NewRiver REIT plc · LSE:NRR
NewRiver REIT — FY2022 Earnings Presentation
41 slides from NewRiver REIT's earnings presentation, Jun 7, 2022
Slide 1: Full Year Results 2022
Full Year Results 2022 12 months to 31 March 2022 7 June 2022
Slide 2: Overview: Balance sheet strengthened, operations resilient and strategy progressing well
OVERVIEW: BALANCE SHEET STRENGTHENED, OPERATIONS RESILIENT AND STRATEGY PROGRESSING WELL BALANCE SHEET UFFO RESILIENT RETURN TO STRONG ESG SIGNIFICANTLY RECOVERING OPERATING CAPITAL GROWTH PROGRESS STRENGTHENED WELL PERFORMANCE • LTV reduced to 34% • UFFO +146% to • Rent collection 96% • Retail Park
Slide 3: Delivering on our objectives
DELIVERING ON OUR OBJECTIVES FY21 KEY PRIORITIES FY22 KEY OUTPUTS • £224M pub business disposal Divest ourselves of our community pub business in order • LTV significantly improved to 34%, within guidance to reset our LTV and reposition for growth • Surplus capital position • Accelerated progress on
Slide 4: Market backdrop: well-positioned
MARKET BACKDROP: WELL-POSITIONED • Rising cost of living, spend more focused on essentials: UK Annual Inflation vs Weekly Earnings Growth inflation at 30yr high squeezing household disposal income. Despite 10% 9.0% this, retail sales +3.5%1 y-o-y with low unemployment at 3.9%1 and 8% 7.0% buoyant ho
Slide 5: Resilient operating performance
RESILIENT OPERATING PERFORMANCE Strong, diversified occupier base Robust Rent Affordable Strong Leasing Collection Average Rent Pricing % NRR total Retailer rental income 1 2.9% 2 2.7% 96% £11.74 psf +7.4% 3 2.6% vs ERV 4 2.4% (FY21: 92%) (FY21: £11.51) Long term deals 5 2.4% 6 2.1% High Retention H
Slide 6: Valuations: return to capital growth
VALUATIONS: RETURN TO CAPITAL GROWTH • Retail parks – accelerated capital growth in H2 • Core and Regeneration Shopping Centres – return to capital growth in H2 • Significant total return outperformance against MSCI over the past 3 years: • Shopping Centres: past 12 months total return of 3.3%, outp
Slide 7: Our core portfolio metrics: continued focus on resilient retail
OUR CORE PORTFOLIO METRICS: CONTINUED FOCUS ON RESILIENT RETAIL • Improvement on our long term risk profile and continued portfolio focus on resilient retail: Retail Parks, Core Shopping Centres and Regeneration which accounts for 85% of portfolio • Core Retail showing strong operational and return
Slide 8: ESG: Delivering on our commitment
ESG: DELIVERING ON OUR COMMITMENT 23 • Published our Pathway to Net-Zero, validated by SBTi EPRA Sustainability Best Practice • Signatory of Better Building Partnership Climate Commitment Gold Recommendations Awards. Uplift from Bronze • Significant improvements in ESG benchmarks • Short term target
Slide 9: Finance Review
FINANCE REVIEW
Slide 10: Key highlights
KEY HIGHLIGHTS UFFO recovering and fully covered dividend • FY22 UFFO of £28.3 million compares to FY21 UFFO of £11.5 million; Retail UFFO £12.8 million in H2 vs £7.7 million in H1 • Final dividend of 3.3 pence takes total dividend for FY22 to 7.4 pence, equivalent to 80% of UFFO Portfolio returned
Slide 11: UFFO: Improved retail performance
UFFO: IMPROVED RETAIL PERFORMANCE • Underlying Funds From Operations (“UFFO”) £28.3m, Proportionally consolidated compared to £11.5m in FY21 UFFO • Retail net property income increased to £51.8m, despite £m £m £m £148m of disposals during FY21 and FY22, as Covid-19 Revenue 77.7 38.3 77.7 disruption
Slide 12: Retail net property income bridge (£m)
RETAIL NET PROPERTY INCOME BRIDGE (£M)
Slide 13: Dividend policy: sustainable, flexible and fully covered
DIVIDEND POLICY: SUSTAINABLE, FLEXIBLE AND FULLY COVERED UFFO per share (pence) Dividend per share (pence) • Progressive, flexible and fully • 80% of Underlying Funds covered From Operations to be paid out as dividends • Factors in underlying trading conditions and allows appropriate capital and ope
Slide 14: Balance sheet: significantly strengthened position
BALANCE SHEET: SIGNIFICANTLY STRENGTHENED POSITION • Investment property £649m at 31 March 2022 (March 2021: £974m); decrease from March due predominantly to completed disposal activity • Cash holdings and Borrowings reduced following the repayment of £170m of RCF and the cancellation of COMPLETED £
Slide 15: EPRA NTA per share: recovery in H2 (pence)
EPRA NTA PER SHARE: RECOVERY IN H2 (PENCE)
Slide 16: Loan to value within guidance: reduced to 34% from 51% during FY22
LOAN TO VALUE WITHIN GUIDANCE: REDUCED TO 34% FROM 51% DURING FY22
Slide 17: Debt structure & maturity: impact of FY22 actions
