to 138 and 140 to 141.
A variety of financial information and reports were
prepared by the Investment Adviser and provided to the
Board and the Committee over the course of the year.
These included budgets, periodic re-forecasting following
acquisitions or corporate activity, papers to support the
raising of additional finance and general compliance.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 81
Significant issue How the issue was addressed
Valuation of property portfolio
Cushman and Wakefield have been engaged to value, on a bi-annual
basis, the Company’s Investment Property portfolio. The Group’s
Portfolio value, inclusive of the acquired France assets, as at
30 June 2024 was £1.78 billion (30 June 2023: £1.69 billion)
reflecting a valuation decline, net of costs, of 3.2% for the year on
a like-for-like basis.
The valuation of the Group’s property portfolio is a key determinant of
the Group’s net asset value as well as directly impacting the fee
payable to the Investment Adviser.
The valuation is conducted externally by independent valuers,
however, the nature of the valuation process is inherently subjective
due to the assumptions made in determining market comparable
yields and estimated rental values.
The Audit and Risk Committee met with the valuer on two occasions,
together with the Investment Adviser and external auditor in January
and August to review the valuation included within the half-year and
year-end financial statements. This review included the valuation
process undertaken, changes in market conditions, recent transactions
in the market and how these impacted our Portfolio and the valuer’s
expectations in relation to future rental growth and yield movement.
The Committee asked the valuer to highlight significant judgements
or disagreements with the Investment Adviser during the valuation
process to ensure a robust and independent valuation had taken place.
The Auditor, BDO, reviewed the underlying assumptions using its real
estate experts and provided the Audit and Risk Committee with
a summary of its work as part of its report on the half-year and
year-end results.
As a result of these reviews, the Committee concluded that the
valuation had been carried out appropriately and independently. The
Board approved the valuations in February 2024 and September 2024
in respect of the interim and annual valuations.
As a result of the work performed, we have concluded and
reported to the Board that the Annual Report for the year
ended 30 June 2024, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s performance,
business model and strategy.
Risk management and internal controls
The Board oversees the Group’s risk management and
internal controls and determines the Group’s risk appetite.
The Board has, however, delegated responsibility for review
of the risk management methodology and the effectiveness
of internal controls to the Audit and Risk Committee. The
Group’s system of internal controls includes financial,
operational and compliance controls and risk management.
Policies and procedures, including clearly defined levels of
delegated authority, have been communicated
throughout the Group.
Internal controls are implemented by the Investment
Adviser in respect of the key operational and financial
processes of the business. These policies are designed to
ensure the accuracy and reliability of financial reporting
and govern the preparation of financial statements.
As part of the migration of the Company to the Closed-ended
investment funds category of the LSE’s Main Market, a Board
Memorandum was prepared that documented the financial
position and prospects procedures (“FPPP”) of the Company.
This Memorandum was independently reviewed by an
external accountancy firm and no major deficiencies were
identified, which provided the Committee with additional
comfort that the Group’s system of internal controls remained
fit for purpose and robust. We have confirmed with the
Investment Adviser that there have been no changes to
controls since those documented within that report.
Internal audit function
The Group does not have an internal audit function.
The need for this is reviewed annually by the Committee.
Due to the relative lack of complexity and the outsourcing
of the majority of the day to-day operational functions, the
Committee continues to be satisfied that there is no
requirement for such a function.
Fair, balanced and understandable financial statements
The production and audit of the Group’s Annual Report is
a comprehensive process, requiring input from a number of
contributors. To reach a conclusion on whether the Annual
Report is fair, balanced and understandable, as required
under the AIC Code, the Board has requested that the
Committee advise on whether it considers that the Annual
Report fulfils these requirements. In outlining our advice,
we have considered the following:
• The comprehensive documentation that outlines the
controls in place for the production of the Annual Report,
including the verification processes to confirm the
factual content
• The detailed reviews undertaken at various stages of the
production process by the Investment Adviser, AIFM,
Company Secretary, Financial Advisers, Auditor and the
Committee, which are intended to ensure consistency and
overall balance
• Controls enforced by the Investment Adviser, Company
Secretary and other third-party service providers, to
ensure complete and accurate financial records and
security of the Company’s assets
• The Investment Adviser has a highly experienced team
who have a strong proficiency in producing
financial statements
We also regularly review the Company’s ability to continue
to pay a progressive dividend. All financial information was
fully reviewed and debated both at Committee and Board
level across a number of meetings. The Investment Adviser
and the Auditor update us on changes to accounting
policies, legislation, best practice and areas of significant
judgement by the Investment Adviser. They pay particular
attention to transactions that they deem important due to
size or complexity.
The significant issues considered by the Committee in
respect of the year ended 30 June 2024, which contained
a significant degree of estimation uncertainty, are set out in
the table below.
82 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | AUDIT AND RISK COMMITTEE REPORT CONTINUED
During the year, I also performed a review and walk-through
of the key systems and controls in place at the Investment
Adviser which I found to be suitable for a Company
of our size.
Risk register
During the year, the Audit and Risk Committee, together
with the AIFM and Investment Adviser, undertook a review
of the risk management reporting framework. As a result of
this exercise, the Board reviewed all risks and decided to
rationalise the principal risks from 17 risks, as set out in the
2023 Annual Report, to 10 risks, which can be found on
pages 52 to 54.
The Board and JTC Global AIFM Solutions Limited, the
Company’s Alternative Investment Fund Manager (the
“AIFM”), together have joint overall responsibility for the
Company’s risk management and internal controls, with the
Audit and Risk Committee reviewing the effectiveness of the
Board’s risk management process on its behalf.
We have reviewed and approved all statements included in
the Annual Report concerning internal controls and risk
management taking into consideration the review of the risk
register and our assessment of the Group’s internal controls
and knowledge of the business.
We have also reviewed the adequacy of the Company’s
arrangements for any relevant party to raise concerns, in
confidence, about possible wrongdoing in financial
reporting, regulatory or other relevant matters and the
procedures of both the Company’s AIFM and Investment
Adviser for detecting fraud and preventing bribery.
We consider that they are appropriate.
Committee effectiveness
I believe that the quality of discussion and level of challenge
by the Committee with the Investment Adviser, the external
audit teams and the valuer, together with the timeliness and
quality of papers received by the Committee, ensures the
Committee is able to perform its role effectively.
Details of the performance evaluation conducted during the
year can be found on page 77.
Signed on behalf of the Audit and Risk Committee by:
Jon Austen
Audit and Risk Committee Chair
September
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 83
CORPORATE GOVERNANCE | MANAGEMENT ENGAGEMENT COMMITTEE REPORT
Dear Shareholders
I am pleased to present the Management Engagement
Committee report for the year ended 30 June 2024.
How the Committee operates
The Management Engagement Committee Terms of
Reference are available on the Company’s website and on
request from the Company’s registered office.
During the period to 30 June 2024, the Committee
comprised of six Independent Non-Executive Directors of
the Company, none of which are connected to the AIFM or
Investment Adviser.
Committee Members
Vince Prior: Committee Chair
Jon Austen
Frances Davies
Nick Hewson
Sapna Shah
Cathryn Vanderspar
I was appointed Committee Chair on 22 May 2024,
replacing Sapna Shah, who remains a member of the
Committee. All the Committee members served for the full
year, unless otherwise stated.
During the year, the Management Engagement Committee
held one formal meeting and one ad-hoc meeting. The
Company Secretary and I ensure that the meetings are of
sufficient length to allow the Committee to consider all
important matters and the Committee is satisfied that it
receives full information in a timely manner to allow it to
fulfil its obligations.
Members of the Investment Adviser were invited to attend
the Committee meetings. Hanway Advisory Limited as
Company Secretary acts as secretary to the Committee.
Responsibilities
The main function of the Management Engagement
Committee is to review the compliance, by the Investment
Adviser and the AIFM, with the Company’s investment
policy and their performance of the duties detailed in their
agreements with the Company.
The Committee will regularly review the composition of the
key executives performing the services on behalf of the
Investment Adviser and monitor and evaluate the
performance of other key service providers to the Company.
The Management Engagement Committee has been in
operation throughout the period and operates within clearly
defined terms of reference.
Activities
During the year the Committee reviewed the performance
of the Investment Adviser and AIFM and recommended to
the Board, the continued appointment of the Investment
Adviser and AIFM. The Committee also considered the
performance of key service providers to the Company.
Where appropriate, feedback was provided to the
Investment Adviser, AIFM and key service providers to
enhance the level of service provided to the Company.
Management Arrangements
The Company operates an externally managed alternative
investment fund for the purposes of the AIFMD. In its role
as AIFM, JTC Global AIFM Solutions Limited is responsible
for the portfolio management and risk management of the
Company pursuant to the AIFMD, subject to the overall
control and supervision of the Board. Atrato Capital Limited
acts as the Company’s Investment Adviser.
Under the Investment Advisory Agreement, the Investment
Adviser is entitled to receive advisory fees on the
following basis:
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
uninvested 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).
Vince Prior
Management Engagement
Committee Chair
MANAGEMENT ENGAGEMENT
COMMITTEE REPORT
84 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | MANAGEMENT ENGAGEMENT COMMITTEE REPORT CONTINUED
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:
1/12
th
of 0.7125% per calendar month of Adjusted Net
Asset Value up to or equal to £500 million, 1/12
th
of
0.5625% per calendar month of Adjusted Net Asset Value
above £500 million and up to or equal to £1,000 million
and 1/12
th
of 0.4875% per calendar month of Adjusted Net
Asset Value above £1,000 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.
The annual fee paid to the Investment Adviser under the
Investment Advisory Agreement for the year ended
30 June 2024 was £9.5 million (30 June 2023: £10.3 million).
The Investment Advisory Agreement may be terminated by
the Investment Adviser or the Company with no less than
two years written notice.
In March 2024, the Company entered into an amended and
restated Investment Advisory Agreement (“IAA”) with the
Investment Adviser. The principal amendments to the
existing IAA relate to the termination provisions of the
agreement and seek to reflect the original commercial
intentions of the Board and Investment Adviser. The Board
has agreed to make these amendments to provide
clarification for all parties in the event of a takeover,
delisting or liquidation (a “Relevant Event”). Further
information regarding the changes can be found on page 69.
During the year under review, the AIFM was paid a fee of
0.04% per annum of the net asset value of the Company up
to £1 billion and 0.03% of the net asset value over £1 billion,
subject to a minimum of £50,000 per annum, such fee being
payable quarterly in arrears. The total fees paid to the AIFM
during the year under review were £0.44m.
During the financial year under review, no separate
remuneration was paid by the AIFM to two of its executive
directors, Graham Taylor and Kobus Cronje, because they
were both employees of the JTC group of companies, of
which the AIFM forms part. The third executive director,
Matthew Tostevin, is paid a fixed fee of £10,000 for acting as
a director. Mr Tostevin is paid additional remuneration on
a time spent basis for services rendered to the AIFM and its
clients. Other than the directors, the AIFM has no
employees. The Company has now agreement to pay any
carried interest to the AIFM. During the year under review,
the AIFM paid £10,000 in fixed fees and £46,211 in variable
remuneration to Mr Tostevin.
