NewRiver REIT plc

Well, good morning, and welcome to NewRiver's Half Year Results. I'm pleased to say that NewRiver continues to deliver disciplined growth, underpinned by an experienced and scalable platform.

Our focus remains on sustainable expansion by maximizing value from our assets and ensuring we are ready to act upon accretive opportunities as they arise with capital discipline at the heart of our strategy. We recognize that our share price does not reflect the underlying progress that we have made, and we share the frustration of our shareholders.

That said, we are confident in our platform, our assets, our strategy and the market outlook as we continue to build operational momentum. The first half was a period of strong operational performance, during which we completed the integration of the Capital & Regional portfolio.

We unlocked net annual synergies of GBP 6.2 million and grew cash profits by 31%, enabling an increase in our first half dividend to 3.1p per share, which is fully covered. We maintained strong occupancy and our leasing activity has been robust with double-digit increases in new rents.

This strong leasing performance underpinned by another consecutive period of positive valuation growth. Our balance sheet is strong with comfortable gearing, healthy cash reserves and ample liquidity.

These highlights, strong rents, greater scale, consistently high occupancy and a robust balance sheet position us well to capitalize on an improving retail market. Retail parks and shopping centers, which make up 94% of our portfolio are outperforming broader discretionary retail, supported by resilient consumer demand and improving fundamentals.

Looking forward, we have identified a pipeline of attractive investment opportunities, ranging from single asset deals to larger transactions, which gives us confidence in our ability to achieve greater scale through earnings and value-accretive transactions over time. At an operational level, we are optimistic about the outlook for the retail real estate market.

Recovery in the U.K. retail sector continues.

Retail spend is up, driven by a resilient consumer base, a broadly stable labor market and elevated consumer savings. While overall retail spend continues to grow, online-only retailers are losing share to those with physical stores.

We believe this reflects consumer preferences and the essential role physical stores play for retailers seeking to build brand awareness and drive multichannel sales. Current data shows that vacancy rates in retail are at their lowest level in years, driven by increasing occupational demand and with supply tightening, rental growth prospects are improving.

With a focus on convenience-led retail and omnichannel outlets, our assets are strategically positioned to benefit from these positive trends of a resilient consumer, improving occupational demand and a tightening of available supply of retail space. Our tenants are reporting stronger sales, and we're seeing that through increased demand for space across our assets.

These fundamentals underpin our confidence in future rental growth and long-term portfolio resilience. With increasing retail consumer spend and improving occupational demand for space, the data suggests that investor appetite for retail assets is growing.

This is underpinned by the attractive total returns with supermarkets, shopping centers and retail warehouses outperforming other areas of the real estate market. Capital values and ERVs are rising and liquidity in the capital markets is improving.

We're seeing competitive bidding for quality assets and the risk-adjusted returns that retail offers remain compelling compared to other commercial real estate sectors. We've been able to take advantage of the improving investor demand with the sale of 3 shopping centers for GBP 71 million, in line with book and a further GBP 40 million of asset disposals either under offer or completed since period end with a diverse range of investors, including institutional capital, REITs and private investors.

I'm now going to hand over to Will, who will take you through the financials.

Thanks, Allan, and good morning, everyone. It's my pleasure to be taking you through our half year results, starting with the key highlights.

The first of which is that we've completed all of the Capital & Regional post-acquisition work streams, including integrating the assets onto our platform and systems and unlocking the GBP 6.2 million of admin cost synergies identified during our diligence, in line with planned time lines, i.e., within 12 months of completion on a look-forward basis. We've demonstrated our disciplined approach to capital allocation, selling GBP 70 million of assets at pricing close to book value and recycling a proportion of the proceeds into our own shares at a 26% discount, proactively facilitating Growthpoint's exit from our share register.

Lastly, we've increased the scale of the business while maintaining balance sheet strength and working ourselves into position to commence refinancing in the first part of '26. These highlights have culminated in a first half total accounting return of 5.4% and leave us well positioned as we look forward.

I'll have more details on these areas in the coming slides, starting with the balance sheet and specifically loan to value. This slide shows that we started the year with LTV of 42%, in line with the pro forma communicated on completion of the C&R acquisition a year ago.

At the time of completion, we explained that we remain committed to our LTV guidance and that we were confident in our ability to return to the 40% level through a realistically achievable amount of asset disposals, which we more than achieved during the first half. First, with the disposal of the Abbey Centre in Belfast for just under GBP 60 million and then with 2 smaller disposals in Leith and Wallsend, bringing total disposal proceeds during the half to over GBP 70 million, which reduced LTV to 38%.