DEBT STRUCTURE & MATURITY: IMPACT OF FY22 ACTIONS Actions Impact (1) £335m of drawn debt repaid/ cancelled (1) £335m of drawn debt repaid/ cancelled (2) RCF size reduced and maturity extended • Improved UFFO efficiency • Unlocked £7m annual finance cost saving • Seen the benefit of £3.5m saving in H
Slide 18: Financial policies: fully compliant with significant headroom
FINANCIAL POLICIES: FULLY COMPLIANT WITH SIGNIFICANT HEADROOM Improvement • Conservative financial policies form a key Financial FY21 HY22 FY22 Policies Policy Reported Reported reported vs FY21 and component of financial risk management HY22? strategy • Impact of Covid on portfolio valuation and Gu
Slide 19: Capital allocation: surplus capital provides flexibility
CAPITAL ALLOCATION: SURPLUS CAPITAL PROVIDES FLEXIBILITY INVEST INTO • LTV now 34% vs guidance of <40% EXISTING PORTFOLIO • £14m of investment into existing portfolio in LTV NOW FY23 WITHIN SURPLUS CAPITAL <40% INVEST INTO • £55m disposal target in FY23 POSITION GUIDANCE DIRECT MARKET • Plan to main
Slide 20: Looking ahead: UFFO building blocks (£m)
LOOKING AHEAD: UFFO BUILDING BLOCKS (£M) SURPLUS CAPITAL DEPLOYMENT OVER TIME* 3 COVID IMPACT TO RECOVER OVER TIME 2 SAVINGS UNLOCKED / IDENTIFIED 1 9.2 5.7 7.4-10.9 Pence PS Pence PS Pence PS *£60m surplus capital at 7% for illustrative purposes
Slide 21: Portfolio and Strategy Update
PORTFOLIO AND STRATEGY UPDATE Allan Lockhart: Chief Executive
Slide 22: Progress on our strategy: capital recycling
PROGRESS ON OUR STRATEGY: TO DELIVER AN INCOME-LED TAR OF 10% CAPITAL RECYCLING CAPITAL PARTNERSHIPS REGENERATON ENHANCE RETURNS AND IMPROVE OUR LONG TERM RISK PROFILE • £305m of sales completed; sale of Hawthorn Pub business • On track to exit Work Out Portfolio by end of FY23 • Investing into accr
Slide 23: Progress on our strategy: capital partnerships
PROGRESS ON OUR STRATEGY: TO DELIVER AN INCOME-LED TAR OF 10% CAPITAL RECYCLING CAPITAL PARTNERSHIPS REGENERATON ENHANCE RETURNS IN CAPITAL LIGHT WAY • Crystalising returns and increasing prospect of promote; sale of Poole Retail Park and Wakes Retail Park +30% vs acq price • Acquired The Moor (NRR
Slide 24: Progress on our strategy: regeneration
PROGRESS ON OUR STRATEGY: TO DELIVER AN INCOME-LED TAR OF 10% CAPITAL RECYCLING CAPITAL PARTNERSHIPS REGENERATON CAPITAL GROWTH THROUGH REDEVELOPING SURPLUS RETAIL SPACE • Completed disposal of 2 regeneration projects: • Penge – acquired in 2015 for £6.9m, capex of £2.3m to unlock opportunity of >25
Slide 25: FY23 strategic priorities
FY23 STRATEGIC PRIORITIES Complete Work Out portfolio exit Expand capital partnership and turnaround strategies by activities and crystalise returns end of FY23 factored into promote Redeploy c.£55m of FY23 Secure planning at Grays. disposals in a highly disciplined Complete residential site sale wa
Slide 26: Appendix
Appendix title Slide # Appendix title Slide # Background information Valuation Presentation team 27 Valuation analysis for shopping centres and retail parks 38 Performance track record 28 Contribution from Hawthorn 39 Our proven business model 29 Disclaimer 40 Portfolio segmentation: key characteris
Slide 27: Allan Lockhart and Will Hobman
Allan Lockhart Will Hobman Chief Executive Chief Financial Officer • Co-founded NewRiver in 2009 as Property Director. Appointed • Will is a Chartered Accountant with over 10 years of experience, CEO effective 1 May 2018 having qualified at BDO LLP working in its Audit and Corporate • Started his ca
Slide 28: Performance track record
PERFORMANCE TRACK RECORD FY22 HY22 FY21 HY21 Underlying FFO (‘UFFO’) £28.3m £15.5m £11.5m £9.3m Underlying FFO (‘UFFO’) Retail £20.5m £7.7m £15.6m £8.9m Underlying FFO (‘UFFO’) per share 9.2p 5.1p 3.8p 3.0p Ordinary dividend per share 7.4p 4.1p 3.0p - Total dividend per share 7.4p 4.1p 3.0p - Total
Slide 29: Our proven business model
OUR PROVEN BUSINESS MODEL Flexible balance sheet Our operating platform is underpinned by a conservative, unsecured balance sheet. We are focused on maintaining our conservative covenant headroom position and have access to significant liquidity which provides us with the flexibility to pursue oppor
Slide 30: Portfolio segmentation: key characteristics
PORTFOLIO SEGMENTATION: KEY CHARACTERISTICS Shopping Shopping Shopping Centres Centres Centres Retail Parks - Core - Regen - Work Out Other Valuation £168m £221m £162m £90m £8m Portfolio Weighting 26% 34% 25% 14% 1% Number of Assets 15 14 3 11 5 Average Lot Size (100% Share) £17.3m £19.0m £53.6m £7.