Further information on the AIFM’s remuneration can be
found in the Alternative Investment Fund Manager’s Report
on pages 94 to 95.
Continuing Appointment of the Investment
Adviser and AIFM
The Management Engagement Committee has reviewed the
continuing appointment of the Investment Adviser and
AIFM and are satisfied that their appointment remains in
the best interests of shareholders as a whole.
Committee effectiveness
I believe that the quality of discussion and level of challenge
by the Committee with the Investment Adviser and AIFM,
together with the timeliness and quality of papers received
by the Committee, ensures the Committee is able to perform
its role effectively.
Details of the performance evaluation conducted during the
year can be found on page 77.
Signed on behalf of the Management Engagement
Committee by:
Vince Prior
Management Engagement Committee Chair
September
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 85
CORPORATE GOVERNANCE | ENVIRONMENTAL SOCIAL GOVERNANCE (ESG) COMMITTEE REPORT
Dear Shareholders
I am pleased to present the ESG Committee report for the
year ended 30 June 2024.
How the Committee operates
The ESG Committee Terms of Reference are available on
the Company’s website and on request from the Company’s
registered office.
The Committee comprised three Independent
Non-Executive Directors of the Company, none of which is
connected to the AIFM, or Investment Adviser.
Committee Members
Frances Davies: Chair of the Committee
Nick Hewson
Cathryn Vanderspar
All the Committee members served for the full year, unless
otherwise stated.
Jon Austen, Vince Prior, Sapna Shah and members of the
Investment Adviser and AIFM were invited to attend the
Committee meetings. Hanway Advisory Limited, as
Company Secretary, acts as secretary to the Committee.
During the year, the ESG Committee held its inaugural
meeting. The Company Secretary and I ensure that the
meetings are of sufficient length to allow the Committee to
consider all important matters and the Committee is
satisfied that it receives full information in a timely manner
to allow it to fulfil its obligations.
Responsibilities
The Committee serves as an independent and objective
party to monitor the integrity and quality of the Company’s
ESG strategy, and to ensure that the Company’s ESG
strategy is integrated into its business plan, corporate values
and objectives. It also fosters a culture of responsibility and
transparency in respect of managing the Company’s
ESG impacts.
The Committee’s key responsibilities include:
• Overseeing the establishment and implementation of
policies and codes of practice
• Setting KPIs related to ESG matters and overseeing
performance against those KPIs
• Overseeing the Company’s due diligence and other
processes to identify and manage the Company’s ESG
risks and impacts, including with respect to
climate-related risks
• Identifying the required resourcing and funding of
ESG-related activity
• Overseeing the Company’s engagement with its broader
stakeholder community
• Ensuring that the Company monitors and reviews current
and emerging ESG trends, relevant international
standards and legislative requirements and analysing how
those are likely to impact the Company
• Reviewing and approving the Company’s sustainability
reporting, including the Company’s annual Sustainability
Report (which covers the Company’s material ESG topics)
and TCFD Report.
The Committee focuses on the following three areas:
Environmental: The Company’s impact on the natural
environment and its response to the challenge of climate
change including: GHG emissions; energy consumption;
generation and use of renewable energy; biodiversity and
habitat; impact on water resources and deforestation;
pollution; efficient use of resources; the reduction and
management of waste; and the environmental impact of
the Company’s supply chain.
Social: The Company’s interaction with stakeholders
and the communities in which it operates and the role
of the Company in society including: board policies (e.g.
stakeholder engagement, diversity, non-discrimination
and equality of treatment, health, safety and well-being);
ethical/responsible sourcing; labour standards of the
supply chain (including child labour and modern slavery);
and engagement with and contribution to the broader
community through social projects and charitable donations.
Frances Davies
ESG Committee
Chair
ENVIRONMENTAL SOCIAL GOVERNANCE (ESG)
COMMITTEE REPORT
86 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | ENVIRONMENTAL SOCIAL GOVERNANCE (ESG) COMMITTEE REPORT CONTINUED
Corporate governance and behaviour: The ethical conduct
of the Company’s business including its corporate
governance framework, business ethics, policies, and codes
of conduct (e.g. related to donations and political lobbying,
bribery and corruption), and the transparency of
non-financial reporting.
The Investment Adviser has been delegated responsibility
for the day-to-day delivery of the Company’s sustainability
strategy which aligns to these three focus areas, and for
managing the ESG impacts of the Company. The strategy
is reviewed annually by the ESG Committee on behalf of
the Company. The ESG Committee receives a report and
verbal update from the Investment Adviser at every quarterly
meeting in relation to the delivery of the sustainability
strategy and the management of ESG risks and opportunities,
including in relation to climate-related risks.
Activities
During the year there were four meetings at which we
discussed, and where relevant recommended to the Board
for approval, a variety of matters including:
• The submission of targets, by the Company, for validation
by the SBTi
• The implementation of various policies including
a charitable giving policy, environmental and biodiversity
policy, modern slavery statement and supply chain
human rights policy
• Quarterly sustainability updates
• The Company’s budget for ESG related matters
• The Company’s refreshed Sustainability Strategy
• The structure and content of the Company’s sustainability
report for the year ended 30 June 2024
In addition, measures have also been undertaken to advance
the collective knowledge and skills of the ESG Committee
including through specific training on climate risks and
TCFD reporting.
Further details of the Company’s progress against its
commitments can be found in the TCFD report on pages 39
to 51 and the Company’s Sustainability report.
Committee effectiveness
I believe that the quality of discussion and level of challenge
by the Committee with the Investment Adviser, together
with the timeliness and quality of papers received by the
Committee, ensure that the Committee is able to perform its
role effectively.
Details of the performance evaluation conducted during the
year can be found on page 77.
Signed on behalf of the ESG Committee by:
Frances Davies
ESG Committee Chair
September
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 87
CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT
Dear Shareholders
I am pleased to present the Remuneration Committee report
for the year ended 30 June 2024.
How the Committee operates
The Remuneration Committee Terms of Reference are
available on the Company’s website and on request from
the Company’s registered office.
Our Committee comprised of three Independent
Non-Executive Directors of the Company, none of which
are connected to the AIFM, or Investment Adviser.
Committee Members
Cathryn Vanderspar: Committee Chair
Jon Austen
Frances Davies
All the Committee members served for the full year, unless
otherwise stated.
During the year, the Remuneration Committee held two
formal meetings. The Company Secretary and I ensure that
the meetings are of sufficient length to allow the Committee
to consider all important matters and the Committee is
satisfied that it receives full information in a timely manner
to allow it to fulfil its obligations.
Nick Hewson, Vince Prior, Sapna Shah and members of the
Investment Adviser were invited to attend the Committee
meetings. Hanway Advisory Limited, as Company Secretary,
also attended as secretary to the Committee.
The Committee determines the level of Non-Executive Directors’
remuneration. A benchmarking exercise was undertaken in the
year. The Committee reviewed the benchmarking and also gave
due consideration to other relevant factors, such as the wider
market considerations, inflation and the time commitment
required of Directors. In consultation with the Investment
Adviser and the brokers, the Committee concluded that there
would be a marginal increase to Directors’ remuneration, with
effect from 1 July 2024, representing a 4.0% increase on total
Director remuneration.
Full details of the Group’s policy with regards to Directors’
remuneration paid during the year ended 30 June 2024 are
shown below.
Committee Responsibilities
The main responsibilities of the Remuneration Committee,
which apply as necessary to the Company, its subsidiary
undertakings and the Group as a whole, are to:
• Set the remuneration policy for the Board and the
Company’s Chair
• Review the ongoing appropriateness and relevance of the
remuneration policy
• Agree the policy for authorising claims for expenses for
the Directors
In determining Remuneration Policy, the Remuneration
Committee takes into account all factors which it deems
necessary, including the Company’s strategy and the risk
environment in which it operates, relevant legal and
regulatory requirements, the provisions and
recommendations of the AIC Code considered to be relevant
and associated guidance. In order to obtain reliable, up-to-date
information about remuneration in other companies of
comparable scale and complexity, the Remuneration
Committee may appoint remuneration consultants and
commission or purchase any reports, surveys or information
which it deems necessary, at the expense of the Company, but
within any budgetary constraints imposed by the Board.
The Committee is responsible for appropriately managing
Directors’ conflicts of interests. Directors' other interests have
been disclosed. No conflicts have been identified during the
year. If a conflict were to be identified, the Committee would
take the appropriate steps to resolve and manage such
conflicts appropriately.
It is the Board’s policy that Directors do not have service
contracts, but each new Director is provided with a letter of
appointment, and these are available for inspection at the
Company’s registered office. Each Director is appointed for an
initial three-year term, subject to annual re-election at the
Company’s AGM. Directors are typically expected to serve two
three-year terms, but may be invited by the Board to serve for
an additional period. The Directors appointments can be
terminated at no notice, in accordance with the terms of the
letters of appointment without compensation for loss of office.
Committee effectiveness
I believe that the quality of discussion and level of challenge by
the Committee with the Investment Adviser, together with the
timeliness and quality of papers received by the Committee,
ensures the Committee is able to perform its role effectively.
Details of the performance evaluation conducted during the
year can be found on page 77.
Cathryn Vanderspar
Remuneration Committee
Chair
REMUNERATION
COMMITTEE REPORT
88 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT CONTINUED
DIRECTORS’ REMUNERATION POLICY
The Company’s policy is to determine the level of Directors’
fixed annual fees in accordance with its Articles of
Association.
When setting the level of Directors’ fees, the Company will
have due regard to the experience of the Board as a whole,
the time commitment required, the responsibilities of the
role and to be fair and comparable to non-executive
directors of similar companies.
Furthermore, the level of remuneration should be sufficient
to attract and retain the Directors needed to oversee the
Company properly and to reflect its specific circumstances.
The Company may also periodically choose to benchmark
Directors’ fees with an independent review, to ensure they
remain fair and reasonable.
Directors’ fees are reviewed annually and will be adjusted
from time to time, as may be determined by the Board under
the Articles of Association and this policy. In terms of the
Company’s Articles of Association, the aggregate
remuneration of all the Directors shall not exceed £500,000
per annum but this may be changed by way of
ordinary resolution.
The Directors are also entitled to be paid their reasonable
expenses incurred in undertaking their duties.
Additional Directors’ fees may be paid by the Company
where Directors are involved in duties beyond those
normally expected as part of the Directors’
appointment. In such instances, where additional
remuneration is paid, the Board will provide details of the
events, duties and responsibilities that gave rise to any
additional directors’ fees in the Company’s annual report.
No element of the Directors’ remuneration is performance
related, nor does any director have any entitlement to
pensions, share options or any long-term incentive plans
from the Company. Directors’ fees are payable in cash,
monthly in arrears.
