2022. A great deal has changed in the world since we last presented to you. How do we view our world of supermarket property against that backdrop? Our tenants' businesses are performing well, underpinned by non-discretionary consumer spending. The most recent figures show that grocery sales in the U.K. are up 8.8%, and that means that's giving us robust income. Of course, supermarket property valuations haven't been immune to the broader macroeconomic backdrop, and that's obviously reflected in our NTA. However, we feel confident that in this environment, we can deliver attractive levered returns to our shareholders. We have a huge amount of balance sheet flexibility, and that's because we've just sold our stake in the Sainsbury's Reversion Portfolio, and it gives us a lot of capacity in the balance sheet.
We're also very confident about the sustainability of our dividends. I'm now gonna hand you over to Haf, who's gonna take you through the detail of the financials.
Thank you, Ben. Good morning. I'm pleased to report the financial results for the six months to 31st of December, 2022. In terms of financial highlights for the period, Super now has GBP 1.8 billion of total assets, an EPRA NTA of GBP 0.92 per share, with our portfolio now valued at a 5.5% net initial yield. Following the hedges which were put in place during the period, 100% of our debt is fixed at a weighted average cost of 2.9%. We achieved a 36% increase in the growth of our rent through a combination of new acquisitions and rental growth when measured against the same period in the prior year. Finally, we paid a GBP 0.03 per share dividend and remain on track to meet our GBP 0.06 pence per share full year target.
Let me now take you through this in more detail, starting with the income statement. Net rental income was GBP 45.9 million, up 41% from GBP 32.6 million when compared to the same period in the prior year. On the next slide, we have provided a rental bridge showing the growth in passing rent. On an annualized basis, net rental income now stands at GBP 98.1 million, up from GBP 80.2 million in the period. This was driven by growth from new acquisitions, contributing GBP 16.6 million to the rent roll and a further GBP 1.2 million from rent reviews, representing growth of 3.7% on a like-for-like basis. Moving back to the income statement overview. Net income from our joint venture was GBP 7.4 million, up GBP 1.2 million since last year.
This reflects our investment in the Sainsbury's Reversion Portfolio, which as you will be aware, was disposed of after the balance sheet date. Rob will take us through that later in the presentation. Administrative and other expenses have increased by GBP 1.7 million as we continue to scale the business. As you can see at the bottom of this slide, that scale continues to deliver cost savings to shareholders with our Adjusted EPRA Cost Ratio falling year-over-year and now stands at 15.1% compared to 15.9% in the prior period. Finance expenses have increased to GBP 9 million, up from GBP 5.7 million since last year. This reflects the additional debt to fund portfolio growth given the increased size of the business. Let me now talk you through the debt in more detail.
With the highly defensive nature of our investment strategy, we continue to see significant appetite for our credit from a wide range of institutional lenders. During the period, we transitioned nearly 50% of our debt to unsecured with a syndicate of four banks. We also refinanced our existing facilities with HSBC and most recently Bayerische Landesbank. Fitch reaffirmed our credit rating at BBB+ in February of this year, which reflects the strength and resilience of our business. As of today, we have GBP 862 million of committed debt facilities and an LTV of 35%. As we'll discuss, we expect this to fall further to below 30% in July as the remaining proceeds from the JV are received. At the period end, we had just over GBP 170 million of undrawn debt capacity.
Our debt book remains highly diversified with a staggered maturity profile and continue to have good access to a broad pool of debt capital. Our weighted average debt maturity now stands at four years, and the shorter dated tranche of GBP 62 million is scheduled for repayment. Let me now talk you through our hedging strategy, which was designed to protect our dividend. The graph on the left shows the interest rate swaps curve, which is the market's expectations for future interest rates. The orange line is where it was in September following Kwasi Kwarteng's mini-budget. The gold line is where it was at the period end. The blue line is where it is today. Interest rates have clearly shown considerable volatility in the period. We took the decision to remove this volatility from our earnings by fixing 100% of the company's floating debt.
This had a one-off cost to the company of GBP 41 million, resulting in a funding rate today of 2.9%, fixing the company's cost of debt through the peak of the interest rate curve. It is for this reason why we feel confident in the sustainability of our dividend going forward. Moving on to the next slide, adjusted earnings have increased to GBP 36.4 million compared to GBP 26.9 million in the prior year. However, on a per share basis, this has fallen from GBP 0.031 per share to GBP 0.029 per share, which is primarily as a result of the timing of deployment of capital, resulting in a 0.98x dividend cover ratio. However, we remain fully on course to deliver a fully covered dividend by the year-end.