In mid-August, Growthpoint announced its intention to sell at least 10% of its 14% holding in NewRiver. And we facilitated their exit by buying back 10% of our share capital with the remaining 4% acquired by new and existing shareholders at 75p per share, representing a 6% discount to the price at which we raised equity last year and a 26% discount to March '25 NTA per share.

We did this primarily because the transaction was accretive to UFFO and NTA per share, but also to clear a potential overhang on our shares. And following the buyback, LTV increased back up to 42%, which is modestly above guidance.

But importantly, during the first half, we demonstrated financial discipline and the liquidity of our portfolio in disposing GBP 70 million of assets at close to book value. And our LTV position is supported by a stable portfolio valuation, which again showed modest growth in the first half.

Furthermore, we remain very comfortable with the strength of our overall financial position because we consider LTV alongside our net debt-to-EBITDA and interest cover ratios, which remain among the best in the listed peer group. And lastly, post period end, we've already reduced LTV on a pro forma basis through further sales, and we're currently progressing disposals, which we expect to complete in the coming months.

Next, more on the balance sheet and our refi plans. Our cash position remains strong and has increased since March because proceeds from asset disposals in the first half outweighed the cash cost of the buyback.

Gross debt is the same as in March, with the main component still the GBP 140 million Mall facility and GBP 300 million bond. EPRA NTA per share has increased, principally due to the buyback, offset slightly by disposals.

And our overall debt metric position remains strong, as I've just explained, which was recognized by Fitch in September when they reaffirm NewRiver's investment-grade credit ratings at BBB with a stable outlook and BBB+ on the bond itself. Moving on to refinancing.

We expect the first phase of our plans focused on The Mall facility to commence soon. And during the first half, we focused on getting into a position to execute by maintaining maximum flexibility within our current structure, exercising a plus 1 option on The Mall facility to extend maturity to January '28 and extending the plus 1 window on the GBP 100 million undrawn RCF to March '26.

Looking ahead, we recognize that right now, we're still very well positioned with a low cost of debt and a predominantly unsecured debt structure. In addition, due to our elevated cash position, which we expect to increase further as we complete disposals to reduce LTVs within guidance, our total refi requirement is likely to be less than the GBP 440 million of drawn debt we currently have.

And we're clear that in any refinancing, we want to make sure we extract maximum benefit from our current position, which we're aware has inherent value given where rates are today. But we're keen to begin to manage our maturity profile.

So we plan to be active in the debt market in the first half of '26, and our preference is to remain as an unsecured borrower. Before I move on to H1 UFFO, I'd like to spend a moment on C&R, specifically the progress we've made on the synergies post acquisition and what this means for earnings accretion.

As part of our diligence, we identified GBP 6.2 million of admin cost synergies, which were the key driver of the UFFO per share accretion expected as a result of the transaction. And we said that we expected these synergies to be unlocked within 12 months of completion on an annualized basis.

We've made good progress by the end of FY '25, which continued into HY '26 as we completed the migration of C&R property management and accounting data onto our systems over the summer, which was the final major step in integrating the 2 businesses. And we've continued to make great progress on the cost savings, which are now fully unlocked.

The chart on the slide translates this into accretion. Starting with HY '25 UFFO per share of 3.7p, which is the baseline pre-acquisition position.

Number one shows the impact of funding the transaction on UFFO per share, being the equity placing, cash and share consideration and transaction costs. Number two shows the level of profit contribution unlocked, ignoring Snozone seasonality.

Number three shows the benefit of the final synergies, the majority of which will come through in FY '27. And number four shows the expected benefit to come from near-term leasing activity in the C&R portfolio, including the reversal of the impact of retailer restructuring in H1.

Lastly, as shown as #5 on the slide, after factoring in disposals to reduce LTV to guidance and the upcoming Mall refi, we remain on track to deliver the mid- to high teens UFFO per share accretion outlined at the time of the transaction. Next, first half UFFO, which in pounds million increased from GBP 11.5 million in the prior period to GBP 15.1 million this year, principally because of the scale added via the C&R acquisition.

The bridge on the slide focuses on the per share movement, which is important as it forms the basis of our dividend policy. This reduced from 3.7p in the first half of the prior year to 3.3p in the first half of this year.

And I'll now walk you through the key moving parts, firstly, on a look-through basis, excluding phasing. Starting with the C&R impact, where you'll recognize the figures from the previous slide, being dilution from acquisition funding and then C&R accretion, which is shown on the slide as 2.1p on a look-through basis, ignoring Snozone seasonality, which I'll discuss in more detail on the next slide.

