TIDMNRR
RNS Number : 6970A
NewRiver REIT PLC
03 June 2021
NewRiver PLC
Preliminary unaudited results for the year ended 31 March
2021
3 June 2021
Resilient performance and a return to dividend
Allan Lockhart, Chief Executive commented: "Our resilient
performance over the last year has underlined the fundamental
strength of our business. Critically, we improved our cash and
liquidity position through market-leading rent collection,
achieving our non-core disposals target and letting over 1 million
sq ft of retail space.
Our performance was underpinned by our unsecured balance sheet,
our diversified portfolio focused on local convenience and
community and the dedication and expertise of our staff who
successfully completed a range of transactions in a very
challenging market.
Whilst NewRiver's retail portfolio has proved to be more
resilient than that of the wider market over the last twelve
months, we are determined to ensure that this remains the case over
the longer term. As previously announced, we have undertaken a full
strategic review of our portfolio to help us refine our retail
strategy. As part of this review the Board took the decision to
dispose of our Hawthorn community pub business. The divestment is
ongoing and will significantly improve our financial strength,
provide the firepower required to reshape our portfolio and enable
Hawthorn to capitalise on the significant growth potential
available as an independent platform.
Having successfully navigated the challenges of COVID-19 we look
to the future with genuine confidence based upon an improving
consumer market, the underlying strength of our business and a
clear strategic plan to deliver long-term shareholder value. This
confidence is reflected in the Board's decision to reinstate our
dividend."
Financial results
-- Underlying Funds From Operations ('UFFO') of GBP11.5 million (FY20: GBP52.1 million)
-- UFFO per share of 3.8 pence (FY20: 17.0 pence)
-- IFRS loss after tax of -GBP150.5 million (FY20: -GBP121.1 million)
-- Like-for-like valuation decline of 13.6% which was less
marked in the second half (H1:-8.2%, H2:-5.6%)
-- EPRA NTA per share down 24.9% to 151 pence, driven by the valuation decline
Strong liquidity position, dividend resumed
-- In line with disposals target, GBP81 million of sales
completed since April 2020 at a modest discount to book value
-- Fully unsecured balance sheet with no bank refinancing requirement until August 2023
-- Unrestricted cash of GBP154 million as at 31 March 2021, up
88% since start of the year from GBP82 million (total accessible
liquidity at 31 March 2021 of GBP199 million)
-- LTV of 50.6% at 31 March 2021 (31 March 2020: 47.1%);
strategy in place to deliver significant reduction
-- Reinstated dividend of 3.0 pence per share, representing 80% of UFFO
-- Investment Grade balance sheet maintained at BBB with Stable Outlook
Resilient operational metrics
-- 93% of retail rent due in FY21 either collected or alternative payments agreed
-- Rent collection for Q1 FY22 stands at 85%, tracking ahead of the same period last year
-- Increased retail occupancy of 95.8% (31 March 2020: 94.8%);
pubs occupancy of 98.0% (31 March 2020: 97.0%)
-- 1.2 million sq ft of new lettings and renewals completed
across the retail portfolio at 0.6% premium to ERV
-- Strong trading performance in Hawthorn community pub business
following each reopening; since 12 April trading across our pub
estates has significantly exceeded management expectations
Stakeholder management and support during COVID-19
-- Over 300 revised payment agreements negotiated with retail
occupiers to support them through a challenging period while
ensuring strong rent collection
-- Enhanced support offered to independent retailers and charity occupiers
-- Service charges for retail occupiers further reduced; 12%
reduction in budgets over the last four years
-- GBP8 million invested in Hawthorn pub partner support to help
retain tenants and ensure rapid recovery on reopening
Elevated focus on ESG
-- Established our ambitious three-step net zero carbon targets,
aligned with a 1.5degC scenario
-- Rolled out bespoke shopping centre-led Environmental &
Social Implementation Plans across 85% of our retail portfolio to
guide on-the-ground Environmental, Social and Governance ('ESG')
initiatives
-- Continued to provide enhanced support to our charity partner,
the Trussell Trust, through Board and Executive Committee salary
sacrifices, donations and virtual fundraising events
Results summary
Performance Note FY21 FY20 Change
Underlying Funds From Operations ('UFFO') (1) GBP11.5m GBP52.1m -78%
----- ----------- ----------- -------
UFFO per share (1) 3.8p 17.0p -78%
----- ----------- ----------- -------
Ordinary dividend 3.0p 16.2p -81%
----- ----------- ----------- -------
Ordinary dividend cover (2) 127% 105%
----- ----------- ----------- -------
Interest cover (3) 2.3x 4.8x
----- ----------- ----------- -------
Net Property Income GBP48.2m GBP92.9m
----- ----------- ----------- -------
IFRS Loss after taxation (4) -GBP150.5m -GBP121.1m
----- ----------- ----------- -------
IFRS Basic EPS -49.1p -39.6p
----- ----------- ----------- -------
Total Accounting Return (5) -24.9% -14.7%
----- ----------- ----------- -------
GRESB Score (6) 60 70
----- ----------- ----------- -------
Balance Sheet Note March 2021 March 2020 Change
IFRS Net Assets GBP460.4m GBP610.6m
----- ----------- ----------- -------
EPRA NTA per share (7) 151p 201p -25%
----- ----------- ----------- -------
Balance Sheet (proportionally consolidated) (8) March 2021 March 2020
----- ----------- ----------- -------
Net debt GBP493.3m GBP563.6m
----- ----------- ----------- -------
Principal value of gross debt (9) GBP653.1m GBP652.4m
----- ----------- ----------- -------
Cash GBP154.3m GBP82.1m
----- ----------- ----------- -------
Weighted average cost of debt (10) 3.2% 3.4%
----- ----------- ----------- -------
Weighted average debt maturity (11) 4.8 years 5.9 years
----- ----------- ----------- -------
Loan to value (12) 50.6% 47.1%
----- ----------- ----------- -------
Notes:
(1) Underlying Funds From Operations ('UFFO') is a Company
measure of cash profits which includes recurring cash profits and
excludes other one off or non-cash adjustments as set out in Note
12 to the Financial Statements and in the Finance Review. UFFO is
used by the Company as the basis for ordinary dividend policy and
cover
(2) Ordinary dividend cover is calculated with reference to
UFFO
(3) Interest cover is tested at corporate level and is
calculated by comparing actual net property income received versus
cash interest payable on a 12 month look-back basis. The
calculation was aligned to covenant calculations during FY21
therefore the FY20 figure is now calculated as 4.8x compared to
3.8x as previously disclosed.
(4) IFRS Loss after taxation due to non-cash valuation decline
of GBP152.9 million, compared to a decline of GBP166.9 million in
the prior year
(5) Total Accounting Return is the EPRA NTA per share movement
during the year, plus dividends paid in the year, divided by EPRA
NTA per share at the start of the period
(6) GRESB is the leading sustainability benchmark for the global
real estate sector, and its annual assessment scores participating
companies out of 100. In 2020 GRESB Assessment structure
fundamentally changed, establishing a new baseline for measuring
performance. GRESB therefore advises against direct comparison
between 2020 GRESB Scores and prior year results.
(7) EPRA Net Tangible Assets ('NTA') is based on IFRS net assets
excluding the mark-to-market on derivatives and related debt
adjustments, the carrying value of intangibles, the mark-to-market
on the convertible bonds, as well as deferred taxation on property
and derivative valuations and is adjusted for the dilutive impact
of share options
(8) Proportionally consolidated means Group and share of JVs
& associates
(9) Principal value of gross debt being GBP635.0 million of
Group and GBP18.1 million share of JVs & associates
(10) Cost of debt assuming GBP215 million revolving credit
facility is fully drawn
(11) Average debt maturity assumes one-year extension option is
exercised and bank approved. Excluding this option, debt maturity
at 31 March 2021 is 4.3 years
(12) Is the ratio of gross debt less cash, short-term deposits
and liquid investments to the aggregate value of properties and
investments. LTV is expressed on a proportionally consolidated
basis
For further information
NewRiver REIT plc +44 (0)20 3328 5800
Emily Meara (Head of Investor
Relations)
Lucy Mitchell (Director of Corporate Communications,
PR & Marketing)
+44 (0)20 7251
Finsbury 3801
Gordon Simpson
James Thompson
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation. This announcement has been
authorised for release by the Board of Directors.
Results presentation
A pre-recorded presentation will be streamed at 10:00am BST
today on our website ( www.nrr.co.uk ) and at the following link:
https://kvgo.com/IJLO/NewRiver_Full_Year_Results_2021 . This will
be followed immediately by a live Q&A session for investors and
analysts.
The dial in details for the conference call facility are as
follows:
UK Toll Free: 0808 109 0700
Standard International Access: +44 (0)20 3003 2666
Password: NewRiver
The accompanying slides will be made available at www.nrr.co.uk
just prior to the presentation commencing.
Forward-looking statements
The information in this announcement may include forward-looking
statements, which are based on current projections about future
events. These forward-looking statements reflect the directors'
beliefs and expectations and are subject to risks, uncertainties
and assumptions about NewRiver REIT plc (the 'Company'), including,
amongst other things, the development of its business, trends in
its operating industry, returns on investment and future capital
expenditure and acquisitions, that could cause actual results and
performance to differ materially from any expected future results
or performance expressed or implied by the forward-looking
statements.
None of the future projections, expectations, estimates or
prospects in this announcement should be taken as forecasts or
promises nor should they be taken as implying any indication,
assurance or guarantee that the assumptions on which such future
projections, expectations, estimates or prospects have been
prepared are correct or exhaustive or, in the case of the
assumptions, fully stated in the document. As a result, you are
cautioned not to place reliance on such forward-looking statements
as a prediction of actual results or otherwise. The information and
opinions contained in this announcement are provided as at the date
of this document and are subject to change without notice. No one
undertakes to update publicly or revise any such forward looking
statements. No statement in this document is or is intended to be a
profit forecast or profit estimate or to imply that the earnings of
the Company for the current or future financial years will
necessarily match or exceed the historical or published earnings of
the Company.
Chief Executive's review
Overview
In a financial year dominated by COVID-19 disruption, we made
good progress against our strategic objectives of enhancing our
cash and liquidity position, reducing net debt and thereby
protecting our balance sheet. Ongoing restrictions in the second
half of the year had an impact on our trading performance however
our affordable offering and strong relationships with retailers
meant that we achieved market-leading retail rent collection rates
and secured 1.2 million sq ft of new leases and renewals during the
year. Our pub performance also recovered quickly on reopening last
summer and in April of this year. In spite of a challenging market
we reached our FY21 disposals target of GBP80 million at only a
modest discount to book value, further supporting our cash position
and LTV. Our strategic progress has been underpinned by a robust
financial and operational performance which reflects the inherent
quality and liquidity of our portfolio, our clear market offering
and a best-in-class retail and pub platforms.
Results and dividend resumption
Our financial performance in the year was inevitably affected by
the national lockdowns and restrictions imposed in response to
COVID-19. Underlying Funds From Operations ('UFFO') were GBP11.5
million, compared with GBP52.1 million in the prior year, and EPRA
Net Tangible Assets per share were down 25%, driven largely by a
non-cash reduction in portfolio valuation. Pressure on rents and
yield expansion, exacerbated by COVID-19, has led to valuation
declines across the retail real estate sector. The decline in our
portfolio valuation has, however, been less pronounced than that of
our peers, owing primarily to our affordable rents and structurally
higher equivalent yields. Encouragingly, our valuation decline has
slowed in the second half of the financial year and our retail park
portfolio has returned to growth. Our total return for the year of
-6.9% has outperformed the MSCI-IPD benchmark by +120 bps, driven
by an income return outperformance of 180 bps. We believe that this
outperformance is explained by the quality of our asset management,
the affordability of our rents, our portfolio positioning, and the
liquidity of our assets.
Since the start of the pandemic we have been focused on
protecting our cash position and, in spite of significant
disruption throughout FY21, we closed the year with an improved
cash and liquidity position of GBP199.3 million, increased from
GBP127.1 million at the start of the year. As a result, net debt
reduced to GBP493.3 million from GBP563.6 million at the start of
the year. This improvement was made possible by market-leading rent
collection metrics and a successful disposal programme.
At the start of the financial year we set a target to dispose of
between GBP80 million and GBP100 million of assets, with the
proceeds to be used to reduce debt. We reached our target with
completed disposals of GBP81 million during the year at a blended
discount of only 6% to book values. To have achieved this in an
exceptionally challenging market demonstrates the inherent
liquidity in our portfolio. We have already exchanged or are under
offer on a further GBP79 million of disposals so far in FY22.
The disposal programme has mitigated the effects of valuation
declines on our LTV metric which, at 50.6% as at 31 March 2021, is
higher than our guidance but still well within debt covenant
thresholds. We are confident that we will significantly reduce LTV
through the divestment of Hawthorn, our community pub business, and
through further non-core retail disposals.
Given our resilient operational performance during the pandemic,
the success of our disposal programme to date and the further net
debt reduction to come from the disposal of Hawthorn, the Board has
declared a dividend of 3.0 pence per share in respect of the year
ended 31 March 2021. Our future dividend policy will be to pay
dividends equivalent to 80% of UFFO, with any top up as required
under the REIT regime rules to be confirmed at the full year
results. Dividends will be declared twice annually at the Company's
half and full year results, with reference to the most recently
completed six-month period.
Retail operational performance
Our retail portfolio, focused on essential retailing for local
communities, delivered robust operational metrics throughout the
year. Our strong relationships with occupiers, awareness of their
individual circumstances and affordable rents meant that our rent
collection levels improved throughout the year. This was despite
the UK Government's rental moratorium being in place for the full
year. We closed the financial year with a blended retail cash rent
collection rate of 86% across all four quarters (rising to 93%
including rent either deferred or subject to regear).
During the year we completed 1.2 million sq ft of new lettings
and renewals across our retail portfolio, representing GBP6.5
million of annualised rent. Our high volume of leasing activity has
generated an increase in our occupancy rate to 95.8% (31 March
2020: 94.8%). Our rental income is well-diversified, with 1,700
leases across over 800 different occupiers. This diversification,
combined with our affordable rents at an average of GBP11.51 per sq
ft as at 31 March 2021, supports the sustainability of our
income.
Hawthorn community pub business
In our Hawthorn community pub business, protecting our people,
our financial position and supporting our pub partners has been our
primary focus throughout the year. Over 86% of our pub partners
invested in their pub during the first lockdown and, seeing the
positive impact on initial reopening, we invested a further GBP0.9
million in improving our pubs' outside space during the second half
of FY21. In total, we invested GBP7 million in over 200 capital
projects in FY21, many of which enhanced the outside space of our
pubs to ensure that they were ready to welcome as many customers as
possible on reopening. The success of our approach during lockdown
was recently recognised in the results of KAM Media's 'Licensee
Index', the leading operator sentiment tracker for the UK licensed
and tenanted pub sector. Hawthorn's overall rating in this index --
8.5 out of 10 -- was the highest of all major pub companies.
Despite lockdowns preventing our pub portfolio from operating
for significant periods of the year, like-for like-volumes in our
Leased & Tenanted pubs and like-for-like sales in our Operator
Managed pubs recovered quickly on reopening in both July 2020 and
April 2021. Pub occupancy remained high at 98.0% (31 March 2020:
97.0%).
We also made good progress on disposals, completing non-core pub
sales of GBP9.8 million during the year, which further enhanced our
cash and liquidity position and delivered on our strategic plan to
exit from the fully managed segment of our portfolio.
Post the balance sheet date our insurers have confirmed that, in
principle, our insurance policy should cover machine and wet rent
losses incurred within our Leased and Tenanted estate for an
indemnity period of three months. While the details and quantum of
this claim are still to be confirmed it will, if successful,
further improve our UFFO, cash and liquidity position in FY22.
Capital partnerships
Another strategic priority was to build on our BRAVO
relationship to identify and pursue attractively priced acquisition
opportunities.
In September 2020 we disposed of our 90% interest in Sprucefield
Retail Park, Lisburn, to BRAVO for net proceeds of GBP34.7 million.
This disposal expanded and strengthened our capital partnership
with BRAVO while lowering our LTV. NewRiver retains a 10% interest
in the asset, benefits from 10% of the net rental income and will
also receive a management fee and 'promote' fee based on financial
performance.
During the year we also exchanged contracts to acquire The Moor,
Sheffield, in our capital partnership with BRAVO (completed in
April 2021). The acquisition price of GBP41.0 million (NewRiver
share: GBP4.1 million) reflects a significant discount to the
breakup value of the individual assets acquired. It also represents
an attractive net initial yield ('NIY') of 9.1% (rising to 9.8%
following the completion of a number of leasing deals). Following
this acquisition, the BRAVO capital partnership now has GBP192.8
million of assets under management (NewRiver share: GBP44.2
million) and we continue to review attractive acquisition
opportunities to pursue within similar structures. Annualised asset
management fee income is now GBP1.3 million.
Portfolio-wide strategic review
Alongside our FY21 objectives to execute our disposals
programme, protect retail and pub revenues and strengthen capital
partnerships, we also undertook a comprehensive portfolio-wide
strategic review in the second half of the financial year. This
strategic review, underpinned by the new portfolio segmentation we
announced at half-year, involved analysing every asset in the
portfolio in terms of current and projected resilience and
value-creation opportunities. The review examined current and
emerging trends across the retail landscape, including shoppers'
changing behaviours and priorities, to determine how we can ensure
that our portfolio remains as resilient in the future as it has
proved to be during the pandemic.
The strategic review and its findings culminated in the Board's
commitment to three key priorities for the business:
-- Divest ourselves of our community pub business in order to
reset our LTV and provide the firepower to reshape our
portfolio.
-- Sell our non-core retail assets and recycle the resultant capital into resilient retail
-- Transform our regeneration assets to create long-term value
by jointly working with sector specialists and appropriate capital
partners
Our clear strategic aim is that by 2025 assets in our portfolio
will display only the characteristics of resilient retail, and we
believe that these collective measures will transform our business
into a more agile and resilient proposition which provides the
appropriate balance of income and capital returns.
We will be hosting a Capital Markets Day to provide further
details around our new retail strategy in September 2021.
ESG priorities - supporting our communities and our commitment
to net zero carbon
COVID-19 has highlighted the importance of community and we are
proud that our assets and operations could offer some support to
local communities during a year of extreme uncertainty and hardship
for many. The initiatives we undertook in the year included
security teams delivering shopping to those shielding, pubs
converting into pop-up village shops to serve isolated
neighbourhoods, and temporary units being used as vaccination
centres to support the NHS. We continued to provide enhanced aid to
our charity partner, the Trussell Trust, whose vital work supports
over 1,200 food banks. One of our corporate fundraising initiatives
included a steps challenge where we covered 7,723 miles over three
weeks by cycling, running and walking - further than travelling to
New York and back. We also focused on staff welfare, organising
regular virtual events to maintain engagement and providing mental
health and wellbeing workshops. Across our portfolio, we continued
to engage with Local Authorities to help them secure and deploy
funding to transform their town centres into vibrant places that
serve their local communities.
We recognise the importance of promoting a robust ESG programme
which is firmly embedded in our business model and were delighted
to receive our first EPRA Sustainability Best Practice
Recommendations award (Bronze) in September 2020. Another milestone
in our ESG journey was reached in the year by the adoption of a net
zero carbon target in-line with the UK's aim of achieving net zero
carbon emissions by 2050. This year we reduced our greenhouse gas
emissions by 33% compared to our baseline year of 2018. We will
provide further details regarding our net zero pathway and progress
later this year. Strong ESG credentials will form the basis of a
sustainable business model and will also make us a more attractive
long-term partner for our tenants, local authorities, capital
partners and lenders. We will continue to identify potential
improvements in this area which will shape our future ESG
programme.
Outlook
COVID-19 has posed unprecedented challenges however our
operational and financial achievements have reinforced our belief
in the underlying strength of our portfolio and platform. As a
result we have focused our efforts on ensuring that our portfolio
remains resilient over the longer term.
The macroeconomic environment is improving; in May the Bank of
England upgraded its 2021 growth outlook for the UK economy from 5%
to 7.25%, driven by an anticipated sharp rise in consumer spending.
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.
In terms of the investment market, liquidity in retail parks
improved during the year and investor demand for regeneration
projects also increased over the second half of FY21, especially
for assets located in areas with attractive underlying residential
values. 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.
Allan Lockhart
Chief Executive
Business review
Highlights
-- Completed GBP81 million of disposals at a blended NIY of 6.4%
and 6% blended discount to valuation
-- Exchanged on the acquisition of The Moor, Sheffield, in our
capital partnership with BRAVO for total consideration of GBP41.0
million (NewRiver share: GBP4.1 million)
-- Retail occupancy remained high at 95.8% (31 March 2020:
94.8%); average rent remains affordable at GBP11.51 per sq ft
-- Completed 1.2 million sq ft of new lettings and renewals
across the retail portfolio; long-term deals on average -3.1% below
previous passing rent and +0.6% above valuation ERV
-- Hawthorn occupancy of 98.0% at 31 March 2021 (31 March 2020:
97.0%); like-for-like volumes for Leased & Tenanted pubs (80%
of Hawthorn) performed strongly following July 2020 and April 2021
reopening
-- Development pipeline stands at 2.6 million sq ft, of which
over 75% relates to residential development
-- Portfolio valued on a proportionally consolidated basis at
GBP974 million as at 31 March 2021 (31 March 2020: GBP1.20
billion)
-- Total property return of -6.9%, outperforming the MSCI-IPD benchmark by 120 bps
Capital Allocation
Disposals
During the year we reached our FY21 disposal target of GBP80
million to GBP100 million of assets, completing GBP81.2 million of
disposals at an average blended NIY of 6.4% and a 6% blended
discount to March 2020 valuations. Disposals were typically of
assets where we had completed our asset management and development
initiatives or where we were disposing to joint venture structures
in-line with our capital partnerships strategy, as was the case for
Sprucefield Retail Park.
We achieved our disposal target amidst a challenging market
environment, taking advantage of improved liquidity in retail parks
during the last six months of the financial year to dispose of
assets in Dundee, Felixstowe, Beverley and Canvey Island. All of
these assets have been subject to the completion of successful
asset management initiatives by NewRiver.
The most significant disposal in the second half of the
financial year was of Canvey Island Retail Park, Essex, a 62,000 sq
ft A1 development which was developed by NewRiver and completed in
November 2018. The retail park recently became fully occupied, with
the final 15,000 sq ft unit let to Iceland on a 10-year lease,
completing an occupier line-up which also includes M&S
Foodhall, Sports Direct, B&M and Costa Coffee. The disposal was
completed for a total consideration of GBP11.9 million, in-line
with the March 2020 valuation, and generated a 13% profit on
cost.
Our largest asset disposal in the year was of a 90% interest in
Sprucefield Retail Park, Lisburn, to our capital partner BRAVO for
net proceeds of GBP34.7 million, reflecting a NIY of 9.0% and a 5%
discount to the March 2020 valuation. NewRiver will retain a 10%
interest in the asset, will benefit from 10% of the net rental
income and, as appointed asset manager, will also receive a
management fee and promote fee based on financial performance. This
disposal has helped us to manage our LTV and has expanded and
strengthened our relationship with BRAVO as part of NewRiver's
capital partnerships strategy.
The success of our disposal programme demonstrates the inherent
liquidity of our essential retail and locally positioned portfolio
despite FY21 being one of the most challenging periods on record.
So far in FY22 we have exchanged on GBP16 million of disposals and
GBP63 million of disposals are under offer.
Acquisitions
Our investment priorities during the year were focused on the
successful execution of our disposal programme, and acquisition
activity in FY21 was therefore rightly limited. However, our
capital partnerships strategy allowed us to take advantage of
market dynamics, while limiting balance sheet exposure, and in
February 2021 we exchanged on a 10% interest in The Moor,
Sheffield, as part of a GBP41.0 million acquisition by our BRAVO
relationship. This acquisition completed in April 2021.
