Newriver Reit Plc · LSE:NRR
Newriver Reit — H1 FY23 Earnings Presentation
46 slides from Newriver Reit's earnings presentation, Nov 24, 2022
Slide 1: Half Year Results 2023
Half Year Results 2023 6 months to 30 September 2022 24 November 2022
Slide 2: Operational Momentum & Financial Strength
OPERATIONAL MOMENTUM & FINANCIAL STRENGTH BALANCE SHEET RESILIENT ESG RETAIL UFFO VALUATION STRENGTH OPERATING INCREASED STABILITY PROGRESS MAINTAINED PERFORMANCE • Retail UFFO +77% • Low LTV of 33.8% • Rent collection at • Portfolio valuation • GRESB: Ranked 1st to £13.6m 97% -1.3% in Europe for •
Slide 3: Market Backdrop Challenging but NewRiver Well Positioned
MARKET BACKDROP CHALLENGING BUT NEWRIVER WELL POSITIONED Online sales as % of total retail • Limited disruption in occupier market: Peak Online % sales % change YoY 50.0 45.7 • Company failures low; key restructuring already taken place 40.0 -25% from peak • % Sales online Vacancy continuing to decr
Slide 4: Market Backdrop: Business Rates Benefit
MARKET BACKDROP: BUSINESS RATES BENEFIT Overall Market % Change in Rateable Values 2017 to 2023 (England & Wales) • Key outputs from Autumn Statement and 2023 revaluation: NewRiver -19.3 • UBR frozen for a second year running Retail -10.0 • Downwards phasing abolished All properties 7.1 Offices 10.2
Slide 5: Market Backdrop: Retail Values More Insulated
MARKET BACKDROP: RETAIL VALUES MORE INSULATED • Investment deal volumes consistent with 2021 in Shopping Centre and Retail Park market • Overall market adjusting to rising bond yields; low yielding sectors experiencing greatest impact on capital values • NewRiver Equivalent Yield +280bps higher than
Slide 6: Another Resilient Operating Performance
ANOTHER RESILIENT OPERATING PERFORMANCE Robust Rent Affordable Average Strong Leasing Portfolio focused on essential goods & services Collection Rent (psf) Pricing vs ERV % NRR total Retailer rental income 1 2.9% 92% 97% 97% £11.5 £11.7 £11.6 +7.4% 2 2.6% 3 2.6% +3.0% +0.6% 4 2.4% 5 2.2% FY21 FY22 H
Slide 7: Valuations: Stability Amidst Market Volatility
VALUATIONS: STABILITY AMIDST MARKET VOLATILITY Surplus/ LFL EY LFL ERV Surplus/ Deficit % Portfolio Valuation EY As at 30 September 2022 Deficit Movement Movement H1 FY22 H2 FY22 H1 FY23 Weighting (£m) % H1 % % % Shopping Centres – Core 34% 222 0.2 9.3 -0.09 -0.4 -0.4% 3.7% 0.2% Retail Parks 27% 170
Slide 8: ESG: Delivering on Our Commitment
ESG: DELIVERING ON OUR COMMITMENT 23 Ranked 1st in Europe for Management module; • GRESB: 70/100 (standing investments); 90/100 100% in Social and Governance components; (Development) Ranked 1st in European Hotel Developers and awarded Global Sector Leader Status • Climate Resilience progress: award
Slide 9: Finance Review
FINANCE REVIEW Will Hobman: Chief Financial Officer
Slide 10: Key Highlights