The Directors hold their office in accordance with the
Articles of Association and their appointment letters. No
Director has a service contract with the Company, nor are
any such contracts proposed. The Directors’ appointments
can be terminated in accordance with the Articles of
Association and without compensation.
In accordance with the Articles of Association, all Directors
are required to retire and seek re-election at least every three
years. Although not required by the Company’s Articles of
Association, the Company is choosing to comply with
Provision 23 of the AIC Code requiring all Directors to be
subject to annual election. All Directors retire at each
Annual General Meeting and those eligible and wishing to
serve again offer themselves for election.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 89
ANNUAL REPORT ON DIRECTORS’ REMUNERATION
Directors’ Fees
The Committee considers the level of Directors’ fees at least
annually. Reviews of Directors’ fees take place in each
financial year, with any changes being applicable from the
start of the next financial year. The remuneration of the
Directors was benchmarked during the year ended
30 June 2024. Following consultation with the Investment
Adviser and the brokers, the Committee concluded that: the
Directors’ base fees be increased marginally; that the Audit
and Risk Committee Chair fee be increased to £10,000 and
that the Nomination Committee Chair fee be increased to
£5,000 to align with the other Committee Chair fees. The
increase to the fees is reflective of the time commitment
required of the Directors. There are no further changes to
the Directors’ remuneration for this year. In aggregate, total
fees remain under the limit set out in the governing
documents as set out below.
Revised fee
per annum from
1 July 2024
Fee per annum
year ended
30 June 2024
Chair £78,000 £75,000
Non-Executive
Directors (“NED”s)
£54,500 £52,500
Senior Independent
Director (“SID”)*
£5,000 £5,000
Audit and Risk
Committee Chair*
£10,000 £9,000
Remuneration
Committee Chair*
£5,000 £5,000
Nomination
Committee Chair*
£5,000 £4,000
Management
Engagement
Committee Chair*
£5,000 £5,000
Environmental, Social,
and Governance
Committee Chair*
£5,000 £5,000
* No additional fee is payable for Committee Chair positions undertaken by
the Chair of the Board
Directors’ emoluments – single total figure table (audited)
The Directors who served during the year received the
following emoluments, all of which was in the form of fees.
Nick Hewson received £626 and Sapna Shah received £126
of expenses during the year.
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Fixed
Remuneration
(both years)
Annual
percentage
change since
30 June
2023
Nick Hewson 75 75 100% -
Jon Austen 62 62 100% -
Vince Prior 61 62 100% -2%
Cathryn
Vanderspar
58 58 100% -
Frances Davies 58 58 100% -
Sapna Shah* 58 18 100% 222%
* Appointed March
Relative importance of spend on pay
The table below sets out, in respect of the year ended
30 June 2024:
a) The remuneration paid to the Directors
b) The management fee and expenses which have been
included to give shareholders a greater understanding of
the relative importance of spend on pay
c) Distributions to shareholders by way of dividend to
provide a comparison of the shareholders’ returns against
Directors’ remuneration
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Variance year
on year %
Directors’ fees 371 330 12%
Management fee
and expenses
9,472 10,292 -8%
Dividends paid 75,335 74,328 1%
Directors’ fees as a percentage of
Year ended
30 June 2024
%
Year ended
30 June 2023
%
Management fee and expenses 3.9 3.2
Dividends paid 0.49 0.44
90 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | REMUNERATION COMMITTEE REPORT CONTINUED
Directors’ shareholdings (audited)
The Directors (and their PCA’s) had the following beneficial
interests in the issued ordinary share capital of the Company
as at 30 June 2024 and at the date of this report:
Directors
As at the date
of this report
As at
30 June 2024
Nick Hewson 1,330,609 1,330,609
Jon Austen 305,339 305,339
Vince Prior 213,432 213,432
Cathryn Vanderspar 125,802 125,802
Frances Davies 36,774 36,774
Sapna Shah 70,081 70,081
The Company does not oblige the Directors to hold shares in
the Company, but this is encouraged to ensure the
appropriate alignment of interests.
Group performance – Total Shareholder Return
The Board is responsible for the Group’s investment strategy
and performance, whilst the management of the investment
portfolio is delegated to the AIFM. The AIFM has, in turn,
delegated certain services, including but not limited to
advice on acquisitions and financing, to the Investment
Adviser. The graph below compares, for the period from our
IPO in June 2017 to 30 June 2024, the total return (assuming
all dividends are reinvested) to ordinary shareholders
compared to the FTSE All-Share Index. This index was
chosen as it is considered an indicative measure of the
expected return from an equity stock. An explanation of the
performance of the Group for the year ended 30 June 2024
is given in the Strategic Report.
It is a company law requirement to compare the
performance of the Group’s share price to a single broad
equity market index on a total return basis. However, it
should be noted that certain constituents of the comparative
index used above are larger in size than the Group. The
Group does not have a benchmark index.
Consideration of shareholder views
The Company is committed to engagement with
shareholders and will seek major shareholders’ views in
advance of making significant changes to its remuneration
policy and how it is implemented. The Chair of the
Remuneration Committee attends the AGM to hear the
views of shareholders on remuneration and to answer
any questions.
The Directors’ Remuneration Policy was approved by
shareholders at the 2021 AGM with 99.98% of the votes
cast being in favour of the resolution. The Directors’
remuneration report for the year ended 30 June 2023 was
approved by the shareholders at the 2023 AGM with 99.81%
of the votes cast being in favour.
Voting at Annual General Meeting
In accordance with section 439A of the Companies Act
2006, the Remuneration Policy is subject to a binding vote
at the 2024 AGM, being three years since the last approval.
There are no proposed changes to the Company’s
Remuneration Policy.
An Ordinary Resolution to approve the Director’s
Remuneration Report will be put to shareholders at the
Company’s 2024 AGM and shareholders will have the
opportunity to express their views and raise any queries in
respect of the Director’s Remuneration Report at
this meeting.
Signed on behalf of the Remuneration Committee by:
Cathryn Vanderspar
Remuneration Committee Chair
September
60
80
100
120
140
160
180
Relative performance
FTSE All Share vs The Company
2017 2018 2019 2020 2021 2022 20242023
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 91
CORPORATE GOVERNANCE | DIRECTORS’ REPORT
The Directors present their report together with the audited
financial statements for the year ended 30 June 2024. The
Corporate Governance Statement on pages 74 to 75 forms
part of this report.
Principal activities and status
The Company is registered as a UK public limited company
under the Companies Act 2006. It is an Investment
Company as defined by Section 833 of the Companies Act
2006 and has been established as a Closed-ended investment
company with an indefinite life. The Company has a single
class of shares in issue which were traded during the year
on the Closed-ended investment funds category of the LSE’s
Main Market. The Group has entered the Real Estate
Investment Trust regime for the purposes of UK taxation.
The Company is a member of the Association of Investment
Companies (the “AIC”).
Results and dividends
The results for the year are set out in the attached financial
statements. It is the policy of the Board to declare and pay
dividends as quarterly interim dividends.
In respect of the 30 June 2024 financial year, the Company
has declared the following interim dividends amounting to
6.06 pence per share (2023: 6.00 pence per share).
Relevant Period
Dividend
per share
(pence)
Ex-dividend
date Record date Date paid
Quarter ended
30 September 2023 1.515 12 Oct 2023 13 Oct 2023 16 Nov 2023
Quarter ended
31 December 2023 1.515 11 Jan 2024 12 Jan 2024 14 Feb 2024
Quarter ended
31 March 2024 1.515 11 Apr 2024 12 Apr 2024 16 May 2024
Quarter ended
30 June 2024 1.515 11 Jul 2024 12 Jul 2024 16 Aug 2024
Dividend policy
Subject to market conditions and performance, financial
position and outlook, it is the Directors’ intention to pay
an attractive level of dividend income to shareholders
on a quarterly basis. The Company intends to grow
the dividend progressively through investment in
supermarket properties with upward-only, predominantly
inflation-protected, long-term lease agreements.
Directors
The names of the Directors who served in the year ended
30 June 2024 are set out in the Board of Directors section
on pages 64 to 65 together with their biographical details
and principal external appointments.
Powers of Directors
The Board will manage the Company’s business and may
exercise all the Company’s powers, subject to the Articles,
the Companies Act and in certain circumstances, are subject
to the authority being given to the Directors by shareholders
in the general meeting.
The Board’s role is to provide entrepreneurial leadership of
the Company within a framework of prudent and effective
controls that enable risk to be assessed and managed. It also
sets up the Group’s strategic aims, ensuring that the
necessary resources are in place for the Group to meet its
objectives and review investment performance. The Board
also sets the Group’s values, standards and culture. Further
details on the Board’s role can be found in the Corporate
Governance Report on page 63.
Appointment and replacement of Directors
All Directors were elected or re-elected at the AGM on
7 December 2023. In accordance with the AIC Code, all the
Directors will retire and those who wish to continue to serve
will offer themselves for election or re-election at the
forthcoming Annual General Meeting.
Directors’ indemnity
The Company maintains £35 million of Directors’ and
Officers’ Liability Insurance cover for the benefit of the
Directors, which was in place throughout the year. The level
of cover was increased to £40 million on 4 July 2024 and
continues in effect at the date of this report.
Significant shareholdings
The table below shows the interests in shares notified to the
Company in accordance with Chapter 5 of the Disclosure
Guidance and Transparency Rules issued by the Financial
Conduct Authority who have a disclosable interest of 3% or
more in the ordinary shares of the Company as at
30 June 2024.
Number of shares
Percentage of issued
share capital
Blackrock Inc. 68,196,517 5.46%
Schroders Plc 63,131,941 5.08%
Close Brothers
Asset Management
62,147,569 4.99%
Quilter Plc 62,058,617 4.99%
Ameriprise Financial, Inc. 61,728,272 4.98%
Nick Hewson
Chair
DIRECTORS'
REPORT
92 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | DIRECTORS’ REPORT CONTINUED
Since the year end, and up to 17 September 2024, the
Company has not received any further notifications of
changes of interest in its ordinary shares in accordance with
DTR 5. The information provided is correct as at the date of
notification.
Donations and contributions
The Group approved a donation of £120,000 to The Atrato
Foundation during the year which was settled post year end.
Branches outside the UK
The Company has no branches outside the UK.
Financial risk management
The Group’s exposure to, and management of, capital risk,
market risk and liquidity risk is set out in note 21 to the
Group’s financial statements.
Amendments to the Articles
The Articles may only be amended with shareholders’
approval in accordance with the relevant legislation.
Employees
The Group has no employees and therefore no employee
share scheme or policies for the employment of disabled
persons or employee engagement.
Anti-bribery policy
The Company has a zero-tolerance policy towards bribery
and is committed to carrying out its business fairly, honestly
and openly. The anti-bribery policies and procedures apply
to all its Directors and to those who represent the Company.