The Moor is a 680,000 sq ft retail and leisure estate located in
Sheffield city centre close to the city's railway station, council
offices, and both Sheffield University and Sheffield Hallam
University. The estate is anchored by Next, Sainsbury's, and an
occupier-owned Primark, and is next to a 670-space car park, a
nine-screen cinema and The Moor Market, a covered marketplace owned
by Sheffield City Council.
The estate comprises 15 assets capable of being sold separately,
which provides inherent liquidity and offers a range of mixed-use
development opportunities. NewRiver has identified the potential to
develop up to 1,100 build-to-rent residential units and up to 300
purpose-built student accommodation units, offering significant
capital growth opportunities.
The acquisition price of GBP41.0 million reflects a significant
discount to the break-up value of these individual assets, as
provided by an independent valuer. It also represents a NIY of
9.1%, which is imminently expected to rise to 9.8% following the
completion of a number of leasing deals, with an equivalent yield
of 11.3% and a reversionary yield of 14.6%. NewRiver will also be
appointed as asset and development manager, in return for a
management fee calculated with reference to the gross rental income
and development costs of the asset, and will receive a 'promote'
based on financial performance.
Capital expenditure
In-line with our strategy of protecting our cash and liquidity
position we took a prudent approach to capital expenditure
('capex') during the year, investing a total of GBP5.3 million in
capex projects across our retail assets. The projects selected were
all income or value-accretive for the portfolio.
Projects undertaken across the retail portfolio during the year
include:
-- The construction of two drive-thru units at Waterfront Retail
Park, Barry, let on 15-year leases to Burger King and Costa Coffee,
improving the weighted average lease expiry (WALE) of the park and
likely to increase footfall, dwell time and average spend;
-- Amalgamation of the former Maplin and Mothercare units at
Blackburn Retail Park to create a new 25,000 sq ft B&M Bargains
unit and garden centre;
-- Lease surrender and subsequent landlord shell works of an
unoccupied unit in Wakes Retail Park, Newport, which we
subsequently relet to Food Warehouse on terms which materially
increased the WALE of the park to eight years and enhanced the
asset's valuation;
-- Landlord shell works, which included replacing a shop front
with a large, glazed entrance, to facilitate a letting to Wren
Kitchens at Kittybrewster Retail Park in Aberdeen;
-- Subdivision of the 55,000 sq ft unit formerly occupied by
Boots in The Prospect Centre, Hull; the ground floor area was
subsequently re-let to B&M Bargains, improving the WALE.
Across the pub estate we invested GBP7.9 million in capex
projects during the financial year (GBP8.1 million including
c-stores) which largely focused on improving the outside space of
our pubs to ensure that they were ready to welcome customers on
reopening.
Retail portfolio operations
Overview
Our UK-wide retail portfolio comprises 33 community shopping
centres, 19 retail parks and a small number of high street units.
These assets have an occupier line-up focused on essential goods
and services, and over two-thirds of them are anchored by a major
food and grocery brand. Our community shopping centres are located
in town and city centres, in close proximity to transport
connections, civic services and other local amenities, and are
characterised by a low travel time and a high frequency of visits.
Our retail parks are located on the edge of urban areas, in close
proximity to major A-roads, and are characterised by a spacious
open-air shopping experience and large free car parks which make
them highly compatible with retailers' click & collect
strategies.
COVID-19 lockdown, rent collection and ancillary revenue
Following the UK Government's requirement that all non-essential
retail premises had to temporarily close on 23 March 2020, our
centre managers ensured that all of our centres were compliant with
the regulations and that the centres were able to remain open and
provide a safe and secure shopping experience for those requiring
essential retail. The safety of our staff and customers remained
our main priority throughout FY21, a period in which communities
and businesses faced the challenge of three national lockdowns and
interim periods of tiered restrictions. Reflecting our focus on
providing essential retail to local communities, on average 66% of
our occupiers were open and trading throughout FY21.
Supported by affordable rents, occupiers across our portfolio
have proved resilient, with the majority of retailers who were
forced to close during lockdowns reopening within days of the
easing of restrictions on non-essential retail. We have also made
good progress in continuing to reduce occupier costs, achieving a
12% reduction in service charge budgets over the last four
years.
Since the first national lockdown in March 2020, we have engaged
constructively with our occupiers to collect contractual rent due,
and we made significant progress by negotiating over 300 revised
payment agreements. In a number of cases we have given occupiers
the option to be invoiced and pay rent monthly, rather than
quarterly in advance, which more closely aligns our revenue
collection with occupier cash flows. Despite the UK Government's
rental moratorium being in place for the full year, our rent
collection figures improved throughout the period and we closed the
year with a blended retail cash rent collection rate of 86% across
all four quarters of the financial year. Including rent either
deferred or subject to regear, this blended rate rises to 93%. Rent
collection in respect of the first quarter of FY22, due on 25 March
2021, currently stands at 85% including deferrals and regears,
ahead of collection at the same point last year.
Status of rent collection as at 27 May 2021
Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY21 Total FY21
Collected 82% 87% 91% 84% 86%
------------ ------------ ------------ ------------ -----------
Deferred 2% 2% 1% 4% 3%
------------ ------------ ------------ ------------ -----------
Re-gear 7% 4% 3% 4% 4%
------------ ------------ ------------ ------------ -----------
Total collected or
alternative payments
agreed 91% 93% 95% 92% 93%
------------ ------------ ------------ ------------ -----------
Waived 7% 5% 1% 3% 4%
------------ ------------ ------------ ------------ -----------
Rent outstanding 2% 2% 4% 5% 3%
------------ ------------ ------------ ------------ -----------
Total (%) 100% 100% 100% 100% 100%
------------ ------------ ------------ ------------ -----------
As this table shows, the majority of rent has been collected as
originally requested. Of the alternative payment agreements, the
majority of occupiers have either had rent deferred, over a period
of 2 to 24 months, averaging 12 months, or have agreed to a
re-gear, which typically entails a lease being extended in exchange
for the granting of a rent-free period. We have agreed to waive
rent in exceptional circumstances, for example for certain
charities and small and independent retailers.
Our rent collection metrics have consistently tracked ahead of
the wider market, demonstrating the strength of our occupier
relationships, the affordability of our rents and the resilience of
value and essential retail during an unprecedented period of
disruption and uncertainty.
Car parking utilisation and income during FY21 was also
significantly reduced as a result of COVID-19. We provided free
parking for key workers in relevant centres however overall park
usage was lower, leading to a 63% fall in car park income to GBP2.7
million.
In a similar way, commercialisation income has also suffered,
reducing by 57% year-on-year to GBP1.2 million. As we emerge from
COVID-19 we are focused on restoring commercialisation income to
previous levels and note that commercialisation activity is
recovering well following the easing of restrictions in April 2021.
We have retained all of our mall retail operators and our food and
beverage operators have performed particularly strongly, especially
those within open centres. A number of mall operators have expanded
into retail units in our centres in Newtownabbey and Middlesbrough.
Pop-up markets have also increased in number; whilst not highly
profitable in isolation, they generate considerable consumer
interest, animate centres and thereby help to revive footfall and
dwell times.
Leasing activity
During the year we completed 1,157,100 sq ft of new lettings and
renewals across our retail portfolio, representing GBP6.5 million
of annualised rent. This represents over a 70% uplift on leasing
volume of 678,100 sq ft completed in the previous financial year.
In the final two quarters of the year we witnessed a progressive
increase in the rents secured compared with both passing rent and
ERV. Long-term leasing deals for the year in aggregate were signed
at a -3.1% discount to previous passing rent and a 0.6% premium to
March 2020 ERV. Long-term leasing deals had an average length of
7.3 years. This high volume of leasing activity means that our
occupancy rate increased to 95.8% (31 March 2020: 94.8%) despite
the challenging market backdrop.
Our leasing activity throughout the year reflected our focus on
essential retailing. During the year we signed four leasing deals
with B&M, including three new lettings across our retail park
portfolio, and further deals with Homebase, Marks & Spencer,
Holland & Barrett, Wren Kitchens, The Works, Costa Coffee and
Burger King. In September 2020, we signed a portfolio deal with the
value card and gift retailer Cardzone, which saw it take an
additional six stores across our portfolio and more than doubled
our rental income from this growing retailer.
During the third quarter Next opened one of its first collection
& returns pods in the car park of Cuckoo Bridge Retail Park,
Dumfries, underlining the increasing importance of retail parks to
retailers' click & collect strategies.
In the final quarter of the financial year we completed two
significant leasing transactions totalling over 37,000 sq ft with
Instant Offices, a flexible office provider, in our shopping
centres in Cardiff and Bexleyheath. These transactions highlight
the alternative use potential of our well-located, accessible
assets. We also signed a new lease with Sports Direct for a 30,400
sq ft unit in Poole Retail Park.
Retail portfolio profile
Our retail rental income is well-diversified, with 1,700 leases
across over 800 different occupiers, and our top occupiers are
focused on providing essential goods and services. Our policy is
that no single retailer will account for more than 5% of total
rent, and our top tenants in terms of gross rental income at period
end were B&M, Poundland and Superdrug, each accounting for 1.9%
of total rent. This diversification, combined with our affordable
rents of GBP11.51 per sq ft as at 31 March 2021, underpins the
sustainability of our income. Although we consider lease length to
be less of a factor in supporting income sustainability, we were
pleased to see our weighted average lease expiry remain constant at
5.2 years (31 March 2020: 5.2 years).
Top retail occupiers
Rank Occupier % Total gross income Number of stores in
portfolio
1 B&M 1.9 11
------------------------- --------------------- --------------------
2 Poundland 1.9 20
------------------------- --------------------- --------------------
3 Superdrug 1.9 16
------------------------- --------------------- --------------------
4 Wilko 1.8 8
------------------------- --------------------- --------------------
5 Boots 1.7 16
------------------------- --------------------- --------------------
6 Primark 1.6 4
------------------------- --------------------- --------------------
7 TK Maxx 1.5 8
------------------------- --------------------- --------------------
8 Marks & Spencer 1.3 3
------------------------- --------------------- --------------------
9 Iceland 1.3 14
------------------------- --------------------- --------------------
10 Sainsbury's 1.2 3
------------------------- --------------------- --------------------
Subtotal 16.1
------------------------- ---------------------
e.g. Next, B&Q, WHSmith,
11-25 Home Bargains 11.1
------------------------- ---------------------
e.g. Greggs, Costa,
26-100 Tesco, Dunelm 18.8
------------------------- ---------------------
Total 46.0
------------------------- ---------------------
At our half-year results we provided a new sub-segmentation of
our shopping centre portfolio (Core/Regeneration/Work Out) in order
to further improve understanding of the income and valuation
profile of our assets, and our strategies to extract further value
from our portfolio. The segmentation, provided in more detail
below, shows that two-thirds of our assets are held in community
pubs, Core Shopping Centres and retail parks; strategies here are
to deliver income and valuation growth through active asset
management and small-scale developments. Our Regeneration Shopping
Centres portfolio includes our assets with significant large-scale
residential redevelopment potential, to be realised through our
development pipeline or disposal programme. Our Work Out Shopping
Centres portfolio is where a supply and demand imbalance is having
a significant impact on rents, and our strategy is to either
successfully reposition these centres to enable them to become core
through active management, or create regeneration opportunities or
dispose of them.
Sub-segment(1) Description % of portfolio Strategy
by value
Community Wet-led community pubs 25% Operational initiatives
pubs in suburban locations. and small-scale development
Delivering EBTIDA and (e.g. c-stores) initiatives
valuation growth pre-COVID-19 to enhance income and valuations
------------------------------- --------------- ----------------------------------
Core Shopping Located in areas with 22% Asset management and small-scale
Centres good supply/demand dynamics development (e.g. combining
for retail space, resulting units) initiatives to enhance
in sustainable income income and valuations
and valuations
------------------------------- --------------- ----------------------------------
Regeneration Centres with opportunities 22% Unlock value from regeneration
Shopping to deliver larger scale opportunities through capital
Centres residential-led regeneration partnerships or selling
schemes with the benefit of planning
------------------------------- --------------- ----------------------------------
Retail Parks Conveniently located food 16% Asset management and small-scale
& grocery-anchored retail development (e.g. drive
parks, offering free car thru pods) initiatives to
parking and optimised enhance income and valuations
for click & collect
------------------------------- --------------- ----------------------------------
Work Out Located in areas with 13% Asset management initiatives
Shopping an oversupply of retail to reposition centres and
Centres space, leading to downward move them into the Core
pressure on rents and Shopping Centres segment,
valuations and selective disposals
------------------------------- --------------- ----------------------------------
Other Standalone high street 2% Asset management initiatives
units, non-income generating to protect income and selective
development sites and disposals
other miscellaneous assets
------------------------------- --------------- ----------------------------------
1. Note that the Group considers its operating segments to be
Retail and Pubs for reporting purposes
Impact of CVAs and administrations
Our retail portfolio was affected by a number of Company
Voluntary Arrangements (CVAs) or administrations during FY21 which
related to occupiers including BrightHouse, New Look, Clarks,
Clintons, Peacocks and Bonmarché. CVAs and administrations have
been far more prevalent in the mid-market fashion and department
store sectors this year. As we have long recognised this
vulnerability we have deliberately avoided over-exposure to these
sectors, focusing instead on occupiers who provide essential retail
and convenience to their local community. Mid-market fashion
retailers account for less than 4% of our total rent and we do not
have any department stores within our portfolio.
Total exposure to retailers involved in CVAs or administrations
during the year was GBP5.3 million, or 5.7% of our annual net
rental income at the start of the year. Adjusting for those stores
unaffected by CVAs and amounts recovered through new leasing
transactions or transactions currently in legals on affected units,
the net rental exposure falls by GBP1.3 million to GBP4.0 million.
Furthermore, CVAs and administrations notably reduced in the second
half of FY21; of the GBP5.3 million total exposure for FY21 only
GBP1.7 million, primarily relating to New Look, Peacocks and
Clarks, relates to the second half.
Asset management platform
Despite a challenging year for Local Authorities and asset
owners we are pleased to have secured a renewal of our third-party
asset management mandates with Canterbury City Council and Knowsley
Council to manage key retail assets in their town centres. In
addition, we have secured two further mandates for the assets
acquired via our relationship with BRAVO during the year. The
scale, relationships and governance credentials of the NewRiver
platform continues to attract the interest of Local Authorities and
private owners of retail assets.
Hawthorn community pub portfolio operations
Overview
Our Hawthorn community pub business owns 673 pubs throughout
England, Scotland and Wales. Over 96% of our pubs are owned
freehold, and occupancy was 98% at period end (31 March 2020:
97.0%).
Across Hawthorn, 80% of sites operate under a Leased &
Tenanted model, whereby Hawthorn has an occupational lease with a
tenant, who is responsible for all operating costs of the pub,
including staff costs. Most of our Leased & Tenanted pubs are
'tied', meaning that tenants are required to purchase drinks from
Hawthorn and lease games machines from Hawthorn-approved suppliers.
In return, Hawthorn receives rental income, a margin between the
wholesale price and sale price to tenants on drinks supplied, and a
share of machine profits.
The remaining 20% of Hawthorn sites operate under an Operator
Managed model, whereby Hawthorn enters into an operator agreement
with a pub partner. Hawthorn incurs all operating costs of running
the pub, except for staff costs, which are borne by the operator.
In return, Hawthorn receives gross turnover generated by the pub
and pays a management fee to the pub partner, which is on average
around 20% of net revenue.
First COVID-19 lockdown and subsequent recovery
The UK Government required the temporary closure of all
hospitality businesses on 20 March 2020, and our entire portfolio
was closed until 4 July 2020, when pubs in England were allowed to
reopen. During the lockdown period, our focus was on protecting
Hawthorn's financial position and supporting our pub partners. To
protect our financial position, we accessed UK Government support
packages which we invested directly in pub partner assistance and
reduced non-essential capex and operating costs. Our Business
Development Managers were in close contact with our pub partners
and provided help in accessing available government support,
including the Retail, Hospitality and Leisure Grant and the
Coronavirus Job Retention Scheme. In addition, over 86% of our pub
partners invested in their pub during the lockdown, particularly in
improving outside space. Reflecting this level of support, 97% of
our tenants said they were either satisfied or very satisfied with
Hawthorn's help during the lockdown period.
From 4 July 2020, our pubs in England were allowed to reopen,
and within a week over 90% of our pub portfolio in England was
operational. Following the lifting of restrictions in Scotland and
Wales several weeks later, over 90% of our entire portfolio was
trading by mid-August 2020.
The underlying performance of our pubs was strong following
reopening, with like-for-like volumes in our Leased & Tenanted
portfolio down only 8% and like-for-like sales in our Operator
Managed pubs down only 16% compared to the same period in 2019.
This performance compared favourably to the wider market; pub
like-for-like sales were down 18% over the same period according to
the Coffer Peach Business Tracker.
In order to support our pub partners recovery following
reopening, we did not charge rent for the months of July or August
2020, and launched our innovative Partner Investment Fund, through
which we matched investments made by pub partners. Both of these
schemes were conditional on obtaining commitments from our pub
partners that ensured we were able to retain the best tenants and
operators for the long-term.
New restrictions from October 2020 and reopening from April
2021
From October 2020, our pub operations began to face new
restrictions, initially in the form of new hospitality closures in
Scotland but culminating in further national restrictions for
England announced by the UK Government on 31 October. As a result
of COVID-19 measures, our pubs were only able to trade for 17 weeks
of the financial year and certain pubs have been able to operate
for an even shorter period as a result of local tier restrictions.
Furthermore, our pubs have also been subject to significant
restrictions on trading capacity to satisfy social distancing
requirements.
The experience gained during the first lockdown meant that we
could act swiftly and effectively, offering financial aid and
practical advice, to support our tenants and pub operators during
this period of fresh restrictions.
During FY21 we invested GBP1.3 million of grant income in
support payments to pub partners in our Operator Managed estate.
These support payments, designed to cover operator living costs,
were aimed at maintaining high levels of operator retention and
occupancy. This ensured that our pubs were ready to welcome back
customers on reopening and removed the burden of vacant property
costs. At the end of our financial year only four pubs in our
Operator Managed portfolio were vacant, representing a 96.4%
occupancy level. This is a testament to the targeted support and
strong relationships our Business Development Managers (BDMs) and
wider team have forged with our pub operators.
Within our Leased & Tenanted pub estate we have invested
almost GBP8 million in rental support to our pub tenants, enabling
them to build cash reserves and recover swiftly on reopening. At
the end of the financial year only 11 of our Leased & Tenanted
pubs were unoccupied, representing a 98.0% occupancy level.
Following decisive action to invest in our portfolio during the
first lockdown, and having seen the benefits of this on reopening,
we took the opportunity to future-proof more of our pubs during the
second half of FY21 and invested a further GBP0.9 million in
improving outside space. An additional GBP0.3 million (matched by
tenants) was also invested via our Partner Investment Fund to
support 110 new schemes.
The dedication and talent of the Hawthorn team was recognised in
the results of KAM Media's February 2021 'Licensee Index', the
leading operator sentiment tracker for the UK licensed and tenanted
pub sector. Hawthorn's overall rating in this index - 8.5 out of 10
- was the highest of all major pub companies, and in the area of
COVID-related support specifically, Hawthorn scored 9.2 out of 10,
again the highest amongst the major pub companies.
After several months of temporary closure, Hawthorn opened over
60% of its portfolio on 12 April 2021, following the easing of
restrictions on outside trading, and reopened the vast majority of
the remaining pubs following the easing of restrictions on indoor
trading from 17 May. With a focus on well-located community and
suburban pubs, and with the benefit of more consumers working from
home and using their local services and facilities, we have once
again been able to recover quickly on reopening and trading is
tracking significantly ahead of budget. Since 12 April,
like-for-like volumes in our Leased & Tenanted portfolio are
down only 2% compared to the same period in 2019 which is a
remarkable achievement given that for the majority of this time we
have only been trading in outdoor space and the weather was poor.
Like-for-like sales in our Operator Managed pubs are down 17%
compared to the same period in 2019 but are still ahead of budget
and in line with the wider pub sector as measured by the Coffer
Peach Business Tracker. Rent collection is progressing well; we
have collected 95% of all rent billed since 4 December 2020.
In response to the revenue recovery in our pubs since reopening
we made the decision to repay funds received under the Coronavirus
Job Retention Scheme during lockdown last year. These funds were
repaid to HMRC in April 2021.
Convenience store ('c-store') developments
To date we have delivered 26 c-stores to the Co-op and during
the year we completed construction of 10 apartments at the Seaview
Inn, Poole. We sold these apartments, including the c-store, for
GBP2.8 million in February 2021 to a single purchaser. We received
a premium payment of GBP275,000 from the Co-op in May 2020
following completion of the Seaview Co-op development. We are
currently exploring further c-store opportunities on surplus land
across our pub portfolio. This includes one of our sites in
Glasgow, where we could deliver a scheme similar to the development
at the Sea View Inn, comprising a c-store and up to 30
apartments.
Pub and c-store disposals
Our disposal programme across the pub estate progressed well
despite the restrictions on pub operations throughout large parts
of the year, reflecting the inherent liquidity of these assets.
Since 1 April 2020 we have completed 45 pub disposals and two
c-store disposals, generating total sales proceeds of GBP13.8
million. The pub disposals generated gross proceeds of GBP9.8m,
representing an average blended discount of only 7% to book values,
and during this period we exited from the fully managed segment by
selling our remaining fully managed pubs, in line with our
strategy.
Development in the retail portfolio
Our development pipeline totals 2.6 million sq ft (2.2 million
sq ft in the near-term) and is one of the ways in which we extract
further value from our assets, particularly those in our
Regeneration Shopping Centre segment. Over 70% of our development
pipeline is within the Regeneration Shopping Centre portfolio and,
reflecting our focus on realising alternative use potential, over
75% of the pipeline relates to residential development.
For the majority of projects in our pipeline, we intend to
either sell the site with the benefit of planning or continue with
development through capital partnerships. However, for smaller
projects with a lead time of less than 12 months, such as our
c-store developments for the Co-op, we will typically fund and
manage the construction ourselves, using our experienced in-house
development team.
The disruption caused by COVID-19 has had an acute impact on our
development progress during the year; Local Authorities' planning
resources have been stretched even further and planning
applications and on-site construction works across the UK have
experienced significant delays. To protect our cash and liquidity
position we also curtailed many of our capex projects at the outset
of the pandemic and focused on projects where we were confident of
generating positive returns with limited risk.
Development pipeline
Shopping Retail Health Hotel C-store Residential Total Retail Resi
Centre Park & Social Pipeline & Pre-sold
Care Leisure
Pre-let
Sq ft Sq ft Sq ft Sq ft Sq ft Sq ft Sq ft % %
Completed/Under
construction
in FY21 - 3,600 - 37,900 3,600 8,100 53,200 100 -
--------- -------- --------- -------- -------- ------------
Planning granted 279,000 31,000 - 63,100 10,700 562,500 946,300 56 29
--------- -------- --------- -------- -------- ------------ -------- ---------
In planning - - - - 3,500 13,200 16,700 100 -
--------- -------- --------- -------- -------- ------------ -------- ---------
Pre-planning - 77,300 54,200 - 3,500 1,056,900 1,191,900 41 -
--------- -------- --------- -------- -------- ------------ -------- ---------
Near-term
pipeline 279,000 111,900 54,200 101,000 21,300 1,640,700 2,208,100
--------- -------- --------- -------- -------- ------------ -------- ---------
Early
feasibility
stages - - - 50,000 - 378,000 428,000
--------- -------- --------- -------- -------- ------------ -------- ---------
Total pipeline 279,000 111,900 54,200 151,000 21,300 2,018,700 2,636,100
--------- -------- --------- -------- -------- ------------ -------- ---------
Additional
residential
potential(1) - - - - - 451,200
--------- -------- --------- -------- -------- ------------
1. A strategic review of our entire retail portfolio identified
the p otential to deliver residential units adjacent to or above
our assets over the next 5-10 years
Completed in period/Under construction
Romford Premier Inn: During the year we continued on-site at the
development of an 85-room Premier Inn at a former high street unit
in Romford, Greater London. This development has already been sold
to a property investor as part of a pre-let forward funding
agreement and practical completion is on schedule for the end of
June. Our development team's efforts resulted in the achievement of
BREEAM 'Very Good' certification for our design stages of the
construction of the Premier Inn, which notably achieved 100% for
Land Use & Ecology and Transport.
