NewRiver REIT’s retail assets returned to capital value growth, with new strategy beginning to pay off.
Last year the company set out plans to focus its portfolio entirely on “resilient retail” – which would see its portfolio made up of predominantly retail parks.
Its retail portfolio was valued at £649m at 31 March 2022, with values rising 2.6% in the second half of the year (following a prolonged period of valuation falls). The valuation gains helped the company move to a profit after tax of £7.0m (2021: loss of £122.1m).
The group’s EPRA net tangible assets (NTA) was down 11% to 134p, due to the sale of its pubs business for £224m as part of the new strategy, but did increase from the 131p at September 2021 due to the capital value growth.
Underlying funds from operations increased to £28.3m or 9.2p per share, from £11.5m or 3.8p last year. That allowed the group to pay a dividend for the year of 7.4p (from 3p the previous year).
As well as the sale of the pub business, the group also sold £77.1m of non-core retail assets, allowing it to get control of its loan to value (LTV), reducing it from 50.6% to 34.1%.
Its capital structure has been materially strengthened, with group debt reduced to £335m and no maturities until 2028. It has cash and available liquidity of £213.2m.
Operational highlights
The group made just over 1m sq ft of lettings and renewals in the year at an average of 7.4% above estimated rental value (ERV), while occupancy was stable at 95.6%.
Allan Lockhart, chief executive, said: “The decisive actions that we took last year have delivered a significant improvement in our financial and operating metrics, with LTV down from 51% to 34%, Underlying Funds From Operations up by 146% to £28.3 million, portfolio valuation returning to capital growth, high occupancy maintained, leasing volumes and pricing improved and finally, total dividend more than doubled to 7.4 pence per share, fully covered by UFFO. All of this was achieved despite the disruption from COVID-19.
“There can be no doubt that today we are in a far stronger financial and operational position than when we outlined our strategy to create the most resilient retail portfolio in the UK a year ago. As such we are optimistic about our future prospects and our strategic aim to deliver consistent 10% total accounting returns, even though it is clear that UK economic growth is slowing due to high inflation and monetary and fiscal tightening. Uncertainty does create opportunities and we have put ourselves into a strong position where we have genuine optionality.”
NRR : NewRiver REIT returns to capital value growth