NewRiver upbeat on first half despite industry-wide struggles

NewRiver REIT reported “robust” cash returns in its half-year results on Wednesday, even as funds from operations decreased to £25.3m from £26.5m year-on-year.

The FTSE 250 company said the decrease was mainly due to a £2.2m one-off promote received in the prior period, offset by net acquisition activity.

Funds from operations per share totalled of 8.3p, down from 10.0p a year earlier.

The firm’s ordinary dividend per share increased by 3% to 10.8p, the board declared, which was 77% covered, as the company said its “disciplined approach” had meant capital was not yet fully deployed, in anticipation of future acquisition opportunities.

NewRiver’s third quarter ordinary dividend rose 3% to 5.4p per share.

Its EPRA net asset value per share fell to 283p from 292p at the end of March, which was apparently impacted by a valuation decline of 1.8%.

Total property return was ahead 2.4%, or 230 basis points compared to the MSCI-IPD benchmark, with the total accounting return up 0.6%, slipping from growth of 6.3% 12 months earlier.

NewRiver said its proportionally consolidated loan-to-value ratio was 35%, rising from 28% at the end of March, with the increase due to acquisitions, and still “well within” the board’s guidance.

IFRS net assets stood at £864.3m, down from £892.4 million at the start of the period, while its net property income improved to £43.2m from £40.1m year-on-year.

The company’s IFRS profit after tax was £2.7m, plunging from £29.3m a year ago, with IFRS basic earnings per share sliding to 0.9p from 11.0p.

On the operational front, retail occupancy was 96.2%, slipping from 96.5% at the beginning of the year, while pub occupancy was down to 98.6% from 99.0%.

A total of 127 retail leasing events occurred across 653,000 square feet, with long-term deals on terms 10.7% ahead of previous rent.

NewRiver highlighted its “affordable” average retail rent of £12.48 per square foot, up from £12.36 at the end of March, with the firm deliberately limiting its exposure to structurally challenged sub-sectors such as department stores, which made up less than 0.1% of total income, and and casual dining, which made up 1.1%.

Like-for-like footfall across shopping centres declined 1.9%, which still outperformed the UK benchmark by 100 basis points, the company’s board said.

Its like-for-like net income across the retail portfolio slipped 0.5%, which the board said reflected the impact of company voluntary arrangements and administrations.

“NewRiver has delivered a robust performance in a challenging market, with resilient cash returns underpinned by solid operational metrics,” said chief executive officer Allan Lockhart.

“Our continued focus on the growing sub-sectors of the market characterised by convenience, value and frequent spend on everyday essentials continues to serve us well.”

During the period, Lockhart said the company remained active across its retail portfolio, signing leases with “growing, best-in class” operators and progressing its risk-controlled development pipeline, most recently reaching practical completion at Canvey Island Retail Park in Essex.

“We continued to diversify our portfolio by investing in high-quality community pubs through the acquisition of Hawthorn Leisure, where integration is progressing well and we remain on track to deliver annualised scale-based synergies of at least £3m.

“We achieved all of this while maintaining the strong balance sheet required to support our growth ambitions.”

Looking ahead, NewRiver’s income profile was well-diversified and it had deliberately avoided sub-sectors such as department stores, mid-market fashion and casual dining, Lockhart said, which the board believed were “most exposed” to the structural changes impacting the retail market.

“The way that people live, work and consume is evolving rapidly and, as an active and specialist owner of community assets with a strong balance sheet, we are well placed to adapt to and benefit from these changes.”