NewRiver REIT plc Full Year Results
18 June 2020
Focus on essential retail provides resilience in testing times
Allan Lockhart, Chief Executive commented: “We are reporting these results against an extraordinary market backdrop, as COVID-19 continues to cause significant disruption for occupiers in our key markets. As the Government starts to ease the lockdown restrictions, we are preparing to return to trading in our retail portfolio in June and planning for a return to trading in our pubs from July. We have undertaken extensive planning and are well-prepared to adjust to the new normal. The safety and wellbeing of our employees, occupiers and other stakeholders remains our top priority, and will continue to guide our response.
Until March, FY20 was a year of continued strategic progress, as we delivered solid operational metrics and a relatively robust financial performance. Recognising the threat of COVID-19 towards the end of the year, we took early and decisive action to protect the financial position of the Company. This included a partial drawdown of our Revolving Credit Facility ('RCF'), the cancellation of non-essential capex, a reduction of operating expenditure, securing eligibility for the joint HM Treasury and Bank of England's Covid Corporate Finance Facility ('CCFF') and the decision not to pay a fourth quarter dividend.
At 31 March 2020 we had £177 million of cash and credit facilities available to the Company which, together with our unencumbered balance sheet, gives us confidence in our ability to remain cash positive and debt covenant compliant even in a scenario of very significant cashflow disruption and valuation decline.
Our portfolio is focused on essential retail and convenience, and has proved resilient through the last three months as over one third of our tenants continued to trade. As a consequence of previous portfolio reshaping, we have limited exposure to department stores, mid-market fashion and casual dining. In the coming year we will accelerate changes to our portfolio to create assets that are best in class and relevant to the changing nature of retail.
Our priorities for the coming year are to:
- fully reopen our assets and work with occupiers to rebuild our revenues
- recycle capital from assets, through disposal or change of use to a more valuable asset class, to improve Loan to Value ('LTV') in-line with Company guidance
- release value from our development pipeline
- continue to build a strong asset management platform together with world-class capital partners
The structural changes in UK retail that were already underway have been accelerated by COVID-19. It is clear that much existing retail space in the UK needs to be repurposed and we have been at the forefront of creating this change through developing mixed-use schemes in town centres. We believe that with our skill set and expertise, our management team, and our capital partnerships, we are well-positioned to respond to both the structural challenges and to the changing dynamics of the communities in which our assets are located. This will, we believe, continue to create sustainable long-term value for our shareholders.”
Financial results for FY20
- Underlying Funds From Operations ('UFFO') of £52.1 million (FY19: £55.1 million); includes the impact of £2.8 million of lost income and provisions relating to COVID-19
- UFFO per share of 17.0 pence (FY19: 18.1 pence)
- Total dividend per share declared of 16.2 pence (FY19: 21.6 pence); 105% covered by UFFO
- IFRS loss after tax of -£121.1 million (FY19: -£36.9 million) mainly due to non-cash reduction in portfolio valuation
- EPRA NAV per share of 201 pence (March 2019: 261 pence), impacted by -12.3% like-for-like valuation decline
- Total Property Return -5.4%, +480 bps vs MSCI-IPD benchmark; Total Accounting Return -14.7% (FY19: -3.3%)
- Proportionally consolidated LTV of 47% at 31 March 2020 (31 March 2019: 37%)
Operational performance for FY20
- Completed acquisitions of £172.8 million (NewRiver share: £102.3 million), reflecting a blended NIY of 9.5%
- Completed disposals of £48.4 million, reflecting a blended NIY of 5.5% and 1.5% discount to March 2019 valuation
- Retail occupancy of 94.8% (March 2019: 95.2%); Pubs occupancy of 97.0% (March 2019: 97.9%)
- Average retail rent of £12.66 per sq ft (March 2019: £12.52 per sq ft)
- 678,100 sq ft of retail lettings and renewals; long-term deals +1.2% ahead of previous passing rent
- Like-for-like footfall outperformed UK benchmark by +100 bps, with -5.0% year-on-year decline, including COVID-19
- Like-for-like EBITDA per pub +2.3% across our 720 community pubs
- Development pipeline stands at 2.5 million sq ft, including 0.9 million sq ft of planning consents
- GRESB Score improvement of +13% and second consecutive Green Star, underlining our commitment to ESG
Significant available liquidity of £177 million
- Wholly unsecured balance sheet provides significant flexibility and capacity
- Cash reserves of £82 million at 31 March 2020; Undrawn revolving credit facilities of £45 million at 31 March 2020
- Eligibility confirmed for CCFF; £50 million facility currently undrawn, but improves available liquidity to £177 million
- No bank refinancing events due until August 2023; £300 million corporate bond is not due for repayment until 2028
- Compliant with all debt covenants
- On 1 April 2020, Fitch Ratings affirmed NewRiver's Long-Term IDR at 'BBB' with a Stable Outlook and senior unsecured rating at 'BBB+'. NewRiver was also assigned a new 'F2' Short-Term IDR
- Suspension of non-essential capex; limited contractual capex across our risk-controlled development pipeline