Human Rights
The Company has a zero-tolerance approach to modern
slavery and human trafficking and is committed to ensuring
its organisation and business partners operate with the same
values. The Company’s modern slavery and human
trafficking statement can be found on the
Company’s website.
Research and development
No expenditure on research and development was made
during the period.
Related party transactions
Related party transactions for the year ended 30 June 2024
can be found in note 28 of the financial statements.
Annual General Meeting
The Annual General Meeting of the Company will be held
on 3 December 2024.
Greenhouse gas emissions
As a listed entity, the Company is required to comply with
the SECR regulations under the Companies (Directors’
Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018. Information regarding
emissions arising from the Group's activities are included
within the TCFD aligned report on pages 39 to 51.
Disclosure of information to auditor
All of the Directors have taken all the steps that they ought
to have taken to make themselves aware of any information
needed by the auditor for the purposes of their audit and
to establish that the Auditor is aware of that information.
The Directors are not aware of any relevant audit
information of which the auditor is unaware.
Significant agreements
There are no agreements with the Company or a subsidiary
in which a Director is or was materially interested or to
which a controlling shareholder was party.
Share capital structure
As at 30 June 2024, the Company’s issued share capital
consisted of 1,246,239,185 ordinary shares of one penny
each, all fully paid and listed on the Closed-ended
investment funds category of the FCA’s Official List of the
LSE’s Main Market. Further details of the share capital,
including changes throughout the year are summarised in
note 22 of the financial statements.
Subject to authorisation by Shareholder resolution, the
Company may purchase its own shares in accordance with
the Companies Act 2006. At the Annual General Meeting
held in 2023, shareholders authorised the Company to make
market purchases of up to 186,811,253 Ordinary Shares.
The Company has not repurchased any of its ordinary
shares under this authority, which is due to expire at the
AGM in 2024 and appropriate renewals will be sought.
There are no restrictions on transfer or limitations on the
holding of the ordinary shares. None of the shares carry any
special rights with regard to the control of the Company.
There are no known arrangements under which financial
rights are held by a person other than the holder of the
shares and no known agreements on restrictions on share
transfers and voting rights.
Post balance sheet events
For details of events since the year end date, please refer to
note 29 of the consolidated financial statements.
Corporate Governance
The Company’s statement on corporate governance can be
found in the Corporate Governance Report on pages 74 to
75 of this Annual Report. The Corporate Governance Report
forms part of this directors’ report and is incorporated into it
by cross-reference.
Information included in the strategic report
The information that fulfils the reporting requirements
relating to the Group’s business during the year and likely
future developments can be found on pages 14 to 38.
This Directors’ Report was approved by the Board and is
signed on its behalf by:
Nick Hewson
Chair
September
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 93
CORPORATE GOVERNANCE | DIRECTORS’ RESPONSIBILITIES STATEMENT
DIRECTORS’ RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable law
and regulations.
The UK Companies Act 2006 requires the Directors to
prepare financial statements for each financial period.
Under that law, the Directors have elected to prepare the
Group financial statements in accordance with UK adopted
international accounting standards and the Company
financial statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice), including
Financial Reporting Standard 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland”.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for
that period.
In preparing these financial statements, the Directors are
required to:
• Select suitable accounting policies and then apply them
consistently
• Make judgements and accounting estimates that are
reasonable and prudent
• State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements
• Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business
• Prepare a Directors’ Report, a Strategic Report, Directors’
Remuneration Report and Corporate Governance
Statement which comply with the requirements of the
Companies Act 2006
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual
Report and Accounts, taken as a whole, are fair, balanced,
and understandable and provides the information necessary
for shareholders to assess the Group’s performance,
business model and strategy.
The Company is required to make the Annual Report and
Accounts available on a website. The Company’s website
address is www.supermarketincomereit.com. Financial
statements are published on the Company’s website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial
statements, which may vary from such legislation in other
jurisdictions. The maintenance and integrity of the
Company’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
Responsibility Statement
The Directors confirm to the best of their knowledge:
• The Group financial statements prepared in accordance
with UK adopted international accounting standards and
the Company financial statements prepared in accordance
with applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice), including Financial Reporting
Standard 102 “The Financial Reporting Standard”
applicable in the UK and Republic of Ireland, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Group
• The Annual Report and Accounts include a fair review
of the development and performance of the business and
the position of the Group and Company, together with
a description of the principal risks and uncertainties
that they face
• The Annual Report and Accounts taken as whole, is fair,
balanced and understandable and the information
provided to shareholders is sufficient to allow them to
assess the Group’s performance, business model
and strategy
This Responsibility Statement was approved by the Board
of Directors and is signed on its behalf by:
Nick Hewson
Chair
September
94 SUPERMARKET INCOME REIT PLC
CORPORATE GOVERNANCE | ALTERNATIVE INVESTMENT FUND MANAGER’S REPORT
Background
The Alternative Investment Fund Managers Directive (the
“AIFMD”) came into force on 22 July 2013. The objective of
the AIFMD was to ensure a common regulatory regime for
funds marketed in or into the EU which are not regulated
under the UCITS regime. This was primarily for investors’
protection and also to enable European regulators to obtain
adequate information in relation to funds being marketed in
or into the EU to assist their monitoring and control of
systemic risk issues.
The AIFM is a non-EU Alternative Investment Fund
Manager (a “Non-EU AIFM”), the Company is a non-EU
Alternative Investment Fund (a “Non-EU AIF”) and the
Company is marketed primarily into the UK, but also into
the EEA. Although the AIFM is a non-EU AIFM, so the
depositary rules in Article 21 of the AIFMD do not apply, the
transparency requirements of Articles 22 (Annual report)
and 23 (Disclosure to investors) of the AIFMD do apply to
the AIFM and therefore to the Company. In compliance
with those articles, the following information is provided to
the Company’s shareholders by the AIFM.
1. Material Changes in the Disclosures to Investors
During the financial year under review, there were no
material changes to the information required to be made
available to investors before they invest in the Company
under Article 23 of the AIFMD from that information set
out in the Company’s prospectus dated 1 October, 2021,
save as updated in the supplementary prospectus dated
7 April, 2022, as disclosed below and in certain sections
of the Strategic Report, those being the Chair’s Statement,
Investment Adviser’s Report, TCFD Compliant Report, Our
Principal Risks and the Section 172(1) Statement, together
with the Corporate Governance Report in this annual
financial report..
2. Risks and Risk Management Policy
The current principal risks facing the Company and the
main features of the risk management systems employed by
AIFM and the Company to manage those risks are set out
in the Strategic Report (Our Principal Risks and Risk and
Going Concern), the Audit and Risk Committee Report and
the Directors’ Report.
3. Leverage and borrowing
The Company is entitled to employ leverage in accordance
with its investment policy and as described in the Chair’s
Statement, the sections entitled “Financial Highlights” and
“Financial Overview” in the Strategic Report and the notes
to the Financial Statements. Other than as disclosed therein,
there were no changes in the Company’s borrowing powers
and policies.
4. Environmental, Social and Governance (ESG) Issues
and Regulation (EU) 2019/2099 on Sustainability-Related
Disclosures in the Financial Services Sector (the “SFDR”)
As a member of the JTC group of Companies, the AIFM’s
ultimate beneficial owner and controlling party is JTC
Plc, a Jersey-incorporated company whose shares have
been admitted to the Official List of the UK’s Financial
Conduct Authority and to trading on the London
Stock Exchange’s Main Market for Listed Securities
(mnemonic JTC LN, LEI 213800DVUG4KLF2ASK33).
In the conduct of its own affairs, the AIFM is committed
to best practice in relation to ESG matters and has
therefore adopted JTC Plc’s ESG framework, which can
be viewed online at https://www.jtcgroup.com/esg/. JTC
Plc’s sustainability report can also be viewed online in its
annual financial report located at https://www.jtcgroup.
com/investor-relations/annual-review/.
As at the date of this report, JTC Plc is a signatory of the U.N.
Principles for Responsible Investment. The JTC group is also
carbon neutral and works to support the achievement of ten
of the U.N.’s Sustainable Development Goals. JTC Plc
reports under TCFD and under the SASB framework. JTC
Plc also reported publicly to the Carbon Disclosure Project
in 2023 and selected the Science Based Targets initiative as
its chosen net zero framework.
From the perspective of the SFDR, although the AIFM is
a non-EU AIFM, the Company is marketed into the EEA, so
that the AIFM is required to comply with the SFDR in so far
as it applies to the Company and the AIFM’s management of
the Company, which the Company has classified as being
within the scope of Article 6 of the SFDR.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 95
The AIFM and Atrato Capital Limited (“Atrato”) as the
Company’s Alternative Investment Fund Manager and
Investment Adviser respectively do consider ESG matters in
their respective capacities, as explained in SUPR’s
prospectus dated 1 October 2021, as updated by SUPR’s
supplementary prospectus dated 7 April 2022. Copies of
both of those documents can be viewed on the AIFM’s
website at https://jtcglobalaifmsolutions.
com/clients/supermarket-income-reit-plc/.
Since the publication of those documents, the AIFM, Atrato
and the Company have continued to enhance their
collective approach to ESG matters and detailed reporting
on (a) enhancements made to each party’s policies,
procedures and operational practices and (b) our collective
future intentions and aspirations is included in the TCFD
Compliant Report included in the Strategic Report and the
ESG Committee Report in this annual financial report. The
Company is also publishing a separate Sustainability Report
alongside this report which is available on the website.
The AIFM also has a comprehensive risk matrix (the
“Matrix”), which is used to identify, monitor and manage
material risks to which the Company is exposed, including
ESG and sustainability risks, the latter being an
environmental, social or governance event or condition that,
if it occurred, could cause an actual or a potential material
negative impact on the value of an investment. We also
consider sustainability factors, those being environmental,
social and employee matters, respect for human rights,
anti-corruption and anti-bribery matters.
The AIFM is cognisant of the announcement published by
H.M. Treasury in the UK of its intention to make mandatory
by 2025 disclosures aligned with the recommendations of
the Task Force on Climate-related Financial Disclosures,
with a significant proportion of disclosures mandatory by
2023. The AIFM also notes the roadmap and interim report
of the UK’s Joint Government-Regulator TCFD Taskforce
published by H.M. Treasury on 9 November 2020. The
AIFM continues to monitor developments and intends to
comply with the UK’s regime to the extent either mandatory
or desirable as a matter of best practice.
5. Remuneration of the AIFM’s Directors and Employees
During the financial year under review, no separate
remuneration was paid by the AIFM to two of its executive
directors, Graham Taylor and Kobus Cronje, because they
were both employees of the JTC group of companies, of
which the AIFM forms part. The third executive director,
Matthew Tostevin, is paid a fixed fee of £10,000 for acting as
a director. Mr Tostevin is paid additional remuneration on
a time spent basis for services rendered to the AIFM and its
clients. Other than the directors, the AIFM has no
employees. The Company has no agreement to pay any
carried interest to the AIFM. During the year under review,
the AIFM paid £10,000 in fixed fees and £46,211 in variable
remuneration to Mr Tostevin.
