LONDON (ShareCast) - (Sharecast News) - Supermarket Income reported a 30% spike in its annualised passing rent in its audited results on Tuesday, reaching £100.6m.

The FTSE 250 real estate investment trust said it maintained 100% occupancy and collected 100% of the rent due, with an average rental uplift of 4.1%.

Adjusted earnings saw a rise of 26% to £72.4m, as the board declared a dividend of 6p per share for the year, with its target dividend set at 6.06p per share for 2024.

The board said the UK grocery market expanded by 11% during the period, with a cumulative 30% growth since the company's initial public offering, to a value of £242bn.

Notably, supermarket store revenues grew significantly higher than rents, indicating better affordability and stronger rental values.

It said UK supermarket property investments surpassed £1.7bn over the year.

The company successfully sold its interest in 21 supermarket properties for a total consideration of £430.9m during the year, delivering an internal rate of return of 30% and a money-on-money multiple of 1.9x.

It further purchased 11 supermarket properties valued at £399m.

Supermarket Income REIT said its portfolio now featured a weighted average unexpired lease term of 14 years and predominant tenant covenants, with 77% of the income generated from retail giants Sainsbury's and Tesco.

Moreover, 78% of the rental income was linked to inflation, capped at 4% per annum.

With rising interest rates, the valuation of supermarket properties had seen a dip, but there were positive signs of stabilisation, with the direct portfolio now valued at £1.69bn, reflecting a net initial yield of 5.6% as of 30 June and up from £1.56bn in the prior year.

The company's financial health remained strong after Fitch Ratings reaffirmed its BBB+ investment-grade credit rating in February.

It also reduced its total debt, with a current loan-to-value ratio of 34%, while 100% of its drawn debt was hedged, with the average finance cost fixed at 3.1%.

"The UK grocery sector has again demonstrated resilience despite the challenging macroeconomic environment we have experienced during the year," said chair Nick Hewson.

"We remain focused on our investment strategy of acquiring and managing a high-quality portfolio of omnichannel supermarkets.

"These give us exposure to the fastest growing segment of the UK grocery market, which itself is experiencing strong growth."

Hewson noted that during the year, Sainsbury's purchased the company's interest in the Sainsbury's Reversion Portfolio joint venture for £430.9m, which it redeployed into higher-yielding supermarkets that met its strict investment criteria alongside reducing debt, materially strengthening its balance sheet.

"This purchase by one of our own tenants of 21 of its own stores highlights the attractiveness of UK supermarket property, which is further illustrated by the fact that the year has seen in excess of £1.7bn of investment volume in our property sub-sector, driven by the positive long-term outlook for UK grocery.

"This activity has contributed to stabilising property valuations in the UK supermarket property sub-sector.

"As we look forward, the quality of our unique omnichannel supermarket portfolio and the increasing affordability of grocery rents, together with our robust balance sheet, means we are well positioned to continue delivering long-term value for our shareholders."

At 0853 BST, shares in Supermarket Income REIT were up 3.33% at 77.5p.

Reporting by Josh White for Sharecast.com.

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