KEY HIGHLIGHTS Continued recovery in Underlying Funds From Operations and dividend • UFFO of £13.6 million compared to £12.8 million in the second half and retail UFFO of £7.7 million in the first half of the prior year • Total H1 dividend of 3.5 pence compared to 3.3 pence final FY22 dividend • Div
Slide 11: Retail UFFO Recovering
RETAIL UFFO RECOVERING Proportionally consolidated £m £m Revenue 37.7 38.3 Property operating expenses (12.0) (13.1) Net property income 25.7 25.2 Administrative expenses (5.5) (6.0) Other income 1.4 - Net finance costs (7.9) (11.4) Taxation (0.1) (0.1) Retail UFFO 13.6 7.7 Contribution from Hawthor
Slide 12: Retail Net Property Income Bridge (£m)
RETAIL NET PROPERTY INCOME BRIDGE (£M) HY22 Net disposals HY22 Like-for-like Rent and service charge Car park and HY23 NPI NPI provisions commercialisation NPI Rebased income
Slide 13: NPI Pre-Pandemic vs Now: HY20 vs HY23 (£m)
NPI PRE-PANDEMIC VS NOW: HY20 VS HY23 (£M) HY20 Net disposals HY20 HY21 HY21 HY22-HY23 AM Fees HY23 NPI NPI LFL Decline Covid NPI NPI NPI Rebased Impact Recovery
Slide 14: UFFO Status (pence ps)
UFFO STATUS (PENCE PS) RECOVERING REDUCING FIXED REBUILDING Net income Admin expenses Net finance costs UFFO PS DPS
Slide 15: Dividend Policy: Sustainable, Flexible and Fully Covered
DIVIDEND POLICY: SUSTAINABLE, FLEXIBLE AND FULLY COVERED POLICY AIM QUANTUM RETAIL ONLY • 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 operational decisions
Slide 16: Key Balance Sheet & Debt Metrics
KEY BALANCE SHEET & DEBT METRICS EPRA NTA per share Loan to Value Interest Cover Ratio 132p 33.8% 3.9x March 22 - 134p March 22 - 34.1% March 22 - 3.5x September 21 - 131p September 21 - 39.4% September 21 - 2.7x Net debt: EBITDA Cash & liquidity Drawn debt cost fixed at 3.5% 5.1x £220m No maturity
Slide 17: EPRA NTA per Share: Stability in H1 (pence)
EPRA NTA PER SHARE: STABILITY IN H1 (PENCE) Sep-21 Retail UFFO Dividends H2 Valuation Other Mar-22 Retail UFFO Dividends H1 Valuation Other Sep-22
Slide 18: Financial Policies: Material Headroom
FINANCIAL POLICIES: MATERIAL HEADROOM Financial HY22 FY22 HY23 Policy Policies Reported Reported Reported Guidance <40% LTV 39.4% 34.1% 33.8% Policy <50% Balance sheet <100% 65.0% 51.5% 49.8% gearing Net debt: <10x 6.9x 4.6x 5.1x EBITDA Interest >2.0x 2.7x 3.5x 3.9x cover ICR Pub Debt Retail NRI ICR
Slide 19: Capital Allocation: Flexibility Maintained
CAPITAL ALLOCATION: FLEXIBILITY MAINTAINED • LTV at 34% vs Guidance of <40% INVEST INTO EXISTING PORTFOLIO • Near-term guidance remains the same as at FY22 - plan to maintain some headroom to LTV guidance to keep maximum optionality WITHIN CAPITAL <40% ALLOCATION INVEST INTO • Allocation position wi
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 IDENTIFIED 1 HY23 UFFO Covid disruption HY23 UFFO HY23 UFFO Finance and admin Covid impact Surplus capital insurance Ongoing Annualised cost savings deployment 4.4 7.9 8.2-11.
