NewRiver confident in cash position as pub estate closes
By Josh White
Date: Monday 23 Mar 2020
(Sharecast News) - NewRiver REIT issued a further update on the impact of the Covid-19 coronavirus pandemic on its business on Monday, following the government announcement on 20 March of the temporary closure of entertainment and hospitality premises.
The FTSE 250 real estate investment trust said its community pub business, Hawthorn Leisure, has closed all of its sites with immediate effect.
It said it had anticipated pub closures "at some stage soon", and was therefore well prepared for this outcome.
The firm said it had improved its financial position further at the end of last week to ?75m of unrestricted cash balances and ?45m of committed undrawn credit facilities, providing ?120m of available liquidity.
It had already undertaken "extensive" scenario testing, factoring in the loss of income from its pub portfolio, which the board said confirmed NewRiver had "significant" covenant headroom and a capital structure that was "well-placed" to absorb a prolonged period of uncertainty.
"One such scenario in our testing is that the company does not receive any pub income for the next six months, and a reduced income beyond this, whilst the pub business rebuilds," the board said.
"It also assumes that there is a significant reduction in the company's retail portfolio income for the next 12 months."
In that scenario, NewRiver said the analysis showed that it would have in excess of ?50m of cash and ?45m of undrawn credit facilities after 12 months.
"Based on this analysis, the company is confident that it will remain compliant with its financial covenants for the next 12 months.
"The company has no bank or refinancing events until August 2023."
NewRiver also noted the recent announcements from the government aimed at providing financial assistance to businesses impacted by the pandemic, saying the business rates holiday would apply to the entire pub portfolio, which would save the company and its tenants an estimated ?5m in cash flow over the next 12 months.
It said it was also supporting its pub partners and tenants who employed staff to enable them to apply for the Coronavirus Job Retention Scheme, which will see 80% of the wage costs of employees who were unable to fulfil their role due to the pandemic to be borne by the government.
"To protect against the possibility that market conditions remain challenging for the next 18 months or more, the company is working with its advisors to apply for the Covid Corporate Financing Facility programme using its investment grade credit rating," the board added.
It said it was also currently working with its insurance brokers and insurers to make a claim for the business disruption caused by Covid-19, and for loss of rent.
"NewRiver remains a financially sound business with a liquidity position and capital structure that is well placed to absorb a prolonged period of uncertainty.
"It is worth noting that NewRiver's retail portfolio represented 70% of the company's net rental income as at 30 September 2019."
That portfolio was focused on occupiers in the food and grocery, health and beauty, discounter and essential services sub-sectors, with almost two-thirds of its retail assets anchored by a major food and grocery brand.
"Given the fast-changing situation, the company will provide the market with further updates in due course."
At 0927 GMT, shares in NewRiver REIT were down 12.08% at 61.1p.
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