NewRiver swings to loss, but loan-to-value improves

The London-listed real estate investment trust said its cash reserves increased to £138m from £111.3m at the end of March.

Interest cover improved to 5.2x, up from 4.3x in March and 3.9x in September last year, while the net debt-to-EBITDA ratio further improved to 4.4x, from 4.9x in March and 5.1x in September 2022.

NewRiver said it had taken steps to strengthen its financial position further by refinancing its £100m undrawn revolving credit facility, extending its maturity to November 2026 at a reduced cost.

The firm now boasted a fully unsecured balance sheet with a fixed interest rate of 3.5% on drawn debt and no maturity on drawn debt until 2028.

Despite some challenges, NewRiver said its underlying financials remained resilient, with underlying funds from operations for the period amounting to £12.3m, slightly ahead of the £12.2m reported in the second half of the prior year but reduced from £13.6m in the first half of 2023 due to disposals completed in the last 12 months and Covid-related credits recognised in the same period.

Underlying funds from operations per share reached 4p, compared to 3.9p per share in the second half of last year and 4.4p per share in the first half of 2023.

To support capital deployment, NewRiver temporarily increased its dividend to 85% payout, with a dividend of 3.4p per share, up from 3.2p in the second half of the prior year and 3.5p per share in the first half.

The company’s portfolio was valued at £553m, delivering a total return of 1.7%, outperforming the MSCI All Retail index’s return of 0.3%.

However, NewRiver reported an IFRS loss after tax of £2.6m, primarily due to a 2% valuation decline, in contrast to a profit of £4.1m in the first half of 2023.

EPRA net tangible assets (NTA) per share decreased 3.3% to 117p, compared to 121p at the end of March, mainly due to a modest decline in portfolio valuation.

Despite the challenges, NewRiver said it achieved an improved half-year total accounting return of -0.7%, compared to -5.7% in the second half of the last year and +1% in the first half of 2023.

Operationally and strategically, NewRiver said it maintained stability, with rent collection remaining at 98%.

Occupancy levels increased to 97.7% - the highest since the company’s founding in 2009, up from 96.7% at the end of March.

The firm also reported 361,800 square feet of leasing transactions, with long-term transactions seeing an 11.0% increase in rent compared to previous rates and a 3.9% increase compared to estimated rental value.

NewRiver said the lease expiry or break retention rate improved to 98% from 92% at the end of March.

It saw a 71% increase in asset management fee income from capital partnerships compared to the first half of 2023, driven by a mandate from M&G Real Estate that began in the fourth quarter of the 2023 financial year.

Furthermore, NewRiver submitted a significant regeneration planning application in Grays and remains on track with its Work Out disposal programme.

Of the four assets identified for disposal by the end of the 2024 financial year, one asset was currently under offer, and one had been exchanged.

“During the first half we have continued to deliver the positive operational momentum which has been building consistently over the last two years,” said chief executive officer Allan Lockhart.

“Our occupational market today is in the best position it has been for five years.

“As a result, we have seen active demand for space which has led to our occupancy increasing to almost 98%, the highest level we have recorded since NewRiver was founded in 2009 and a tenant retention rate at lease expiry or break of 98%.”

Lockhart said the company’s leasing transactions were positive versus estimated rental value and previous passing rent.

“Our operations are supported by the strength of our balance sheet position, with a loan-to-value of 29.5%, £138m of cash available, a newly extended revolving credit facility and no refinancing requirement until 2028.

“For some time now, we have deliberately built up our cash position in anticipation of securing the right opportunities to deliver compelling returns and, encouragingly, growth opportunities are now starting to emerge.

“In the meantime, so that our shareholders receive benefits as we wait to deploy, we have taken the decision to temporarily increase our dividend payout, resulting in a comfortably covered first half dividend of 3.4p per share.”

At 0951 GMT, shares in NewRiver REIT were down 1.94% at 85.8p.

Reporting by Josh White for Sharecast.com.