Planning granted
During the financial year over 436,000 sq ft of planning
consents have been secured despite the considerable planning delays
and disruption caused by COVID-19. A summary of some of the key
projects is provided below.
Burgess Hill: In September 2020, Mid Sussex District Council
approved our revised planning application for our 465,000 sq ft
mixed-use regeneration scheme in Burgess Hill town centre. Working
closely with local stakeholders, we had adjusted the design of the
scheme to increase its residential provision, from 142 units to
172, and reduce space designated for retail, reflecting the
changing nature of the retail market.
The revised scheme includes a 16-lane bowling alley, a 10-screen
multiplex cinema, and an 85-bed hotel with a new public café,
alongside a significantly improved public realm to provide
functional space for managed outdoor events. However, the impact of
COVID-19 over the last 12 months has been particularly challenging
for the leisure sector, which means that it is likely to take
longer to deliver the cinema and bowling elements of the
masterplan. Therefore, in the meantime we are consulting with Mid
Sussex District Council to investigate the potential of bringing
forward the 172-unit residential redevelopment scheme as a priority
alongside completing a 'partial implementation' scheme to build the
new carpark and refurbish the existing retail units.
Medical centre in Wallsend: In February 2021 planning consent
was granted for the development of a new medical centre on our land
adjacent to The Forum shopping centre in Wallsend. This land is
under offer to a primary care property specialist, and we
anticipate that the new medical centre will be open by Summer
2022.
Expansion of existing unit at Rishworth Centre and Railway
Street Retail Park, Dewsbury: We have signed an agreement for lease
with Aldi to occupy a 19,000 sq ft unit at Rishworth Centre and
Railway Street Retail Park, Dewsbury, expanding an existing unit
that is currently occupied by Next. We achieved planning in March
2021 and intend to start on site in late summer 2021.
Newton Mearns extension and residential development: We have
planning for a 10,000 sq ft extension of Newton Mearns' The Avenue
shopping centre - near Glasgow - to accommodate a fitness operator.
We are also under offer from a local housing developer on adjacent
land at the shopping centre which has the potential for 36
residential units.
Pre-planning
Our pre-planning progress has also been impacted by COVID-19
however we are working on a number of opportunities which we will
be looking to accelerate in the coming months.
Grays: We acquired Grays Shopping Centre in June 2018,
recognising a significant opportunity for a high-density
residential-led redevelopment of the site, which is located just 35
minutes from central London by train. We are currently working
closely with Thurrock Council to bring forward a redevelopment plan
that would reduce existing commercial floorspace from 177,000 sq ft
to 70,000 sq ft, increase public open areas and facilitate an
improved pedestrian flow through Grays town centre, as well as
providing over 800 new homes. In February 2021 an updated
pre-application report was submitted to Thurrock Council setting
out the evolution of the scheme following consultations with
council officers. In May the council confirmed their broad support
for the work carried out on the proposals so far and we are now
preparing presentations for the Design Review Panel in order to
build further support for the outline planning application.
Fareham: We are awaiting planning consent to reconfigure the
internal road network at Locks Heath shopping centre in Fareham,
Hampshire, which will enable two land sales; one to a senior living
housing developer and another to a local residential developer. Our
value-add strategy will provide new homes adjacent to our thriving
shopping centre and will improve overall returns from the
asset.
Witham: At Newlands shopping centre in Witham, Essex, we are in
negotiations to sell one site to a housebuilder alongside planning
to deliver 37 apartments and potentially a new health centre on
another site. Successful delivery will not only bring new homes
into the centre of Witham but will also provide a much-needed
community service in the heart of our shopping centre.
Valuation
During the year our portfolio valuation declined to GBP974
million from GBP1.20bn at 31 March 2020 as a result of disposal
activity and a 13.6% reduction in portfolio valuation.
A breakdown of the key valuation movements by asset type is
provided below.
As at 31 March Valuation Portfolio Valuation Valuation Valuation Topped-up NEY LFL ERV
2021 (NRR share) Weighting Deficit Deficit Deficit NIY Movement
H1 H2 FY
----------
(GBPm) (%) (%) (%) (%) (%) (%) (%)
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Pubs & C-Stores 248 25% -4.5% -4.2% -8.5% 11.0% 11.0% -
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Shopping Centres
- Core 210 22% -10.4% -8.5% -18.0% 9.5% 9.3% -9.9%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Shopping Centres
- Regeneration 210 22% -6.9% -3.0% -9.7% 5.9% 6.7% -7.1%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Retail Parks 157 16% -4.8% 0.7% -4.8% 7.3% 7.7% 0.4%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Shopping Centres
- Work Out 132 13% -15.1% -13.1% -26.2% 9.3% 13.2% -5.6%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Other 17 2% -16.4% -11.6% -27.2% 9.1% 7.6% -17.4%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
Total 974(1) 100% -8.2% -5.6% -13.6% 8.8% 9.5% -6.4%
------------- ----------- ---------- ---------- ---------- ---------- ------ ----------
1. See note 14 for reconciliation between Valuation (NRR share)
shown in this table, and the relevant notes to the financial
statements
Valuations in the shopping centre and retail park markets have
been significantly impacted during the COVID-19 period through an
acceleration of yield expansion, cash flow disruption and ERV
decline. However, within our portfolio we are now seeing a clear
trend towards valuation stabilisation, with our valuation decline
slowing (H1 FY21: -8.2%, H2 FY21: -5.6%) driven by a significant
improvement in ERV decline (H1 FY21: -4.8%, H2 FY21: -1.6%) as
evidenced by our strong leasing performance during the year.
Overall, our shopping centre portfolio saw like-for-like
equivalent yields expand by 81 bps resulting in the portfolio now
being valued at an equivalent yield of 9.3%. Our shopping centre
NIY is now 8.2% (260 bps higher than the 20-year MSCI long-term
average of 5.6%).
Our Core shopping centre portfolio saw a valuation decline of
18% during the period attributable to 89 bps of yield expansion and
9.9% ERV decline. Regeneration shopping centres experienced a much
lower rate of valuation decline of 9.7% owing to the portfolio's
significant alternative use value ('AUV').
The resilience of our retail park assets was particularly
evident in the second half of the financial year with ERV growth
reverting to positive territory (H2 FY21: 2.0%) and yields
stabilising (H2 FY21: -6 bps). Our retail park portfolio is now
valued at an equivalent yield of 7.7%.
The Work Out shopping centre portfolio, which represents only
13% of all our gross assets, suffered a 26.2% valuation decline.
This decline was mainly market driven with equivalent yields
expanding by 206 bps to 13.2%. Whilst we do not anticipate further
significant outward yield movement we remain committed to reducing
our exposure to these assets over the medium term.
Despite the significant disruption to the pub sector during FY21
our pub values performed well, reporting just 8.5% of valuation
decline, in part reflecting the portfolio's lack of exposure to
city centre locations most affected by the abrupt shift to working
from home.
As the table below shows, our portfolio outperformed the
MSCI-IPD All Retail benchmark on a total return basis by 120 bps,
attributable to an income return outperformance of 180 bps. When
our portfolio returns are compared to the specific indices for
shopping centres and retail parks, our portfolios show a
considerably higher total return outperformance (total returns
ahead by 1,670 bps for shopping centres and 430 bps for retail
parks). In our view, our overall outperformance is driven by the
affordable, sustainable nature of our rents, our smaller, more
liquid lot sizes and our high occupancy levels, which means that
our ERV decline was far less marked than our peers.
Year to 31 March 2021 Total Return Income Return Capital Growth
NRR portfolio -6.9% 7.5% -13.5%
------------- -------------- ---------------
MSCI-IPD Benchmark(1) -8.1% 5.5% -12.9%
------------- -------------- ---------------
Relative performance +120 bps +180 bps -60 bps
------------- -------------- ---------------
Year to 31 March 2021 Total Return
NRR shopping centre portfolio -10.8%
-------------
MSCI-IPD shopping centre Benchmark(1) -23.6%
-------------
Relative performance +1,670 bps
-------------
NRR retail park portfolio 0.6%
-------------
MSCI-IPD retail park Benchmark(1) -3.6%
-------------
Relative performance +430 bps
-------------
1. Benchmark includes monthly & quarterly valued retails
For a number of years we have been tracking the alternative use
value ('AUV') for our retail assets and as at 31 March 2021 the AUV
of our retail portfolio is GBP767 million which, for the first
time, exceeds our retail book values by 6%. The majority
alternative use in our portfolio is residential which has been a
key driver of the increase in our AUV.
Finance review
COVID-19 has inevitably had an impact on our financial
performance in the year. At the outset of the pandemic we moved
quickly and decisively to protect our cash and liquidity position
by drawing down on our Revolving Credit Facility ('RCF'),
accelerating our disposal strategy, cancelling non-essential
capital expenditure and suspending dividend payments. As a result,
no dividends were paid in the period, compared to 16.2 pence per
share in FY20. In recognition of the Company's increased cash and
liquidity position, resilient performance during the pandemic and
the improving market backdrop, the Board has today announced the
resumption of dividends, declaring a dividend of 3.0 pence relating
to FY21.
Given the difficult circumstances that we faced, it is
unsurprising that Underlying Funds From Operations ('UFFO') came in
at GBP11.5 million compared to GBP52.1 million in the prior year,
however we have remained profitable in spite of the fact that our
community pub business was only able to trade for 17 weeks of the
financial year. Our IFRS loss after tax was -GBP150.5 million,
compared to a loss of -GBP121.1 million in the prior year,
predominantly reflecting a non-cash reduction in portfolio
valuation of GBP152.9 million.
Our portfolio was valued on a proportionally consolidated basis
at GBP0.97 billion at 31 March 2021, compared to GBP1.20 billion at
31 March 2020, reflecting a 13.6% like-for-like decline in
portfolio valuation and the successful execution of our disposal
strategy. Our EPRA Net Tangible Assets per share were 151 pence (31
March 2020: 201 pence) and our IFRS net assets were GBP460.4
million (31 March 2020: GBP610.6 million), with the changes
predominantly explained by a non-cash reduction in portfolio
valuation. The valuation declines across all segments of the
portfolio have been less marked, or have reversed, in the second
half of the financial year.
Improved cash and liquidity position despite unprecedented
income disruption
Throughout the financial year, we have taken decisive actions to
protect the strength of our unsecured and unencumbered balance
sheet by maximising our cash and available liquidity position and
reducing net debt. We ended the year with total available liquidity
of GBP199.3 million, increased from GBP127.1 million as at 31 March
2020. This reflects the increase in our entirely unrestricted cash
position from GBP82.1 million to GBP154.3 million. As a result, net
debt reduced from GBP563.6 million to GBP493.3 million over the
financial year.
Since the UK's first national lockdown in March 2020, we have
closely monitored our liquidity position, undertaking detailed
analysis and stress testing which continues to demonstrate that we
remain a financially sound business with a capital structure that
is well placed to absorb a prolonged period of uncertainty. We
moved quickly to apply for the Covid Corporate Financing Facility
('CCFF'), for which our eligibility to draw GBP50 million was
confirmed in April 2020. While we did not draw the CCFF, our
eligibility meant that we had available undrawn debt facilities of
GBP95 million including the undrawn portion of our revolving credit
facility, until the CCFF lapsed in March 2021. In recognition of
the resilience of our position, in December 2020, Fitch Ratings
reaffirmed NewRiver's Long-Term Issuer Default Rating (IDR) at
'BBB' with Stable Outlook, its senior unsecured rating at 'BBB+',
and its Short-Term IDR at 'F2'. The senior unsecured rating applies
to NewRiver's GBP300 million senior unsecured bond dated 2028.
LTV increased by 350 bps from 47.1% at the start of the year to
50.6% at 31 March 2021, primarily as a result of non-cash valuation
declines mitigated by the successful execution of our disposal
strategy, with GBP81.2 million of completed disposals. Despite
increasing during the year LTV remains safely below our covenant
thresholds and, encouragingly, the rate of valuation decline has
reduced significantly in the second half of the financial year with
retail park valuations returning to growth. Notwithstanding a full
year of COVID-19 disruption our interest cover ratio, the other
covenant attached to our unsecured facilities, remains in
compliance at 2.3x, ahead of our closest covenant of 1.75x.
Our LTV guidance is unchanged and we remain committed to
reducing our LTV to below 40%. We plan to do this through further
targeted disposals, as demonstrated by the GBP79 million of retail
disposals we currently have exchanged or under offer, and the
recently announced intention to divest ourselves of Hawthorn, our
community pub business.
Finally, we have a covenant light capital structure with all of
our balance sheet assets unencumbered. There are no refinancing
events until August 2023, so our balance sheet is in a strong
position as we emerge from COVID-19. Maintaining our balance sheet
strength and executing our plan to reduce LTV will be a key focus
for the rest of FY22 and beyond.
Key performance measures
The Group financial statements are prepared under IFRS, where
the Group's interests in joint ventures are shown as a single line
item on the income statement and balance sheet. Management reviews
the performance of the business principally on a proportionally
consolidated basis which includes the Group's share of joint
ventures on a line-by-line basis. The Group's financial key
performance indicators are presented on this basis.
In addition to information contained in the Group financial
statements, Alternative Performance Measures ('APMs'), being
financial measures that are not specified under IFRS, are also used
by management to assess the Group's performance. These include a
number of the financial statistics included on Page 2 of this
document. These APMs include a number of European Public Real
Estate Association ('EPRA') measures, prepared in accordance with
the EPRA Best Practice Recommendations reporting framework, which
are summarised in the 'Alternative Performance Measures' section at
the end of this document. We report these measures because
management considers them to improve the transparency and relevance
of our published results as well as the comparability with other
listed European real estate companies. Definitions for APMs are
included in the glossary and the most directly comparable IFRS
measure is also identified. The measures used in the review below
are all APMs presented on a proportionally consolidated basis
unless otherwise stated.
The APM on which management places most focus, reflecting the
Company's commitment to driving cash income returns, is UFFO. UFFO
measures cash profits, which includes recurring cash profits and
excludes other one-off or non-cash adjustments. We consider this
metric to be the most appropriate for measuring the underlying
performance of the business as it is familiar to non-property
investors, and better reflects the Company's generation of cash
profits. It is for this reason that UFFO is used to measure
dividend cover.
The relevant sections of this Finance Review contain supporting
information, including reconciliations to the financial statements
and IFRS measures. The 'Alternative Performance Measures' section
also provides references to where reconciliations can be found
between APMs and IFRS measures.
Underlying Funds From Operations
The following table reconciles IFRS profit after taxation to
UFFO, which is the Company's measure of cash profits.
Reconciliation of loss after taxation to UFFO
31 March 2021 31 March 2020
(GBPm) (GBPm)
-------------
Loss for the period after taxation (150.5) (121.1)
------------------------------------------ ------------- -------------
Adjustments
Revaluation of property 154.7 162.6
Revaluation of joint ventures' investment
properties (1.8) 4.3
Loss on disposal of investment properties 5.5 1.8
Revaluation of derivatives 0.1 2.8
Loss on disposal of subsidiary 2.2 -
Acquisition costs 0.1 0.4
Deferred tax (1.4) 0.5
EPRA earnings 8.9 51.3
-------------
Depreciation on public houses 1.1 0.8
Forward looking element of IFRS 9 0.6 -
Abortive fees 0.3 -
Share-based payment charge 0.6 -
Underlying Funds From Operations 11.5 52.1
-------------
Underlying Funds From Operations is represented on a
proportionally consolidated basis in the following table.
31 March 2021 31 March
2020
UNDERLYING FUNDS FROM Group Non-cash JVs & Associates Proportionally Proportionally
OPERATIONS adjustments(1) GBPm consolidated consolidated
GBPm GBPm GBPm GBPm
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Revenue 91.1 - 4.6 95.7 148.2
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Property operating expenses (47.1) 0.6 (1.0) (47.5) (55.3)
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Net property income 44.0 0.6 3.6 48.2 92.9
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Administrative expenses (23.4) 2.1 (0.2) (21.5) (19.8)
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Other income 7.2 - - 7.2 -
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Net finance costs (22.8) (0.1) (0.8) (23.7) (22.0)
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Taxation 2.7 (1.4) - 1.3 1.0
----------------------------- ------- ---------------- ----------------- --------------- ---------------
Underlying Funds From
Operations 11.5 52.1
----------------------------- ------- ---------------- ----------------- --------------- ---------------
UFFO per share (pence) 3.8 17.0
------- ---------------- ----------------- --------------- ---------------
Ordinary dividend per
share (pence) 3.0 16.2
------- ---------------- ----------------- --------------- ---------------
Ordinary dividend cover 127% 105%
------- ---------------- ----------------- --------------- ---------------
Admin cost ratio 24.9% 14.9%
------- ---------------- ----------------- --------------- ---------------
Weighted average # shares 306.4 305.9
------- ---------------- ----------------- --------------- ---------------
1. Adjustments to Group figures to remove non-cash items,
principally forward looking element of IFRS 9 GBP(0.6) million,
depreciation on public houses GBP(1.1) million, abortive fees and
acquisition costs GBP(0.4) million, share-based payment charge
GBP(0.6) million, revaluation of derivatives GBP0.1 million and
Deferred tax GBP1.4 million
Net property income
Analysis of retail net property income (GBPm)
----------------------------------------------------- -------
Retail net property income for the year ended
31 March 2020 68.4
---------------------------------------------- ----- -------
Like-for-like rental income (3.4)
FY21 CVAs and administrations (2.4)
Rent and service charge provisions (5.6)
Lease modifications (1.6)
Car park and commercialisation income (5.6)
---------------------------------------------- ----- -------
COVID-19 impact (15.2)
Acquisitions 2.1
Disposals (2.2)
Asset management fees 0.3
Other property costs (2.1)
Other (0.7)
---------------------------------------------- ----- -------
Retail net property income for the year ended
31 March 2021 47.2
---------------------------------------------- ----- -------
On a proportionally consolidated basis, retail net property
income was GBP47.2 million for the year ended 31 March 2021
compared to GBP68.4 million in the year ended 31 March 2020.
Like-for-like net rental income declined by GBP3.4 million, or
-6.2%, including the impact of CVAs and administrations in the
prior year. Further to this, CVAs and administrations in FY21,
including New Look and Peacocks, reduced net property income by
GBP2.4 million.
The GBP5.6 million provision increase has been made in relation
to retail rents and service charge amounts that we have deemed
unlikely to be received as a result of the COVID-19, and the lease
modifications reduction of GBP1.6 million reflects the impact of
reprofiling rents where, for example, rent free periods have been
offered as a result of the impact of COVID-19. Car park and
commercialisation income has declined by GBP5.6 million, or -59%,
reflecting reduced footfall across town centres during the national
lockdown period.
The GBP2.1 million of additional income from acquisitions
related to a full half of income from five retail parks acquired in
our relationship with BRAVO, and the acquisition of Sprucefield
Retail Park, in FY20. This more than offset the GBP2.2 million of
income lost as a result of our asset disposal programme.
The GBP0.3 million increase in asset management fee income,
reflects our increased focus on leveraging our market-leading asset
management platform, by managing assets on behalf of joint venture
partners and third parties.
Analysis of Hawthorn net property income (GBPm)
Hawthorn net property income for the year ended
31 March 2020 24.5
------
Decrease in like-for-like income (0.6)
COVID-19 closure impact (14.6)
Partner support provided (8.7)
Beer destruction (0.4)
------------------------------------------------ ------ -------
COVID-19 impact (23.7)
Bravo Inns acquisition 0.8
Acquisition of 28 pubs from Marston's 0.2
Pub and c-store disposals (0.3)
Other 0.1
------------------------------------------------ ------ -------
Hawthorn net property income for the year ended
31 March 2021 1.0
------------------------------------------------ ------ -------
Pub net property income was GBP1.0 million during the year to 31
March 2021, compared to GBP24.5 million in the year to 31 March
2020, predominantly due to the mandatory closure of our pub
portfolio for the vast majority of the financial year as part of
the UK Government's response to the COVID-19 pandemic. In England,
where the majority of our pubs are located, we experienced seven
months of national lockdowns, two months of the tiered system, and
just three months of normal trading over the Summer of 2020. When
the pubs were open and able to trade, performance was encouraging,
with only a modest like-for-like decline of GBP0.6 million,
reflecting reduced capacity, recovering customer confidence, some
localised restrictions, and the Government's Eat Out to Help Out
scheme.
The direct impact of closing our pubs throughout the sustained
periods of lockdown in the year adversely impacted by income by
GBP14.6 million, with the support provided to partners,
predominantly in the form of rent waivers, further reducing income
by GBP8.7 million. The cost of destroying beer supplies adversely
impacted income by GBP0.4 million.
The impact of a full year of income from the acquisitions of
Bravo Inns and 28 community pubs from Marston's in FY20 added
GBP0.8 million and GBP0.2 million respectively.
Administrative expenses
Administrative expenses were GBP21.5 million in the year,
compared to GBP19.8 million in FY20. A driver of the increase
included the investment we have made into our Hawthorn operating
platform in support of the acquisitions made in FY20.
Other income
Other income of GBP7.2 million was received during the year,
GBP2.7 million relating to our retail portfolio, and GBP4.5 million
relating to our pub portfolio. In retail, other income related
entirely to insurance proceeds received following the fire in
October 2018 at the unit formerly occupied by B&M at Clifton
Moor Retail Park in York.
In the pubs, we received a dilapidation payment in relation to
cost of repairs made to the 'Trent' portfolio. This contributed a
further GBP0.8 million to income. In addition, we received GBP3.7
million of government grants on our operator managed estate, due to
the income disruption caused by the closure of the pub estate in Q1
as a result of COVID-19.
Net finance costs
Net finance costs were GBP23.7 million in the year, compared to
GBP22.0 million in the prior year. This is mainly due to the
strategic liquidity decision to draw on our RCF in order to protect
our cash and liquidity position at the onset of COVID-19
(contributing GBP1.1 million of the increase), and increase in
margin due to our LTV rising above 40% in the second half of FY20
(GBP0.6 million).
Taxation
As a REIT we are exempt from UK corporation tax in respect of
our qualifying UK property rental income and gains arising from
disposal of exempt property assets. The majority of the Group's
income is therefore tax free as a result of its REIT status. Our
REIT exemption does not extend to profits arising from the margin
made on the sale of drinks within the pub portfolio and other
sources of income. There was a tax credit of GBP1.3 million during
the year, reducing tax provisions made which are no longer expected
to be required.
Dividends
On 19 March 2020 we announced that the Board had decided not to
declare a fourth quarter dividend for the year ended 31 March 2020
due to uncertainty around the impact of COVID-19 on the Company's
operations. When we announced our results for the first half of the
financial year on 26 November 2020 we stated that, due to the
uncertainty that remained at the time, the Board had decided not to
pay a dividend in respect of the first half in order to continue
its focus on cash reserves and liquidity, but that it was the
Board's intention that a covered dividend would be reinstated at
the full year.
Although significant uncertainty remains globally, with the
success of the vaccine roll-out in the UK and with the easing of
further restrictions on 17 May, England is on track to remove the
majority of restrictions on 21 June 2021. In this context, together
with the Company's increased cash and liquidity position and
resilient performance during the pandemic, the Board has declared a
dividend of 3.0 pence per share in respect of the year ended 31
March 2021.
Prior to COVID-19, NewRiver's policy was to pay dividends on a
quarterly basis in equal instalments, and the quarterly dividend
for the forthcoming year was set at the full year results. This
policy was successful for a number of years, but ultimately did not
allow management the flexibility to make the capital and
operational decisions required in order to achieve the Company's
strategic priorities.