6. Remuneration of the AIFM Payable by the Company
The AIFM was during the year under review paid a fee of
0.04% per annum of the net asset value of the Company up
to £1 billion and 0.03% of the Company’s net asset value in
excess of £1 billion, subject to a minimum of £50,000 per
annum, such fee being payable quarterly in arrears. The
total fees paid to the AIFM during the year under review
were £0.44 million.
JTC Global AIFM Solutions Limited
Alternative Investment Fund Manager
September
96 SUPERMARKET INCOME REIT PLC
FINANCIAL STATEMENTS
CONTENTS
FINANCIAL STATEMENTS
97 Independent Auditors’ Report to
the members of Supermarket
Income REIT PLC
104 Consolidated Financial Statements
108 Notes to the Consolidated
Financial Statements
138 Company Financial Statements
140 Notes to the Company
Financial Statements
142 Unaudited Supplementary Information
147 Glossary
148 Contacts Information
FINANCIAL
STATEMENTS
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 97
FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the Parent Company’s affairs
as at 30 June 2024 and of the Group’s loss for the
year then ended;
• the Group financial statements have been properly
prepared in accordance with UK adopted international
accounting standards;
• the Parent Company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
• the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements of Supermarket
Income REIT Plc (the ‘Parent Company’) and its subsidiaries
(the ‘Group’) for the year ended 30 June 2024 which
comprise the consolidated statement of comprehensive
income, the consolidated and company statement of
financial position, the consolidated and company statement
of changes in equity, the consolidated cash flow statement
and notes to the financial statements, including material and
significant accounting policy information. The financial
reporting framework that has been applied in their
preparation is applicable law and UK adopted international
accounting standards. The financial reporting framework
that has been applied in the preparation of the Parent
Company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial
Reporting Standard 102 The Financial Reporting Standard
applicable in the United Kingdom and Republic of Ireland
(United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that
the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. Our audit
opinion is consistent with the additional report to the
audit committee.
Independence
Following the recommendation of the audit committee, we
were appointed by the Directors on June 2017 to audit the
financial statements for the 13-month period ended
30 June 2018 and subsequent financial periods. The period
of total uninterrupted engagement including retenders and
reappointments is 7 years, covering the years ended 2018 to
2024. We remain independent of the Group and the Parent
Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed
public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that
standard were not provided to the Group or the
Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group
and the Parent Company’s ability to continue to adopt the
going concern basis of accounting included:
• Using our knowledge of the Group and its market sector
together with the current economic environment to assess
the Directors’ identification of the inherent risks to the
Group’s business and how these might impact the Group’s
ability to remain a going concern for the going concern
period, being the period to 30 September 2025, which is at
least 12 months from when the financial statements are
authorised for issue;
• Obtaining an understanding of the Directors’ process for
assessing going concern including an understanding of
the key assumptions used;
• We have reviewed the forecasts that support the Directors’
going concern assessment and:
– challenged the Investment Adviser’s forecast
assumptions in comparison to the current performance
of the Group;
– agreed the inputs into the forecasts to supporting
documentation for consistency with contractual
agreements, where available;
– agreed the Group’s available borrowing facilities and
the related covenants to supporting financing
documentation and calculations;
• Analysed the sensitivities applied by the Directors’ stress
testing calculations and challenged the assumptions made
using our knowledge of the business and of the current
economic climate, to assess the reasonableness of the
downside scenarios selected;
• Obtained covenant calculations and forecast calculations
to test for any potential future covenant breaches;
• Considered the covenant compliance headroom for
sensitivity to both future changes in property valuations
and the Group’s future financial performance;
• Reviewed the agreements for extensions or modifications
of loan agreements since the year end up to the date of the
signed financial statements;
• Considered board minutes, and evidence obtained
through the audit and challenged the Directors on the
identification of any contradictory information in the
forecasts and the resultant impact to the going concern
assessment;
• Reviewed the disclosures in the financial statements
relating to going concern to check that the disclosure is
consistent with the circumstances
98 SUPERMARKET INCOME REIT PLC
FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC
CONTINUED
Based on the work we have performed, we have not
identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast
significant doubt on the Group and the Parent Company’s
ability to continue as a going concern for a period of at least
twelve months from when the financial statements are
authorised for issue.
In relation to the Parent Company’s reporting on how it has
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage 100% (2023: 100%) of Group profit before tax
100% (2023: 100%) of Group revenue
100% (2023: 100%) of Group total assets
100% (2023: 100%) of Group investment property
2024 2023
Key audit matters Valuation of investment property
Acquisition and disposal of investments in joint ventures
The acquisition and disposal of investments in joint ventures is no longer a KAM because
the joint venture interest was disposed of in the prior year.
Materiality Group financial statements as a whole
£18.4 million (2023: £19.3 million) based on 1% (2023: 1%) of Group total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding
of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material
misstatement in the financial statements. We also addressed
the risk of management override of internal controls,
including assessing whether there was evidence of bias by
the Directors that may have represented a risk of material
misstatement.
The Group operates in the United Kingdom and France in
one segment, investment property, structured through
a number of subsidiary entities. None of the subsidiaries
were individually considered to be significant components
and as such the audit approach included undertaking audit
work on the key risks of material misstatements identified
for the Group across the subsidiary entities. The Group audit
engagement team performed full scope audits in order to
issue the Group and Parent Company audit opinion,
including undertaking all of the audit work on the risks of
material misstatement identified in the key audit matters
section below. As a result of our audit approach, we
achieved coverage of 100% of rental income and 100% of
investment property valuations.
Climate change
Our work on the assessment of potential impacts on
climate-related risks on the Group’s operations and financial
statements included:
• Enquiries and challenge of the Investment Adviser and
the Group’s independent property valuer to understand
the actions they have taken to identify climate-related
risks and their potential impacts on the financial
statements and adequately disclose climate-related risks
within the annual report;
• Our own qualitative risk assessment taking into
consideration the sector in which the Group operates and
how climate change affects this particular sector and
property asset class;
• Review of the minutes of Board, Audit Committee and
ESG Committee meetings and other papers related to
climate change and performed a risk assessment as to
how the impact of the Group’s risk assessment as set out
in the Group’s Sustainability and TCFD Compliance
Report may affect the financial statements and our audit;
• We challenged the extent to which climate-related
considerations, including the expected cash flows from
the initiatives and commitments have been reflected,
where appropriate, in the Investment Adviser’s going
concern assessment and viability assessment;
• We also assessed the consistency of management’s
disclosures included as 'Statutory Other Information’
within the Strategic Report with our knowledge obtained
from the audit.
Based on our risk assessment procedures, we did not
identify there to be any Key Audit Matters materially
impacted by climate-related risks.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and
directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 99
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of
investment properties
As detailed in note 13,
the Group owns
a portfolio of
investment properties
which, as described in
the accounting policy in
note 2.10, are held at
fair value in the Group
financial statements.
As described in the
‘significant accounting
judgements, estimates
and assumptions’
section of note 1,
determination of the
fair value of investment
properties is a key area
of estimation.
IAS 40 Investment properties requires all
investment properties to be recognised at
fair value with any changes in the fair
value in any period to be recognised in the
income statement.
The Group has engaged Cushman &
Wakefield to undertake a full year end
valuation of all the properties in
accordance with RICS Red Book
requirements.
Property valuations are subject to a high
degree of estimation and judgement as
they are calculated from a number of
different assumptions specific to each
individual property.
They have therefore been identified as an
area of specific focus for our audit.
A fraud risk also arises from the data
supplied to Cushman & Wakefield, which
could intentionally misstate property or
lease details to obtain
a misstated valuation.
Our audit work included, but was not restricted to, the following:
Group’s controls relating to the valuation of investment properties
• We reviewed and evaluated the design, implementation and
appropriateness of the Group’s controls relating to the valuation of
investment properties, including the processes by which the Group
ensures that accurate data is provided to the external valuer, Cushman
& Wakefield (C&W). In doing so, we performed a walkthrough of the
relevant controls by obtaining supports for the design and
implementation of the controls.
Experience of the valuer and relevance of its work
• We assessed the competency, qualifications, independence and
objectivity of the independent external valuer engaged by the Group
and reviewed the terms of their engagement for any unusual
arrangements, limitations in the scope of their work or evidence of
management bias.
• Real estate experts within our team read the valuation reports and
confirmed that all valuations had been prepared in accordance with
applicable valuation guidelines and were therefore appropriate for
determining the carrying value in the Group’s financial statements.
Data provided to the valuer
• We validated the underlying data provided to the valuer by the
Investment Adviser which included key observable inputs such as
current rent and lease term by agreeing a sample to the executed lease
agreements as part of our audit work.
Assumptions and estimates used by the valuer
• We developed yield expectations for each property using available
independent industry data, reports and comparable transactions in the
market around the period end. This was undertaken with assistance of
our real estate experts
• We evaluated the other key valuation assumptions, being the market
rental values, taking into account the location and specifics of
each property.
• We then discussed both the assumptions used and the valuation
movement in the period with the Investment Adviser, the Chair of the
Audit Committee and the independent valuer.
• Where the valuation yield was outside of our expected range we
challenged the independent valuer on specific assumptions and
reasoning for the yields and/or market rents applied and corroborated
their explanations where relevant, including agreeing to third-party
documentation and market comparisons.
• While we consulted with internal RICS-qualified experts as part of
setting our expectations, our expert also attended the meetings with
the Group’s valuers to assist us in assessing that explanations provided
were appropriate and in line with market knowledge.
Related disclosures in the financial statements
• We reviewed the appropriateness of the Group’s disclosures within the
financial statements in relation to valuation methodology, key valuation
assumptions and valuation sensitivity by checking that this adheres to
the disclosure requirements of the reporting framework used.
Key observations:
Based on our work we have not noted any material instance which may
indicate that the assumptions adopted by the Directors in the valuation
were not reasonable or that the methodology applied was inappropriate.
100 SUPERMARKET INCOME REIT PLC
FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC
CONTINUED
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude
by which misstatements, including omissions, could
influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the
probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to
Specific materiality
We also determined that for other account balances and
classes of transactions that impact the calculation of EPRA
Earnings, a misstatement of less than materiality for the
financial statements as a whole, specific materiality, could
influence the economic decisions of users. As a result, we
determined that specific materiality for these items should
be £2.5 million (2023: £3.2 million), being 5% of EPRA
Earnings (2023: 5% of Adjusted Earnings). EPRA Earnings
excludes the impact of the net loss on revaluation of
investment properties, changes in fair value of interest rate
derivatives and finance income on interest rate derivatives
held at fair value through profit and loss. We further applied
a performance materiality level of 75% (2023: 75%) of
specific materiality to ensure that the risk of errors
exceeding specific materiality was appropriately mitigated.