Moving away from the income statement onto the statement of financial position. Gross assets stand at GBP 1.9 billion, up 19% from GBP 1.6 billion in the prior year. The business has not been immune to falling property valuations, and as a result, our EPRA NTA per share now stands at GBP 0.92 per share. Looking at our direct portfolio specifically, as we announced in February, the valuation of the portfolio moved from 4.6% net initial yield to 5.5% net initial yield, which has resulted in property values falling by 13% with our direct portfolio now standing at GBP 1.6 billion.
Looking at this on a fund level, the fall in property valuations has been the primary reason for the falling in EPRA NTA, falling from GBP 1.11 per share as reported in our September pro forma to GBP 0.92 per share. I will now hand it over to Steven, who will take us through our views on the grocery market.
Thank you, Haf. Good morning. In an otherwise uncertain world, the U.K. grocery market continues to go from strength- to- strength. Monthly annualized store sales volumes are up 8.8%, and this is having a positive impact on the financial performance of our tenants. The Q3 updates to cash flow guidance from both Tesco and Sainsbury's shows how these stronger volume trends, together with momentum behind cost reductions, is delivering material financial growth. The elevated cash flow generation is resulting in increased investment in their own estates, as seen through their activity in the property market, which I will take you through shortly. Despite the wider economic headwinds, strong growth has been a feature of the grocery market for the last five years.
Over this period, U.K. grocery has recorded persistent growth, increasing by GBP 33 billion to a GBP 222 billion market as of December 2022. Our specialist investment strategy is dedicated to this growing market, which is a nondiscretionary spend sector with growth from three powerful drivers, mainly increased working, home working, inflation, and population growth. We're benefiting from the alignment of our strategy to powerful structural changes in the way in which grocery demand is fulfilled. I'll take you through that now. In this graph, we show how that GBP 33 billion of growth is distributed by format. As you can see, omnichannel is the largest growth format in U.K. grocery. Over 80% of all online grocery orders in the U.K. are fulfilled through an omnichannel supermarket, and that's growing.
Our deliberate decision to build a portfolio of omnichannel stores provides a long-term structural driver to our ERV growth, thereby providing us with the opportunity to capitalize on the growth that we're seeing in our occupational market. As you can see from these tables of sellers and buyers, over the last five years, close to GBP 8 billion of transactions has taken place in supermarket leasehold property. This rotation of supermarket property into long-term specialist investors, combined with the acquisition activities of the operators on their own leasehold property, is leading to a net contraction of supply, which we believe will be favorable to long-term investment yields. It's no surprise that investment volumes in our sector have reduced in 2022, consistent with all other asset classes. However, our market is unique given our tenants' investment activity in this market.
Our market looks materially different when we add the operators' activity. It's no surprise to us that our tenants are the biggest buyers of their own stores, given the long-term value in supermarket property. 2022 shows the extent of this activity as the operators recycle growing free cash flows back into investments in their own leasehold property. Let me take you through investment yields in a bit more detail. On this graph, we show the MSCI yield series for supermarkets, all property, and logistics. While the supermarket index is a broad series of assets, not fully reflective of our long income omnichannel focus, it does highlight the relative correction in yields since September. On the right of this graph, you can see that supermarket yields have rebased faster than any other sector, with yields of 5.7% or 90 basis points wider than all property.
What's particularly noticeable is that, at a time when the prospects for our occupational market is at their strongest level, supermarket investment property is at its cheapest. On the left, when we contrast this to all property in the 2009 GFC, when supermarkets were one of the most expensive property asset classes, today, supermarkets are one of the cheapest. Our investment market has never looked more compelling, and we believe represents one of the most attractive asset classes in U.K. property. We continue to produce our own yield series for long leased supermarket property. Our rules in forming this index never change, and let me remind you how we compile this yield series. It's based on all trailing transactions within each 12-month period, and which are representative of our investment market.
That is transactions which had over 10 years' unexpired lease terms benefiting from index linked or fixed uplifts. Not surprising, given the economic backdrop, transactional yields have moved out to 5.6%. As we showed earlier, the correction to yields, however, presents a real opportunity for us to acquire investments at a more attractive entry point. On this graph, we show the historical IRRs to the current implied IRR following the rebasement of investment yields, both on a levered and unlevered basis. At current yields, supermarkets provide over 200 basis point improvement, increasing from 7%-8% IRR to 9%-10% IRR today, which we believe provides a highly attractive return relative to the risk-free rate. In addition, we consider these returns to be highly attractive when considering the strength and quality of our tenant base.