Disposals reduced UFFO on a per share basis by 0.4p, reflecting the impact of disposals in the prior year and the first half of the current year, principally Newtownabbey. Next, the buyback, which we completed in mid-August.

The slide initially shows the look-through impact on H1, assuming the buyback had concluded at the start of the half. On to operational matters, starting with core NPI, including AM fees, which have added 0.1p per share, principally reflecting a full half of contribution from Ellandi versus a partial contribution in the prior year, which gives us 4.4p per share on a look-through basis before then reflecting H1 timing.

Continuing with operational matters. The portfolio has performed well in H1, but we've seen some temporary income disruption from retailer restructurings, principally Poundland, but also River Island, Claire’s and Bodycare, which have impacted H1 through increased provisioning, and we expect will result in some income disruption in the second half as we negotiate the best possible terms or seek alternative occupiers.

Next, we strip out the benefit of the share buyback, which will benefit H2 in the first half of FY '27 because of the timing late in H1. And then the impact of Snozone seasonality, which gets us to the 3.3p we've reported today.

On to Snozone, which you'll remember we acquired in December '24 as part of the C&R transaction. It's an operational business with 3 sites, 2 in the U.K.

and 1 in Spain. Our observations after a year of ownership are that it's a high-quality leisure operating platform and a very well-run business that makes a meaningful contribution to UFFO on an annual basis.

But as flagged in our full year results 6 months ago, its contribution is seasonal, which is more pronounced under NewRiver's ownership because we have a March rather than a December year-end as C&R had, which means Snozone's controlled loss period falls squarely into H1 and peak trading falls into H2. This is why when we presented our full year results back in June, we highlighted that the EBITDA recorded in our first 3.5 months of ownership of GBP 3.7 million exceeded Snozone's annual trading output because this initial period encompass Snozone's peak trading season without any of its period of controlled loss.

So the result in H1 of a loss of GBP 1.6 million is in line with our expectations, as is the level of profitability delivered in H2 to date. This H1 performance means Snozone delivered EBITDA of GBP 2.9 million over the 12 months ended 30th of September, which is relevant when we come to look at the first half dividend.

As you'll know, we pay dividends twice per annum, announced within our half and full year results and based on 80% of UFFO. Today, we've reported UFFO per share for H1 of 3.3p.

As explained on the previous slide, this includes Snozone's controlled loss period. If we adjust for this seasonality in order to smooth our in-year earnings profile, by assuming Snozone's profits accrue on a straight-line basis over the year and using the EBITDA generated over the 12 months to September as our basis, this increases UFFO per share by 0.6p, giving an adjusted UFFO per share of 3.9p.

Taking 80% of this gives an H1 dividend of 3.1p per share, which is fully covered by H1 UFFO per share of 3.3p. In the second half, we will, in effect, apply the equivalent seasonality adjustment because the full year dividend will be calculated as 80% of full year UFFO per share, less the H1 dividend of 3.1p.

Meaning the blended payout for the financial year will be 80% of our FY '26 UFFO, in line with our policy. Thank you all for listening.

I'll now hand you back to Allan.

All right. Thank you, Will.

We believe that our consistently high occupancy and tenant retention rates, combined with affordable rents will drive sustainable rental growth. We've achieved strong leasing volumes with retention rates improving year-on-year.

New leasing rents are growing from a highly affordable base, ensuring our assets remain attractive to both new and existing tenants. This approach minimizes void risk and supports stable income growth.

Evidence of our success can be seen through our leasing activity, which consistently outperforms with new rents at 11.3% above ERV and 24.2% ahead of previous rents. And our long-term rental compound annual growth rate has been steadily improving over the last 4 years.

I would highlight that our portfolio today has delivered a compound annual growth rate in rents of 1% per annum over the last 9 years based on 3 years of aggregated leasing during a period where retail was highly disrupted by COVID and peak online. This affirms our portfolio positioning, our leasing strategy and the quality of our asset management.

Our high level of occupancy is supported by active and diverse demand for space across our portfolio. We have a broad tenant mix, which reduces concentration risk and enhances income stability.

As you can see, no retailer represents more than 3.5% of our portfolio rents. Leasing volumes are high with a strong pipeline, allowing us to capture inherent rental reversion in our portfolio.

We have a strong pipeline of new leasing deals, which will help offset some short-term disruption from recent tenant CVAs. Retail is a highly competitive and dynamic sector.