We consider that the EPRA Earnings benchmark is more
comparable with other market participants.
Reporting threshold
We agreed with the Audit Committee that we would report
to them all individual audit differences in excess of £125,000
(2023: £160,000). We also agreed to report differences below
this threshold that, in our view, warranted reporting on
qualitative grounds.
determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular
circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole and
performance materiality as follows:
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report other than the financial statements and
our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to
be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that
there is a material misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
Group financial statements Parent company financial statements
2024
£m
2023
£m
2024
£m
2023
£m
Materiality 18.4 19.3 16.6 16.2
Basis for
determining materiality
Materiality for the Group and Parent Company’s financial statements was set at 1% of total assets (2023: 1%).
This provides a basis for determining the nature and extent of our risk assessment procedures, identifying and
assessing the risk of material misstatement and determining the nature and extent of further audit procedures.
Rationale for the
benchmark applied
We determined that total assets would be the most appropriate basis for determining overall materiality as we
consider it to be the principal considerations for the users of the financial statements in assessing the financial
performance of the Group.
Performance materiality 13.8 14.5 12.5 12.2
Basis for determining
performance materiality
Performance materiality is set at an amount to reduce to an appropriate low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk
assessment, together with our assessment of the Group’s overall control environment, our judgement was that
overall performance materiality for the Group should be 75% (2023: 75%) of materiality. We determined that
the same measure as the Group was appropriate for the Parent Company.
Rationale for the
percentage applied for
performance materiality
We determined that 75% of materiality would be appropriate based on our risk assessment, together with our
assessment of the Group’s and Parent Company’s overall control environment, the low number of components,
the low value of brought forward adjustments impacting the current year and low value of expected
misstatements, based on past experience.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 101
Corporate governance statement
The Listing Rules require us to review the Directors’
statement in relation to going concern, longer-term
viability and that part of the Corporate Governance
Statement relating to the parent company’s compliance
with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit.
Going concern and
longer-term viability
• The Directors' statement with regards to the appropriateness of adopting the going concern basis of accounting and
any material uncertainties identified set out in the “Going Concern” section of the Strategic Report; and
• The Directors’ explanation as to their assessment of the Group’s prospects, the period this assessment covers and
why the period is appropriate as set out in the “Assessment of viability” section of the Strategic Report.
Other Code provisions • Directors' statement on fair, balanced and understandable as set out in the Audit and Risk Committee Report;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out in the
“Our Principal Risks” section of the Strategic Report;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems as set out in the Audit and Risk Committee Report; and
• The section describing the work of the audit committee as set out in the Audit and Risk Committee Report.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by
the Companies Act 2006 and ISAs (UK) to report on certain
opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
Directors’
remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance
with the Companies Act 2006.
Corporate
governance statement
In our opinion, based on the work undertaken in the course of the audit the information about internal control and risk
management systems in relation to financial reporting processes and about share capital structures, given in
compliance with rules 7.2.5 and 7.2.6 in the Disclosure Guidance and Transparency Rules sourcebook made by the
Financial Conduct Authority (the FCA Rules), is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in this information.
In our opinion, based on the work undertaken in the course of the audit information about the Parent Company’s
corporate governance code and practices and about its administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been
prepared by the Parent Company.
Matters on which we
are required to report
by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
102 SUPERMARKET INCOME REIT PLC
FINANCIAL STATEMENTS | INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF SUPERMARKET INCOME REIT PLC
CONTINUED
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities
statement, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent
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 Group or the Parent Company
or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of
non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is
detailed below:
Non-compliance with laws and regulations
Based on:
• our understanding of the Group and the industry in which
it operates;
• discussion with management and those charged
with governance;
• obtaining an understanding of the Group’s policies and
procedures regarding compliance with laws and
regulations,
we considered the significant laws and regulations to be the
applicable accounting framework, the Companies Act 2006,
UK Listing Rules and the UK Real Estate Investment Trust
(REIT) regime.
The Group is also subject to laws and regulations where the
consequence of non-compliance could have a material effect
on the amount or disclosures in the financial statements, for
example through the imposition of fines or litigations. We
identified such laws and regulations to be UK VAT
regulations.
Our procedures in respect of the above included:
• review of minutes of meetings of those charged with
governance for any instances of non-compliance with
laws and regulations;
• review of correspondence with regulatory and tax
authorities for any instances of non-compliance with laws
and regulations;
• review of financial statement disclosures and agreeing to
supporting documentation;
• involvement of tax experts in the audit; and
• Review of legal expenditure accounts to understand the
nature of expenditure incurred.
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
ANNUAL REPORT 2024 103
Fraud
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
• enquiry with the Investment Adviser, AIFM and those
charged with governance regarding any known or
suspected instances of fraud;
• obtaining an understanding of the Group’s policies and
procedures relating to:
– detecting and responding to the risks of fraud; and
– internal controls established to mitigate risks
related to fraud;
• review of Board and Committee meeting minutes for any
known or suspected instances of fraud;
• Discussion amongst the engagement team as to how and
where fraud might occur in the financial statements; and
• Performing analytical procedures to identify any unusual
or unexpected relationships that may indicate risks of
material misstatement due to fraud.
Based on our risk assessment, we considered the areas most
susceptible to fraud to be inputs to investment property
valuations and management override of controls.
Our procedures in respect of the above included:
• to address the risk on the inputs to investment property
valuation, we agree the key observable inputs provided
by the Investment Adviser to the external valuer which
consists of the current rent and lease term. We agreed
these inputs to a sample of executed lease agreements as
part of our audit work; and
• we addressed the risk of management override of internal
controls through the following procedures:
– we tested a sample of journal entries throughout the
year, which met a defined risk criteria, by agreeing to
supporting documentation;
– we tested a sample of journal entries throughout the
year, which does not meet the pre-defined risk criteria,
by agreeing to supporting documentation;
– we agreed the bank and loan balances to direct bank
confirmations and agreements; and
– we evaluated whether there was evidence of bias by the
Investment Adviser and the Directors that represented
a risk of material misstatement due to fraud. This
included evaluating any management bias within the
valuation of investment property, as mentioned under
the key audit matters subheading.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement team
members who were all deemed to have appropriate
competence and capabilities and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit.
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s
members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Parent Company’s
members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company
and the Parent Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Charles Ellis (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
September
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2024
Year to
Year
to
30 June 2024
30 June 2023
Notes
£’000
£’000
Gross
rental income
4
Service
charge income
4
Service charge expense
5
(7,441 )
(6,518 )
Net Rental Income
Administrative and other expenses
6
(15,218 )
(15,429 )
Operating
profit before changes in fair value of investment properties and share of
income and profit on disposal from joint venture
Changes in fair value of investment properties
13
(65,825 )
(256,066 )
Share of income from joint venture
Profit
on disposal of joint venture
Operating
profit/(loss)
(133,079 )
Finance
income
9
Finance
expense
9
(40,043 )
(39,315 )
Changes
in fair value on interest rate derivatives
18
(31,251 )
Profit
on disposal of interest rate derivatives
Loss before taxation
(21,324 )
(144,866 )
Tax
credit/(charge) for the year
10
Loss for the year
(21,184 )
(144,866 )
Items
to be reclassified to profit or loss in subsequent periods
Fair
value movements in interest rate derivatives
18
(1,765 )
Foreign
exchange movement
Total
comprehensive expense for the year
(22,917 )
(143,798 )
Total
comprehensive expense for the year attributable to ordinary Shareholders
(22,917 )
(143,798 )
Earnings
per share – basic and diluted 11 (1.7 11.7
pence
104 SUP ER M AR K E T IN C OME R EI T P L C
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
Notes
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Non
-current assets
Investment
properties
13
Financial asset arising from sale and leaseback transactions
15
Interest
rate derivatives
18
Total
non-current assets
Current assets
Interest rate derivatives
18
Trade and other receivables
16
Deferred
tax asset
20
Cash and cash equivalents
Total
current assets
Total
assets
Non-current liabilities
Bank
borrowings
19
Trade
and other payables
Total
non-current liabilities
Current liabilities
Bank borrowings due within one year
19
Deferred
rental income
Trade and other payables
17
Total
current liabilities
Total liabilities
Net
assets
Equity
Share
capital
22
Share premium reserve
22
Capital reduction reserve
22
Retained
earnings
(24,141 )
(2,957 )
Cash
flow hedge reserve
23
Other
reserves
Total
equity
Net
asset value per share – basic and diluted
27
EPRA NTA per share
27
The consolidated financial statements were approved and authorised for issue by the Board of Directors on 17 September 2024 and
were signed on its behalf by:
Nick
Hewson
Chair
ANNU AL R EP OR T 2024 105
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIALS
106 SUPERMARKET INCOME REIT PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
Share
capital
£’000
Share
premium
reserve
£’000
Cash flow
hedge
reserve
£’000
Other
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 July 2023 12,462 500,386 3,304 – 704,531 (2,957 ) 1,217,726
Comprehensive income for the year
Loss for the year – – – – – (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 the year – – (1,765 ) 32 – (21,184 ) (22,917 )
Transactions with owners
Interim dividends paid (note 12) – – – – (75,335 ) – (75,335 )
As at 30 June 2024 12,462 500,386 1,539 32 629,196 (24,141 ) 1,119,474
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
Share
capital
£’000
Share
premium
reserve
£’000
Cash flow
hedge
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 July 2022 12,399 494,174 5,114 778,859 141,909 1,432,455
Comprehensive income for the year
Loss for the year – – – – (144,866 ) (144,866 )
Cash flow hedge reserve to profit for
the year on disposal of interest rate
derivatives – – (2,878 ) – – (2,878 )
Other comprehensive income – – 1,068 – – 1,068
Total comprehensive loss for the year – – (1,810 ) – (144,866 ) (146,676 )
Transactions with owners
Ordinary shares issued at a
premium during the year 63 6,301 – – – 6,364
Share issue costs – (89 ) – – – (89 )
Interim dividends paid (note 12) – – – (74,328 ) – (74,328 )
As at 30 June 2023 12,462 500,386 3,304 704,531 (2,957 ) 1,217,726
ANNUAL REPORT 2024 107
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2024
Notes
Year to
30 June 2024
£’000
Year to
30 June 2023
£’000
Operating activities
Loss for the year (attributable to ordinary Shareholders) (21,184 ) (144,866 )
Adjustments for:
Tax credit (140 )
Changes in fair value of interest rate derivatives measured at fair value through profit
and loss 31,251 (10,024 )
Changes in fair value of investment properties and associated rent guarantees 13 65,825 256,066
Movement in rent smoothing and lease incentive adjustments 4 (2,434 ) (2,763 )
Amortisation of lease fees 18 –
Finance income 9 (23,781 ) (14,626 )
Finance expense 9 40,043 39,281
Share of income from joint venture – (23,232 )
Profit on disposal of interest rate derivative – (2,878 )
Profit on disposal of Joint Venture – (19,941 )
Cash flows from operating activities before changes
in working capital 89,598 77,017
(Increase) in trade and other receivables (2,996 ) (548 )
Decrease in rent guarantee receivables – 191
Increase in deferred rental income 3,202 5,198
Increase in trade and other payables 2,252 2,461
Net cash flows from operating activities 92,056 84,319
Investing activities
Disposal of Property, Plant & Equipment – 222
Acquisition and development of investment properties 13 (136,184 ) (362,630 )
Capitalised acquisition costs (10,266 ) (14,681 )
Bank interest received 78 –
Receipts from other financial assets 290 290
Investment in joint venture – (189,528 )
Settlement of Joint Venture carried interest (7,500 ) –
Proceeds from disposal of Joint Venture 134,912 292,636
Net cash flows used in investing activities (18,670 ) (273,691 )
Financing activities
Costs of share issues – (89 )
Bank borrowings drawn 19 217,560 912,114
Bank borrowings repaid 19 (191,077 ) (598,486 )
Loan arrangement fees paid (1,318 ) (5,010 )
Bank interest paid (35,275 ) (22,408 )
Settlement of interest rate derivatives 21,182 8,646
Settlement of Joint Venture Carried Interest – (8,066 )
Sale of interest rate derivatives 18 38,482 2,878
Purchase of interest rate derivative 18 (45,364 ) (44,255 )
Bank commitment fees paid (1,031 ) (1,708 )
Dividends paid to equity holders (75,335 ) (67,963 )
Net cash flows (used in) / from financing activities (72,176 ) 175,653
Net movement in cash and cash equivalents in the year 1,210 (13,719 )
Cash and cash equivalents at the beginning of the year 37,481 51,200
Cash and cash equivalents at the end of the year 38,691 37,481
108 SUPERMARKET INCOME REIT PLC
ANNUAL REPORT 2024 109
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
1. Basis of preparation continued
110 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1. Basis of preparation continued
ANNUAL REPORT 2024 111
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
1. Basis of preparation continued
112 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 113
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
2. Summary of material accounting policies continued
114 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Summary of material accounting policies continued
ANNUAL REPORT 2024 115
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
Summary of material accounting policies continued
116 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 117
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
118 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 119
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
10. Taxation continued
120 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
11. Earnings per share continued
1
ANNUAL REPORT 2024 121
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
122 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
13. Investment properties continued
ANNUAL REPORT 2024 123
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
13. Investment properties continued
124 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 125
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
14. Subsidiaries continued
126 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 127
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
18. Interest rate derivatives continued
128 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNUAL REPORT 2024 129
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
130 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
21. Categories of financial instruments continued
ANNUAL REPORT 2024 131
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
21. Categories of financial instruments continued
132 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
21. Categories of financial instruments continued
ANNUAL REPORT 2024 133
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
134 SUPERMARKET INCOME REIT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
ANNU AL R EP OR T 2024 135
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIALS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
28. Transactions with related parties continued
136 SUP ER M AR K E T IN C OME R EI T P L C
28.
