NewRiver REIT plc (LON:NRR) saw its shares sink on Monday as its community pub business, Hawthorn Leisure, was forced to close all of its sites amid new coronavirus containment measures imposed by the UK government.
However, the FTSE 250 investment trust sought to reassure investors that it will have “significant covenant headroom” to absorb a prolonged period of uncertainty, saying that under a scenario in which it receives no pub income for the next six months, and a reduced income beyond this while the business rebuilds, it will have over £50mln in cash and £45mln of undrawn credit facilities for 12 months.
“Based on this analysis, the company is confident that it will remain compliant with its financial covenants for the next 12 months”, NewRiver said.
The company also said the entire pub portfolio will qualify for the UK government’s business rates holiday, saving it and its tenants around £5mln in cash flow over the next 12 months, and that it was supporting its partners to apply for the Coronavirus Job Retention Scheme, whereby 80% of wage costs of employees unable to fulfil their roles due to the pandemic are funded by the government.
NewRiver added that it was working to apply for a corporate financing facility to protect against the challenging market conditions and was also working with its insurance brokers and insurers to claim for the business disruption and rent losses caused by the coronavirus outbreak.
“NewRiver remains a financially sound business with a liquidity position and capital structure that is well placed to absorb a prolonged period of uncertainty”, the company said.
In a note on Monday, analysts at the REIT’s house broker Liberum, which rates the firm at ‘buy’ with a 195p target price, said the shares were currently trading at a 40% discount to gross asset value and the company’s scenario planning “does not assume any benefit from operational savings or any benefit from the government’s measures”.
Meanwhile, analysts at fellow house broker Peel Hunt, which rate NewRiver at ‘buy’ with a 225p price target, said the company’s decision last week not to pay a fourth quarter dividend will “preserve £17mln of cash” and that the company was “unlikely to be the last REIT to take such action”.
However, despite the reassurances, the shares fell 10.9% to 62p in early deals.
–Adds broker comment and updates share price–