As a consequence, NewRiver's dividend policy will now be to pay
dividends equivalent to 80% of UFFO. These dividends will be
declared twice annually at the Company's half and full year
results, calculated with reference to the most recently completed
six-month period.
The Company is a member of the REIT regime whereby profits from
its UK property rental business are tax exempt. The REIT regime
only applies to certain property-related profits and has several
criteria which have to be met, including that at least 90% of our
profit from the property rental business must be paid as dividends.
We intend to continue as a REIT for the foreseeable future.
A dividend of 3.0 pence per share in respect of the year ended
31 March 2021 will, subject to shareholder approval at the 2021
AGM, be paid on 3 September 2021. The ex-dividend date will be 29
July 2021. The dividend will be payable as a REIT Property Income
Distribution (PID).
Balance sheet
EPRA net assets include a number of adjustments to the IFRS
reported net assets and both measures are presented below on a
proportionally consolidated basis.
As at 31 March 2021 As at 31 March
2020
Group JVs & Associates Proportionally Proportionally
GBPm GBPm consolidated consolidated
GBPm GBPm
-------- ----------------- --------------- ---------------
Properties at valuation 930.1 44.1 974.2 1,197.1
Right of use asset 86.5 - 86.5 87.2
Investment in JVs & associates 30.9 (30.9) - -
Other non-current assets 1.9 1.6 3.5 2.9
Cash 150.5 3.8 154.3 82.1
Other current assets 26.0 1.2 27.2 27.9
-------- ----------------- --------------- ---------------
Total assets 1,225.9 19.8 1,245.7 1,397.2
-------- ----------------- --------------- ---------------
Other current liabilities (47.6) (1.9) (49.5) (49.9)
Lease liability (84.9) - (84.9) (86.3)
Debt (629.7) (17.9) (647.6) (645.7)
Other non-current liabilities (3.3) - (3.3) (4.7)
-------- ----------------- --------------- ---------------
Total liabilities (765.5) (19.8) (785.3) (786.6)
-------- ----------------- --------------- ---------------
IFRS net assets 460.4 - 460.4 610.6
-------- ----------------- --------------- ---------------
EPRA adjustments:
Goodwill (0.5) (0.2)
Deferred tax 0.7 2.1
Fair value financial
instruments 2.6 2.7
-------- ----------------- --------------- ---------------
EPRA NTA 463.2 615.2
-------- ----------------- --------------- ---------------
EPRA NTA per share 151p 201p
-------- ----------------- --------------- ---------------
IFRS net assets per share 150p 199p
-------- ----------------- --------------- ---------------
LTV 50.6% 47.1%
-------- ----------------- --------------- ---------------
Net assets
As at 31 March 2021, IFRS net assets were GBP460.4 million (31
March 2020: GBP610.6 million). The reduction was primarily due to a
13.6% like-for-like decrease in portfolio valuation.
EPRA NTA is calculated by adjusting net assets to reflect the
potential impact of dilutive ordinary shares, and to remove the
fair value of any derivatives and goodwill held on the balance
sheet. These adjustments are made with the aim of improving
comparability with other European real estate companies. EPRA NTA
decreased by 25% to GBP463.2 million, from GBP615.2 million at 31
March 2020. EPRA NTA per share decreased by 25% to 151 pence per
share at 31 March 2021 compared to 201 pence per share at 31 March
2020. The decrease in EPRA NTA and EPRA NTA per share is primarily
due to the 13.6% like-for-like decrease in portfolio valuation.
Properties at valuation
Proportionally consolidated properties at valuation was GBP974.2
million at 31 March 2021, compared to GBP1,197.1 million at 31
March 2020, due to a 13.6% like-for-like decline in valuations and
the completion of GBP81.2 million of disposals, in line with our
strategy to complete between GBP80-100 million of disposals in
FY21.
Net debt & financing
Analysis of movement in proportionally consolidated net debt
(GBPm)
Group JVs & Associates Proportionally
consolidated
-----------------
Net debt at 31 March 2020 547.8 15.8 563.6
------------------------------------------- -----------------
Operating activities
Net cash inflow from operating activities (8.6) (2.4) (11.0)
Investing activities
New borrowings - 2.0 2.0
Investment in associate 2.4 - 2.4
Disposal of subsidiary (38.5) (38.5)
Disposal of investment properties (40.1) (2.1) (42.2)
Purchase of plant and equipment 3.3 - 3.3
Development and other capital expenditure 10.0 0.4 10.4
Financing activities
Ordinary dividends paid 1.4 1.4
Other 1.5 0.4 1.9
Net debt at 31 March 2021 479.2 14.1 493.3
-----------------
Proportionally consolidated net debt decreased by GBP70.3
million during the year to GBP493.3 million, primarily as a result
of our disposal activity.
Operating activities generated a net cash inflow of GBP11.0
million, compared with UFFO of GBP11.5 million. As part of our
disposal programme, we received cash proceeds of GBP78.3 million,
net of re-investment in associates, primarily Sprucefield, of
GBP2.4m, in addition to new debt taken out in associates of GBP2.0
million. The purchase of plant and equipment, and development and
other capex, represented cash outflows of GBP3.3 million and
GBP10.4 million respectively. The payment of withholding tax on the
dividend relating to Q3 FY20 resulted in a net cash outflow of
GBP1.4 million.
Financial policies
Our conservative financial policies were put in place in
consultation with shareholders and form a key component of our
financial risk management strategy. Our LTV increased from 47.1% at
31 March 2020 to 50.6% at 31 March 2021 due to non-cash portfolio
valuation declines, the effect of which was partially mitigated by
the successful execution of our disposal programme and cash
generation from our portfolio. While LTV at this level remains
safely below our covenant thresholds, it is now ahead of both our
stated policy and our guidance.
We are as committed as ever to reducing our LTV to below 40% and
balance sheet gearing to below 100%, and we plan to do this through
our actions, as demonstrated by the GBP79 million of retail
disposals we currently have exchanged or under offer, and the
recently announced intention to divest ourselves of Hawthorn, our
community pub business.
Similarly, whilst our Net debt: EBITDA ratio is now above our
stated policy, the strategic disposals outlined in these results
alongside the projected revenue recovery following the easing of
lockdown restrictions will significantly improve this metric in the
future.
Financial policy Proportionally consolidated
31 March 2021 31 March 2020
------------------ -------------- --------------
Net debt GBP493.3m GBP563.6m
Principal value of gross debt GBP653.1m GBP652.4m
Weighted average cost of debt(1) 3.2% 3.4%
Weighted average debt maturity(2) 4.8 yrs 5.9 yrs
Guidance <40%
Loan to value Policy <50% 50.6% 47.1%
FY21 FY20
------------------ -------------- --------------
Net debt: EBITDA <10x 14.6x 7.7x
Interest cover >2.0x 2.3x 4.8x
Ordinary dividend cover(3) >100% 127% 105%
Group
31 March 2021 31 March 2020
------------------ -------------- --------------
Balance sheet gearing <100% 104% 90%
------------------ -------------- --------------
1. Cost of debt assuming GBP215 million revolving credit facility is fully drawn
2. Average debt maturity assumes one-year extension option is
exercised and bank approved. Excluding this option, debt maturity
at 31 March 2021 is 4.3 years
3. Calculated with reference to UFFO
Additional guidelines
Alongside our financial policies we have a number of additional
guidelines used by management to analyse operational and financial
risk, which we disclose in the following table:
Guideline 31 March 2021
Single retailer concentration <5% of gross income 1.9% (B&M, Poundland
and Superdrug)
-------------------------- ---------------------
Development expenditure <10% of GAV <1%
-------------------------- ---------------------
>70% pre-let or pre-sold
Risk-controlled development on committed 100%
-------------------------- ---------------------
Pub weighting (excluding
c-stores) <30% of GAV 25%
-------------------------- ---------------------
Conclusion
It has been a challenging year for the UK economy and lockdown
restrictions have impaired the financial performance of the Company
and impacted the valuation of our portfolio. In spite of this we
remained profitable, generating GBP11.5 million of UFFO, our cash
and liquidity position has improved over the year by GBP72 million
and we have maintained our Investment Grade credit rating.
Key to the strength of our financial position in navigating our
way through the pandemic has been our unsecured balance sheet, the
flexibility and unencumbered nature of our banking facilities and
our corporate bond, which have enabled us to take decisive action
whilst not being distracted by any covenant issues, with a covenant
light capital structure that puts us at an advantage to manage risk
and explore opportunities. The divestment of our community pub
business will strengthen the balance sheet and reduce LTV towards
our stated guidance of 40%.
NewRiver has one of the best and most efficient capital
structures in the sector. This financial year has tested and proven
this and we have come through FY21 in a strong financial position
as we look forward to the year ahead.
Mark Davies
Chief Financial Officer
Notes to Editors
About NewRiver
NewRiver REIT plc ('NewRiver') is a leading Real Estate
Investment Trust specialising in buying, managing and developing
essential retail and leisure assets throughout the UK.
Our GBP1.0 billion portfolio covers 9 million sq ft and
comprises 33 community shopping centres, 19 conveniently located
retail parks and 673 community pubs. We hand-picked our assets to
deliberately focus on occupiers providing essential goods and
services, and avoid structurally challenged sub-sectors such as
department stores, mid-market fashion and casual dining. This
focus, combined with our affordable rents and desirable locations,
delivers sustainable and growing returns for our shareholders,
while our active approach to asset management and inbuilt 2.6
million sq ft development pipeline provide further opportunities to
extract value from our portfolio.
NewRiver has a Premium Listing on the Main Market of the London
Stock Exchange (ticker: NRR). Visit www.nrr.co.uk for further
information.
Principal risks and uncertainties
Our approach to risk management
Risk is inherent in all business and effective risk management
is a key element in the delivery of our strategy and operation of
our business model. The COVID-19 pandemic brought economic and
social disruption over FY21 however our culture and strong
governance systems have supported the business during this
challenge. Our small workforce encourages flexibility and
collaboration across the business in all areas including risk. The
accessibility and flexibility of the Board and senior staff are
particularly pertinent when adapting to emerging and external risks
such as a global pandemic. This flexibility has enabled the
business to adjust and respond to this fast-changing situation and
prove its resilience and adaptability.
The Board has ultimate responsibility for the risk management
and internal controls of the Company, and regularly evaluates our
appetite for risk, ensuring our exposure to risk is managed
effectively. The Audit Committee monitors the adequacy and
effectiveness of the Company's risk management and internal
controls and supports the Board in assessing the risk mitigation
processes and procedures. The Executive Committee is closely
involved with day-to-day risk management, ensuring that it is
embedded within the Company's culture and values, and that there is
a delegation of accountability for each risk to senior
management.
Risk appetite
There are multiple risks that could impact our ability to
successfully execute our strategy. The Board generally has a low
risk appetite but recognises that the external environment in which
it operates is inherently risky. Mitigating actions are therefore
agreed for all risks that exceed the Group's risk appetite. Our
experienced leadership team continuously works to mitigate the
risks arising from the external environment.
Significant factors which contribute to the low risk of our
business include:
-- Maintaining an unsecured balance sheet, with the Company
benefiting from a more diversified debt structure and gaining
access to a larger pool of capital to help achieve our strategic
goals
-- Our disciplined approach to stock selection with probability risk adjusted returns
-- Deploying capital in joint ventures, thereby diversifying risk
-- A diverse tenant base in which there is no single tenant exposure of more than 3%
-- Our experienced Board and senior management
Risk monitoring and assessment including emerging risks
The identification of risks is a continual process which has
been highlighted more so this year than ever before with a global
pandemic creating uncertainty across all sectors both economically
and socially. The Company maintains a risk register in which a
range of categories are considered. These risks are linked to the
business model and strategic priorities of the Company.
The risk register assesses the impact and probability of each
identified risk. By identifying all risks on a register and
continuously updating this register principal risks can be
identified as those that might threaten the Company's business
model, future performance, solvency or liquidity and reputation.
Their potential impact and probability will also be a factor in
whether they are classed as principal. The risk register also
records actions that can be taken to further mitigate the risk and
each action is assigned to an individual or group. Mitigation
factors and actions are assigned to all risks whether they are
principal, non-principal or emerging. The continuous updating of
this risk register assists in identifying emerging risks as they
develop and ensures that their impact is continually assessed as
they emerge and progress. All risks on the register are 'scored' in
terms of impact and probability. A risk heat map can be a useful
visual aid to understand the potential impact and probability of
each significant risk on a gross basis prior to mitigation.
Principal risk areas are:
External risks Operational risks
1. Macroeconomic 7. People
-------------------------
2. Political and regulatory 8. Financing
-------------------------
3. Catastrophic external event 9. Asset management
-------------------------
4. Climate change 10. Development
-------------------------
5. Changes in technology and consumer 11. Acquisition
habits and demographics
-------------------------
6. Cyber Security (New) 12. Disposal
-------------------------
Risk assessment during the year
The general risk environment in which the Company operates
remained uncertain throughout the year. While the easing of
lockdown rules from June 2020 onwards removed some risk relating to
COVID-19, particularly in our macroeconomic, catastrophic external
event and asset management risk categories, the second wave of
infections and the imposition of further restrictions by the UK and
other national governments from October 2020 onwards meant that
much of these risk factors returned. Wider concerns around the
deterioration of the UK retail market, and continued political and
economic uncertainty relating to the UK's departure from the EU,
remained throughout the year.
External Risks
Risk and Monitoring and management Change in risk assessment
impact during the period
1.
Macroeconomic * The Board regularly assesses the Company's strategy * Macroeconomic risk has remained the same during the
Economic in the context of the wider macroeconomic period and is considered a medium impact risk with a
conditions environment. This continued review of strategy medium to high probability.
in the UK and focuses on positioning our portfolio for the evolving
changes to economic situation.
fiscal * Although retail sales and pub sales rebounded after
and monetary the first national lockdown further restrictions by
policy may * The Board and management team consider updates from the UK and other national governments from October
impact external advisers, reviewing key indicators such as 2020 onwards meant that sales in pubs and
market forecast GDP growth, employment rates, interest rates non-essential retail were again impacted.
activity, and Bank of England guidance and consumer confidence Restrictions are however now lifting again and the
demand for indices. vaccination programme is proving successful.
investment
assets, the
operations * Our portfolio is focused on resilient market * The uncertainty around the impact of the COVID-19
of our sub-sectors such as essential retailers and wet-led pandemic continues to result in declines in asset
occupiers pubs. valuations, which has narrowed the headroom on some
or the of our debt covenants.
spending
habits of the * Through regular stress testing of our portfolio we
UK ensure our financial position is sufficiently * Possible higher inflation could fuel wage growth and
population. resilient. costs leading to rate increases above current
forecasts.
* Closely monitoring rent collection and cash flow
* The Bank of England is expecting a strong recovery to
pre-pandemic levels so these Macroeconomic risks are
expected to improve.
---------------------------------------------------------------- ---------------------------------------------------------------
2. Political
and * The Board regularly considers political and * Political and regulatory risk has increased in the
regulatory regulatory developments and the impact they could period and is considered a high impact risk with a
Changes in UK have on the Company's strategy and operating high probability.
Government environment.
policy,
the adverse * Political uncertainty surrounding COVID-19 remains,
effects * External advisers, including legal advisers, provide although the roll out of vaccinations and opening up
of Brexit on updates on emerging regulatory changes to ensure the of restrictions is positive.
our tenants, business is prepared and is compliant.
or the impact
of political * There still remain uncertainties around the longer
uncertainty * We regularly assess market research to gauge the term impacts of Brexit and also uncertainties
on impact of regulatory change on consumer habits. relating to the possibility of Scottish Devolution.
the
consumers'
retail and * We carry out stress testing on our portfolio in * The Coronavirus Act imposed a moratorium on
leisure relation to regulatory changes which may impact our landlords' ability to forfeit leases of commercial
spend. operations or financial position. property for non-payment of rent in England and Wales
and Northern Ireland. This moratorium has again been
extended and will now expire on 30 June 2021.
* Where appropriate, we participate in industry and
other representative bodies to contribute to policy
and regulatory debate. Individual ExCo constituents * There are further uncertainties around the outcome of
are members of BPA, BBPA and the High Street task the Government review of the Landlord and Tenant Act
force. 1954.
---------------------------------------------------------------- ---------------------------------------------------------------
3.
Catastrophic * The Board have developed a comprehensive crisis * Catastrophic external event risk has been increased
external response plan which details actions to be taken at a during the period and is considered a high impact
event head office and asset-level. risk with a high probability.
An external
event
such as civil * The Board regularly monitors the Home Office * The impact of COVID-19 has caused unprecedented
unrest, a terrorism threat level and other security guidance. economic and operational disruption. We mitigated th
civil e
emergency impact through our portfolio positioning focused on
including * The Board regularly monitors advice from the UK essential goods and services, our cash position and
a large-scale Government regarding pandemic responses and emergency liquidity and our active approach to asset
terrorist procedures at our assets are regularly tested and management.
attack enhanced in-line with the latest UK Government
or pandemic, guidance.
could * COVID-19 has also demonstrated the effectiveness of
severely home working for the business, which has ensured
disrupt * We have robust IT security systems which cover data preparedness for any future lockdowns.
global security, disaster recovery and business continuity
markets and plans.
cause * The Board continues to review the Company's response
damage and to the COVID-19 pandemic and make any necessary
disruption * The business has comprehensive insurance in place to amendments to our crisis response plan.
to our minimise the cost of damage and disruption to assets.
assets.
* The roll out of vaccinations and the opening up of
restrictions is positive and our operational
performance has proved the resilience of our
portfolio.
---------------------------------------------------------------- ---------------------------------------------------------------
4. Climate
change * We have a comprehensive ESG programme which is * Climate change risk has increased during the period
Adverse regularly reviewed by the Board and Executive and is considered a medium impact risk with a medium
impacts Committee. A detailed overview of the programme can likelihood.
from be found in our standalone ESG report.
environmental
incidents * ESG has risen up the agenda of many stakeholders and
such * One of the key objectives of the programme is to expectations of compliance with best practice have
as extreme minimise our impact on the environment through increased
weather reducing energy consumption, sourcing from renewable
or flooding sources, and increased recycling.
could * Regulatory requirements have also increased during
impact the the period, in addition to the scoring criteria for
operation * We are developing our pathway to Net Zero Carbon and certain ESG benchmarks such as GRESB
of our setting new medium and long term targets in line with
assets. the latest climate science.
A failure to * Our ESG committee pre-empted these changes and our
implement initiatives and disclosure continue to evolve in-line
appropriate * We regularly assess assets for environmental risk and with best practice.
climate risk ensure sufficient insurance is in place to minimise
management the impact of environmental incidents.
measures, * ESG is embedded into capital allocations and is
comply with considered for all future acquisitions.
evolving * ESG performance is independently reviewed by our
regulations external environmental consultants and is measured
and against applicable targets and benchmarks.
meeting our
ESG
targets could * We have included TCFD disclosures in our Annual
impact the Report.
operation
and value of
our assets,
leading
to a risk of
asset
obsolescence,
reputational
damage and
erosion
of investor
value.
---------------------------------------------------------------- ---------------------------------------------------------------
5. Changes in
technology * The Board and Executive Committee regularly assess * Changes in technology and consumer habits risk has
and our overall corporate strategy, and acquisition, remained the same during the year and is considered a
consumer asset management and disposal decisions in the medium impact risk with a low to medium probability.
habits context of current and future consumer demand. Our
and strategy is designed to focus on resilient assets
demographics. that take into account these future changes. * Although COVID-19 lockdown restrictions have
Changes in significantly increased home working and online
the shopping, we expect some of this to unwind in the
way consumers * We closely assess the latest trends reported by CACI, short term but consumer habits will evolve over the
live, work, our research provider, to ensure we are aligned with medium term.
shop evolving consumer trends.
and use
technology * Our portfolio is focused on providing essential
could have an * Our retail portfolio is focused on essential spending retail to local communities, which continues to
adverse on goods and services which are resilient to the mitigate the impact of online retail on our
impact growth of online retail. Our community wet-led pubs portfolio.
on demand for perform an important social and societal function,
our assets. providing experiences which cannot be replicated
online. * While COVID-19 may have accelerated the trend to
online shopping this provides opportunities for our
portfolio, particularly retail parks and local
* Our retail parks are ideally positioned to help community shopping centres.
retailers with their multi-channel retail strategies.
* Our strategy is to reshape our portfolio to ensure
* The alternative use valuation of our portfolio shows over the longer term we have the most resilient
we have optionality in realising value from assets retail portfolio in the UK.
which do not have a future as retail assets.
---------------------------------------------------------------- ---------------------------------------------------------------
6. Cyber
security * There are limited IT servers on sites. * This is a New Principal risk. Whilst this risk has
A cyber always been recorded and monitored on our risk
attack register its prominence has been elevated in the year
could result * Multiple third party supplier programs are used which because one of our third party suppliers experienced
in the Group have their own security systems and are independently a cyber security incident. No data breaches were
being unable audited by Deloitte and ISO2000 accredited. found to have been made but our normal reporting
to use its IT systems were slower as a result of not having access
systems to our normal reporting channels while the incident
and/or * ExCo receives quarterly reporting on IT matters. was being investigated.
losing data.
This could
delay * Security protocols are in place to ensure swift * This risk could also be increased due to employees
reporting and changes to data access following staff changes and working from home during the pandemic.
divert authority limit access.
management
time. This
risk * We are have reviewed our IT systems and have a number
could be of focus areas to enhance over the year.
increased
due to many
employees * Cyber insurance cover is in place
working from
home during
the
pandemic.
---------------------------------------------------------------- ---------------------------------------------------------------
Operational Risks
Risk and Monitoring and management Change in risk assessment
impact during the period
7. People
The inability * Attracting, retaining and developing talent is core * People risk remains unchanged during the period and
to attract, to our HR strategy, which is regularly reviewed by is considered a low to medium impact risk with a low
retain the Board and Executive Committee. to medium probability.
and develop
our
people and * We undertake an extensive Employee Engagement Survey * It remains a challenging operating environment for
ensure once a year to gauge employee views on leadership, the Company, which could present some issues in
we have the company culture, health and wellbeing, personal attracting and retaining talent, but this impact is
right growth and benefits and recognition. This informs any mitigated by an active employee engagement programme
skills in changes to HR policy. and the alignment of reward with both individual and
place Company-level performance.
could prevent
us from * We regularly benchmark our pay and benefits against
implementing those of peers and the wider market. * We have focused on staff well-being during this
our strategy. challenging time. We have actively sought regular
. feedback from staff. Mindful of mental and physical
* Succession planning is in place for all key positions well-being during these prolonged periods of
and is reviewed regularly by the Nomination self-isolation and working from home we devised an
committee. active programme of staff events such as virtual
social gatherings and exercise classes to help staff
keep engaged.
* Longer notice periods are in place for key employees.
* Our staff retention rate is 95%.
* Our recruitment policies consider the needs of the
business today and our aspirations for the future,
whilst ensuring our unique corporate culture is
maintained.
------------------------------------------------------------ ------------------------------------------------------------
8. Financing
If gearing * The Board regularly assesses Company financial * Financing risk remains unchanged during the period
levels performance and scenario testing, covering levels of and is considered a high impact risk with a low to
become higher gearing and headroom to financial covenants and medium probability.
than our risk assessments by external rating agencies.
appetite or
lead * Although macroeconomic developments, particularly in
to breaches in * The Company has a programme of active engagement with the wake of COVID-19 have impacted financial markets,
bank covenants key lenders and shareholders. the strength of the Company's balance sheet, and the
this would results of our extensive scenario testing, and
impact stress-testing of headroom, means we have
our ability to * The Company has a wholly unsecured balance sheet, significantly mitigated the risk of not being able to
implement our which mitigates the risk of a covenant breach caused secure sufficient financing.
strategy. The by fluctuations in individual property valuations.
business could
also struggle * Through our disposal programme strategy we have
to obtain * The Company has long-dated maturity on its debt, managed to mitigate the impact COVID-19 might
funding providing sufficient flexibility for refinancing. otherwise have had on our cash and liquidity position
or face and LTV.
increased
interest rates * Weekly working capital and cash flow analysis is
as a result of reviewed by the Executive Committee and detailed
macroeconomic forward assessments of cashflows are carried out
factors. regularly.