Slide 21: Portfolio Review & Outlook
PORTFOLIO REVIEW & OUTLOOK Allan Lockhart: Chief Executive
Slide 22: Continuing Resilience in Core Shopping Centres
CONTINUING RESILIENCE IN CORE SHOPPING CENTRES CORE SHOPPING CENTRES RETAIL PARKS REGEN WORKOUT 34% Portfolio Weighting Occupancy Retention Rate1 WALE (new leasing activity) Key Retailers 96.6% 96.5% 97.6% 98% 7.8 yrs 89% 7.4 yrs 88% 6.8 yrs FY21 FY22 1H23 FY21 FY22 1H23 FY21 FY22 1H23 Rent Free (mo
Slide 23: Continuing Resilience in Retail Parks
CONTINUING RESILIENCE IN RETAIL PARKS CORE SHOPPING CENTRES RETAIL PARKS REGEN WORKOUT 27% Portfolio Weighting Occupancy Retention Rate1 WALE (new leasing activity) Key Retailers 97.6% 97.1% 97.0% 98% 100% 92% 13.1 yrs 8.9 yrs 9.1 yrs FY21 FY22 1H23 FY21 FY22 1H23 FY21 FY22 1H23 Rent Free (months) L
Slide 24: Regen on Track to Deliver Capital Growth
REGEN ON TRACK TO DELIVER CAPITAL GROWTH CORE SHOPPING CENTRES RETAIL PARKS REGEN WORKOUT 24% Portfolio Weighting • Burgess Hill: Continued momentum with Agreement for Lease progressing with leading food operator as anchor as part of mixed use project with 172 consented residential units • Grays: Ad
Slide 25: On Track to Exit Work Out: 8% by End of FY23
ON TRACK TO EXIT WORK OUT: 8% BY END OF FY23 CORE SHOPPING CENTRES RETAIL PARKS REGEN WORK OUT 14% Portfolio Weighting Timeline to Exit Workout Portfolio 16% 14% Planned Disposals Turnaround Strategies 14% £20.4m of disposals 6 x assets 5 x assets 12% £15.9m turnaround 11% strategies complete £41.5m
Slide 26: Growth in Our Capital Partnerships
GROWTH IN OUR CAPITAL PARTNERSHIPS • New 3 year Operational Management agreement • Leading real estate investor, 16 retail parks & 1 shopping centre • Momentum across existing mandates • The Moor, Sheffield added to Joint Venture with BRAVO: c.250 residential units • Expansion and extension of the C
Slide 27: Scenario Testing Analysis
SCENARIO TESTING ANALYSIS Affordable Rent Analysis • Objective: Assessment of rental cashflow stability through rental affordability factoring in increased pressure on retailers’ margins • Approach: P&L created on each unit with turnover/cost assumptions e.g. costs of goods, staffing, utilities, bus
Slide 28: Resilient Retailer Affordability
RESILIENT RETAILER AFFORDABILITY • Current rents affordable with headroom; portfolio trading at an affordable level with +200bps headroom • 2023 affordability gap as retail costs peak; reducing the AOCR below the portfolio OCR at this point in time • However, limited rent exposure; only £0.6m afford
Slide 29: Low Risk Income Profile
LOW RISK INCOME PROFILE NewRiver Portfolio Projected Tenant Probability of Failure over 1 to 10 years • Assessment of the risk associated with the future rental cashflows Equivalent Yield 3.5 NewRiver Portfolio 3.2 INCANS Projected Cumulative Probability of Failure % 8.7% • Income Analytics has deve
Slide 30: Summary
SUMMARY • Strong financial position • Operational momentum underpinned by resilient portfolio • Stable valuations and sector leading yield spread • Battle-hardened, market-leading platform and team • Expanding capital-light asset management opportunities • Optimally positioned for macro-economic hea
Slide 31: Appendix
Appendix title Slide # Appendix title Slide # Background information Valuation Presentation team 32 Valuation analysis for shopping centres and retail parks 44 Performance track record 33 Disclaimer 45 Our proven business model 34 Portfolio segmentation: key characteristics 35 Top 10 assets by value
Slide 32: Presentation Team
PRESENTATION TEAM 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 12 years of post qualified CEO effective 1 May 2018. experience, having qualified at BDO LLP working in its Au
Slide 33: Performance Track Record
PERFORMANCE TRACK RECORD HY23 FY22 HY22 FY21 Retail Underlying FFO (‘UFFO’) £13.6m £20.5m £7.7m £15.5m Retail UFFO per share 4.4p 6.7p 2.5p 5.1p Underlying FFO (‘UFFO’) £13.6m £28.3m £15.5m £11.5m Underlying FFO (‘UFFO’) per share 4.4p 9.2p 5.1p 3.8p Ordinary dividend per share 3.5p 7.4p 4.1p 3.0p O
Slide 34: 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 opport
Slide 35: Portfolio Segmentation: Key Characteristics
PORTFOLIO SEGMENTATION: KEY CHARACTERISTICS Retail Parks Shopping Shopping Shopping Other Centres Centres Centres - Core - Regen - Work Out Valuation £170m £222m £156m £88m £8m Portfolio Weighting 27% 34% 24% 14% 1% Number of Assets 15 14 3 11 5 Average Lot Size (100% Share) £17.6m £19.2m £51.5m £7.
