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NewRiver REIT’s share price crumbles following FY results! Here’s what I’d do now

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NewRiverREIT's The Moor property in Sheffield
Image: NewRiverREIT

For UK retail shares, 2020 proved to be a nightmare as Covid-19 spread across the country. Bricks-and-mortar stores were particularly badly hit as the pandemic forced people to shop online. Non-essential retailers had to close their doors completely, of course. The extent of the damage was clear in the full-year financials that NewRiver REIT (LSE: NRR) released today.

Investor appetite is weak across all UK share indexes on Thursday. But confidence in retail and leisure property owner NewRiver has taken a particularly hard whack. Shares in the company were last trading 5% cheaper than last night’s close, at 99.5p.

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NewRiver REIT’s losses widen

NewRiver REIT announced today that it had clocked up a pre-tax loss of £153.2m during the 12 months to March 2021. This was up from its loss of £121.6m in fiscal 2020.

Meanwhile the value of NewRiver’s property portfolio fell to £974m last year from £1.2bn a year earlier. This was due to asset sales as well as a 13.6% decline in the portfolio’s like-for-like valuation.

The company said, however, that the like-for-like valuation drop eased during the second half of the year. This reduced to 5.6% from 8.2% in the first six months of financial 2021.

A bright outlook

Chief executive Allan Lockhart said that “Covid-19 has posed unprecedented challenges”, but he added that, “Our operational and financial achievements have reinforced our belief in the underlying strength of our portfolio and platform”. As a consequence the business has decided to reinstate dividends and pay a 3p per share reward for last year.

Lockhart cheerily noted, “Consumer confidence in the UK economy has returned to pre-pandemic levels and we are well placed to benefit from consumers’ growing preference for shopping locally and supporting community assets”. He said too, “We are starting to see early signs of an uplift in shopping centre liquidity and we expect the investment market to improve further as we emerge from the Covid-19 crisis.

With the benefit of an improving market backdrop and the insights gained from our recent strategic review we are looking forward to the coming year with genuine optimism”, Lockhart added.

Should I buy this UK share?

City analysts are confident that NewRiver REIT will get back to moving in the right direction soon, too. Market consensus is for the firm to generate earnings per share of 12p per share in financial 2022. This compares with the losses of 49.1p per share the property giant recorded last year. Of course, forecasts can change based on future developments. 

NewRiver trades on an low forward price-to-earnings (P/E) ratio of around 10 times. But despite its cheapness I’m not tempted to add the UK property share to my portfolio. It’s possible that profits could rebound strongly in the short-to-medium term as coronavirus restrictions are rolled back. But I still worry about NewRiver’s long-term future as e-commerce goes from strength to strength. And of course the emergence of Covid-19 variants could shred any near-term recovery to ribbons, too. I’d rather buy other UK shares today.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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