TIDMNRR
RNS Number : 3684V
NewRiver REIT PLC
14 April 2021
NewRiver REIT plc
("NewRiver" or the "Company")
Trading and Strategy Update
NewRiver is today providing a trading and strategy update ahead
of the announcement of our Full Year Results on 3 June 2021.
Introduction
During the pandemic period we have significantly improved our
strong cash and liquidity position, achieving this through our
successful retail disposal programme, tightly controlling capital
expenditure and making good progress on rent collection. As a
result, we ended the financial year with GBP198 million of cash and
undrawn revolving credit facilities, increased from GBP127 million
at 31 March 2020.
Our independent valuers are now concluding their work on valuing
our property portfolio as at 31 March 2021. The indicative outcome
of this exercise is that our valuation decline in the second half
of FY21 will be less than that reported in the first half. Retail
parks have returned to positive capital growth, our pub and
regeneration portfolios have experienced only modest capital
declines and our core shopping centre and work out portfolios have
seen an improvement in H2 compared to H1.
The key factors that have enabled our business to navigate this
challenging period successfully are a diversified portfolio focused
on local convenience, essential retail and community, an unsecured
balance sheet, strict cash management within our retail and pub
portfolios and the dedication of our people. Despite the headwinds
that continue to impact all physical retail, we move into our new
financial year with increasing optimism due to the UK's successful
vaccination programme, the reopening of non-essential retail and
our pubs, and the well reported increase in consumer savings.
Strategy update
We have used the last year to complete a thorough review of all
of our assets and developed a clear view of what resilient retail
looks like in the future. We believe that resilient retail assets
in the future will be those located in catchments with long-term
growth potential and the right balance between the supply of
physical retail space and demand for that space; they will have an
offering that meets the everyday needs of customers while playing a
distinct role within their communities. We will reshape our
portfolio to ensure that over the longer term we only own retail
assets that display these key characteristics.
Taking account of all the factors noted above, we have committed
to the following strategic priorities:
-- Divest ourselves of our community pub business in order to
reset our LTV and provide the firepower to reshape our portfolio.
This includes a potential Initial Public Offer ('IPO') of
Hawthorn
-- Sell our non-core retail assets and recycle the resultant capital into resilient retail
-- Transform our regeneration assets to create long-term value
by jointly working with sector specialists and appropriate capital
partners
By 2025 our clear strategic aim is that assets in our portfolio
will display only the characteristics of resilient retail and we
believe that the collective measures outlined above will transform
NewRiver into a more agile business committed to delivering
attractive returns to shareholders.
Following our Full Year results on 3 June 2021 we plan to host a
Capital Markets Day in September 2021, at which we will communicate
further detail on our new retail strategy.
Retail portfolio operational performance
We closed the year with a blended retail cash rent collection
rate of 85% across all four quarters of the financial year, with
collections remaining ahead of the wider market in the final
quarter, despite renewed lockdown restrictions. Including rent
either deferred or subject to regear, this blended rate rises to
93%. Rent collection in respect of the first quarter of FY22, due
on 25 March 2021, is currently tracking ahead of collection at the
same point last year.
Our retail occupancy at 31 March 2021 remained high at 95.8%
(March 2020: 94.8%) as a result of our sustained leasing momentum.
In the fourth quarter we completed 360,500 sq ft of new lettings
and renewals, representing GBP2.5 million of rent, exceeding the
188,100 sq ft completed in the fourth quarter of FY20. Long-term
deals were signed at a 5.7% premium to ERV and a 3.7% premium to
previous passing rent. These included two significant deals
totalling over 32,000 sq ft with Instant Offices, a flexible office
provider, in our shopping centres in Cardiff and Bexleyheath.
Our retail portfolio remains well-diversified, with our top five
tenants, Poundland, Superdrug, B&M, Wilko and Boots
representing 9% of our gross income at 31 March 2021. Our average
rent remains affordable at GBP11.51 per sq ft (March 2020: GBP12.66
per sq ft).