Slide 31: Top 10 assets by value
TOP 10 ASSETS BY VALUE Gross rent Name Floor area (NR Share) Occupancy Key occupiers Broadway Shopping Centre & Broadway Square Retail 531,000 £9.4m 97% Sainsbury’s, M&S, Boots, Wilko Park, Bexleyheath Abbey Centre, Newtownabbey 320,000 £5.5m 98% Primark, Next, Argos, River Island Priory Meadow Shop
Slide 32: Retail lease profile
RETAIL LEASE PROFILE 1. Please note the leases subject to review as per the above analysis have an average WALE of 8.4 years with upward only rent reviews and therefore the differential between passing rent and ERV is low risk
Slide 33: Reconciliation of IFRS loss after taxation to UFFO
RECONCILIATION OF IFRS LOSS AFTER TAXATION TO UFFO FY22 FY21 £m £m Loss after taxation (26.6) (150.5) Adjustments Revaluation of investment properties 12.3 154.7 Revaluation of joint ventures’ investment properties (5.8) (1.8) Changes in fair value of financial instruments and associated close out c
Slide 34: Adjusted Funds from Operations (AFFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO) FY22 FY21 Analysis of capital FY22 FY21 Recoverable £m £m expenditure £m £m Criteria Capitalised from tenants Gross rental income (GRI) 95.8 95.7 Essential 1.1 0.7 Works required to maintain physical environment in state P O FFO before void costs for repairs 29.
Slide 35: Financial policies and additional guidelines
FINANCIAL POLICIES AND ADDITIONAL GUIDELINES Proportionally consolidated Financial Policies 31 March 2022 31 March 2021 Net debt £221.5m £493.3m Principal value of gross debt £314.0m £653.1m Weighted average cost of drawn debt1 3.4% 3.2% Weighted average debt maturity - total2 4.8 years 4.3 yrs Weig
Slide 36: Loan to value
LOAN TO VALUE 31 March 2022 31 March 2021 £m £m Borrowings 295.8 629.7 Cash and cash equivalents (82.8) (150.5) Net debt 213.0 479.2 Equity attributable to equity holders of the parent 414.1 460.4 Net debt to equity ratio (‘Balance sheet gearing’) 51% 104% Share of joint ventures’ and associates’ bo
Slide 37: Number of shares
NUMBER OF SHARES Number of shares (m) 31 March 2022 31 March 2021 Weighted average – basic1 307.2 306.4 Weighted average – diluted2 309.0 307.2 Year end – basic3 307.2 306.5 Year end – diluted4 309.0 307.3
Slide 38: Valuation analysis for shopping centres and retail parks
VALUATION ANALYSIS FOR SHOPPING CENTRES AND RETAIL PARKS: HIGH CASH YIELD, LOW AVERAGE LOT SIZE 30% NewRiver Shopping Centres 20% NewRiver Retail Parks Average lot size: £17.8m Average lot size: £17.3m NEY: 9.6% 18% NEY: 6.6% 25% 16% 20% 14% Equivalent Yield Equivalent Yield 12% 15% 10% 8% 10% MSCI1
Slide 39: Contribution from Hawthorn (£m)
CONTRIBUTION FROM HAWTHORN (£M) Removing the impact of the timing of the insurance settlement, the Hawthorn contribution increased from £3.7m in HY21 to £4.5m in HY22 Hawthorn contributed £7.8 million of operating profit in FY22 prior to its disposal on 20 August 2021, which compares to a £4.0 milli
Slide 40: Disclaimer
DISCLAIMER The information in this presentation may include forward-looking statements, which are based on current expectations and projections about future events. These forward-looking statements reflect the directors' beliefs and expectations and are subject to risks, uncertainties and assumption
Slide 41: NewRiver REIT plc
NewRiver REIT plc 16 New Burlington Place London Wi1S 2HX www.nrr.co.uk