Supermarket Income REIT — SUPR takes majority interest in indirect portfolio

Supermarket Income REIT (LSE: SUPR)

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Last close As at 02/02/2023

GBP1.05

7.90 (8.18%)

Market capitalisation

GBP1,200m

Research: Real Estate

Supermarket Income REIT — SUPR takes majority interest in indirect portfolio

Supermarket Income REIT (SUPR) has acquired an additional 25.5% beneficial interest in the Sainsbury’s Reversion Portfolio (SRP) from its joint venture (JV) partner. It now has a 51% interest with 49% held by Sainsbury’s. SUPR’s positioning in the winding up of the SRP structure is strengthened, its relationship with Sainsbury’s, operator of the stores, is deepened, and it expects to further enhance the return on its SRP investment. Separately, reflecting widespread expectations that yields will continue to widen across real estate sectors, our forecast net tangible assets (NTA) per share is reduced by c 10%.

Martyn King

Written by

Martyn King

Director, Financials

Supermarket Income REIT_resized

Real Estate

Supermarket Income REIT

SUPR takes majority interest in indirect portfolio

Increased JV investment

Real estate

19 January 2023

Price

101.5p

Market cap

£1,261m

Net debt (£m) at 30 June 2022

297.3

Net LTV at 30 June 2022

32.1%

Shares in issue

1,242.6m

Free float

99.5%

Code

SUPR

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

3.4

(18.0)

Rel (local)

(6.4)

(8.5)

(18.4)

52-week high/low

133p

96p

Business description

Supermarket Income REIT, listed on the Premium Segment of the London Stock Exchange, invests in supermarket property, primarily let to leading UK supermarket operators, on long, inflation-linked leases. The investment objective is to provide an attractive level of income, with the potential for capital growth, with a 7–10% pa total shareholder return target over the medium term.

Next events

H123 results

February 2023

Analyst

Martyn King

+44 (0)20 3077 5700

Supermarket Income REIT is a research client of Edison Investment Research Limited

Supermarket Income REIT (SUPR) has acquired an additional 25.5% beneficial interest in the Sainsbury’s Reversion Portfolio (SRP) from its joint venture (JV) partner. It now has a 51% interest with 49% held by Sainsbury’s. SUPR’s positioning in the winding up of the SRP structure is strengthened, its relationship with Sainsbury’s, operator of the stores, is deepened, and it expects to further enhance the return on its SRP investment. Separately, reflecting widespread expectations that yields will continue to widen across real estate sectors, our forecast net tangible assets (NTA) per share is reduced by c 10%.

Year end

Rental income (£m)

EPRA
earnings (£m)

EPRA EPS*
(p)

NAV**/
share (p)

DPS
(p)

P/NAV
(x)

Yield
(%)

06/22

72.1

57.4

5.9

115

5.94

0.88

5.9

06/23e

97.3

71.7

5.8

102

6.00

0.99

5.9

06/24e

103.1

70.9

5.7

105

6.00

0.97

5.9

06/25e

107.1

74.2

6.0

109

6.00

0.93

5.9

Note: *EPRA EPS is normalised, excluding gains on revaluation and other non-recurring items. **NAV is EPRA NTA throughout this report.

Short-term investment: Strategic & financial benefits

As we have discussed in previous notes, SUPR’s investment in the SRP has been highly successful. From 2020 to date, SUPR estimates an IRR of 26%, adding 8p per share to NTA, and we expect this to increase further, including benefits from this deal. Representing its share of the sale of 21 SRP stores to Sainsbury’s, SUPR will receive a minimum £380m in two tranches (£264m in March 2023 and £116m in July). It will also benefit financially and strategically from its increased/controlling interest in the remaining five SRP stores (four regeared and let to Sainsbury’s and one to be sold) as the structure unwinds. SUPR’s JV partner benefits from accelerated liquidity while funding arranged by SUPR for the £196m investment will be quickly repaid from the March tranche of sale proceeds, eliminating a temporary increase in loan-to-value (%).

A structurally supported sector

SUPR’s investment proposition is based primarily on robust and visible income growth from long, predominantly upward-only, mostly inflation-linked leases with strong tenants. The non-discretionary nature of grocery sales supports operators in passing through inflationary cost pressures and although their margins have tightened, cash flow is strong. Rents are a small share (c 4%) of store turnover and with indexed rent uplifts typically capped at c 4%, rent affordability increases. Rising interest rates continue to force a reassessment of property valuations across the real estate sector, although with transaction volumes low, the extent is difficult to assess. Reflecting on this we have increased our assumed yield widening, reducing FY23e EPRA NTA per share by 11p to 102p, flowing through to FY24 and FY25e.

Valuation: Well-supported income visibility

SUPR’s FY23 DPS target of 6.0p represents an attractive yield of 5.8%, reflected in the shares trading close to EPRA NTA, below the average 5% premium since IPO.

