Shares in retail and leisure property company NewRiver REIT (NRR) jumped 14% to 84.75p on above-average volume after the firm posted a sharp increase in earnings and raised its dividend.

Thanks to an improving market background in the retail sector and a large dose of self-help, the shopping mall and retail park owner reported a 67% rise in underlying funds from operations to £15.5 million for the six months to September.

The firm’s balance sheet was also significantly strengthened with the sale of the Hawthorn pub business for £224 million and retail disposals of £24.4 million.

That allowed it to reduce its debt pile by £335 million and still pay a 4.1p per share interim dividend compared with last year’s total dividend of just 3p per share.

Chief executive Allan Lockhart was upbeat: ‘We end the first half of the year in a stronger position and, with the benefit of an improving market backdrop and our clear strategic plan, we are well positioned to achieve our medium term target of a consistent 10% total accounting return.’

The firm recorded average cash rent collection of 90% during the half, with the third quarter tracking at the same level, and a retail occupancy rate of close to 96% across its properties.

Analysts at house broker Shore Capital described the results as ‘pleasing’ after a period of substantial progress for the company and suggested the shares were ‘fundamentally undervalued’ given the hike in the dividend and the fact asset values have stabilized with the direction of travel now positive rather than negative.

They concluded: ‘NewRiver has positively turned several corners and its share price looks materially detached from what we would consider fair value (we would suggest c105p for starters).’

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Issue Date: 25 Nov 2021