Slide 36: 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 Park, 537,000 £9.5m 98% Sainsbury’s, M&S, Boots, Wilko Bexleyheath Abbey Centre, Newtownabbey 320,000 £5.6m 98% Primark, Next, Argos, River Island Priory Meadow Shop
Slide 37: Retail Lease Profile
RETAIL LEASE PROFILE Passing rent of ERV of leases leases expiring expiring £m £m FY23 6.1 7.1 FY24 6.8 7.7 FY25-FY26 13.2 14.1 Total 26.1 28.9 Passing rent ERV of leases WALE of leases subject to subject to subject to review review review £m £m Years FY23 2.4 2.0 5.8 FY24 4.3 3.9 9.1 FY25-FY26 3.8
Slide 38: Reconciliation of IFRS Profit/(Loss) After Taxation to UFFO
RECONCILIATION OF IFRS PROFIT / (LOSS) AFTER TAXATION TO UFFO HY23 HY23 HY23 HY22 HY22 HY22 Retail Hawthorn Total Retail Hawthorn Total £m £m £m £m £m £m Profit / (loss) after taxation 4.1 - 4.1 (16.6) (33.3) (49.9) Adjustments Revaluation of investment properties 10.3 - 10.3 24.6 - 24.6 Revaluation
Slide 39: Adjusted Funds From Operations (AFFO)
ADJUSTED FUNDS FROM OPERATIONS (AFFO) HY23 HY22 Analysis of capital HY23 HY22 Recoverable £m £m expenditure £m £m Criteria Capitalised from tenants Gross rental income (GRI) 30.1 30.2 Essential 0.6 0.5 Works required to maintain physical environment in state P O FFO before void costs for repairs 14.
Slide 40: Balance Sheet: Strength Maintained
BALANCE SHEET: STRENGTH MAINTAINED • Investment property broadly stable at £643m at 30 September 2022 (versus £649m at March 2022); relatively flat due to modest -1.3% valuation decline and no disposal activity • Balance sheet remains fully unsecured and closest maturity on drawn debt in March 2028
Slide 41: Financial Policies and Additional Guidelines
FINANCIAL POLICIES AND ADDITIONAL GUIDELINES Proportionally consolidated Financial Policies 30 September 2022 31 March 2022 Net debt £217.1m £221.5m Principal value of gross debt £316.0m £314.0m Weighted average cost of debt – drawn only1 3.5% 3.4% Weighted average debt maturity – drawn only1 5.2 ye
Slide 42: Loan to Value
LOAN TO VALUE 30 September 31 March 2022 30 September 2022 2021 £m £m £m Borrowings 296.3 295.8 295.8 Cash and cash equivalents (92.5) (82.8) (34.6) Net debt 203.8 213.0 261.2 Equity attributable to equity holders of the parent 409.5 414.1 402.1 Net debt to equity ratio (‘Balance sheet gearing’) 49.
Slide 43: Number of Shares
NUMBER OF SHARES 30 September 31 March 30 September Number of shares (m) 2022 2022 2021 Weighted average – basic1 309.0 307.2 306.6 Weighted average – diluted2 310.4 309.0 307.6 Year end – basic3 309.0 307.2 307.0 Year end – diluted4 311.0 309.0 308.0
Slide 44: 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 NewRiver Retail Parks Average lot size: £17.6m 20% Average lot size: £17.6m NEY: 9.5% NEY: 6.6% 18% 25% 16% 20% 14% 12% MSCI1 EY: 5.9% 15% 10% 8% MSCI1 EY: 9.4% 10% 6% 4% 5%
Slide 45: 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 46: NewRiver REIT plc
NewRiver REIT pic 89 Whitfield Street London WIT 4DE www.nrr.co.uk