The business model at NewRiver REIT (NRR) sets it apart from other retail landlords, but that doesn’t stop valuers taking a red pen to its portfolio. So, in the six months to September, its net asset value (NAV) shrank, while headline profits virtually disappeared as the previous £2.2m valuation uplift was replaced with a downward valuation of £24.7m.
All this comes at a time when net rental income grew by nearly six per cent to £42.9m, with occupancy levels steady at 96.2 per cent. A total of 127 retail leases were secured, covering 653,000 square feet (sq ft) on long-term deals at 10.7 per cent above previous passing rents.
This resilience largely reflects the fact that NewRiver remains focused on the convenience end of the retail market, where the non-discretionary spread of shops is less affected by the rise in online shopping. Tenants are also relatively sticky, too, because at £12.48 per sq ft, average rents are roughly half those prevailing in the retail sector. The May acquisition of Hawthorn Leisure for an enterprise value of £107m, representing an initial yield of 13.6 per cent, brings with it 298 pubs and potential synergies of £3m.
Analysts at Peel Hunt are forecasting adjusted NAV at the March 2019 year-end of 281.4p, from 291.8p a year earlier.
| NEWRIVER REIT (NRR) | ||||
| ORD PRICE: | 228.5p | MARKET VALUE: | £693m | |
| TOUCH: | 228-228.5p | 12-MONTH HIGH: | 342p | LOW: 228p |
| DIVIDEND YIELD: | 9.3% | TRADING PROP: | nil | |
| DISCOUNT TO NAV: | 20% | |||
| INVESTMENT PROP: | £1.37bn** | NET DEBT: | 56% | |
| Half-year to 30 Sep | Net asset value (p) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p)* |
| 2017 | 294 | 29.9 | 11.0 | 10.5 |
| 2018 | 284 | 3.3 | 0.9 | 10.8 |
| % change | -3 | -89 | -92 | +3 |
| Ex-div: | 27 Dec | |||
| Payment: | 08 Feb | |||
| *Dividends paid quarterly. XD and Payment refer to 2nd quarter dividend of 5.4p a share **Includes joint ventures | ||||