Reflecting our focus on essential retail, approximately 54% of
our occupiers by gross income remained open and trading during the
fourth quarter, despite the current lockdown restrictions across
the UK. This includes eight of our top 10 occupiers by gross
income. This figure has risen rapidly this week to 82% (89% in
England), following the opening of non-essential stores in England
from 12 April.
Hawthorn
After several months of temporary closure, Hawthorn opened over
60% of its pubs in England on 12 April 2021, following the easing
of restrictions on outside trading, and plans to reopen the
remainder of its portfolio when inside trading is permitted from 17
May. With a focus on well-located community and suburban pubs, our
portfolio is well placed to benefit from consumers working from
home and using their local services and facilities, and we expect
this to lead to a strong bounce back, as we saw in the summer of
2020 when on reopening Hawthorn outperformed the UK pub sector.
During the period of temporary closure, the focus in our
Hawthorn community pub business has been on protecting and
supporting our pub partners and we are delighted that the hard work
of the Hawthorn team was recently recognised in the results of KAM
Media's 'Licensee Index', the leading operator sentiment tracker
for the UK licensed and tenanted pub sector. Hawthorn's overall
rating in this index -- 8.5 out of 10 -- was the highest of all
major pub companies, and in the area of Covid-related support
specifically, Hawthorn scored 9.2 out of 10, again the highest
amongst the major pub companies. These results demonstrate the
significant goodwill that has been generated between Hawthorn and
its pub partners over the past year, which will be a key driver of
our bounce back in the coming months.
NewRiver's Board is focused on how best to maximise value for
our shareholders and to achieve Hawthorn's mission of being the
Number 1 community pub company in the UK. In keeping with our
strategy, the Board has agreed that Mark Davies will lead a
potential IPO of Hawthorn. Mark has been instrumental in driving
and growing NewRiver's community pub company since 2013 and has
been CEO of Hawthorn since 2019. Mark also sits on the Board of the
British Beer and Pub Association and has been CFO of NewRiver for
12 years since IPO in 2009.
Subject to the transaction completing, the Board intends that
Will Hobman, who has been NewRiver's Finance Director for 18 months
and with the Company for five years, will be appointed CFO of
NewRiver.
Capital Transactions
Since 1 April 2020, we have completed GBP81 million of disposals
at a relatively tight discount to the last reported book value
despite the extremely challenging market conditions over the last
12 months. A further GBP12 million of disposals have exchanged and
we are currently under offer on GBP80 million of disposals.
Disposals completed, exchanged and under offer total GBP173
million.
We also completed the acquisition of The Moor in Sheffield in
our joint venture with BRAVO in April 2021. The acquisition price
of GBP41.0 million ( NewRiver share: GBP4.1 million) reflects a
significant discount to the breakup value of the individual assets
acquired, as provided by an independent valuer. It also represents
a net initial yield of 9.1%, which is expected to rise imminently
following the completion of a number of leasing deals to 9.8%, with
an equivalent yield of 11.3% and a reversionary yield of 14.6%.
Centred around an open-air pedestrianised thoroughfare, the
estate provides 680,000 sq ft of retail and leisure space anchored
by Next, Sainsbury's, and an occupier-owned Primark, alongside a
670-space car park, a nine-screen cinema and The Moor Market, a
covered marketplace owned by Sheffield City Council. NewRiver has
identified the potential to develop up to 1,100 build-to-rent
residential units and up to 300 purpose-built student accommodation
units, offering significant capital growth opportunities.
Cash and liquidity
At 31 March 2021, we had GBP153 million of cash reserves, which
is GBP71 million higher than the position as at 31 March 2020,
driven by completed disposals and rent collection. Including our
GBP45 million of undrawn revolving credit facilities, the Company
has total available liquidity of GBP198 million.
Outlook
The reopening of non-essential retail on 12 April coupled with
the significant available consumer spend will be positive for
retailers with a physical store channel. As a result, the good
leasing progress that we delivered during the pandemic period is
expected to continue into the next quarter.