Transaction details

SUPR has acquired the additional 25.5% beneficial interest in the SRP for £196m, previously owned by its JV partner, British Airways Pensions Trustees (BAPTL). SUPR’s beneficial interest in SRP increases to 51%, with Sainsbury’s continuing to own the remaining 49%, although this ownership structure will contractually unwind in stages, in March 2023 and July 2023, as previously indicated. Although this is a short-term investment, SUPR expects it will be accretive to the already strong returns that it expects from its SRP investment. Equally important, it enhances SUPR’s strategic positioning as the SRP transaction with Sainsbury’s reaches its conclusion.

The SRP comprises 26 Sainsbury’s supermarkets. Sainsbury’s exercised its purchase option in respect of 21 of these at an agreed aggregate price of £1,040m and it is the completion of these purchases that will trigger cash returns to SUPR of at least £380m in two tranches, in March 2023 (£264m) and July 2023 (£116m). In addition, Sainsbury’s has now entered into new 15-year leases (with five yearly open market rent reviews and a tenant break option at year 10) on four of the five stores over which it did not exercise its purchase option and it is expected that a fifth will be sold at vacant possession value. The beneficial interest in these five stores is now held between SUPR (51%) and Sainsbury’s (49%), which also operates the stores. Although Sainsbury’s opted not to acquire these stores under the terms set by the SRP, their quality is underlined by Sainsbury’s commitment to them, regearing the leases on sustainable terms.

Ignoring the strategic aspects of this transaction, in very simple financial terms: for a short-term investment of £196m, SUPR has increased its share of the Sainsbury’s sale proceeds (21 stores) from at least £190m to at least £380m. Similarly, it has increased its beneficial interest in the remaining five SRP stores and will benefit from any other efficiencies that may be created by the new ownership structure.

We see potential for SUPR to acquire the regeared remaining SRP stores outright, subject to satisfactory terms. Additional acquisition opportunities with Sainsbury’s are also possible now that SUPR is no longer in the position of being a potential seller of stores to Sainsbury’s. We note that Sainsbury’s continues to undertake sale and leaseback transactions and that in September 2022 it came close to completing a £500m transaction with LXi REIT, aborted as market volatility increased.

Funding

The acquisition has been funded entirely by a new debt facility, which has no recourse to any of SUPR’s assets other than its interest in the SRP. The facility has a margin of 1.5% over SONIA and an arrangement fee of 2.0% and will be repaid in full following receipt of the first payment from Sainsbury’s in March 2023. Including the arrangement fee, we estimate a funding cost of c £6m, which has been built into the transaction terms and will not appear within SUPR’s net interest expenses. SUPR estimates that on its last published property portfolio valuation as at 30 June 2022 (FY22), the pro forma LTV ratio following the acquisition is 39% (from 36% pre-transaction). It expects this to decline quickly to 31% following the repayment of the facility in full in March and to 26% in July following receipt of the second tranche of proceeds from Sainsbury’s.

Revision to property valuation assumptions

With a weaker demand-supply balance, rising bond yields and limited market transactions, there is much uncertainty about future capital values, despite many sectors continuing to benefit from structural support, defensive income streams and increasing rents. We would include supermarket property, especially omnichannel stores, in the latter. Nonetheless, real estate investors are anticipating a continued widening of property yields across all sectors.

Our previous assumption, and we stress assumption given the level of uncertainty, was that the valuation yield on SUPR’s portfolio would increase by c 35bp from the 30 June 2022 (FY22) level of 4.6%. We now assume a 50bp increase during FY23 (an implied c 6% reduction in property values) and for yields to drift higher over the following two years, reaching 5.25%, as capital values fail to fully keep pace with rent growth.

Our FY23e EPRA NTA per share is reduced by c 11p to 102p versus 113p previously; FY24e by 10p to 105p; and FY25 by 9p to 109p.

We have made no other changes to our forecasts, including for the SRP transaction, and will review these with interim results in February 2023.

Exhibit 1: Financial summary

Year ended 30 June (£m)

2021

2022

2023e

2024e

2025e

INCOME STATEMENT

Rent receivable

46.2

69.7

94.5

100.3

104.3

Rent smoothing adjustment

2.0

2.7

2.8

2.8

2.8

Net service charge expense

(0.2)

(0.3)

0.0

0.0

0.0

Total rental income

47.9

72.1

97.3

103.1

107.1

Administrative & other expenses

(9.3)

(13.9)

(16.4)

(16.8)

(17.3)

Operating profit before investment property change in fair value

38.7

58.2

80.9

86.4

89.9

Change in fair value of investment properties

36.3

21.8

(117.6)

32.9

61.2

Share of profit of jv

15.5

43.3

13.0

0.0

0.0

Negative goodwill

0.0

0.0

0.0

0.0

0.0

Operating profit/(loss)

90.5

123.3

(23.7)

119.3

151.1

Net finance expense

(8.5)

(13.0)

(18.1)

(15.5)

(15.7)

Profit/(loss) before tax

82.0

110.3

(41.8)

103.8

135.4

Tax

0.0

0.0

0.0

0.0

0.0

Profit/(loss) for the period

82.0

110.3

(41.8)