* Our credit rating is independently assessed by Fitch
Ratings every six months.
------------------------------------------------------------ ------------------------------------------------------------
9. Asset
management * Asset-level business plans are regularly reviewed by * Asset management risk has increased during the period
The the asset management team and the Executive Committee and is considered a medium to high impact risk with a
performance and detailed forecasts are updated frequently. medium to high probability.
of our assets
may not meet
with the * The Executive Committee reviews whole portfolio * The COVID-19 pandemic has placed restrictions on the
expectations performance on a quarterly basis to identify any operations of our occupiers and impacted performance
outlined in trends that require action. and rent collection at our assets.
their
business
plans, * Our asset managers are in contact with centre * There have been a number of high-profile retail
impacting managers and occupiers on a daily basis to identify failures since the beginning of the pandemic,
financial potential risks and improvement areas. including amongst our occupier base.
performance
and
the ability to * Revenue collection is reviewed weekly by the * Our COVID-19 response has focused on supporting
implement our Executive Committee occupiers and ensuring businesses can emerge from the
strategies crisis in robust financial shape.
* The roll out of vaccinations and the opening up of
restrictions is positive and our operational
performance has proved the resilience of our assets.
------------------------------------------------------------ ------------------------------------------------------------
10.
Development * We apply a risk-controlled development strategy * Development risk has remained unchanged through the
Delays, through negotiating long-dated pre-lets (typically at period and is considered a low to medium impact risk
increased least 70% of assets). with a low probability.
costs and
other
challenges * All development is risk-controlled and forms only 5% * Although the COVID-19 pandemic has brought delays to
could of the portfolio by value. many development projects, they remain a small part
impact our of our portfolio and committed capex is low.
ability
to pursue our * Capital deployed is actively monitored by the
development Executive Committee, following detailed due diligence * Our largest developments, which include regeneration
pipeline modelling and research. schemes in Burgess Hill and Cowley, Oxford, are
and therefore driven by key trends which are likely to re-emerge
our ability to after the immediate impacts of COVID-19 ease.
profitably * An experienced development team monitors on-site
recycle development and cost controls.
development * A number of our regeneration assets are under offer
sites and this will decrease the proportion of assets
and achieve * On large scale developments where construction is focussed on development which inherently reduces risk
returns more than 12 months we look to carry out the project exposure.
on in partnership and/or forward sell.
development.
------------------------------------------------------------ ------------------------------------------------------------
11.
Acquisition * We carry out thorough due-diligence on all new * Acquisition risk has reduced through the period and
The acquisitions, using data from external advisers and is considered a low impact risk with a low
performance our own rigorous in-house modelling before committing probability.
of asset and to any transaction. Probability weighted analysis
corporate takes account of these risks.
acquisitions * Our key capital allocation priority is to use cash
might not meet proceeds to reduce debt therefore there will be
with our * Acquisitions are subject to approval by the Board and limited acquisition activity for the foreseeable
expectations Executive Committee, who are highly experienced in future, other than taking 10% stakes in capital
and the retail and pub real estate sectors. partnerships where applicable.
assumptions,
impacting our
revenue and * We have the ability to acquire in joint ventures,
profitability. thereby sharing risk.
------------------------------------------------------------ ------------------------------------------------------------
12. Disposal
We may face * Our portfolio is focused on high-quality assets with * Disposal risk has increased during the period and is
difficulty low lot sizes, making them attractive to a wide pool considered a low to medium impact risk with a Medium
in disposing of buyers. Probability.
of assets or
realising
their * Assets are valued every six months by external * Political uncertainty and the onset of COVID-19 has
fair value, valuers, enabling informed disposal pricing increased market uncertainty, causing some purchasers
thereby decisions. to reconsider or delay acquisition decisions.
impacting
profitability
and our * Disposals are subject to approval by the Board and * We have an active disposal programme, with the volume
ability Executive Committee, who are highly experienced in of transactions being completed naturally increasing
to reduce debt the retail and pub real estate sectors. disposal risk. The average lot size however is lower
levels or make than most in the market so tends to be more liquid.
further
acquisitions. * Our portfolio is large and our average asset lot size
is small, meaning that each asset represents only a
small proportion of revenues and profits, thereby
mitigating the impact of a sale not proceeding.
------------------------------------------------------------ ------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2021
Operating Operating Fair
and Fair value and value
financing adjustments Total financing adjustments Total
2021 2021 2021 2020 2020 2020
Notes GBPm GBPm GBPm GBPm GBPm GBPm
================================= ===== ========== ============ ======= ========== ============ =======
Revenue 4 91.1 - 91.1 144.8 - 144.8
Property operating expenses* 5 (47.1) - (47.1) (55.0) - (55.0)
================================= ===== ========== ============ ======= ========== ============ =======
Net property income 44.0 - 44.0 89.8 - 89.8
================================= ===== ========== ============ ======= ========== ============ =======
Administrative expenses 6 (23.4) - (23.4) (20.9) - (20.9)
Other income 7 7.2 - 7.2 - - -
Share of income / (loss) from
joint ventures 15 2.3 1.2 3.5 2.0 (3.9) (1.9)
Share of income / (loss) from
associates 16 0.1 0.6 0.7 0.1 (0.4) (0.3)
Net valuation movement 14/17 - (154.7) (154.7) - (162.6) (162.6)
Loss on disposal of subsidiary 8 (2.2) - (2.2) - - -
Loss on disposal of investment
properties 9 (5.5) - (5.5) (1.5) - (1.5)
================================= ===== ========== ============ ======= ========== ============ =======
Operating profit / (loss) 22.5 (152.9) (130.4) 69.5 (166.9) (97.4)
Finance income 10 0.3 - 0.3 0.1 - 0.1
Finance costs 10 (23.1) - (23.1) (24.3) - (24.3)
================================= ===== ========== ============ ======= ========== ============ =======
(Loss) / profit for the year
before taxation (0.3) (152.9) (153.2) 45.3 (166.9) (121.6)
Taxation 11 1.3 1.4 2.7 1.0 (0.5) 0.5
================================= ===== ========== ============ ======= ========== ============ =======
Profit / (loss) for the year
after taxation 1.0 (151.5) (150.5) 46.3 (167.4) (121.1)
================================= ===== ========== ============ ======= ========== ============ =======
Loss for the year after taxation (150.5) (121.1)
Other comprehensive loss
Other movement 0.2 -
Revaluation of property, plant
and equipment (0.5) (1.0)
================================= ===== ========== ============ ======= ========== ============ =======
Total comprehensive loss for
the year (150.8) (122.1)
================================= ===== ========== ============ ======= ========== ============ =======
Loss per share
Basic (pence) 12 (49.1) (39.6)
Diluted (pence) 12 (49.1) (39.6)
================================= ===== ========== ============ ======= ========== ============ =======
All activities derive from continuing operations of the
Group.
*Included in property operating expenses is a charge of GBP7.1
million (2020: GBP2.5 million) for expected credit losses relating
to tenant debtors.
CONSOLIDATED BALANCE SHEET
For the year ended 31 March 2021
2021 2020
Notes GBPm GBPm
======================================== ===== ======= =======
Non-current assets
Investment properties 14 934.9 1,185.6
Right of use asset 3.5 3.9
Investments in joint ventures 15 25.6 22.1
Investments in associates 16 5.3 0.9
Property, plant and equipment 17 54.1 56.2
Goodwill 0.5 0.2
======================================== ===== ======= =======
Total non-current assets 1,023.9 1,268.9
======================================== ===== ======= =======
Current assets
Trade and other receivables 18 26.0 26.7
Current taxation asset - 0.7
Cash and cash equivalents 21 150.5 80.8
======================================== ===== ======= =======
Total current assets 176.5 108.2
Assets held for sale 19 25.5 -
======================================== ===== ======= =======
Total assets 1,225.9 1,377.1
======================================== ===== ======= =======
Equity and liabilities
Current liabilities
Trade and other payables 22 46.9 46.8
Lease liability 24 0.7 0.7
Derivative financial instruments 20 - 0.1
======================================== ===== ======= =======
Total current liabilities 47.6 47.6
======================================== ===== ======= =======
Non-current liabilities
Derivative financial instruments 20 2.6 2.6
Deferred tax liability 11 0.7 2.1
Lease liability 24 84.9 85.6
Borrowings 23 629.7 628.6
======================================== ===== ======= =======
Total non-current liabilities 717.9 718.9
======================================== ===== ======= =======
Net assets 460.4 610.6
======================================== ===== ======= =======
Equity
Share capital 25 3.1 3.1
Share premium 25 227.4 227.4
Merger reserve 25 (2.3) (2.3)
Retained earnings and other reserves 25 232.2 382.4
======================================== ===== ======= =======
Total equity 460.4 610.6
======================================== ===== ======= =======
Net Asset Value (NAV) per share (pence)
EPRA 12 151p 201p
Basic 12 150p 199p
Diluted 12 150p 199p
======================================== ===== ======= =======
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2021
2021 2020
GBPm GBPm
========================================================= ======= =======
Cash flows from operating activities
Loss for the year before taxation (153.2) (121.6)
Adjustments for:
Loss on disposal of investment property 5.5 1.5
Loss on disposal of subsidiary 2.2 -
Net valuation movement 154.7 163.0
Net valuation movement in joint ventures (1.2) 3.9
Net valuation movement in associates (0.6) 0.4
Share of income from joint ventures (2.3) (2.0)
Share of income from associates (0.1) (0.1)
Net interest expense 22.9 18.7
Rent free lease incentives (2.6) (2.1)
Movement in expected credit loss 7.1 2.5
Amortisation of legal and letting fees 0.2 (0.2)
Depreciation on property plant and equipment 1.9 1.2
Share based-payment expense 0.6 -
Net movement from fair value of derivatives (0.1) 2.7
========================================================= ======= =======
Cash generated from operations before changes in working
capital 35.0 67.9
Changes in working capital
Increase in trade and other receivables (8.2) (1.7)
Increase / (decrease) in payables and other financial
liabilities 2.2 (5.0)
========================================================= ======= =======
Cash generated from operations 29.0 61.2
Interest paid (22.1) (17.7)
Corporation tax received 1.7 -
Dividends received from joint ventures - 2.0
========================================================= ======= =======
Net cash generated from operating activities 8.6 45.5
Cash flows from investing activities
Disposal of subsidiary 38.5 -
Interest income 0.3 0.1
Investment in joint ventures assets - (15.4)
Investment in associate assets (2.4) (1.2)
Purchase of investment properties - (44.1)
Business combinations, net of cash acquired - (6.3)
Disposal of investment properties 40.1 50.7
Development and other capital expenditure (10.0) (14.1)
Purchase of plant and equipment (3.3) (10.1)
========================================================= ======= =======
Net cash generated from / (used in) investing activities 63.2 (40.4)
========================================================= ======= =======
Cash flows from financing activities
Repayment of bank loans - (48.7)
New borrowings - 161.9
Repayment of principal portion of lease liability (0.7) (0.8)
Dividends paid - ordinary (1.4) (63.8)
========================================================= ======= =======
Net cash(used in) / generated from financing activities (2.1) 48.6
========================================================= ======= =======
Cash and cash equivalents at beginning of the year 80.8 27.1
Net increase in cash and cash equivalents 69.7 53.7
========================================================= ======= =======
Cash and cash equivalents at 31 March 150.5 80.8
========================================================= ======= =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2021
Retained
earnings
Share Share Merger and other
capital premium reserve reserves Total
Notes GBPm GBPm GBPm GBPm GBPm
================================== ===== ======== ======== ======== =========== =======
As at a April 2019 3.1 225.0 (2.3) 570.3 796.1
Loss for the year after taxation - - - (121.1) (121.1)
Revaluation of property, plant
and equipment 17 - - - (1.0) (1.0)
================================== ===== ======== ======== ======== =========== =======
Total comprehensive loss for
the year - - - (122.1) (122.1)
Transactions with equity holders
Net proceeds from issue of shares 25 - 2.4 - - 2.4
Dividends paid 13 - - - (65.8) (65.8)
================================== ===== ======== ======== ======== =========== =======
As at 31 March 2020 3.1 227.4 (2.3) 382.4 610.6
Loss for the year after taxation - - - (150.5) (150.5)
Other movements - - - 0.2 0.2
Revaluation of property, plant
and equipment 17 - - - (0.5) (0.5)
================================== ===== ======== ======== ======== =========== =======
Total comprehensive loss for
the year - - - (150.8) (150.8)
Transactions with equity holders
Share-based payments - - - 0.6 0.6
================================== ===== ======== ======== ======== =========== =======
As at 31 March 2021 3.1 227.4 (2.3) 232.2 460.4
================================== ===== ======== ======== ======== =========== =======
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
General information
NewRiver REIT plc (the 'Company') and its subsidiaries (together
the 'Group') is a property investment group specialising in
commercial real estate in the UK. The Company is registered and
domiciled in the UK and the registered office of the Company is 16
New Burlington Place, London, W1S 2HX.
Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented,
other than where certain new policies have been adopted.
Basis of preparation
The financial information included in the consolidated financial
statements has been prepared on a going concern basis using
accounting policies consistent with International Financial
Reporting Standards (IFRS) and interpretations issued by the IFRS
Interpretations Committee (IFRS IC) and in accordance with the
Companies Act 2006, and the Disclosure and Transparency Rules of
the Financial Conduct Authority.
In addition to complying with international accounting standards
in conformity with the requirements of the Companies Act 2006, the
consolidated financial statements also comply with international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
The unaudited financial information contained in this
announcement does not constitute the Group's statutory accounts as
at and for the year ended 31 March 2021, but is derived from those
statutory accounts, which have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. The Company's statutory
accounts as at and for the year ended 31 March 2021 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting on 27 July 2021. Accordingly, the financial
information for 2021 is presented as unaudited in this
announcement.
The statutory accounts for the year ended 31 March 2020 have
been filed with the Registrar of Companies. The auditors' report
for those accounts was unqualified, did not draw attention to any
matters by way of emphasis and did not include a statement under
Section 498 (2) or (3) of the Companies Act 2006.
Going concern
The Group and Company's going concern assessment considers the
Group's principal risks, and is dependent on a number of factors,
including cashflow and liquidity, continued access to borrowing
facilities and the ability to continue to operate the Group's
unsecured debt structure within its financial covenants. The
Group's balance sheet is unsecured, which means that none of its
debt is secured against any of its property assets. This type of
financing affords significant operational flexibility, and consists
of GBP380 million of unsecured bank facilities and a GBP300 million
unsecured corporate bond with the earliest expiry date being August
2023. The debt has a number of financial covenants that the Group
is required to comply with including an LTV covenant of less than
60%, and a 12 month historical interest cover ratio of more than
1.75x, and both sources of unsecured financing have cure provisions
in the event of a breach.
The going concern assessment is based on a 12 month outlook from
the date of the approval of these financial statements, using the
Group's three year forecast. This forecast is based on a reasonable
worst case scenario, which includes the key assumptions listed
below.
- A further 6% blended reduction in capital values across the
portfolio over the next twelve months, in addition to the 13.6%
recorded in the year ended 31 March 2021
- A further 10% reduction in net income in our Retail portfolio,
excluding agreed deferments; this reflects a significant downside
to rental agreements re-geared or re-negotiated throughout the
pandemic given that 92% of rents relating to Q4 FY21 were collected
or alternative payments agreed at the time of reporting despite a
full national Lockdown being in place throughout the quarter in
question
- A further full national Lockdown in Winter/Spring in 2021/22
in our pub portfolio, this has been modelled to mirror the full
national Lockdown seen this past year and is phased as a 50%
reduction in Q3 FY22 (i.e. throughout December, including Christmas
and New Year), a 100% reduction in Q4 FY22 (i.e. full lockdown for
the entire 3 months) and a 25% reduction in Q1 FY23 as the Pubs
once again re-open through the Spring
- No disposal proceeds are assumed throughout the forecast
period, despite the completion of GBP81 million of disposals during
FY21, at a relatively tight discount to book values, with a further
GBP79 million of assets exchanged or under offer
- No new financing is assumed, but existing facilities are
presumed to remain available (earliest expiry August 2023)
Under this scenario, the Group and Company is forecast to
maintain sufficient cash and liquidity resources, and remain
compliant with its financial covenants. Further sensitivity
analysis was performed on this scenario, including assuming a more
significant valuation decline and a lower income collection rate.
Even applying this sensitivity analysis, the Group and Company
maintains sufficient cash and liquidity reserves to continue in
operation throughout the going concern assessment period.
In light of the significant impact of Covid-19 on the UK
economy, and the retail and leisure sectors in which the Group
operates, the Directors have placed a particular focus on the
appropriateness of adopting the going concern basis in preparing
the Group's financial statements for the year ended 31 March
2021.
Based on the consideration above, the Board believes that the
Group and Company has the ability to continue in business at least
12 months from the date of approval of the financial statements for
the year ended 31 March 2021 and therefore have adopted the going
concern basis in the preparation of this financial information.
Cash flow statement
The Group has reported the cash flows from operating activities
using the indirect method. Interest received is presented within
investing cash flows; interest paid is presented within operating
cash flows. The acquisition and disposal of investment properties
are disclosed as cash flows from investing activities because this
most appropriately reflects the Group's business activities.
Preparation of the consolidated financial statements
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries controlled by the
Company, made up to 31 March each year. Control is achieved when
the Company is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the investee.
The consolidated financial statements account for interest in
joint ventures and associates using the equity method of accounting
per IFRS 11 and IAS 28 respectively. The financial statements for
the year ended 31 March 2021 have been prepared on the historical
cost basis, except for the revaluation of investment properties,
the revaluation of property, plant and equipment and derivatives
which are held at fair value through profit and loss. In the
current financial year the Group has adopted a number of minor
amendments to standards effective in the year issued by the IASB,
none of which have had a material impact on the Group. The
accounting policies used are otherwise consistent with those
contained in the Group's previous Annual Report and Accounts for
the year ended 31 March 2020.
New accounting polices
The Group has adopted the following amendments and Conceptual
Framework for the first time in the year ended 31 March 2021:
- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
- Definition of a Business (Amendments to IFRS 3)
- Covid-19-Related Rent Concessions (Amendment to IFRS 16)
- Definition of Material (Amendments to IAS 1 and IAS 8)
- Revised Conceptual Framework and amendments to References to
the Conceptual Framework in IFRS Standards.
- Adopting these amendments and Conceptual Framework has not
impacted amounts recognised in prior periods or are expected to
have a material impact in future periods based on the Group's
current strategy.
Standards and amendments issued but not yet effective
A number of new amendments relevant to the Group, have been
issued but are not yet effective for the current accounting
period.
Effective for the year ended 31 March 2022
- Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Effective for the year ended 31 March 2023
- Annual Improvements to IFRS Standards 2018-2020
- Property, Plant and Equipment - Proceeds before Intended Use (Amendments to IAS 16)
- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
- Reference to the Conceptual Framework (Amendments to IFRS 3)
Effective for the year ended 31 March 2024
- Disclosure of Accounting Policies (Amendments to IAS 1)
- Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
- Definition of Accounting Estimates (Amendments to IAS 8)
No material impact is expected upon the adoption of these
standards.
Other accounting policies:
Revenue recognition
Rental income
Rental income from fixed and minimum guaranteed rent reviews is
recognised on a straight-line basis over the entire lease term.
Where such rental income is recognised ahead of the related cash
flow, an adjustment is made to ensure the carrying value of the
related property including the accrued rent does not exceed the
external valuation. Initial direct costs incurred in negotiating
and arranging a new lease are amortised on a straight-line basis
over the period from the date of lease commencement to the expiry
date of the lease.
Where a rent-free period is included in a lease, this is
recognised over the lease term, on a straight-line basis, as a
reduction of rental income.
Where a lease incentive payment, or surrender premiums are paid
to enhance the value of a property, it is amortised on a straight-
line basis over the period from the date of lease commencement to
the expiry date of the lease as a reduction of rental income. It is
management's policy to recognise all material lease incentives and
lease incentives greater than six months. Upon receipt of a
surrender premium for the early determination of a lease, the
profit, net of dilapidations and non-recoverable outgoings relating
to the lease concerned, is accounted for from the effective date of
the modification, being the date at which both parties agree to the
modification, considering any prepaid or accrued lease payments
relating to the original lease as part of the lease payments for
the new lease.
Letting costs are recognised over the lease term on a straight
line basis as a reduction of rental income.
Service charge income
Service charge income is recognised in accordance with IFRS 15.
This income stream is recognised in the period in it is earnt and
when performance obligations are met.
IFRS 15 is based on the principle that revenue is recognised
when control passes to a customer. The majority of the Group's
income is from tenant leases and is therefore outside of the scope
of IFRS 15. However, the standard applies to service charge income.
Under IFRS 15, the Group needs to consider the agent versus
principal guidance. The Group is principal in the transaction if
they control the specified goods or services before they are
transferred to the customer. In the provision of service charge,
the Group has deemed itself to be principal and therefore the
consolidated statement of comprehensive income and the consolidated
balance sheet reflect service charge income, expenses, trade and
other receivables and trade and other payables.
Managed pub income
Managed pub income relates to income received in the pub
business relating to food, drinks and machine income. The revenue
from drink and food is recognised at the point at which the goods
are provided. The revenue earned from machines is recognised in the
period in which it relates.
In the Group's pub business, revenue is measured at the fair
value of the consideration received or receivable and represents
amounts receivable for goods and services provided in the normal
course of business, net of discounts, VAT and other sales-related
taxes.
Asset management fees
Management fees are recognised in the consolidated statement of
comprehensive income as the services are delivered and performance
obligations met. The Group assesses whether the individual elements
of service in the agreement are separate performance obligations.
Where the agreements include multiple performance obligations, the
transaction price will be allocated to each performance
obligation.
Car park income
Car park income is recognised in accordance with IFRS 15. This
income stream is recognised in the period in which it is earnt and
when performance obligations are made.
Turnover related rent
Turnover related rent relates to the margin earnt on the sale of
wet products and is recognised at the fair value of the
consideration received or receivable for goods and services
provided in the normal course of business.
Other income
Other income is recognised in accordance with IFRS 15. This
income stream is recognised in the period in which it is earnt and
when performance obligations are made.
Government grants
Monetary resources transferred to the Group by the government,
government agencies or similar bodies are recognised at fair value,
when the Group is reasonably certain that the grant will be
received. Grants are recognised in the consolidated statement of
comprehensive income within other income, on a systematic basis,
over the same period during which the expenses, for which the grant
was intended to compensate, are recognised.
Grants are disclosed in other income in note 7 to the
accounts.
Promote payments
The Group is contractually entitled to receive a promote payment
should the returns from a joint venture or associate to the joint
venture or associate partner exceed a certain internal rate of
return. This payment is only receivable by the Group on disposal of
underlying properties held by the joint venture or associate or
other termination events. Any entitlements under these arrangements
are only accrued for in the financial statements once the Group
believes the above performance conditions have been met and there
is no risk of the revenue reversing.
IFRS 15
All revenue streams under IFRS 15 allocate transaction price
against performance obligations as they are satisfied. With the
exception of asset management fees, IFRS 15 revenue streams do not
carry variable consideration. There are no significant judgements
in applying IFRS 15. There are no significant payment terms on any
of the IFRS 15 revenue streams.
Service charge expense
Service charge expenses are recognised in the period in which
they are incurred.
Finance income and costs
Finance income and costs are recognised using the effective
interest rate method. The effective interest method is a method of
calculating the amortised cost of a financial asset or financial
liability and of allocating the interest income or interest expense
over the relevant period. The effective interest rate is the rate
that exactly discounts estimated future cash payments or receipts
throughout the expected life of the financial instrument, or a
shorter period where appropriate, to the net carrying amount of the
financial asset or financial liability.