And while our occupational market has been steadily improving, we have had some recent disruption from the CVAs of Poundland, Bodycare, Homebase and River Island. Now there's no indication that these CVAs are a reflection of the broader retail market, and we're expecting there to be no material impact to our operations over the medium term as we make good progress in mitigating the disruption.

Already, we have replaced Homebase with superior leasing deals to Sainsbury's and The Range, and we're making good progress on mitigating the impact from Poundland, and we're in negotiations with the new owner of Bodycare. We are seeing strong underlying consumer spending growth and both our occupiers and assets are benefiting.

We're located in areas with strong local demographics and high frequency of use, which helps drive outperformance in customer spend. Retailers in our portfolio consistently exceed national averages for sales, whether in our shopping centers or our retail parks, demonstrating the quality of our locations and the resilience of our occupiers.

We focus on convenience and omnichannel retail, ensuring our assets are integral to the communities that they serve. Evidence of our outperformance is reflected in our tenant sales data and the continued interest from leading retailers securing space within our assets.

Active asset management is central to our value creation strategy. We continuously target improved tenant profiles, enhanced asset quality and seek to drive rental growth through our strategic initiatives.

Our hands-on approach enables us to unlock and identify opportunities for income enhancement and capital appreciation. Our Retail Park in Dumfries is a great example of our active asset management, where we have improved tenant quality with the introduction of Sainsbury's, Tapi, Food Warehouse and Next.

We increased rents with the introduction of drive-thru restaurants, the new letting to Sainsbury's, which was secured at a significant increase to the previous passing rent, and we negotiated a much higher rent with B&M at lease renewal, having created positive rental evidence with the new lettings to Food Warehouse and Next. All this activity has delivered positive income and capital returns.

Snozone, the U.K.' s leading indoor ski operator, is a business that we acquired as part of the Capital & Regional transaction, and it presents an excellent opportunity for growth within our portfolio.

Snozone has a high-quality management team with extensive operational experience in leisure beyond just skiing. It is a highly profitable, well-run business, and it holds a dominant position across the markets it serves.

However, as Will said, it is inherently seasonal. And so we are actively exploring opportunities that utilizes the management team's experience and our expertise in asset-backed operations to deliver further earnings growth.

The leisure sector is growing, evidenced by increased demand for leisure space in our retail assets. Snozone's performance has been strong and provides confidence of the potential for further expansion and diversification of our income streams.

We're always looking for opportunities to grow earnings. We have been able to utilize our specialist asset-backed operating platform to pursue capital-light growth through strategic partnerships.

In the first half alone, our net fee income from capital partnerships grew by 40% compared with the same period last year. Over the past 5 years, net income from our capital partnerships has grown almost 20% per annum.

There are ample opportunities for further partnerships with no shortage of partners looking to leverage the value of our platform and operating expertise, and we hope to maintain a similar run rate over the next 5 years. We have a diverse range of partners and are actively discussing a number of investment opportunities across retail parks, regeneration projects and shopping centers.

Capital partnerships allow us to scale efficiently in a capital-light way, share risk, access new markets and collect valuable market data. Capital partnerships are central to our strategy for sustainable long-term earnings growth and will provide attractive recurring and growing income streams that will continue to scale.

To summarize and bring it back to the start, we are in good shape. We have a well-positioned portfolio that is performing, a supportive market backdrop, a balance sheet that provides flexibility and optionality and a market-leading platform ready to capitalize on growth opportunities.

As we explore these opportunities, we believe that increased scale will result in a lower cost of capital, improved cost efficiency and better liquidity for our shareholders. Our pursuit of growth comes with strict capital and financial discipline.

The outlook for retail remains strong, and we will continue to build on our momentum to deliver value for our shareholders.

Well, thank you. We will now move to Q&A, beginning with live questions from the room before taking any questions that have come through online.

So the first question, Tom?

It's Tom Musson from Berenberg. Just first question on debt.

Can you help quantify the earnings impact of higher debt costs, not just from The Mall facility, but the corporate debt, too? And if you think about the need to refi both pieces of debt fairly soon, do you expect to be able to continue growing the dividend in each year going forward, given not just the requirement of those refinance headwinds, but also further disposals that you point to as well?

Yes. Thanks, Tom.

So I would say on debt, we've sort of this morning laid out our plans for refinancing. So we're probably going to look at The Mall facility initially.

If you remember, that was a facility that we inherited as part of the C&R transaction, GBP 140 million facility, 3.45% coupon. And the refinancing of that debt was always in the underwrite of the C&R transaction.