103.8

135.4

Adjust for:

Changes in fair value of investment property

(36.3)

(21.8)

117.6

(32.9)

(61.2)

Share of changes in fair value of JV investment property

(5.6)

(31.1)

(4.0)

0.0

0.0

Negative goodwill

(3.3)

0.0

0.0

0.0

0.0

EPRA earnings

36.8

57.4

71.7

70.9

74.2

EPRA cost ratio inc. direct vacancy costs

16.8%

16.5%

17.5%

16.2%

16.1%

Closing number of shares (m)

810.7

1,239.9

1,242.6

1,242.6

1,242.6

Average number of shares in issue (m)

652.8

975.2

1,242.1

1,242.6

1,242.6

IFRS EPS (p)

12.6

11.3

(3.4)

8.4

10.9

EPRA EPS (p)

5.6

5.9

5.8

5.7

6.0

DPS declared (p)

5.86

5.94

6.00

6.00

6.00

Total EPRA earnings (£m)/Total dividends paid (£m)

104%

108%

101%

95%

100%

EPRA NTA total return

12.1%

12.5%

-5.9%

8.2%

10.4%

BALANCE SHEET

Investment property

1,148.4

1,561.6

1,777.9

1,813.6

1,877.7

Associate

130.3

177.1

50.1

0.0

0.0

Other non-current assets

131.3

193.1

109.3

59.2

59.2

Total non-current assets

1,279.7

1,754.7

1,887.2

1,872.8

1,936.8

Trade & other receivables

3.1

1.86

5.0

5.2

5.4

Cash & equivalents

19.6

51.20

7.5

12.0

9.8

Other current assets

0.2

0.28

0.3

0.3

0.3

Total current assets

23.0

53.35

12.8

17.5

15.5

Deferred rental income

(12.1)

(16.4)

(16.4)

(16.4)

(16.4)

Current tax liabilities

0.0

0.0

0.0

0.0

0.0

Trade &other payables

(8.4)

(10.7)

(15.1)

(15.6)

(16.2)

Total current liabilities

(20.4)

(27.0)

(31.4)

(32.0)

(32.6)

Bank borrowings

(409.7)

(348.5)

(549.0)

(509.5)

(510.0)

Interest rate derivatives

(1.2)

0.0

0.0

0.0

0.0

Total non-current liabilities

(410.9)

(348.5)

(549.0)

(509.5)

(510.0)

Net assets

871.3

1,432.5

1,319.5

1,348.8

1,409.7

IFRS NAV per share (p)

107

116

106

109

113

EPRA NTA per share (p)

108

115

102

105

109

CASH FLOW

Net cash from operations

42.8

63.0

79.3

84.0

87.5

Acquisition & investment in investment property

(570.0)

(388.7)

(331.1)

0.0

0.0

Investment in associate

(58.7)

(3.5)

140.0

50.1

0.0

Other investing activity

(0.9)

(10.6)

0.0

0.0

0.0

Net cash from investing activity

(629.5)

(402.8)

(191.1)

50.1

0.0

Share issuance (net of costs)

345.6

496.4

0.0

0.0

0.0

Debt drawn/(repaid)

284.7

(61.1)

200.0

(40.0)

0.0

Interest paid and other financing costs

(9.3)

(12.7)

(60.8)

(15.0)

(15.2)

Dividends paid

(34.9)

(51.1)

(71.1)

(74.6)

(74.6)

Net cash from financing activity

586.0

371.5

68.1

(129.5)

(89.7)

Change in cash

(0.8)

31.6

(43.7)

4.6

(2.3)

Opening cash

20.4

19.6

51.2

7.5

12.0

Closing cash

19.6

51.2

7.5

12.0

9.8

Debt as per balance sheet

(409.7)

(348.5)

(549.0)

(509.5)

(510.0)

Net debt

(390.1)

(297.3)

(541.6)

(497.5)

(500.3)

LTV

34.0%

19.0%

30.5%

27.4%

26.6%

Source: Supermarket Income REIT historical data, Edison Investment Research forecasts


General disclaimer and copyright

This report has been commissioned by Supermarket Income REIT and prepared and issued by Edison, in consideration of a fee payable by Supermarket Income REIT. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Supermarket Income REIT and prepared and issued by Edison, in consideration of a fee payable by Supermarket Income REIT. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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Centaur Media — Strong cash performance and special dividend

Centaur’s year-end trading update indicates revenue of at least £41m and an EBITDA margin of more than 19.5%. Our FY22e EBITDA, PBT and EPS numbers are unchanged, showing strong growth over the prior year, albeit with a slower H222. Notwithstanding the reduced momentum, Centaur should still meet its FY23 MAP23 targets of £45m in revenue and an EBITDA margin of 23%. Given the strong cash performance, with year-end net cash of £16.0m (excluding lease debt), management has announced the payment of a special dividend of 3.0p per share, payable in February. This still leaves the group with plenty of cash to invest and grow.

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