Transactions with related parties continued
donations
ANNU AL
R EP OR T 2024 137
STRATEGIC
REPORT
GOVERNANCE
REPORT
FINANCIALS
138 SUPERMARKET INCOME REIT PLC
Registered number: 10799126
Notes
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Non-current assets
Investments in subsidiaries D 1,139,114 1,564,226
Intercompany receivables D 491,566 -
Interest rate derivatives 14,312 29,318
Total non-current assets 1,644,992 1,593,544
Current assets
Interest rate derivatives 13,258 13,397
Trade and other receivables E 4,013 11,412
Cash and cash equivalents 382 2,928
Total current assets 17,653 27,737
Total assets 1,662,645 1,621,281
Current liabilities
Bank Borrowings G – 61,856
Trade and other payables F 227,194 127,027
Total current liabilities 227,194 188,883
Non-current liabilities
Bank borrowings G 412,533 315,873
Total liabilities 639,727 504,756
Total net assets 1,022,918 1,116,525
Equity
Share capital H 12,462 12,462
Share premium reserve 500,386 500,386
Capital reduction reserve 629,196 704,531
Retained earnings (119,126) (100,854)
Total equity 1,022,918 1,116,525
The notes on pages 140 to 141 form part of these financial statements.
The Company has taken advantage of the exemption within section 408 of the Companies Act 2006 not to present its own profit and
loss account. The accumulated loss for the year dealt with by the financial statements of the Company was £18,272,000 (2023: loss
£164,541,000). As at 30 June 2024 the Company has distributable reserves of £510.0 million (2023: £603.7 million).
The Company financial statements were approved and authorised for issue by the Board of Directors on 17 September 2024 and were
signed on its behalf by
Nick Hewson
Chair
17 September 2024
ANNUAL REPORT 2024 139
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
Share
capital
£’000
Share
premium
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 July 2023 12,462 500,386 704,531 (100,854) 1,116,525
Loss and total comprehensive loss for the year – – – (18,272) (18,272)
Transactions with owners
Interim dividends paid – – (75,335) – (75,335)
As at 30 June 2024 12,462 500,386 629,196 (119,126) 1,022,918
Share
capital
£’000
Share
premium
reserve
£’000
Capital
reduction
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 July 2022 12,399 494,174 778,859 63,687 1,349,119
Loss and total comprehensive loss for the year – – – (164,541) (164,541)
Transactions with owners
Ordinary shares issued at a premium during the year 63 6,301 – – 6,364
Transfer to capital reduction reserve
Share issue costs – (89) – – (89)
Interim dividends paid – – (74,328) – (74,328)
As at 30 June 2023 12,462 500,386 704,531 (100,854) 1,116,525
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2024
140 SUPERMARKET INCOME REIT PLC
NOTES TO THE COMPANY FINANCIAL STATEMENTS
A. Basis of preparation
The Company’s financial statements have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in
the United Kingdom and the Republic of Ireland.
The principal accounting policies relevant to the Company are as follows:
• Investments in subsidiaries are recognised at cost less provision for any impairment
• Loans and receivables are recognised initially at fair value plus transaction costs less provision for impairment
• Trade payables are recognised initially at fair value and subsequently at amortised cost
• Equity instruments are recognised as the value of proceeds received net of direct issue costs
• Dividends are recognised as a financial liability and deduction from equity in the period in which they are declared
In preparing the Company’s financial statements, advantage has been taken of the following disclosure exemptions
available in FRS 102:
• No cash flow statement has been presented
• Disclosures in respect of the Company’s financial instruments have not been presented as equivalent disclosures have been
provided in respect of the Group
• No reconciliation of the number of shares outstanding at the beginning and end of the year has been presented as it is identical to
the reconciliation for the Group shown in note 22 to the Group financial statements
• No disclosure has been given for the aggregate remuneration of the key management personnel of the Company as their
remuneration is shown in note 8 to the Group financial statements
In the year to 30 June 2024, the Company intends to continue to use these disclosure exemptions unless objections are
received from Shareholders.
B. Significant accounting judgements, estimates and assumptions
In preparing the financial statements of the Company, the Directors have made the following judgements:
• Determine whether there are any indicators of impairment of the investments in subsidiary undertakings. Factors taken into
consideration in reaching such a decision include the financial position and expected future performance of the subsidiary
entity. Where indicators of impairment are identified the carrying value of investments in subsidiaries will be compared to their
recoverable amount and an impairment charge recognised where this is lower than carrying value. The net asset value of the
individual subsidiary entities is considered to be a reasonable proxy for fair value less costs to sell as the underlying investment
properties held within these entities is carried at fair value.
C. Auditor’s remuneration
The remuneration of the auditor in respect of the audit of the Company’s consolidated and individual financial statements for the year
was £292,150 (2023: £260,000). Fees payable for audit and non-audit services provided to the Company and the rest of the Group are
disclosed in note 7 to the Group financial statements.
D. Investment in subsidiary undertakings
The Company’s wholly owned direct subsidiaries are Supermarket Income Investments UK Limited, Supermarket Income Investments
(Midco2) UK Limited, Supermarket Income Investments (Midco3) UK Limited, Supermarket Income Investments (Midco4) UK
Limited, SII UK Halliwell (Midco) Limited, Supermarket Income Investments (Midco 6) UK Limited , Supermarket Income Investments
(Midco7) UK Limited, Supermarket Income Investments (Midco 8), SUPR Finco Limited and SUPR Green Energy Limited all of
which are incorporated and operating in England with a registered address of The Scalpel 18
th
Floor, 52 Lime Street, London, United
Kingdom, EC3M 7AF. The full list of subsidiary entities directly and indirectly owned by the Company is disclosed in note 14 to the
Consolidated Financial Statements.
The movement in the year was as follows:
Year to
30 June 2024
£’000
Opening balance 1,564,226
Additions 1
Disposals (359,865)
Closing balance 1,204,362
Impairments of investments in subsidiaries (65,248)
As at 30 June 2024 1,139,114
Non-current loans receivable 491,566
Closing balance as at 30 June 2024 1,630,680
During the year a number of the Company’s subsidiaries undertook buybacks of their own shares. The proceeds of these buybacks
were left outstanding as intercompany loans provided by the Company to the respective subsidiaries. These transactions are
responsible for the increase in the Company’s intercompany loan receivable balance as at 30 June 2024.
ANNUAL REPORT 2024 141
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
Year to
30 June 2023
£’000
Opening balance 1,329,108
Additions 1,066,634
Closing balance 2,395,742
Impairments of investments in subsidiaries (831,516)
As at 30 June 2023 1,564,226
An impairment of investments in subsidiaries was recognised during both the current and previous year following the payment of
upstream dividends to the Company. Following the payment of dividends, the net assets of certain dividend paying subsidiaries no
longer support the carrying value of the Company’s investment in those entities and thus an impairment charge was recognised to
bring the carrying value of the investments in line with the recoverable amount, which was also considered to be its value in use.
E. Trade and other receivables
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Intercompany receivables 3,645 9,345
Prepayments and accrued income 209 223
VAT receivable 159 –
Other receivables – 1,844
Total trade and other receivables 4,013 11,412
F. Trade and other payables
Trade creditors 2,120 2,235
Corporate accruals 6,491 5,122
VAT payable – 114
Intercompany payables 218,583 119,556
Total trade and other payables 227,194 127,027
G. Bank Borrowings
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Amounts falling due within one year:
Unsecured debt – 62,090
Less: Unamortised finance costs – (234)
Bank borrowings per the Company’s statement of financial position – 61,856
Amounts falling due after more than one year:
Unsecured debt 414,981 318,508
Less: Unamortised finance costs (2,448) (2,635)
Bank borrowings per the Company’s statement of financial position 412,533 315,873
Total bank borrowings 412,533 377,729
Any associated fees in arranging the bank borrowings that are unamortised as at the end of the year are offset against amounts drawn
under the facility as shown in the table above.
Details of the bank borrowings of the Company are disclosed in note 19 to the Group financial statements.