Taxation
Income tax
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the date of the
balance sheet. Tax is recognised in the consolidated statement of
comprehensive income.
Deferred tax
Any deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. A
deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
Investment properties
These properties include completed properties that are
generating rent or are available for rent, and development
properties that are under development or available for development.
Investment properties comprise freehold and leasehold properties
and are first measured at cost (including transaction costs), then
revalued to market value at each reporting date by independent
professional valuers. Leasehold properties are shown gross of the
leasehold payables (and accounted for as right-of-use asset under
IFRS 16, see Leases accounting policy). Valuation gains and losses
in a period are taken to the consolidated statement of
comprehensive income . As the Group uses the fair value model, as
per IAS 40 Investment Properties, no depreciation is provided. An
asset will be classified as held for sale within investment
properties, in line with IFRS 5 Non-Current Assets Held for Sale
and Discontinued Operations, where the asset is available for
immediate sale in their present condition and the sale is highly
probable.
Property, plant and equipment
Fixtures and equipment are stated at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
recognised over the useful lives of the equipment, using the
straight-line method at a rate of between 10% to 25% depending on
the useful life.
Public houses are initially measured at cost and subsequently
measured at valuation, net of depreciation and any impairment
losses. Depreciation is recognised so as to write off the cost or
valuation of assets less their residual values over their useful
lives on the following bases:
- Buildings 4% on a straight line-basis or the lease term if shorter
- Fixtures and fittings 20% on a straight line-basis
- IT 33% on a straight line-basis
- Freehold land and assets in the course of construction are not depreciated.
Residual value is reviewed at least at each financial year and
there is no depreciable amount if residual value is the same as, or
exceeds, book value.
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset.
Joint ventures
Interests in joint ventures are accounted for using the equity
method of accounting. The Group's joint ventures are entities over
which the Group has joint control with a partner. Investments in
joint ventures are carried in the consolidated balance sheet at
cost as adjusted by post-acquisition changes in the Group's share
of the net assets of the joint venture, less any impairment or
share of income adjusted for dividends. In assessing whether a
particular entity is controlled, the Group considers all of the
contractual terms of the arrangement, whether it has the power to
govern the financial and operating policies of the joint venture so
as to obtain benefits from its activities, and the existence of any
legal disputes or challenges to this joint control in order to
conclude whether the Group jointly controls the joint venture.
Associates
Interests in associates are accounted for using the equity
method of accounting. The Group's associates are entities over
which the Group has significant influence with a partner.
Investments in associates are carried in the consolidated balance
sheet at cost as adjusted by post-acquisition changes in the
Group's share of the net assets of the associates, less any
impairment or share of income adjusted for dividends. In assessing
whether the Group has significant influence over a particular
entity, the Group considers all of the contractual terms of the
arrangement.
Leases
At inception, the Group assesses whether a contract is or
contains a lease. This assessment involves the exercise of
judgement about whether the Group obtains substantially all the
economic benefits from the use of that asset, and whether the Group
has the right to direct the use of the asset.
The Group recognises a right-of-use ("ROU") asset and the lease
liability at the commencement date of the lease. The ROU asset is
initially measured based on the present value of lease payments,
plus initial direct costs and the cost of obligations to restore
the asset, less any incentives received.
Lease payments generally include fixed payments and variable
payments that depend on an index (such as an inflation index).
Each lease payment is allocated between the liability and
finance cost. The lease payments are discounted using the interest
rate implicit in the lease if that rate can be readily determined
or if not, the incremental borrowing rate is used at 3.2%. The
finance cost is charged to profit or loss over the lease period so
as to produce a constant rate of interest on the remaining balance
of the liability for each period.
The ROU asset is depreciated over the shorter of the lease term
or the useful life of the underlying asset. The ROU asset is
subject to testing for impairment if there is an indicator of
impairment. ROU assets that are not classified as investment
properties are disclosed on the face of the consolidated balance
sheet on their own line, and the lease liability included in the
headings current and non-current liabilities on the consolidated
balance sheet.
Where the ROU asset relates to land or property that meets the
definition of investment property under IAS 40, after initial
recognition the ROU asset is subsequently accounted for as
investment property and carried at fair value (see Investment
properties accounting policy). Valuation gains and losses in a
period are taken to the consolidated statement of comprehensive
income.
The Group has elected not to recognise ROU assets and
liabilities for leases where the total lease term is less than or
equal to 12 months, or for low value leases of less than GBP3,000.
The payments for such leases are recognised in the consolidated
statement of comprehensive income on a straight-line basis over the
lease term. Depreciation is also charged on the right of use asset
of GBP0.4 million (2020: GBP0.4 million).
Financial instruments
Financial assets
The Group classifies its financial assets as fair value through
profit or loss or amortised cost, depending on the purpose for
which the asset was acquired and based on the business model test.
Financial assets carried amortised cost include tenant receivables
which arise from the provision of goods and services to customers.
These are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue and
are subsequently carried at amortised cost, less provision for
impairment. Impairment provisions for receivables are recognised
based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses.
The probability of tenant default and subsequent non-payment of the
receivable is assessed. If it is determined that the receivable
will not be collectable, the gross carrying value of the asset is
written off against the associated provision. If in a subsequent
year the amount of the impairment loss decreased and the decrease
can be related objectively to an event occurring after the
impairment was recognised, the previously recognised impairment
loss is reversed to the extent that the carrying value of the asset
does not exceed its amortised costs at the reversal date. The
Group's financial assets measured at amortised cost comprise trade
and other receivables and cash and cash equivalents.
The financial instruments classified as financial assets at fair
value through profit or loss include interest rate swap and cap
arrangements. Recognition of the derivative financial instruments
takes place when the contracts are entered into. They are
recognised at fair value and transaction costs are included
directly in finance costs.
The fair values of derivative financial assets and financial
liabilities are determined as follows:
Interest rate swaps and caps are measured using the midpoint of
the yield curve prevailing on the reporting date. The valuations do
not include accrued interest from the previous settlement date to
the reporting date. The fair value represents the net present value
of the difference between the contracted rate and the valuation
rate when applied to the projected balances for the period from the
reporting date to the contracted expiry dates.
Financial assets are derecognised only when the contractual
rights to the cash flows from the financial asset expire or the
Group transfers substantially all risks and rewards of
ownership.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at
call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that
are readily convertible into known amounts of cash and which are
subject to an insignificant risk of change in value, and bank
overdrafts. Bank overdrafts are shown within borrowings in current
liabilities in the consolidated balance sheet.
Financial liabilities
Financial liabilities are classified at fair value through
profit or loss or as other liabilities. A financial liability is
derecognised when the obligation under the liability is discharged
or cancelled or expires.
All loans and borrowings are classified as other liabilities.
Initial recognition is at fair value less directly attributable
transaction costs. After initial recognition, interest bearing
loans and borrowings are subsequently measured at amortised costs
using the effective interest method.
Financial liabilities included in trade and other payables are
recognised initially at fair value and subsequently at amortised
cost.
The fair value of a non-interest bearing liability is its
discounted repayment amount. If the due date of the liability is
less than one year, discounting is omitted.
Value added tax
Revenues, expenses and assets are recognised net of the amount
of value added tax except:
Where the value added tax incurred on a purchase of assets or
services is not recoverable from the taxation authority, in which
case the value added tax is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
Receivables and payables that are stated with the amount of
value added tax included. The net amount of value added tax
recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the consolidated balance
sheet.
Share capital
Shares are classified as equity when there is no obligation to
transfer cash or other assets. The cost of issuing share capital is
recognised directly in equity against the proceeds from issuing the
shares.
Share-based payments
The cost of equity settled transactions is measured with
reference to the fair value at the date at which they were granted.
Where vesting performance conditions are non-market based, the fair
value excludes the effect of these vesting conditions and an
estimate is made at each year end date of the number of instruments
expected to vest. The fair value is recognised over the vesting
period in the consolidated statement of comprehensive income, with
a corresponding increase in equity. Any change to the number of
instruments with non-market vesting conditions expected to vest is
recognised in the consolidated statement of comprehensive income
for that period.
Employee Benefit Trust
The Group operates an Employee Benefit Trust for the exclusive
benefit of the Group's employees. The investment in the Company's
shares held by the trust is recognised at cost and deducted from
equity. No gain or loss is recognised in the consolidated statement
of comprehensive income on the purchase, sale, issue or
cancellation of the shares held by the trust.
Dividends
Dividends to the Company's shareholders are recognised when they
become legally payable. In the case of interim dividends, this is
when paid. In the case of final dividends, this is when approved by
equity holders.
Business combinations
The Group applies the acquisition method to account for business
combinations. The cost of the acquisition is measured at the
aggregate of the fair values, at the date of completion, of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the acquired. The
acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS are
recognised at their fair value at the acquisition. Where the fair
value of the consideration is less than the fair value of the
identifiable assets and liabilities then the difference is
recognised as a bargain purchase in the consolidated statement of
comprehensive income.
Where properties are acquired through corporate acquisitions,
each transaction is considered by management in light of the
substance of the acquisition to determine whether the acquisition
is a business combination or an asset acquisition. If a transaction
is determined to be an asset acquisition then it is accounted for
at cost.
2. Critical accounting judgements and estimates
The preparation of financial statements requires management to
make estimates affecting the reported amounts of assets and
liabilities, of revenues and expenses, and of gains and losses. The
key assumptions concerning the future, and other key sources of
estimation uncertainty at the end of the reporting period, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year, are discussed below. Estimates and judgements are
continually evaluated and are based on historical experience as
adjusted for current market conditions and other factors.
Significant judgements
Leased and tied pub classification as investment property
The Directors have exercised judgement in order to determine the
appropriate classification of the leased and tied pubs as
investment property or property plant and equipment. Under IAS40
'Investment Properties' an entity treats such a property as
investment property if services provided to the occupier are
insignificant to the arrangement as a whole. The Directors consider
that whilst the relative proportion of wet income to lease income
from a tied pub in quantitative terms is not insignificant other
factors should be considered in making the assessment of whether
the services provided to the tenants are insignificant. The income
received by the Group in respect of the sale of wet products is
higher than that which would be received by a third party providing
the same services and that these pubs pay a lower fixed rent than
they would without the wet product tie. This indicates the margin
earned, in substance, predominantly represents turnover related
rent. Accordingly, leased and tied pubs with an aggregate fair
value of GBP195.5 million at 31 March 2021 (2020: GBP219.1 million)
have been classified as Investment Property. Managed houses with an
aggregate value of GBP52.7 million at 31 March 2021 (2020: GBP55.0
million) have been classified as Property, Plant and Equipment.
Principal vs agent
The Group has contracts with breweries and drinks distributors
for the provision of wet product to its pub tenants. In assessing
whether it is appropriate to recognise revenue as principal or
agent, the Directors exercise their judgement in considering the
criteria included in IFRS 15 'Revenue from Contracts with
Customers'. The Group is not responsible for the delivery or the
quality of the wet drink product and does not take physical control
or assume inventory risk in the arrangement; these factors indicate
that the Group is acting as agent and the Directors have concluded
that this outweighs the fact that the Group sets the pricing with
the tenant and bears an element of credit risk. In considering the
nature of the relationship with its pub tenants, the Directors are
satisfied that the provisions of IFRS 15 indicate that the Group is
not acting as principal and has therefore recognised revenue of
GBP4.5 million (2020: GBP13.8 million) in the period representing
only the net margin earned on wet product sales, see note 4 for
further details.
REIT Status
NewRiver is a Real Estate Investment Trust (REIT) and does not
pay tax on its property income or gains on property sales, provided
that at least 90% of the Group's property income is distributed as
a dividend to shareholders, which becomes taxable in their hands.
In addition, the Group has to meet certain conditions such as
ensuring the property rental business represents more than 75% of
total profits and assets. Any potential or proposed changes to the
REIT legislation are monitored and discussed with HMRC. It is the
Directors judgement that the Group has met the REIT conditions in
the year.
Sources of estimation uncertainty
Investment property
The Group's investment properties and public houses are stated
at fair value. The assumptions and estimates used to value the
properties are detailed in note 14. Small changes in the key
estimates, such as the estimated rental value, can have a
significant impact on the valuation of the investment properties,
and therefore a significant impact on the consolidated balance
sheet and key performances measures such as Net Asset Value per
share. As at the 31 March 2021, the material valuation uncertainty
clause has been lifted within the UK Retail sector for the purposes
of these valuations. The material valuation uncertainty clause has
not, however, been lifted in the leisure and hospitality sectors,
including pubs. The external valuers have confirmed that the
inclusion of the "material valuation uncertainty" declaration does
not mean that the valuations for NewRivers pub portfolio cannot be
relied upon. Rather, the phrase is used in order to be clear and
transparent with all parties, in a professional manner that - in
the current extraordinary circumstances - less certainty can be
attached to valuations than would otherwise be the case. The pubs
for which there is a material valuation uncertainty amount to
GBP195.5 million within investment property (note 14) and GBP52.7
million within property, plant and equipment (note 17).
Rents, ERVs, EBITDA multiples and maintainable earnings have a
direct relationship to valuation, while yield has an inverse
relationship. Estimated costs of a development project will
inversely affect the valuation of development properties. There are
interrelationships between all these unobservable inputs as they
are determined by market conditions. The existence of an increase
in more than one unobservable input could be to magnify the impact
on the valuation, see note 14 for sensitivity analysis.
The estimated fair value may differ from the price at which the
Group's assets could be sold. Actual realisation of net assets
could differ from the valuation used in these financial statements,
and the difference could be significant.
Impairment of trade receivables
As a result of Covid-19 the Group's assessment of expected
credit losses is inherently subjective due to the forward-looking
nature of the assumptions made, most notably around the assessment
over the likelihood of tenants having the ability to pay rent as
demanded, as well as the likelihood of rent deferrals and rent free
periods being offered to tenants as a result of the pandemic. The
expected credit loss which has been recognised is therefore subject
to a degree of uncertainty which may not prove to be accurate given
the uncertainty caused by Covid-19 at the reporting date and in the
year ahead as the roadmap to unlocking the United Kingdom takes
effect. The Group has recognised an expected credit loss on trade
receivables of GBP5.6 million (31 March 2020: GBP2.5 million) in
the year. A 10% increase to the percentage loss allowance rates
applied to tenant receivables would result in a GBP0.1 million
increase in other property costs and an equivalent increase in loss
after tax. A 10% decrease to the percentage loss allowance rates
applied to tenant receivables would result in a GBP0.1 million
decrease in other property costs and an equivalent reduction in
loss after tax. See note 18.
3. Segmental reporting
The Group's operations are organised into two operating
segments, being investment in retail property and in pubs. The
retail investments comprise shopping centres, retail warehouses and
high street stores. The pub investments consist of community public
houses. All of the Group's operations are in the UK and therefore
no geographical segments have been identified.
The relevant gross revenue, net rental income and property and
other assets, being the measures of segment revenue, segment result
and segment assets used by the management of the business, are set
out below. The results include the Group's share of assets and
results from properties held in joint ventures and associates.
Included within the administrative expenses is GBP0.4 million
(2020: GBP0.4 million) and GBP1.5 million (2020: GBP1.2 million) of
depreciation in respect of the pubs and retail segments. Included
in the taxation credit is GBP1.3 million credit (2020: GBP0.5
million charge) and GBP1.4 million credit (2020: GBP1.0 million
credit) in relation to the pubs and retail segments.
2021 2020
=================================== ======================= =======================
Retail Pubs Group Retail Pubs Group
Segment revenues and result GBPm GBPm GBPm GBPm GBPm GBPm
=================================== ====== ====== ======= ====== ====== =======
Property rental and related income 61.1 4.4 65.5 76.8 13.6 90.4
Managed pub income - 9.1 9.1 - 22.5 22.5
Turnover related rent - 4.5 4.5 - 13.8 13.8
Service charge income 11.6 - 11.6 16.9 - 16.9
Amortisation of tenant incentives
and letting costs (1.8) - (1.8) (1.5) - (1.5)
Asset management fees 1.2 - 1.2 0.9 - 0.9
Surrender premiums and commissions 1.0 - 1.0 1.8 - 1.8
=================================== ====== ====== ======= ====== ====== =======
Segment revenue 73.1 18.0 91.1 94.9 49.9 144.8
Service charge expense (17.5) - (17.5) (21.1) - (21.1)
Rates (2.2) (0.3) (2.5) (2.3) (1.1) (3.4)
Other property operating expenses (10.4) (16.7) (27.1) (6.2) (24.3) (30.5)
=================================== ====== ====== ======= ====== ====== =======
Property operating expenses (30.1) (17.0) (47.1) (29.6) (25.4) (55.0)
Other income 2.7 4.5 7.2 - - -
=================================== ====== ====== ======= ====== ====== =======
Segment result 45.7 5.5 51.2 65.3 24.5 89.8
=================================== ====== ====== ======= ====== ====== =======
Administrative expenses (23.4) (20.9)
Share of joint ventures' and
associates' profit / (loss) after
tax 4.2 (2.2)
Net valuation movement (154.7) (162.6)
Loss on disposal of investment
properties (5.5) (1.5)
Loss on disposal of subsidiaries (2.2) -
Finance income 0.3 0.1
Finance costs (23.0) (21.5)
Revaluation of derivatives (0.1) (2.8)
Taxation 2.7 0.5
=================================== ====== ====== ======= ====== ====== =======
Loss for the year after taxation (150.5) (121.1)
=================================== ====== ====== ======= ====== ====== =======
Segment assets 2021 2020
=================================== ====================================
Retail Pubs Unallocated Total Retail Pubs Unallocated Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============================ ====== ===== =========== ======= ======= ===== =========== =======
Non-current assets
Investment properties 739.3 195.6 - 934.9 961.2 224.4 - 1,185.6
Investments in joint
ventures 25.6 - - 25.6 22.1 - - 22.1
Investment in associates 5.3 - - 5.3 0.9 - - 0.9
Public houses - 52.7 - 52.7 - 55.0 - 55.0
Property, plant and
equipment - - 1.4 1.4 - - 1.2 1.2
Other non-current
assets - - 4.0 4.0 - - 4.1 4.1
============================ ====== ===== =========== ======= ======= ===== =========== =======
Total non-current
assets 1,023.9 1,268.9
Current assets
Trade and other receivables 25.1 0.9 - 26.0 23.5 3.2 - 26.7
Current taxation
asset _ - - - - - 0.7 0.7
Cash and cash equivalents - - 150.5 150.5 - - 80.8 80.8
Assets held for sale 25.5 - - 25.5 - - - -
============================ ====== ===== =========== ======= ======= ===== =========== =======
Total current assets
including assets
held for sale 202.0 108.2
============================ ====== ===== =========== ======= ======= ===== =========== =======
Segment assets 820.8 249.2 155.9 1,225.9 1,007.7 282.6 86.8 1,377.1
============================ ====== ===== =========== ======= ======= ===== =========== =======
4. Revenue
2021 2020
GBPm GBPm
==================================================== ===== =====
Property rental and related income* 65.5 90.4
Turnover related rent 4.5 13.8
Amortisation of tenant incentives and letting costs (1.8) (1.5)
Surrender premiums and commissions 1.0 1.8
==================================================== ===== =====
Rental related income 69.2 104.5
==================================================== ===== =====
Asset management fees 1.2 0.9
Managed pub income 9.1 22.5
Service charge income 11.6 16.9
==================================================== ===== =====
Revenue 91.1 144.8
==================================================== ===== =====
*Included within property rental and related income is car park
income of GBP2.7 million (2020: GBP7.4 million) which falls under
the scope of IFRS 15. The remainder of the income is covered by
IFRS 16.
Asset management fees, managed pub income and service charge
income which represents the flow through costs of the day-to-day
maintenance of shopping centres falls under the scope of IFRS 15.
Refer to accounting policies in Note 1.
5. Property operating expenses
2021 2020
GBPm GBPm
================================== ===== =====
Service charge expense 17.5 21.1
Rates on vacant units 2.2 3.4
Expected credit loss 7.1 2.5
Pub operating expenses 12.9 20.3
Other property operating expenses 7.4 7.7
================================== ===== =====
47.1 55.0
================================== ===== =====
6. Administrative expenses
2021 2020
GBPm GBPm
=========================================================================================== ===== =====
Wages and salaries 11.3 9.9
Social security costs 1.4 1.5
Other pension costs 0.4 0.4
=========================================================================================== ===== =====
Staff costs 13.1 11.8
Depreciation 1.9 1.6
Share-based payments 0.6 -
Other administrative expenses 7.4 7.1
=========================================================================================== ===== =====
23.0 20.5
Professional fees in relation to the acquisition and integration of Bravo Inns Limited and
Hawthorn 0.1 0.4
Abortive fees 0.3 -
=========================================================================================== ===== =====
Administrative expenses 23.4 20.9
=========================================================================================== ===== =====
Net administrative expenses ratio is calculated as follows:
2021 2020
GBPm GBPm
============================================================================================ ===== =====
Administrative expenses 23.4 20.9
Adjust for:
Asset management fees (1.2) (0.9)
Share of joint ventures' and associates administrative
expenses 0.2 0.1
Depreciation of properties (1.1) (0.8)
Less share based payments (0.6) -
Less professional fees in relation to the acquisition and integration of Bravo Inns Limited
and Hawthorn (0.1) (0.4)
Abortive costs (0.3) -
============================================================================================ ===== =====
Group's share of net administrative expenses 20.3 18.9
============================================================================================ ===== =====
Property rental and related income* 77.6 124.2
Share of joint ventures' and associates' property income 3.9 3.4
============================================================================================ ===== =====
81.5 127.6
Net administrative expenses as a % of property income
(including share of joint ventures) 24.9% 14.9%
============================================================================================ ===== =====
*This balance includes an expected credit loss of GBP5.0 million
(2020: GBPnil), which excludes the GBP0.6 million (2020: GBPnil)
forward looking element of the calculation and GBP1.5 million
(2020: GBPnil) in relation to service charge and insurance (2020:
GBPnil) and includes the expected credit loss held in joint
ventures and associates of GBP0.3 million (2020: GBP0.1
million).
Average monthly number of staff
2021 2020
============================== ==== ====
Directors 7 7
Operations and asset managers 48 44
Pubs 28 52
Support functions 90 79
============================== ==== ====
173 182
============================== ==== ====
Auditors' remuneration
2021 2020
GBP'000 GBP'000
=============================================== ======== ========
Audit of the Company's financial statements 315 315
Audit of subsidiaries, pursuant to legislation 235 235
=============================================== ======== ========
550 550
Non-audit fees 100 50
=============================================== ======== ========
Total fees 650 600
=============================================== ======== ========
In addition to this the joint ventures and associates (NewRiver
Retail (Nelson) Limited), NewRiver Retail (Napier) Limited and
NewRiver (Sprucefield) Limited) paid GBP82k (2020: GBP28k) in audit
fees.
7. Other income
2021 2020
GBPm GBPm
=================== ===== =====
Insurance proceeds 2.7 -
Government grants 3.7 -
Dilapidations 0.8 -
=================== ===== =====
Other income 7.2 -
=================== ===== =====
Insurance proceeds relates the full settlement received from a
fire in one of the Group's retail parks, Government grants were
received on the operator managed estate, due to the income
disruption caused by the closure of the pub estate as a result of
Covid-19.
8. Loss on disposal of subsidiary
On the 30 September 2020, the Group disposed of a subsidiary
which owned Sprucefield Retail Park. The Group then acquired a 10%
interest. See note 16.
Included in the carrying value were investment properties of
GBP40.7 million and cash of GBP1.5 million.