With a weakening economy, this quality factor has never been more important, providing a higher degree of income resilience. Now, in summary, despite the turbulence within the investment market, the attractive entry point and high quality income makes supermarket assets one of the most attractive asset classes in the U.K. property market. I'll now hand you over to Rob, who's gonna take you through our portfolio in more detail.
Thanks, Steven. Since IPO, we have grown our unique portfolio of handpicked supermarkets, now totaling 50 stores. 93% of those are omnichannel, and rents are highly affordable for our tenants, with an average rent to turnover of 4%. This affordability of our rents, along with the mission-critical nature of our assets and the strength of our tenants, means that Super has achieved 100% rent collection since inception, and our income is highly contracted over the long term with a 14-year WAULT. Our rent roll now stands at over GBP 95 million and continues to grow through rent reviews, of which 80% are inflation-linked. When acquiring the U.K.'s strongest performing supermarkets, we sometimes also acquire adjacent non-grocery units which are complementary to the supermarket.
Over 75% of these are essential retailers, we take a very conservative approach to our non-grocery exposure with these assets held at an 8.2% valuation yield and representing less than 7% of our portfolio. As mentioned, 93% of the portfolio is omnichannel. Let me take you through an example here at Tesco Thetford, the very first acquisition for Super. The store facilitates traditional in-store shopping, home delivery, and click and collect. The combination of these, along with the petrol station, makes this a revenue center for Tesco, generating around GBP 70 million per annum. Store trading benefits from the nearby Center Parcs and the immediately adjacent King Street development of 5,000 new homes. As you can see, the large roof is ideal for a solar array. Brings me on to sustainability, where we have been further developing the strategy for Super.
At the asset level, our portfolio EPC ratings are 84% C or above, but we are looking to further improve on the sustainability of our assets. Tesco entered into a 20-year PPA for a solar array at one of our stores, whilst we've also agreed terms for EV charging at eight sites. We're also working towards net zero, and Super recently became a signatory of the Net Zero Asset Managers initiative. In September, we reported that our annual report was TCFD aligned for the first time, and we are targeting full compliance ahead of the deadline in 2025. We are also working with specialists. Firstly, Anthesis on the development of our science-based carbon reduction target. On this point, we've started to receive energy consumption data from our tenants for the first time.
Whilst CEN- ESG has also been appointed to benchmark Super against peers and further develop the sustainability strategy. Turning now to our Sainsbury's Reversion Portfolio investment. As a reminder, we've been working on this investment for the last three years in a series of transactions which saw Super's interest grow from an initial 12.75% - 51%, leading up to the sale of the entire interest to Sainsbury's announced earlier this month. This transaction has provided a fantastic return for Super with a 1.9 x money multiple and an IRR of 30%. Let me take you through how we got there. The total JV investment was GBP 217 million into a portfolio of 26 Sainsbury's stores on short leases.
The value opportunity we saw was in the strength of the stores and our conviction over Sainsbury's ongoing occupation beyond lease expiry. These stores represent 7% of Sainsbury's total turnover from only 4% of floor space. Their importance was evidenced through the exercise of buyback options on 21 of the stores for a total consideration of over GBP 1 billion. The price was struck at the peak of the market, achieving a 4.3% net initial yield. Sainsbury's also entered into new 15-year leases on four stores, whilst one will be sold subject to vacant possession. The result is GBP 431 million of sale proceeds to Super, again, generating a 1.9 x money multiple and an IRR of 30%.
In terms of replacing the GBP 12 million of annualized income the Sainsbury's Reversion Portfolio has been generating, Super has options for the redeployment of the GBP 228 million of net equity received. We see opportunities to recycle into further assets with attractive levered returns, which could generate GBP 13 million of income. There is the repayment of debt, which at current rates could save around GBP 11 million per annum. Finally, there is the option of share buybacks. The board is currently considering the merits of all of these options in making decisions over how best to use the proceeds. I'll now hand you back to Ben.