Over 60% of our pub estate in England is open and trading albeit
on a restricted basis. By the end of May 2021 we expect our entire
pub estate to be fully operational and anticipate a strong recovery
in revenue as we saw in the summer of 2020.
In the capital markets, retail parks have recovered quickly
driven by increased investor demand, and we expect that to continue
through the rest of this year. Investor demand for regeneration
projects has also improved over the last six months, especially for
assets located in areas with attractive underlying residential
values. Encouragingly, we are also starting to see early signs of
an improvement in shopping centre liquidity.
Overall, our assessment is that the consumer economy will
perform better than expected but that the retail sector will
continue to be influenced by market trends which existed pre-COVID.
That said, we are confident that our business will emerge from the
pandemic in a stronger position to tackle challenges and to
capitalise on opportunities.
For further information
+44 (0)20 3328
NewRiver REIT plc 5800
Allan Lockhart (Chief Executive)
Mark Davies (Chief Financial Officer)
Emily Meara (Head of Investor
Relations)
+44 (0)20 7251
Finsbury 3801
Gordon Simpson
James Thompson
Kinmont (Financial Adviser to NewRiver) +44 (0)20 7087
Mat Thackery 9100
Jefferies (Adviser on the potential Hawthorn
IPO)
Ed Matthews
Philip Noblet
Rishi Bhuchar +44 (0)20 7029
David Genis 8000
Liberum (Adviser on the potential Hawthorn
IPO)
Richard Crawley
Jamie Richards
Andrew Godber +44 (0)20 3100
Ed Thomas 2000
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as it forms part of
the law of England and Wales by virtue of the European Union
(Withdrawal) Act 2018. This announcement has been authorised for
release by the Board of Directors.
About NewRiver
NewRiver REIT plc ('NewRiver') is a leading Real Estate
Investment Trust specialising in buying, managing and developing
essential retail and leisure assets throughout the UK.
Our GBP1.1 billion portfolio, valued as at 30 September 2020,
covers 9 million sq ft and comprises 33 community shopping centres,
19 conveniently located retail parks and 673 community pubs. We
hand-picked our assets to deliberately focus on occupiers providing
essential goods and services, and avoid structurally challenged
sub-sectors such as department stores, mid-market fashion and
casual dining. This focus, combined with our affordable rents and
desirable locations, delivers sustainable and growing returns for
our shareholders, while our active approach to asset management and
inbuilt 2.6 million sq ft development pipeline provide further
opportunities to extract value from our portfolio.
NewRiver has a Premium Listing on the Main Market of the London
Stock Exchange (ticker: NRR). Visit www.nrr.co.uk for further
information.
About Hawthorn
NewRiver has built a significant pub business since 2013,
principally through the acquisition of 202 pubs from Marston's in
December 2013, 158 pubs from Punch in September 2015 and the
acquisition of Hawthorn in May 2018, which comprised 298 pubs and
brought a highly scalable pub operating platform into the enlarged
business.
These assets now operate from a best-in-class operating platform
and Hawthorn was shortlisted for Best Community Pub Operator at the
2021 Publican Awards. Based in Marston Green, Birmingham, Hawthorn
has built a geographically diverse portfolio of 673 community pubs,
96% of which are freeholds and 80% of which are operated on a
leased & tenanted basis.
Significant investment has been made into the Hawthorn estate,
with c. GBP20 million of capital expenditure across the pub estate
in the three years to 31 March 2020. Hawthorn has a track record of
producing significant returns from capital expenditure with a
return on investment of 28% for growth projects with two years of
trading post investment.
The Hawthorn portfolio was valued at GBP262 million as at 30
September 2020. The EBITDA of Hawthorn during the year ended 31
March 2020 was GBP17.6 million (adjusted for the full year
inclusion of Bravo Inns). However, this was impacted by the
COVID-19 pandemic from March 2020 and, adjusting for this impact,
the estimated pro-forma EBITDA for the year ended 31 March 2020
would have been GBP19.4 million.
LEI Number: 2138004GX1VAUMH66L31
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