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NewRiver REIT PLC

NewRiver REIT plc Delivered a robust performance in a challenging market

NewRiver REIT plc (LON:NRR) today announced half year results

Allan Lockhart, Chief Executive commented: “NewRiver has delivered a robust performance in a challenging market, with resilient cash returns underpinned by solid operational metrics. 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 we remained active across our retail portfolio, signing leases with growing, best-in class operators and progressing our 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 £3 million. We achieved all of this while maintaining the strong balance sheet required to support our growth ambitions.

Looking ahead, our income profile is well-diversified and we have deliberately avoided sub-sectors such as department stores, mid-market fashion and casual dining, which we believe are 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.”

Proven business model delivering robust cash returns, underpinned by a strong balance sheet

· Funds From Operations (‘FFO’) of £25.3 million (HY18: £26.5 million); decrease mainly due to £2.2 million one-off promote received in the prior period, offset by net acquisition activity; FFO of 8.3 pence (HY18: 10.0 pence)

· Ordinary dividend per share increased by 3% to 10.8 pence (HY18: 10.5 pence); 77% covered as our disciplined approach has meant capital is not yet fully deployed in anticipation of future acquisition opportunities

· Q3 FY19 ordinary dividend increased by 3% to 5.4 pence per share (Q3 FY18: 5.25 pence)

· EPRA NAV per share of 283 pence (March 2018: 292 pence), impacted by valuation decline of 1.8%

· Total Property Return +2.4%, +230 bps vs MSCI-IPD benchmark; Total Accounting Return of +0.6% (HY18: +6.3%)

· Proportionally consolidated LTV of 35% (March 2018: 28%); increase due to acquisitions; well within guidance

· IFRS net assets £864.3 million (March 2018: £892.4 million); Net property income £43.2 million (HY18: £40.1 million); IFRS profit after tax £2.7 million (HY18: £29.3 million); IFRS basic EPS 0.9 pence (HY18: 11.0 pence)

Strength of operational metrics demonstrate resilience of convenience & community focused portfolio

· Retail occupancy of 96.2% (March 2018: 96.5%); Pub occupancy of 98.6% (March 2018: 99.0%)

· 127 retail leasing events across 653,000 sq ft; long term deals on terms 10.7% ahead of previous rent

· Affordable average retail rent of £12.48 psf (March 2018: £12.36); deliberately limited exposure to structurally challenged sub-sectors such as department stores (<0.1% of total income) and casual dining (1.1%)

· Like-for-like footfall across shopping centres declined 1.9%; outperforming the UK benchmark by 100 bps

· Like-for-like net income across retail portfolio -0.5% reflecting impact of CVAs and administrations

Remaining disciplined and active in our key investment markets

· Hawthorn Leisure acquired in May 2018 for an enterprise value of £106.8 million, representing a NIY of 13.6%; portfolio of 298 high quality community pubs and an established pub management platform; integration of business progressing well and expected to complete in Q4 FY19; already successfully unlocked £1.7 million of £3 million of expected annualised operating cost synergies and expect to see the benefit of these from early 2019

· Acquired Grays Shopping Centre in June 2018 for £20.2 million and a NIY of 9.4%, and Hollywood Retail & Leisure Park in Barrow-in-Furness in July 2018 for £15.3 million and a NIY of 8.7%

· Completed £14.6 million of disposals 1% ahead of book value, including sales of Whitwick Retail Park in Coalville for £9.9 million, representing a NIY of 6.9% following completion of a programme of active asset management initiatives; further £20.5 million of disposals completed post period end and £23.3 million under offer

Good progress with our strategic opportunities in a changing environment

· Asset Management Platform: signed first agreement with Canterbury City Council at Whitefriars Shopping Centre

· Residential development: completed strategic review of entire portfolio; identified potential to deliver up to 1,300 residential units adjacent to or above our retail assets over the next 5-10 years, in addition to existing pipeline of 1,100 units

Growing income streams and generating value through 1.8 million sq ft risk-controlled development pipeline

· Reached practical completion on 62,000 sq ft Canvey Island Retail Park development; M&S Foodhall and B&M expect to open in January 2019; fully-let annualised rent roll of £1 million and projected yield on cost of 9%

· Convenience store (‘c-store’) development programme for The Co-operative saw completion of two c-stores during the period; on-site with a further four, which on completion will bring total number delivered to 25

Financial Statistics

Performance

Note

HY19

HY18

Change

Funds From Operations (‘FFO’)

(1)

£25.3m

£26.5m

-5%

FFO per share (Pence Per Share)

(1)

8.3

10.0

-17%

Ordinary dividend (Pence Per Share)

10.8

10.5

+3%

Dividend cover

77%

95%

Admin cost ratio

13%

11%

Interest cover

(2)

3.8x

4.6x

Net Property Income

£43.2m

£40.1m

IFRS Profit after taxation

£2.7m

£29.3m

IFRS Basic EPS (Pence Per Share)

0.9

11.0

EPRA EPS (Pence Per Share)

8.0

9.3

Total Accounting Return (paid basis)                                                     

(3)

+0.6%

+6.3%

 

Balance Sheet

Note

Sep 2018

March 2018

Change

IFRS Net Assets

£864.3m

£892.4m

EPRA NAV per share (Pence Per Share)

283

292

-3%

Shares in issue

303.4m

302.9m

Balance Sheet (proportionally consolidated)

Note

Sep 2018

March 2018

Change

Principal value of gross debt

£525.0m

£469.0m

Cash

£30.8m

£116.2m

Cost of debt

(4)

3.2%

3.1%

Average debt maturity

(5)

7.4 years

7.9 years

Loan to value

35%

28%

 

Notes:

(1) Funds From Operations (‘FFO’) is a Company measure of cash profits which includes realised recurring cash profits plus realised profits (or losses) on the sale of properties and excludes other one off or non-cash adjustments as set out in Note 7 and the Chief Financial Officer’s review. FFO is used by the Company as the basis for dividend payments and cover

(2) Interest cover is tested at property level and is the basis for banking covenants. It is calculated by comparing actual net rental income received versus cash interest payable.

(3) Total Accounting Return (paid basis) equals EPRA NAV per share growth plus dividends paid in the period

(4) Cost of debt assuming £215 million revolving credit facility is fully drawn

(5) Average debt maturity assumes one-year extension options are exercised and bank approved