To sum up and turning to the outlook. We operate in a structurally supported growth sector. Our stores are mission critical to our tenants. They're future-proofed by their omnichannel nature, and the income is underpinned by non-discretionary spending. That means that we have a robust, highly contracted income stream, and that grows with inflation-linked rental uplifts. The sale of the Sainsbury's Reversion Portfolio and our fixed debt give us a huge amount of balance sheet flexibility and a sustainable dividend. We believe we can deliver attractive levered returns from the compelling value available from these assets at current market levels. We're gonna be highly disciplined about the way we deploy shareholders' capital. I'm very happy to open up to questions now, both in the room and online.
I'm just gonna quickly sit down so I can see the spreadsheet, so don't mind if I take it from you. John?
Hi. Morning, John Cahill from Stifel. A couple of questions just about the hedges. You gave a really helpful chart on slide 15. I wonder if you could just talk about the pattern of how the hedges roll off. Is it a cliff edge in 2026, or some before, some after? Really with respect to that, you're really within a whisker of full dividend cover. If you could maybe give a few comments on how you see that progressing over time, what the evolution of that will be. Obviously, you know, there's lots of talk in the market about dividends for all U.K. REITs. I just wonder if you could share your view on that, please.
Shall I take the overall strategy and then talk about how they roll off? I mean, I think the strategy was to hedge through that peak in the interest rate curve. You know, if you model us out, as I'm sure you're going to, you know, the contracted rental growth effectively then grows us into, you know, where we end up at the end of that period. We think we can grow the top line to compensate for higher borrowing costs in the future, if that's the case. We're certainly modeling higher borrowing costs post the hedges.
Yeah, just on hedges. We hedge out the term of the maturity of the debt facilities that hedged against.
They obviously roll over different periods, so you in fact, you've got a weighted average that goes out to 2026. The most, the largest tranche with the 250 unsecured facility, that goes out the longest. It's not a cliff edge, it is a kinda gradual profile.
Thank you.
Morning. Kieran Lee at Berenberg. One of the hedging has been taken, so I'll ask you about the tenant performance. You mentioned the sort of 4% rent to turnover ratio. We look at the margins of the grocers and where sort of ERVs for these assets sit relative to sort of passing income.
Mm-hmm.
What makes you sort of so confident that you can make the grocers pay up for that additional rental growth, instead of them using it themselves to flatter their own margins?
Steven, do you wanna take that?
I can do, yes.
Yeah.
I mean, look, in terms of where ERV and rental growth at the moment, I mean, our sector is inflating faster in the contractual rental uplifts that we have within our portfolio. In that respect, we do think there's a lot of tailwinds behind continued ERV growth. When you think about these asset classes, I mean, one of the reasons why they put long leases on them is because they're so important. These assets are the lifeblood of the business. They're the cash generating units for the grocers. In that respect, when the leases do come to an end, we're highly confident that in that scenario where we're into a regear and extending those leases, it's based off a market rent fundamental. Typically, market rents in our space are highly visible at 4% rent turnover.
In that respect, we're quite confident that the benchmarks are there, and the importance of the asset means that we will capture ERV growth that we're currently seeing in this asset class.
Just to go back to the on the EBITDA margin point, those queries. We've actually got a slide in the back in the appendix on 62 on EBITDA margins. What's really notable is the people who are really under pressure on EBITDA margins are the discounters. You know, I think, it's not been much commented on, but actually they're the ones who've been inflating prices the most in this environment to try and compensate for the fact they're on such skinny margins. Whereas actually our tenants still have very healthy margins, even in this environment, 'cause they've just been very effective at managing cost.
Sorry, one more just occurred to me.
Sure.
When you're sort of looking at those redeployment options that you talked to, looking at your debt facilities.
Mm-hmm.
Is there anything on early repayment fees, need to draw additional debt that would make one option more attractive than another?
No, I mean, I think just as an overall point, I mean, we're completely open to kinda all options in terms of deployment of capital. It's a question of how do we use that capital most efficiently, and we look at it very analytically. We will take into account if there are break costs in repaying debt. You know, obviously for share buybacks, it's about where the share price is and what kind of returns that delivers. As we said, I think there's a lot of talk in the market that this, that maybe the model's broken because of the increase in debt costs.
I hope what we've got across today is that actually because of where yields have got to and where inflation is actually levered returns are more attractive now than they were before. We certainly take into account any kind of early prepayment fees. There's most of our book doesn't really have that on the debt side because it's bank facilities. I'll put the call on. Oh. If there are no more from the room, we've got a few online. Okay, we've got a question around acquisition pipeline and the broader state of the market. I mean, I think what we saw last year, interestingly, was that investment volumes, if you included repurchases by the, by the operators, were actually around historic sort of average levels.