2021 2020
===============================
GBPm GBPm
=============================== ====== ====
Gross disposal proceeds 38.5 -
Carrying value (40.7) -
=============================== ====== ====
Loss on disposal of subsidiary (2.2) -
=============================== ====== ====
9. Loss on disposal of investment properties
2021 2020
GBPm GBPm
========================================== ====== ======
Gross disposal proceeds 40.1 48.0
Carrying value (44.7) (47.9)
Cost of disposal (0.9) (1.6)
========================================== ====== ======
Loss on disposal of investment properties (5.5) (1.5)
========================================== ====== ======
Included in this calculation is a loss on disposal of property,
plant and equipment. The properties had a carrying value of GBP0.9
million (2020: GBPnil million) and were disposed of for GBP0.9
million (2020: GBPnil), leading to a loss on disposal of GBPnil
(2020: GBPnil).
10. Finance income and finance costs
2021 2020
GBPm GBPm
====================================== ====== ======
Finance income
Income from loans with joint ventures 0.3 0.1
Finance expense
Interest on borrowings (20.2) (18.7)
Finance cost on lease liabilities (3.0) (2.8)
Revaluation of derivatives 0.1 (2.8)
====================================== ====== ======
Net finance expense (22.8) (24.2)
====================================== ====== ======
11. Taxation
2021 2020
GBPm GBPm
====================================== ===== =====
UK Corporation Tax at 19% (2020: 19%)
Current year (1.4) 0.9
Prior year adjustment (1.3) (1.4)
====================================== ===== =====
Taxation credit (2.7) (0.5)
====================================== ===== =====
The credit for the year recognised in the consolidated statement
of comprehensive income relates to a total income tax credit of
GBP1.3 million (March 2020: GBP1.0 million) and a deferred tax
credit of GBP1.4 million (March 2020: GBP0.5 million charge).
2021 2020
GBPm GBPm
=========================================== ======= =======
Loss before tax (153.2) (121.6)
Tax at the current rate of 19% (2020: 19%) (29.1) (23.1)
Revaluation of property 29.3 30.9
Movement in unrecognised deferred tax 2.2 0.5
Non-taxable profit due to REIT regime (6.7) (9.7)
Non-deductible expenditure 2.9 1.9
Other - 0.4
Prior year adjustment (1.3) (1.4)
=========================================== ======= =======
Taxation credit (2.7) (0.5)
=========================================== ======= =======
Real Estate Investment Trust regime (REIT regime)
The Group is a member of the REIT regime whereby profits from
its UK property rental business are tax exempt. The REIT regime
only applies to certain property-related profits and has several
criteria which have to be met. The main criteria are:
- the assets of the property rental business must be at least 75% of the Group's assets;
- the profit from the tax-exempt property rental business must
exceed 75% of the Group's total profit;
- at least 90% of the Group's profit from the property rental
business must be paid as dividends.
The Group continues to meet these conditions and management
intends that the Group should continue as a REIT for the
foreseeable future.
Deferred tax
31 March 31 March
2020 Movement 2021
GBPm GBPm GBPm
========================= ======== ======== ========
Deferred tax asset 1.2 (1.2) -
Deferred tax liabilities (3.3) 2.6 (0.7)
========================= ======== ======== ========
Net deferred tax (2.1) 1.4 (0.7)
========================= ======== ======== ========
31 March 31 March
2019 Movement 2020
GBPm GBPm GBPm
========================= ======== ======== ========
Deferred tax asset 1.2 - 1.2
Deferred tax liabilities (2.8) (0.5) (3.3)
========================= ======== ======== ========
Net deferred tax (1.6) (0.5) (2.1)
========================= ======== ======== ========
The deferred tax assets and liabilities have been calculated at
the tax rate effective in the period that the tax is expected to
crystallise. The Group has recognised a deferred tax liability
calculated at 19% (2020: 19%). As at 31 March 2021, the Group has
unrecognised tax losses of GBP46.0 million (2020: GBP22.5 million).
The losses have not been recognised as an asset due to uncertainty
over the availability of taxable income to utilise the losses. The
losses do not expire but are reliant on continuity of ownership and
source of trade.
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Bill 2015 (on 26 October 2015) and
include reducing the main rate to 19%. The reduction to 17% from 1
April 2020 enacted as part of the Finance Bill 2016 has been
cancelled as announced in the Budget on 11 March 2020, maintaining
the rate of corporation tax at 19%. Deferred taxes at the balance
sheet date have been measured using the expected enacted tax rate
and this is reflected in these financial statements.
12. Performance measures
A reconciliation of the performance measures to the nearest IFRS
measure is below:
2021 2020
GBPm GBPm
============================================================= ======= =======
Loss for the year after taxation (150.5) (121.1)
Adjustments
Net valuation movement 154.7 162.6
Loss on disposal of investment properties 5.5 1.5
Revaluation of derivatives (0.1) 2.8
Acquisition costs 0.1 0.4
Deferred tax (1.4) 0.5
Loss on disposal of subsidiary 2.2 -
Group's share of joint ventures' and associates' adjustments
Revaluation of investment properties (1.8) 4.3
Revaluation of derivatives 0.2 -
Loss on disposal of investment properties - 0.3
============================================================= ======= =======
EPRA earnings 8.9 51.3
Share-based payment charge 0.6 -
Forward looking element of IFRS 9* 0.6 -
Depreciation on public houses 1.1 0.8
Abortive costs 0.3 -
============================================================= ======= =======
Underlying Funds From Operations (UFFO) 11.5 52.1
============================================================= ======= =======
*Forward looking element of IFRS 9 relates to a provision
against debtor balances in relation to invoices in advance for
future rental income. These balances are not due in the current
year and therefore no income has yet been recognised in relation to
these debtors.
Number of shares
2021 2020
Number of shares No. m No. m
============================================================ ====== ======
Weighted average number of ordinary shares for the purposes
of Basic EPS, UFFO and EPRA 306.4 305.9
Effect of dilutive potential ordinary shares:
Deferred bonus shares 0.8 0.3
============================================================ ====== ======
Weighted average number of ordinary shares for the purposes
of diluted EPS, UFFO and EPRA 307.2 306.2
============================================================ ====== ======
Performance measures (pence)
IFRS
Basic EPS (49.1) (39.6)
Diluted EPS (49.1) (39.6)
UFFO
UFFO per share 3.8 17.0
Diluted UFFO per share 3.7 17.0
EPRA
EPRA EPS 2.9 16.7
Diluted EPRA EPS 2.9 16.7
============================================================ ====== ======
The below table reconciles the differences between the
calculation of basic and EPRA NTA.
EPRA NTA per share and basic NTA per share:
2021 2020
========================= =========================
Shares Pence Shares Pence
GBPm m per share GBPm m per share
============================ ===== ====== ========== ===== ====== ==========
Net assets 460.4 306.5 150p 610.6 306.2 199p
Unexercised employee awards - 0.8 - 0.3
============================ ===== ====== ========== ===== ====== ==========
Diluted net assets 460.4 307.3 150p 610.6 306.5 199p
Deferred tax liability 0.7 - 2.1 -
Fair value derivatives 2.6 - 2.7 -
Goodwill (0.5) - (0.2) -
============================ ===== ====== ========== ===== ====== ==========
EPRA net assets 463.2 307.3 151p 615.2 306.5 201p
============================ ===== ====== ========== ===== ====== ==========
13. Dividends
No dividends have been paid in the year to 31 March 2021.
Details of dividends paid in the year to 31 March 2020 are set out
below:
Pence
Payment date PID Non-PID per share GBPm
=================== ===== ======= ========== ====
Year to March 2020
Ordinary dividends
24 May 2019 5.40 - 5.40 16.3
26 July 2019 5.40 - 5.40 16.5
15 November 2019 5.40 - 5.40 16.5
7 February 2020 5.40 - 5.40 16.5
=================== ===== ======= ========== ====
21.60 - 21.60 65.8
=================== ===== ======= ========== ====
A dividend of 3.0 pence per share in respect of the year ended
31 March 2021 will, subject to shareholder approval at the 2021
AGM, be paid on 3 September 2021. The ex-dividend date will be 29
July 2021. The dividend will be payable as a REIT Property Income
Distribution (PID).
Property Income Distribution (PID) dividends
Profits distributed out of tax-exempt profits are PID dividends.
PID dividends are paid after deduction of withholding tax
(currently at 20%), which NewRiver pays directly to HMRC on behalf
of the shareholder.
Non-PID dividends
Any non-PID element of dividends will be treated in exactly the
same way as dividends from other UK, non-REIT companies.
14. Investment properties
2021 2020
GBPm GBPm
================================================= ======= =======
Fair value brought forward 1,102.3 1,254.1
Acquisitions - 44.1
Capital expenditure 10.0 14.1
Lease incentives, letting and legal costs 2.4 2.3
Reclassification to plant property and equipment (4.1) (5.4)
Transfer to assets held for sale (25.5) -
Disposals (44.7) (47.9)
Disposal of subsidiary (40.7) -
Net valuation movement (147.8) (159.0)
================================================= ======= =======
Fair value carried forward 851.9 1,102.3
================================================= ======= =======
Right of use asset (investment property) 83.0 83.3
================================================= ======= =======
Fair value carried forward 934.9 1,185.6
================================================= ======= =======
The Group's investment properties have been valued at fair value
on 31 March 2021 by independent valuers, Colliers International
Valuation UK LLP and Knight Frank LLP, on the basis of fair value
in accordance with the Current Practice Statements contained in The
Royal Institution of Chartered Surveyors Valuation - Professional
Standards, (the 'Red Book'). The valuations are performed by
appropriately qualified valuers who have relevant and recent
experience in the sector.
The outbreak of Covid-19, declared by the World Health
Organisation as a "Global Pandemic" on 11 March 2020, has impacted
global financial markets. As such, as at the 31 March 2020 the
external valuers were faced with an unprecedented set of
circumstances on which to base a judgement. The valuations across
all asset classes were therefore reported on the basis of "material
valuation uncertainty" as per VPS 3 and VPGA 10 of the RICS Red
Book Global. Consequently, less certainty - and a higher degree of
caution - was attached to the valuations provided than would
normally be the case.
As at the 31 March 2021, the material valuation clause has been
lifted within the UK Retail sector for the purposes of these
valuations. The material valuation uncertainty clause has not,
however, been lifted in the leisure and hospitality sectors,
including pubs. The external valuers have confirmed that the
inclusion of the "material valuation uncertainty" declaration does
not mean that the valuations for NewRivers pub portfolio cannot be
relied upon. Rather, the phrase is used in order to be clear and
transparent with all parties, in a professional manner that - in
the current extraordinary circumstances - less certainty can be
attached to valuations than would otherwise be the case. Investment
property for which there is material valuation uncertainty amount
to GBP195.6 million (2020: GBP224.4 million) of public houses in
the above balance.
The Group is exposed to changes in the residual value of
properties at the end of current lease agreements. The residual
value risk born by the Group is mitigated by active management of
its property portfolio with the objective of optimising tenant mix
in order to:
- achieve the longest weighted average lease term possible;
- minimise vacancy rates across all properties; and
- minimise the turnover of tenants with high quality credit ratings.
The Group also grants lease incentives to encourage high quality
tenants to remain in properties for longer lease terms. In the case
of anchor tenants, this also attracts other tenants to the property
thereby contributing to overall occupancy levels.
There has been no change in the valuation methodology used for
investment property as a result of Covid-19. The impact of Covid-19
on the retail valuation has been the impact on yields and the
capital deduction based on rental income expectations. Within the
pub business, the valuations have made allowances for a delinquency
period.
The fair value at 31 March 2021 represents the highest and best
use.
The properties are categorised as Level 3 in the IFRS 13 fair
value hierarchy. There were no transfers of property between Levels
1, 2 and 3. Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date. Level 2 inputs are inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly. Level 3
inputs are unobservable inputs for the asset or liability.
Information about fair value measurements for the investment
property and public houses using significant unobservable inputs
(Level 3) is set out below:
As at 31 March 2021
Property ERV Property rent
========================= ========================= =========== ===========
EPRA topped
Property up net
Min Max Average Min Max Average equivalent initial
Fair GBP GBP GBP GBP GBP GBP yield yield
value per sq per sq per sq per sq per sq per sq Average Average
(GBPm) ft ft ft ft ft ft % %
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
Shopping Centres
- Core 209.5 9.1 25.4 13.8 8.4 26.9 12.6 9.3% 9.5%
Shopping Centres
- Regeneration 210.5 5.3 19.7 14.7 5.1 13.5 10.5 6.4% 5.7%
Shopping Centres
- Work Out 127.5 6.4 17.1 10.1 3.3 9.1 5.8 13.1% 9.3%
Retail warehouses 117.1 9.5 14.1 11.6 2.3 14.7 9.4 7.7% 6.9%
High street and other 17.3 5.7 14.2 8.1 2.2 17.0 6.7 4.6% 5.4%
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
681.9
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
EBITDA multiples
Property Rent (x) /
(GBP per site Net Initial Yield EBITDA (GBP per
valuation) (%) sq ft)
======= =================== ====================== ===================
Fair
value
(GBPm) Min Max Average Min Max Average Min Max Average
=================== ======= ==== ==== ======= ===== ====== ======= === ===== =======
Pub portfolio 246.8 - - - 0.6x 29.1x 7.4x 2.5 129.4 24.5
Convenience
store development
portfolio 1.4 88.6 88.6 88.6 6.2% 6.2% 6.2% - - -
=================== ======= ==== ==== ======= ===== ====== ======= === ===== =======
248.2
=================== ======= ==== ==== ======= ===== ====== ======= === ===== =======
Total 930.1
=================== ======= ==== ==== ======= ===== ====== ======= === ===== =======
As at 31 March 2020
Property ERV Property rent
========================= ========================= =========== ===========
EPRA topped
Property up net
Min Max Average Min Max Average equivalent initial
Fair GBP GBP GBP GBP GBP GBP yield yield
value per sq per sq per sq per sq per sq per sq Average Average
(GBPm) ft ft ft ft ft ft % %
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
Shopping Centres
- Core 254.7 9.3 31.4 14.9 8.2 21.4 13.9 8.5% 8.5%
Shopping Centres
- Regeneration 232.0 5.3 21.0 15.1 0.2 15.9 10.7 6.4% 5.7%
Shopping Centres
- Work Out 171.3 7.3 15.7 10.7 3.6 11.7 6.5 11.0% 7.9%
Retail warehouses 187.0 8.0 15.7 12.0 2.0 16.0 11.2 7.4% 7.1%
High street and other 32.9 5.0 15.5 6.5 - 16.9 5.2 4.9% 5.0%
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
877.8
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
EBITDA multiples
Property Rent (GBP (x) / Net Initial EBITDA (GBP per
per site valuation) Yield (%) sq ft)
======= ======================== ====================== ====================
Fair
value
(GBPm) Min Max Average Min Max Average Min Max Average
=================== ======= ====== ===== ========= ===== ====== ======= ==== ===== =======
Pub portfolio 273.8 - - - 1.7x 12.2x 7.6x 1.37 115.1 19.65
Convenience
store development
portfolio 5.7 19.2 19.4 19.3 5.0% 5.3% 5.2% - - -
=================== ======= ====== ===== ========= ===== ====== ======= ==== ===== =======
279.5
=================== ======= ====== ===== ========= ===== ====== ======= ==== ===== =======
Total 1,157.3
=================== ======= ====== ===== ========= ===== ====== ======= ==== ===== =======
The investments are a portfolio of retail and leisure assets in
the UK. The valuation was determined using an income capitalisation
method, which involves applying a yield to rental income streams.
Inputs include yield, current rent and ERV. Development properties
are valued using a residual method, which involves valuing the
completed investment property using an investment method and
deducting estimated costs to complete, then applying an appropriate
discount rate.
The relationship of unobservable inputs to fair value are the
higher the rental values and the lower the yield, the higher the
fair value. In the pub portfolio, the valuer values the assets on a
Profits Method, assessing their opinion of the Fair Maintainable
Trade (FMT) that a Reasonable Efficient Operator (REO) could
achieve as at the valuation date having regard to actual trading
performance of each asset and wider market dynamics. In respect of
the pub portfolio, these are valued on the highest and best use
basis. The valuer makes judgements on whether to use residual value
or a higher value to include development potential where
appropriate. Where no conversion opportunity has been identified at
present, the valuer has not specifically considered an alternative
use valuation.
The inputs to the valuation include:
- Rental value - total rental value per annum
- Equivalent yield - the net weighted average income return a
property will produce based upon the timing of the income
received.
- EBITDA multiples and maintainable earnings from each pub
- Estimated development costs
There were no changes to valuation techniques during the year.
The impact of Covid-19 on the retail valuation has been the impact
on yields and the capital deduction based on rental income
expectations. Within the pub business, the valuations have made
allowances for a delinquency period. Valuation reports are based on
both information provided by the Group, e.g. current rents and
lease terms which is derived from the Company's financial and
property management systems and is subject to the Group's overall
control environment, and assumptions applied by the valuers, e.g.
ERVs and yields. These assumptions are based on market observation
and the valuers' professional judgement.
Sensitivities of measurement of significant inputs
As set out within significant accounting estimates and
judgements in note 2, the Group's property portfolio valuation is
open to judgements and is inherently subjective by nature. As a
result, the sensitivity analysis below illustrates the impact of
changes in key unobservable inputs on the fair value of the Group's
properties.
Whilst the property valuations reflect the external valuers'
assessment of the impact of Covid-19 at the valuation date, we
consider +/-10% for ERV, +/-10% for EBITDA +/-100bps for NEY and
+/-100bps for multiplier to capture the increased uncertainty in
these key valuation assumptions, and deem it to be a reasonable
possible scenario.
2021: Sensitivity impact on valuations of a 10% change in
estimated rental value and absolute yield of 100 bps.
Impact on valuations Impact on valuations
of a 10% change of 100 bps change
in ERV in yield
====================== ======================
GBPm GBPm GBPm GBPm
Asset Type Increase Decrease Increase Decrease
Retail asset valuation GBPm 10% 10% 1.0% 1.0%
================================ ====== ========== ========== ========== ==========
Shopping Centres - Core 209.5 18.5 (16.9) (22.1) 27.8
Shopping Centres - Regeneration 210.5 17.6 (18.2) (26.2) 35.6
Shopping Centres - Work Out 127.5 10.8 (11.2) (11.2) 13.4
Retail warehouses 117.1 8.9 (9.3) (14.4) 18.9
High street and other 17.3 0.7 (0.7) (0.4) 0.5
================================ ====== ========== ========== ========== ==========
681.9* 56.5 (56.3) (74.3) 96.2
================================ ====== ========== ========== ========== ==========
This number includes assets held for sale of GBP25.5m.
Sensitivity impact on valuations of a 10% change in EBITDA and
multiplier of 1.0x.
Impact on valuations Impact on valuations
of a 10% change of a 1.0x change
in EBITDA in multiplier
==================== ====================== ======================
GBPm GBPm GBPm GBPm
GBPm Increase Decrease Increase Decrease
Pub asset valuation 10% 10% 1.0x 1.0x
==================== ========== ========== ========== ==========
248.2 36.7 (30.0) 33.4 (33.4)
==================== ========== ========== ========== ==========
2020: Sensitivity impact on valuations of a 10% change in
estimated rental value and absolute yield of 100 bps.
Impact on valuations Impact on valuations
of a 10% change of 100 bps change
in ERV in yield
================================ ===== ====================== ======================
GBPm GBPm GBPm GBPm
Asset Type Increase Decrease Increase Decrease
Retail asset valuation GBPm 10% 10% 1.0% 1.0%
================================ ===== ========== ========== ========== ==========
Shopping Centres - Core 254.7 20.6 (19.0) (26.2) 33.5
Shopping Centres - Regeneration 231.7 21.3 (20.5) (30.1) 41.2
Shopping Centres - Work Out 171.3 15.4 (14.9) (16.9) 20.5
Retail warehouses 186.9 9.4 (16.9) (21.1) 28.0
High street and other 33.2 1.4 (1.4) (1.4) 1.7
================================ ===== ========== ========== ========== ==========
877.8 68.1 (72.7) (95.7) 124.9
================================ ===== ========== ========== ========== ==========
Sensitivity impact on valuations of a 10% change in EBITDA and
multiplier of 1.0x.
Impact on valuations Impact on valuations
of a 10% change of a 1.0x change
in EBITDA in multiplier
==================== ====================== ====================================
GBPm GBPm GBPm
GBPm Increase Decrease Increase GBPm
Pub asset valuation 10% 10% 1.0x Decrease 1.0x
====================
279.3 29.5 (24.1) 37.4 (34.5)
==================== ==================== =========== ========= ==============
Reconciliation to net valuation movement in consolidated
statement of comprehensive income
2021 2020
Net valuation movement in investment properties GBPm GBPm
================================================================== ======= =======
Net valuation movement in investment properties (147.8) (159.0)
Net valuation movement in property, plant and equipment (6.6) (4.0)
Net valuation movement in right of use asset (0.3) 0.4
================================================================== ======= =======
Net valuation movement in consolidated statement of comprehensive
income (154.7) (162.6)
================================================================== ======= =======
Reconciliation to properties at valuation in the portfolio
2021 2020
Note GBPm GBPm
===================================== ==== ===== =======
Investment property 14 851.9 1,102.3
Property, plant and equipment 17 52.7 55.0
Assets held for sale 19 25.5 -
------------------------------------- ---- ----- -------
Wholly owned properties at valuation 930.1 1,157.3
Properties held in joint ventures* 15 35.2 35.4
Properties held in associates 16 8.9 4.4
===================================== ==== ===== =======
Properties at valuation 974.2 1,197.1
===================================== ==== ===== =======
*Included in non-current assets in joint ventures is GBP1.5
million (31 March 2020: GBP1.5 million) loan to joint venture which
should be deducted from this balance.
15. Investments in joint ventures
As at 31 March 2021 the Group has two joint ventures.
2021 2020
GBPm GBPm
=========================================================== ===== =====
Opening balance 22.1 7.6
Additions to investment in joint ventures - 15.4
Loan to joint venture - 3.0
Group's share of profit after taxation excluding valuation
movement 2.3 2.0
Net valuation movement 1.2 (3.9)
Distributions and dividends - (2.0)
=========================================================== ===== =====
Investment in joint venture 25.6 22.1
=========================================================== ===== =====
2021 2020
Name Country of incorporation % Holding % Holding
================================= ========================= =========== ===========
NewRiver Retail Investments LP
(NRI LP) Guernsey 50 50
NewRiver Retail (Napier) Limited
(Napier) UK 50 50
================================= ========================= =========== ===========
The Group is the appointed asset manager on behalf of these
joint ventures and receives asset management fees, development
management fees and potentially performance-related bonuses.