So if you remember in my slide earlier on, I talked about the accretion that we've unlocked to date. But then I said we had to sell assets to get below 40%, and we had to refi The Mall.

So the benefit of the accretion from the C&R transaction is we were able to wrap up the impact of that refi into the accretion effectively. Now the other point to make, I think, is we have GBP 90 million of cash at the moment.

We've said we want to sell -- we've said if we sell GBP 30 million of assets, we'll get below our LTV guidance. So obviously, that cash number will increase.

And if you look at that versus our GBP 440 million of debt, we don't need to refinance GBP 440 million of debt. So it's difficult to talk about the exact phasing of the refi and exactly when the impact will come through.

That kind of depends on -- we've got a couple of our banking friends in the room, how our discussions go in 2026. But what I would say is that we're in a really, really good position.

Fitch has just reaffirmed our ratings. The C&R Mall refi was factored into the accretion.

And actually, our gross debt requirement is significantly less than it's showing on the balance sheet. The reason we've never compressed the 2 numbers, the cash and the gross debt is, of course, because of where rates are and because of how much we're paying on our debt, we've been able to get more than that in the bank.

So there's never been a need for us to do that before. But actually, we're moving into a point where depending on what's said on the 18th, it may well be the case that actually we're no longer making a turn, and that's why I think the timing of the refi's work is well timed.

Okay. And you mentioned in the text of the release to expect a little more income disruption in the second half.

Can you help quantify that impact?

Can you [indiscernible] that, Will?

Yes. I mean, we're talking about 4 retailers really around 3% of rent.

Most units are still occupied and trading. At the minute, there is some short-term impact.

In the second half, it could be anywhere up to, I don't know, between GBP 0.5 million and GBP 1 million, but it's very difficult to say at the moment, Tom, because we're kind of in live discussions with those retailers. Ultimately, we think once we've got through that period of disruption in the medium term, we'll be confident of getting those rents back up to where they are or where they were before the restructuring.

But I think you're quite right, you've picked up on the wording. I think there could be a little bit of disruption in the second half.

Really hard to quantify exactly at the moment, but it could be GBP 0.5 million and GBP 1 million, something like that.

I think it's fair to say, isn't it, that we really are making good progress around some of the CVAs. I think on the slide, you will have seen that excluding Homebase because we've already sorted them out with the deals we've done with Sainsbury's and The Range.

So they've gone, which is great. But in terms of sort of Poundland, Bodycare and the River Island, we have about 250,000 square feet that are subject to CVAs.

We're about 85% in advanced negotiations or deals already agreed. So it's really more of a sort of timing aspect.

The other thing that's really encouraging is just the pipeline of our leasing that we've got going on at the moment, and we're really encouraged around that in terms of the new leasing deals versus previous passing rent. So our team is like super focused on getting those sort of deals sort of wrapped up.

You will have seen a slide -- one of the slides, I think we've got something like 950,000 square feet of leasing deals that we're currently sort of processing under offer in legals, and that's really positive as well. So I think that sets us up nicely for FY '27.

Bjorn Zietsman from Panmure Liberum. Just a quick question around the leasing performance.

It is striking that how far above ERV leasing transactions are coming through. Do you think this more accurately reflects the true reversion potential of the portfolio?

And do you have a sense of why value ERVs are so far below where the market is?

Well, I think the most important thing is to be looking at our compound annual growth rate when you aggregate up all your leasing, and we're really positive that, that is now trending in a positive direction. We're now moved into 1%.

Six months ago, that was plus 0.7%. Twelve months prior to that, it was minus 0.3% and minus 0.4% in the previous year.

So this is moving in the right direction, which is reflective of what we've been saying, which is an improving market outlook. But look, I mean, if you look at our valuations, the values are expecting reversion to come through over the next sort of 5, 6 years, and we're confident that we will be able to sort of deliver that, which will be obviously positive around our P&L and future valuations, we believe.

And then you mentioned you've identified an attractive pipeline of assets. Can you give us a sense of the size of that pipeline?

Well, we never really give a running commentary on what we're doing and what we're looking at. But what we said was that we're seeing opportunities that our single asset deals to larger transactions to corporate opportunities, not just in the public equity markets, but in the private markets.

And we also have the flexibility to either think about doing those ourselves or to do those in partnership. And as I mentioned on the slide in terms of our capital partnerships, we are in active discussions on investment opportunities across retail parks and shopping centers and also regeneration projects.

Do we have any questions online, Lucy?

No questions online.

Great. Okay.

Well, thank you very much for attending. And so it's been hopefully a good presentation from your perspective and look forward to seeing you next year.

Thank you.