There's been quite a lot of headlines about investment volumes falling off a cliff last year. That's because the agency put those numbers together. Don't count the purchases by Tesco and Sainsbury's. We think that's actually a really important driver in this market. There was a period over the last few months where things were very slow. That's really because effectively the bid offer on assets was too wide. The current owners haven't remarked their books. That's all beginning to happen now. We are beginning to see quite a lot of attractive opportunities come to the market at realistic prices. We think there is the opportunity to deploy into attractive, accretive acquisitions.
As I've said a couple times already, we'll weigh that, you know, very heavily against other options for what we can do with capital before we make any recommendations to the board. We've got a question which is, if we don't buy any more supermarkets, will we be able to increase our earnings over time? Obviously, the answer to that is that we've got the contracted rental growth in this highly inflationary environment. That's gonna deliver us, you know, the kind of levels of rental growth we've seen today. Yes, that will grow earnings even if we don't purchase more supermarkets going forwards. Colm's got a long question. Sorry. I'll read it.
Colm's got a question about sort of where yields have got to, whether how we're seeing the market kind of perform in terms of versus where we have our portfolio marked right now. Steven, do you wanna take that?
Yes, I can do. I mean, when you look at the broad yield series, as I said in the presentation, there's a mix of assets in there, short leases, different formats, et cetera. I think where we're seeing overall transaction yields right now is broadly within our asset class, similar to where we have our assets marked. I think when we look forward, what really anchors our thinking is the returns on this asset class that we outlined on page 31. I mean, when we look at where yields are now relative to other asset classes, and we look at the relative return performance of this asset class, we've got a lot more on this in the appendix, by the way. That is a highly attractive return, and we've not assumed any kind of yield compression in those IRRs.
9%-10%, given the risk profile of this asset class, compares incredibly favorably to other asset classes or other investments in this market right now. In that respect, we are quite confident that over the long term, yields will deliver an attractive return for us.
Miranda asks, the LTV comes down to sub 30% in July, where will you be happy for it to go to? I think right now the jury is out. One of the options is leaving leverage lower, permanently and just not having that cost of debt. You know, I think, given the rebasing of our valuations, we, you know, we'd be happy to use that debt capacity to, you know, either fund purchases of assets or share buybacks and probably go to mid-30s kind of area in the medium term. That would be within our lending target, our long-term lending target. There's also a question here around the kind of mooted sale and leasebacks by Asda and Morrisons in the market.
Clearly, Supermarket Income REIT is well-positioned given, you know, its position in the market as the biggest grocery landlord. You know, the flip side of that is obviously that, you know, one of our strengths, we think, right now is that we've got such a low exposure to Asda and Morrisons, so I think we'll be very cautious about approaching those transactions. It may be that there's some way of Super participating in a small way in them. It's very early days. You know, the strength we have is in being able to underwrite the individual store locations.
That gives us some ability to look through the covenant issues at those operators, because what's really important is if something goes wrong at the operator level, that we have the best performing grocery sites, and those will continue to be grocery sites, you know, even if something happens at the operator level. I think we'll be very cautious around those two transactions. We also think the investment market is quite bifurcated between Asda, Morrisons and Tesco, Sainsbury's. You know, we'd expect to see some pretty wide yields coming out on Morrisons and Asda transactions. You know, it's practically impossible to get bank financing against those kinds of assets right now because the banks have got so much of the buyout debt on their balance sheets, and that really reduces the number of purchases.
We also don't think it's a valid read-across to take a Morrisons store price and think that that might apply to our whole portfolio because the market definitely views Tesco and Sainsbury's and others as much stronger propositions and as a result, tighter yields. I think that's it for questions online. Are there any more in the room? Sure.
With Tesco and Sainsbury's sort of coming back into the investment market, does that hinder you in buying those stores going forward?
I mean, we've always worked really closely with them around pipeline. You know, I think right now then, them being very strongly in the market is actually really helpful from a, from a value point of view. I don't think we're at the, at the point where we're worried about not having enough things to buy. We definitely view it as a, as a, as a really big positive. You know, if things do revert to kind of a more normalized situation then we have a really close relationship with them, and we've always managed to sort of coexist in that, in that investment market. Great. If there are no more questions, thank you very much for your time. Really appreciate it.
Obviously, very happy to take any other questions offline or have a chat afterwards. Thank you.
Thank you.