New River reports “robust” performance

New River has reported a rise in Underlying Funds From Operations from £25.6m to £26.4m for the first half of the year.

“We are pleased to report another period of solid performance, as we entered our 10^th year of operations,” said CEO Allan Lockhart.

“Our diversified and differentiated portfolio continued to outperform the market, delivering sustainable cash flows, robust operational metrics and resilient valuations.

“We have made good progress with our key strategies to deliver Underlying Funds From Operations growth and a fully covered dividend. In light of this progress, we have maintained our dividend for the first half at 10.8 pence per share, with cover improved from the comparative period.

“Since 1 April 2019 to the date of this announcement we have completed, exchanged or are under offer on disposals at a blended yield of 5.4%, and have recycled most of this capital into five retail parks at a blended yield of 9.0%.

“Our market-leading asset management platform continues to expand, and now covers a growing number of third-party assets, including our most recent appointment by Knowsley Council. In pubs, supply chain benefits continue to drive like-for-like EBITDA growth, and we continue to extract further value from our portfolio.

“Our strong and unsecured balance sheet, and our ability to recycle capital, leaves us well-positioned to continue our progress to dividend cover.”

The business also said its Hawthorne Leisure portfolio had delivered like-for-like EBITDA growth per pub of 5.5%, as it ”continued to benefit from the scale-based synergies secured in FY19” and the rate of growth was “expected to moderate following annualisation of Hawthorn Leisure integration in January 2020”.

Mark Davies, CEO of Hawthorn Leisure, said: “Our portfolio of 660 community pubs makes us the seventh largest tenanted pub company in the UK. Our pubs are delivering really good results; EBITDA is up 5.5% year-on-year (against some very strong comparatives with the weather and the World Cup last year), delivering scale-based synergies from the Hawthorn Leisure acquisition and integration.

“We continue to invest in our estate, seeing great returns. We have carried out 26 capital expenditure projects in the last six months at a cost of £1.4m, delivering in aggregate an ROI of 24%.

“A key strategic focus for us has been converting some Leased and Tenanted pubs into Operator Managed. We started the financial year with just over 40 Operator Managed pubs, and we now have close to 60, having carefully selected strong, wet-led community pubs and moving them into the Operator Managed format. We are seeing some great returns when we invest in conversions from L&T to Operator Managed, with an ROI of up to 30%. Our initial target is for 15% of our pubs to be Operator Managed, and we expect to be able to do that by the end of the Financial Year.

“The revival in transaction activity in the pub sector has been extremely valuable, and we anticipate attractive opportunities ahead as other pub companies continue to degear or reshape their platforms. We have a best-in-class management platform, and access to capital, that would allow us to significantly expand our portfolio if the opportunity arises.”