H. Share capital
Details of the share capital of the Company are disclosed in note 22 to the Group financial statements.
I. Related party transactions
Details of related party transactions are disclosed in note 28 to the Group financial statements.
142 SUPERMARKET INCOME REIT PLC
UNAUDITED SUPPLEMENTARY INFORMATION
Notes to EPRA and other Key Performance Indicators
1. EPRA Earnings and Adjusted Earnings per Share
For the period from 1 July 2023 to 30 June 2024
Net profit
attributable
to ordinary
Shareholders
£’000
Weighted
average number
of ordinary
shares
1
Number
Earnings/
per share
Pence
Net (loss)/profit attributable to ordinary Shareholders (21,184)1,246,239,185 (1.7)
Adjustments to remove:
Changes in fair value of investment properties and associated rent guarantees 65,825 5.3
Changes in fair value of interest rate derivatives measured at FVTPL 31,251 2.5
Deferred Tax (140) -
Finance income received on interest rate derivatives held at fair value through
profit and loss (22,469) (1.8)
EPRA earnings 53,283 1,246,239,185 4.3
Add finance income received on interest rate derivatives held at fair value through
profit and loss 22,469 1.8
Add accelerated finance costs 70 –
Adjusted EPRA earnings 75,822 1,246,239,185 6.1
1 Based on the weighted average number of ordinary shares in issue in the year ended 30 June 2024.
For the period from 1 July 2022 to 30 June 2023
Net profit
attributable
to ordinary
Shareholders
£’000
Weighted
average number
of ordinary
shares
2
Number
Earnings/
per share
Pence
Net profit attributable to ordinary Shareholders (144,866)1,242,574,505 (11.7)
Adjustments to remove:
Changes in fair value of investment properties and associated rent guarantees 256,066 – 20.6
Changes in fair value of interest rate derivatives measured at FVTPL (10,024) – (0.8)
Profit on disposal of interest rate derivatives (2,878) – (0.2)
Group share of changes in fair value of joint venture investment properties (11,486) – (0.9)
Profit on disposal of groups interest in joint venture (19,940) – (1.6)
Finance income received on interest rate derivatives held at fair value through profit
and loss (9,671) – (0.8)
EPRA earnings 57,201 1,242,574,505 4.6
Add finance income received on interest rate derivatives held at fair value through
profit and loss 9,671 – 0.8
Add accelerated finance costs 1,518 – 0.1
Add Joint Venture acquisition loan arrangement fee 4,009 – 0.3
Adjusted EPRA earnings 72,399 1,242,574,505 5.8
2 Based on the weighted average number of ordinary shares in issue in the year ended 30 June 2023.
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.
ANNUAL REPORT 2024 143
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
30 June 2024
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to ordinary Shareholders 1,119,474 1,119,474 1,119,474
Fair value of Financial asset held at amortised cost (3,493) (3,493) (3,493)
Fair value of interest rate derivatives (31,449) (31,449) –
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
30 June 2023
EPRA NTA
£’000
EPRA NRV
£’000
EPRA NDV
£’000
IFRS NAV attributable to ordinary Shareholders 1,217,726 1,217,726 1,217,726
Fair value of interest rate derivatives (3,609) (3,609) (3,609)
Fair value of Financial asset held at amortised cost (57,583) (57,583) –
Intangibles – – –
Purchasers’ costs – 122,990 –
Fair value of debt – – 4,876
EPRA metric 1,156,534 1,279,524 1,218,993
EPRA metric per share 93p 103p 98p
3. EPRA Net Initial Yield (NIY) and EPRA “topped up” NIY
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Investment Property – wholly owned (note 13) 1,768,216 1,685,690
Investment Property – share of joint ventures – –
Completed Property Portfolio 1,768,216 1,685,690
Allowance for estimated purchasers’ costs 120,239 122,990
Grossed up completed property portfolio valuation (B) 1,888,455 1,808,680
Annualised passing rental income – wholly owned 112,338 99,910
Annualised non-recoverable property outgoings (1,116) (1,117)
Annualised net rents (A) 111,222 98,793
Rent expiration of rent-free periods and fixed uplifts 440 447
Topped up annualised net rents (C) 111,662 99,240
EPRA NIY (A/B) 5.89% 5.46%
EPRA "topped up" NIY (C/B) 5.91% 5.49%
All rent free periods expire within the year to 30 June 2024
4. EPRA Vacancy Rate
EPRA Vacancy Rate
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Estimated rental value of vacant space 591 439
Estimated rental value of the whole portfolio 113,660 100,797
EPRA Vacancy Rate 0.5% 0.4%
The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space as a proportion of the total rental value of the 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.
144 SUPERMARKET INCOME REIT PLC
UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED
5. EPRA Cost Ratio
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Administration expenses per IFRS 15,218 15,429
Service charge income (6,822) (5,939)
Service charge costs 7,441 6,518
Net Service charge costs 619 579
Share of joint venture expenses – 938
Total costs (including direct vacant property costs) (A) 15,837 16,946
Vacant property costs (331) (328)
Total costs (excluding direct vacant property costs) (B) 15,506 16,618
Gross rental income per IFRS 107,851 95,823
Less: service charge components of gross rental income – –
Add: Share of Gross rental income from Joint Ventures – 13,529
Gross rental income (C) 107,851 109,352
EPRA Cost ratio (including direct vacant property costs) (A/C) 14.7% 15.50%
EPRA Cost ratio (excluding vacant property costs) (B/C) 14.4% 15.20%
1. The Company does not have any overhead costs capitalised as it has no assets under development.
ANNUAL REPORT 2024 145
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
6. EPRA LTV
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Group Net Debt
Borrowings from financial institutions 694,168 667,465
Net payables 34,832 –
Less: Cash and cash equivalents (38,691) (37,481)
Group Net Debt Total (A) 690,309 629,984
Group Property Value
Investment properties at fair value 1,768,216 1,685,690
Intangibles – –
Net receivables – 93,620
Financial assets 11,023 10,819
Total Group Property Value (B) 1,779,239 1,790,129
Group LTV (A-B) 38.80% 35.19%
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%
Combined Net Debt (A) 690,309 629,984
Combined Property Value (B) 1,779,239 1,790,129
Combined LTV (A-B) 38.80% 35.19%
7. EPRA Like-for-Like Rental Growth
Sector
Year ended
30 June 2024
£’000
Year ended
30 June 2023
£’000
Like-for-Like
rental growth
%
UK 82,003 80,329 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 £1.30 billion (30 June 2023: £1.35 billion).
146 SUPERMARKET INCOME REIT PLC
UNAUDITED SUPPLEMENTARY INFORMATION CONTINUED
8. EPRA Property Related Capital Expenditure
Group
As at
30 June 2024
£’000
As at
30 June 2023
£’000
Acquisitions 145,834 377,311
Development 380 –
Investment properties – –
Group Total CapEx 146,214 377,311
Joint Venture
Acquisitions – –
Development – –
Investment properties – –
Joint Venture CapEx – –
Total CapEx 146,214 377,311
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
Year to
30 June 2024
Pence per share
(‘p’)
Year to
30 June 2023
Pence per share
(‘p’)
Share price at the start of the year 73.00 119.50
Share price at the end of the year 72.50 73.00
Increase in share price (0.50) (46.50)
Dividends declared for the year 6.06 6.00
Increase / (decrease) in share price plus dividends 5.56 (40.50)
Share price at start of year 73.00 119.50
Total Shareholder Return 8% (34%)
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
30 June 2024
£’000
As at
30 June 2023
£’000
Bank borrowings 694,168 667,465
Less cash and cash equivalents (38,691) (37,481)
Net borrowings 655,477 629,984
Investment properties valuation 1,768,216 1,685,690
Net loan to value ratio 37% 37%
11. Annualised passing rent
Annualised passing rent is the annualised cash rental income being received as at the stated date.
ANNUAL REPORT 2024 147
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
GLOSSARY
AGM Annual General Meeting
AIFMD Alternative Investment Fund Managers Directive
EPRA European Public Real Estate Association
EPS Earnings per share, calculated as the profit for the period after tax attributable to members of
the parent company divided by the weighted average number of shares in issue in the period
FCA Financial Conduct Authority of the United Kingdom
FRI A lease granted on an FRI basis means that all repairing and insuring obligations are imposed
on the tenant, relieving the landlord from all liability for the cost of insurance and repairs
IFRS UK adopted international accounting standards
IPO An initial public offering (IPO) refers to the process of offering shares of
a corporation to the public in a new stock issuance
LSE London Stock Exchange
LTV Loan to Value: the outstanding amount of a loan as a percentage of property value
NAV Net Asset Value
Net Initial Yield Annualised net rents on investment properties as a percentage of the investment property
valuation, less assumed purchaser’s costs of 6.8%
Net Loan to Value or Net LTV LTV calculated on the gross loan amount less cash balances
Omnichannel Stores offering both instore picking and online fulfilment
REIT Real Estate Investment Trust
Running yield The anticipated Net Initial Yield at a future date, taking account of any rent reviews in the
intervening period
Sainsbury’s Reversion Portfolio (SRP) A portfolio consisting of the freehold interest in 26 geographically diverse high quality
Sainsbury’s supermarkets
Total Shareholder Return (TSR) The movement in share price over a period plus dividends declared for
the same period expressed as a percentage of the share price at the start
of the Period
WAULT Weighted Average Unexpired Lease Term. It is used by property companies as an indicator of
the average remaining life of the leases within their portfolios
148 SUPERMARKET INCOME REIT PLC
Directors Nick Hewson (Non-Executive Chair)
Vince Prior (Chair of Management Engagement Committee)
Jon Austen (Chair of Audit and Risk Committee)
Cathryn Vanderspar (Chair of Remuneration Committee)
Frances Davies (Chair of ESG Committee)
Sapna Shah (Chair of Nomination Committee & Senior Independent Director)
Company Secretary Hanway Advisory Limited
The Scalpel 18
th
Floor,
52 Lime Street,
London,
United Kingdom,
EC3M 7AF
Registrar Link Asset Services
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,
GY1 2HT
Investment Adviser Atrato Capital Limited
3
rd
Floor,
10 Bishops Square,
London
E1 6EG
Financial adviser,
Joint Corporate Broker and
Placing Agent
Stifel Nicolaus Europe Limited
150 Cheapside,
London,
EC2V 6ET
Joint Corporate Broker Goldman Sachs International
Plumtree Court,
25 Shoe Lane,
London,
EC4A 4AU
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
Registered Office The Scalpel 18
th
Floor,
52 Lime Street,
London,
EC3M 7AF
Stock exchange ticker ISIN
SUPR
GB00BF345X11
This report will be available on the Company’s website.
CONTACTS INFORMATION
ANNUAL REPORT 2024 149
STRATEGIC REPORT GOVERNANCE REPORT FINANCIALS
Supermarket Income REIT plc
www.supermarketincomereit.com