NewRiver Retail Investments LP and NewRiver Retail (Napier)
Limited have a 31 December year end. The aggregate amounts
recognised in the consolidated balance sheet and consolidated
statement of comprehensive income are as follows:
2021 2020
===================== =============================== ===============================
Group's Group's
Consolidated balance Napier NRI LP Total share Napier NRI LP Total share
sheet GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
===================== ====== ====== ====== ======= ====== ====== ====== =======
Non-current assets 62.4 8.0 70.4 36.8 60.2 10.5 70.7 36.9
Current assets 7.0 1.6 8.6 4.3 2.8 0.4 3.2 1.6
Current liabilities (6.5) (1.0) (7.5) (1.8) (5.8) (0.2) (6.0) (1.5)
Borrowings due in
more than one year (27.3) - (27.3) (13.7) (30.0) - (30.0) (14.9)
===================== ====== ====== ====== ======= ====== ====== ====== =======
Net assets 35.6 8.6 44.2 25.6 27.2 10.7 37.9 22.1
===================== ====== ====== ====== ======= ====== ====== ====== =======
2021 2020
======================== ============================== ==============================
Consolidated statement Group's Group's
of comprehensive Napier NRI LP Total share Napier NRI LP Total share
income GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================== ====== ====== ===== ======= ====== ====== ===== =======
Revenue 6.6 1.3 7.9 4.0 5.1 1.3 6.4 3.2
Property operating
expenses (0.9) (0.8) (1.7) (0.8) (0.3) (0.3) (0.6) (0.3)
======================== ====== ====== ===== ======= ====== ====== ===== =======
Net property income 5.7 0.5 6.2 3.2 4.8 1.0 5.8 2.9
Administration expenses (0.2) (0.1) (0.3) (0.2) (0.2) (0.1) (0.3) (0.1)
Net finance costs (1.3) - (1.3) (0.7) (0.8) (0.1) (0.9) (0.5)
======================== ====== ====== ===== ======= ====== ====== ===== =======
Group's share of
joint ventures' profit
before valuation
movements 4.2 0.4 4.6 2.3 3.8 0.8 4.6 2.3
Net valuation movement 5.0 (2.6) 2.4 1.2 (4.7) (3.2) (7.9) (3.9)
Loss on disposal - - - - - (0.5) (0.5) (0.3)
======================== ====== ====== ===== ======= ====== ====== ===== =======
Profit / (loss) after
taxation 9.2 (2.2) 7.0 3.5 (0.9) (2.9) (3.8) (1.9)
Add back net valuation
movement (5.0) 2.6 (2.4) (1.2) 4.7 3.2 7.9 3.9
======================== ====== ====== ===== ======= ====== ====== ===== =======
Group's share of
joint ventures' profit
before valuation
movements 4.2 0.4 4.6 2.3 3.8 0.3 4.1 2.0
======================== ====== ====== ===== ======= ====== ====== ===== =======
The Group's share of contingent liabilities in the joint
ventures is GBPnil (2020: GBPnil).
The comparative information has been re-presented to show
information per investment.
16. Investments in associates
On the 30 September 2020, the Group disposed of a subsidiary
which owned Sprucefield Retail Park. The Group then acquired a 10%
interest.
The Group has one investment in associate in which it has a 10%
stake, Sealand S.à.r.l, which owns 100% of NewRiver Retail (Nelson)
Limited, NewRiver Retail (Hamilton) Limited and NewRiver Retail
(Sprucefield) Limited.
2021 2020
GBPm GBPm
Opening balance 0.9 -
Additions to Investment in associates 3.7 1.2
Group's share of profit after taxation excluding valuation
movement 0.1 0.1
Net valuation movement 0.6 (0.4)
=========================================================== ===== =====
Investment in associates 5.3 0.9
=========================================================== ===== =====
2021 2020
Country
Name of incorporation % Holding % Holding
==================================================== ================== =========== ===========
NewRiver Retail (Nelson) Limited (Nelson) UK 10 10
NewRiver Retail (Hamilton) Limited (Hamilton) UK 10 -
NewRiver Retail (Sprucefield) Limited (Sprucefield) UK 10 10
==================================================== ================== =========== ===========
The Group is the appointed asset manager on behalf of these
associates and receives asset management fees, development
management fees and potentially performance-related bonuses.
NewRiver Retail (Nelson) Limited, NewRiver (Hamilton) Limited
and NewRiver (Sprucefield) Limited have a 31 December year end. The
aggregate amounts recognised in the consolidated balance sheet and
consolidated statement of comprehensive income are as follows:
31 March 2021 31 March 2020
===================================== =============== ===============
Group's Group's
Total share Total share
Consolidated balance sheet GBPm GBPm GBPm GBPm
===================================== ====== ======= ====== =======
Non-current assets 89.5 8.9 44.0 4.4
Current assets 6.7 0.7 2.0 0.2
Current liabilities (37.5) (3.8) (15.0) (1.5)
Borrowings due in more than one year (42.1) (4.2) (22.0) (2.2)
===================================== ====== ======= ====== =======
Net assets 16.6 1.6 9.0 0.9
===================================== ====== ======= ====== =======
Loans to associates - 3.7 - -
===================================== ====== ======= ====== =======
Net assets 16.6 5.3 9.0 0.9
===================================== ====== ======= ====== =======
2021 2020
2021 Group's 2020 Group's
Consolidated statement of comprehensive Total share Total share
income GBPm GBPm GBPm GBPm
=========================================== ====== ======== ====== ========
Revenue 6.4 0.6 1.7 0.2
Property operating expenses (1.6) (0.2) 0.1 -
=========================================== ====== ======== ====== ========
Net property income 4.8 0.4 1.8 0.2
Administration expenses (0.2) - (0.1) -
Net finance costs (2.8) (0.3) (0.7) (0.1)
=========================================== ====== ======== ====== ========
1.8 0.1 1.0 0.1
Net valuation movement 6.2 0.6 (3.6) (0.4)
=========================================== ====== ======== ====== ========
Profit / (loss) after taxation 8.0 0.7 (2.6) (0.3)
=========================================== ====== ======== ====== ========
Add back net valuation movement (6.2) (0.6) 3.6 0.4
=========================================== ====== ======== ====== ========
Group's share of associates' profit before
valuation movements 1.8 0.1 1.0 0.1
=========================================== ====== ======== ====== ========
17. Property plant and equipment
Office Fixtures Public
equipment and fittings houses Total
Cost or valuation GBPm GBPm GBPm GBPm
================================================ ========== ============= ======= =====
At 1 April 2020 1.8 0.6 56.6 59.0
Additions 0.6 - 2.7 3.3
Revaluation:
Recognised in the consolidated statement
of comprehensive income - - (0.5) (0.5)
Recognised in the consolidated income statement - - (6.6) (6.6)
Net transfers from investment property - - 4.1 4.1
Disposals - - (0.9) (0.9)
================================================ ========== ============= ======= =====
At 31 March 2021 2.4 0.6 55.4 58.4
================================================ ========== ============= ======= =====
Accumulated depreciation
At 1 April 2020 0.7 0.5 1.6 2.8
Charge for the year 0.4 - 1.1 1.5
At 31 March 2021 1.1 0.5 2.7 4.3
================================================ ========== ============= ======= =====
Net book value at 31 March 2021 1.3 0.1 52.7 54.1
================================================ ========== ============= ======= =====
Net book value at 31 March 2020 1.1 0.1 55.0 56.2
================================================ ========== ============= ======= =====
Office Fixtures Public
equipment and fittings houses Total
Cost or valuation GBPm GBPm GBPm GBPm
================================================ ========== ============= ======= =====
At 1 April 2019 1.4 0.6 27.7 29.7
Additions 0.4 - 9.8 10.2
Business combinations - - 18.7 18.7
Revaluation:
Recognised in the consolidated statement
of comprehensive income - - (1.0) (1.0)
Recognised in the consolidated income statement - - (4.0) (4.0)
Net transfers from investment property - - 5.4 5.4
================================================ ========== ============= ======= =====
At 31 March 2020 1.8 0.6 56.6 59.0
================================================ ========== ============= ======= =====
Accumulated depreciation 0.3 0.5 0.8 1.6
At 1 April 2019
Charge for the year 0.4 - 0.8 1.2
Disposals - - - -
================================================ ========== ============= ======= =====
At 31 March 2020 0.7 0.5 1.6 2.8
================================================ ========== ============= ======= =====
Net book value at 31 March 2020 1.1 0.1 55.0 56.2
================================================ ========== ============= ======= =====
Net book value at 31 March 2019 1.1 0.1 26.9 28.1
================================================ ========== ============= ======= =====
The Group's public houses have been valued at fair value on 31
March 2021 by independent valuers, Colliers International Valuation
UK LLP, on the basis of fair value in accordance with the Current
Practice Statements contained in The Royal Institution of Chartered
Surveyors Valuation - Professional Standards, (the 'Red Book'). The
valuations are performed by appropriately qualified valuers who
have relevant and recent experience in the sector. Please see note
14 for further information on the valuation of the Group's
properties. As mentioned in note 17, there is a material valuation
uncertainty clause on the public house valuations, amounting to
GBP52.7 million (2020: GBP55.0 million) in the note above.
The carrying amount of assets which have been revalued would
have been GBP51.3 million (2020: GBP52.7 million) had they been
carried under the cost model. Depreciation is also charged on the
right of use asset of GBP0.4 million (2020: GBP0.4 million), which
is not included in the note above.
18. Trade and other receivables
2021 2020
GBPm GBPm
Trade receivables 9.6 6.2
Restricted monetary asset 5.6 8.1
Service charge receivables* 2.6 5.6
Other receivables 4.9 3.8
Prepayments 1.9 1.4
Accrued income 1.4 1.6
============================ ===== =====
26.0 26.7
============================ ===== =====
*Included in service charge receivables is GBP0.4 million of
Value Added Taxation (2020: GBP0.9 million), GBPnil of accrued
income (2020: GBP2.2 million), GBPnil of prepayments (2020: GBP0.4
million) and GBP2.2 million of service charge debtors (2020: GBP2.1
million).
Trade receivables are shown after deducting a loss allowance of
GBP9.3m (2020: GBP4.2m). The provision for doubtful debts is
calculated as an expected credit loss on trade receivables in
accordance with IFRS 9. The charge to the consolidated statement of
comprehensive income in relation to doubtful debts made against
tenant debtors was GBP5.6 million (2020: GBP2.5 million). The Group
has calculated the expected credit loss by applying a
forward-looking outlook, impacted by the Covid-19 pandemic, to
historic default rates.
The Group monitors rent collection in order to anticipate and
minimise the impact of default by tenants, which may be impacted by
Covid-19 and the ability of tenants to pay rent receivables. All
outstanding rent receivables are regularly monitored. In order to
measure the expected credit losses, trade receivables from tenants
have been grouped on a basis of shared credit risk characteristics
and an assumption around the tenants ability to pay their
receivable, based on conversations held and our knowledge of their
credit history. The expected loss rates are based on historical
payment profiles of tenant debtors and corresponding historical
credit losses. These historical loss rates are then adjusted to
reflect the current pandemic and likelihood that tenants will
pay.
31 March 31 March
2021 2020
GBPm GBPm
========================================================== ======== ========
Opening loss allowance at 1 April 2020/2019 4.2 1.7
Increase in loss allowance recognised in the consolidated
statement of comprehensive income during the year 5.6 2.5
Loss allowance write off (0.5) -
========================================================== ======== ========
Closing loss allowance at 31 March 2021/2020 9.3 4.2
========================================================== ======== ========
The restricted monetary asset relates to cash balances which
legally belong to the Group but which the Group cannot readily
access. They do not meet the definition of cash and cash
equivalents and consequently are presented separately from cash in
the consolidated balance sheet.
19. Assets held for sale
2021 2020
GBPm GBPm
====================================== ===== =====
Assets held for sale at 1 April 2020 - -
Investment properties 25.5 -
====================================== ===== =====
Assets held for sale at 31 March 2021 25.5 -
====================================== ===== =====
In the year ended 31 March 2021 the Group has made a number of
strategic disposals. As at 31 March 2021 there were three retail
parks, included within the Group's retail segment, that were in
negotiations for sale with a third party. These assets were
considered to be in a condition ready for sale and are considered
to meet the held for sale criteria under IFRS.
20. Derivative financial instruments
The Group enters into derivative financial instruments to
provide an economic hedge to its interest rate exchange risks.
These financial instruments are classified as Level 2 fair value
measurements, being those derived from inputs other than quoted
prices. There were no transfers between levels in the current
year.
2021 2020
GBPm GBPm
======================== ===== =====
Interest rate swaps
Current liabilities - (0.1)
Non-current liabilities (2.6) (2.6)
======================== ===== =====
(2.6) (2.7)
======================== ===== =====
Average contract Notional principal
interest rate amount Fair value
================================ ================== ==================== ==============
2021 2020 2021 2020 2021 2020
% % GBPm GBPm GBPm GBPm
================================ ======== ======== ========= ========= ====== ======
Interest rate swaps - receive
floating pay fixed
In less than one year - 0.4% - 13.4 - (0.1)
In more than one year but less
than two 0.8% - 137.2 - - -
In more than two years but less
than five 1.5% 0.4% 137.2 274.5 (2.6) (2.6)
Interest rate caps - - -
In less than one year 1.5% 0.5% 70.0 9.7 - -
In more than one year but less
than two - 0.4% - 70.0 - -
In more than two years but less
than five - - - - - -
================================ ======== ======== ========= ========= ====== ======
344.4 367.6 (2.6) (2.7)
================================ ======== ======== ========= ========= ====== ======
21. Cash and cash equivalents
There are no restrictions on cash in place (2020: nil). As at
the 31 March 2021 and 30 March 2020 cash and cash equivalents
comprised of cash held in bank accounts.
22. Trade and other payables
2021 2020
GBPm GBPm
============================ ===== =====
Trade payables 4.4 2.6
Service charge liabilities* 10.9 13.7
Other payables 7.0 4.4
Accruals 15.0 13.6
Value Added Taxation 2.2 4.4
Rent received in advance 7.4 8.1
============================ ===== =====
46.9 46.8
============================ ===== =====
*Service charge liabilities includes accruals of GBP0.3 million
(31 March 2020: GBP1.3 million), service charge creditors and other
creditors of GBP2.8 million (31 March 2020: GBP2.9 million) and
deferred income of GBP7.8 million (31 March 2020: GBP9.5
million).
23. Borrowings
2021 2020
Maturity of bank facilities: GBPm GBPm
================================= ===== =====
Between two and three years 335.0 -
Between three and four years - 335.0
Between four and five years - -
After five years 300.0 300.0
================================= ===== =====
635.0 635.0
Less unamortised fees / discount (5.3) (6.4)
================================= ===== =====
629.7 628.6
================================= ===== =====
Carrying Carrying
amount Fair value amount Fair value
2021 2021 2020 2020
Unsecured borrowings: GBPm GBPm GBPm GBPm
Term loan 165.0 165.0 165.0 165.0
Revolving credit facility 170.0 170.0 170.0 170.0
Corporate bond 300.0 283.7 300.0 285.0
========================== ======== ========== ======== ==========
635.0 618.7 635.0 620.0
========================== ======== ========== ======== ==========
The fair value of the Group's corporate bond has been estimated
on the basis of quoted market prices, representing Level 1 fair
value measurement as defined by IFRS 13 Fair Value Measurement. The
fair value of the Group's bank loans is approximately the same as
their carrying amount, after adjusting for the unamortised
arrangement fees, and also represents Level 2 fair value
measurement.
Unamortised
facility
Facility fees /
Facility drawn discount
Unsecured borrowings: Maturity date GBPm GBPm GBPm GBPm
========================== ============== ======== ======== =========== =====
Term loan August 2023 165.0 165.0 (0.7) 164.3
Revolving credit facility August 2023 215.0 170.0 (1.0) 169.0
Corporate bond March 2028 300.0 300.0 (3.6) 296.4
========================== ============== ======== ======== =========== =====
680.0 635.0 (5.3) 629.7
========================================= ======== ======== =========== =====
In the year the Group drew down GBPnil (year-ended March 2020:
GBP125 million) of the revolving credit facility.
24. Lease commitment arrangements
The Group earns rental income by leasing its investment
properties to tenants under non-cancellable lease commitments.
The Group holds two types of leases.
- Head leases: A number of the investment properties and managed
houses held as property, plant and equipment owned by the Group are
situated on land held through leasehold arrangements, as opposed to
the Group owning the freehold.
- Office leases: Office space occupied by the Group's head office.
The lease liability and associated ROU asset recognised in the
consolidated balance sheet are set out below.
2021 2020
GBPm GBPm
=================================================== ===== =====
Right of use asset (Investment property) 83.0 83.3
Right of use asset (Property, plant and equipment) 3.5 3.9
Current lease liability 0.7 0.7
Non-current lease liability 84.9 85.6
=================================================== ===== =====
As the head leases meet the definition of investment property,
it is initially recognised in accordance with IFRS 16, and then
subsequently accounted for as investment property in accordance
with IAS 40 and the Group's accounting policy.
The ROU asset in relation to the head office lease has been
recognised as property, plant and equipment. After initial
recognition the ROU head office asset is depreciated on a
straight-line basis over the period of the lease.
The expense relating to low value assets which have not been
recognised under IFRS 16 was GBP0.1 million (March 2020: GBPnil)
and the expense relating to variable lease payments not included in
the measurement of lease liabilities was GBPnil million (March
2020: GBPnil). The total cash outflow in relation to lease
commitments for the year was GBP3.5 million (March 2020: GBP3.4
million).
Lease liability maturity table
2021 2020
GBPm GBPm
====================================== ===== =====
Within one year 0.7 0.7
Between one and two years 0.7 0.7
In the second to fifth year inclusive 2.1 2.1
After five years 82.1 82.8
====================================== ===== =====
85.6 86.3
====================================== ===== =====
Lease commitments payments payable by the Group were as
follows:
2021 2020
GBPm GBPm
====================== ======= =======
Within one year 3.3 3.4
One to two years 3.3 3.4
Two to five years 10.0 10.2
After five years 253.9 256.7
====================== ======= =======
270.5 273.7
Effect of discounting (184.9) (187.4)
====================== ======= =======
Lease liability 85.6 86.3
====================== ======= =======
At the balance sheet date the Group had contracted with tenants
for the following future minimum lease payments on its investment
properties:
2021 2020
GBPm GBPm
====================================== ===== =====
Within one year 64.7 77.2
Between one and two years 55.9 71.6
In the second to fifth year inclusive 114.9 161.8
After five years 161.1 206.6
====================================== ===== =====
396.6 517.2
====================================== ===== =====
The Group's weighted average lease length of lease commitments
at 31 March 2021 was 5.2 years (March 2020: 5.2 years).
Operating lease obligations exist over the Group's offices, head
leases on the Group's retail portfolio and ground rent leases in
the Group's pub portfolio. Investment properties and public houses
are leased to tenants under operating leases with rentals payable
monthly and quarterly. Where considered necessary to reduce credit
risk, the Group may obtain bank guarantees for the term of the
lease. The Group also grants lease incentives in order to encourage
high quality tenants to remain in properties for longer lease
terms. The expense for the year was GBP3.1 million (March 2020:
GBP2.5 million).
25. Share capital and reserves
Share capital
Number
of shares Price Held by Shares
issued per share Total EBT in issue
Ordinary shares m's pence m's m's m's
=================================== ========== ========== ====== ======= =========
1 April 2019 307.8 3.0 304.8
Scrip dividends issued 0.9 206.8 308.7 3.0 305.7
Shares issued under employee share
schemes 0.2 - 308.7 2.8 305.9
Exercise of warrants 0.3 116.0 309.0 2.8 306.2
=================================== ========== ========== ====== ======= =========
31 March 2020 309.0 2.8 306.2
Shares issued under employee share
schemes 0.1 - 309.0 2.7 306.3
=================================== ========== ========== ====== ======= =========
31 March 2021 309.0 2.7 306.3
=================================== ========== ========== ====== ======= =========
Share Share
capital premium Total
GBP'000 GBP'000 GBP'000
1 April 2019 3,050 224,993 228,043
Exercise of warrants 3 333 336
Scrip dividends issued 9 2,023 2,032
======================= ======== ======== ========
31 March 2020 3,062 227,349 230,411
======================= ======== ======== ========
31 March 2021 3,062 227,349 230,411
======================= ======== ======== ========
All issued shares are fully paid up.
Merger reserve
The merger reserve arose as a result of the scheme of
arrangement and represents the nominal amount of share capital that
was issued to shareholders of NewRiver Retail Limited.
Retained earnings
Retained earnings consist of the accumulated net comprehensive
profit of the Group, less dividends paid from distributable
reserves, and transfers from equity issues where those equity
issues generated distributable reserves.
Shares held in Employee Benefit Trust (EBT)
As part of the scheme of arrangement and group reorganisation,
the Company established an EBT which is registered in Jersey. The
EBT, at its discretion, may transfer shares held by it to directors
and employees of the Company and its subsidiaries. The maximum
number of ordinary shares that may be held by the EBT may not
exceed 10% of the Company's issued share capital. It is intended
that the EBT will not hold more ordinary shares than are required
in order to satisfy share options granted under employee share
incentive plans.
There are currently 2,625,006 ordinary shares held by the
EBT.
26. Share-based payments
The Group has three share schemes for employees:
- Share option scheme
- Performance Share Scheme
- Deferred bonus scheme
Share option scheme
Options were granted between 2009 and 2011. The options were
priced at the share price at date of issue. No options were granted
in 2020 or 2021. The charge for the year recognised in the
consolidated statement of comprehensive income was nil (2020:
nil).
Average Outstanding Outstanding Average
exercise at start Number at end Number remaining
Year issued price of year Granted Exercised Lapsed of year exercisable life (years)
============ ========= =========== ======= ========== ====== =========== ============ =============
2012 2.35 338,000 - - - 338,000 338,000 0.5
============ ========= =========== ======= ========== ====== =========== ============ =============
338,000 - - - 338,000 338,000
============ ========= =========== ======= ========== ====== =========== ============ =============
Performance Share Scheme
Zero priced share options have been issued to senior management
and executive directors under the Performance Share Scheme since
2013. The options vest to the extent that performance conditions
are met over a three or four-year period. At the end of the period
there may be a further vesting condition that the employee or
director remains an employee of the Group. Further details on the
scheme and the performance conditions is provided in the
Remuneration Report. The charge for the year recognised in the
consolidated statement of comprehensive income was GBP0.3 million
(2020: GBP0.8 million charge).
Average Outstanding Outstanding Average
exercise at start Number at end Number remaining
Year issued price of year Granted Exercised Lapsed of year exercisable life (years)
============ ========= =========== ========= ========== =========== =========== ============ =============
2017 - 278,506 - - - 278,506 - 5.5
2018 - 962,495 - - (962,495) - - 6.2
2019 - 1,588,060 - - (221,408) 1,336,652 - 7.3
2020 - 2,068,213 - - (250,060) 1,818,153 - 8.2
2021 - - 3,129,236 - (24,365) 3,104,871 - 9.4
============ ========= =========== ========= ========== =========== =========== ============ =============
4,897,274 3,129,236 - (1,458,328) 6,538,182 -
============ ========= =========== ========= ========== =========== =========== ============ =============
Deferred Bonus Scheme
Zero priced share options have been issued to senior management
and executive directors under the Deferred Bonus Scheme since 2016.
The options vest based on the employee or director remaining in the
employment of the Group for a defined period (usually two years).
The charge for the year recognised in the consolidated statement of
comprehensive income for this scheme was GBP0.3 million (March
2020: GBP0.8 million credit).
Average Outstanding Outstanding Average
exercise at start at end Number remaining
Year issued price of year Granted Exercised Lapsed of year exercisable life (years)
============ ========= =========== ======= ========= ======== =========== ============ =============
2018 - 67,016 - (3,462) - 63,554 - (0.7)
2019 - 280,957 - (126,265) - 154,692 - 0.2
2020 - 420,511 - - (97,499) 323,012 - 1.2
2021 - - 526,640 - - 526,640 - 2.4
============ ========= =========== ======= ========= ======== =========== ============ =============
768,484 526,640 (129,727) (97,499) 1,067,898 -
============ ========= =========== ======= ========= ======== =========== ============ =============
Fair value
The fair value of the share options has been calculated based on
a Monte Carlo Pricing Model using the following inputs:
2021 2020
==================== ================ =======
Share price 0.63 1.770
Exercise price Nil Nil
Expected volatility 21% 21%
0.548 -
Risk free rate -0.048% - 0.009% 0.7%
Expected dividends* 0% 12.2%
==================== ================ =======
*based on quoted property sector average.
27. Financial instruments and risk management
The Group's activities expose it to a variety of financial risks
in relation to the financial instruments it uses: market risk
including cash flow interest rate risk, credit risk and liquidity
risk. The financial risks relate to the following financial
instruments: trade and other receivables, cash and cash
equivalents, trade and other payables, borrowings and derivative
financial instruments.
Risk management parameters are established by the Board on a
project-by-project basis. Reports are provided to the Board
quarterly and also when authorised changes are required.
Financial instruments
Valuation 2021 2020
level GBPm GBPm
=================================== ========= ======= =======
Financial assets
Financial assets at amortised cost
Trade and other receivables 22.4 20.2
Cash and cash deposits 150.5 80.8
=================================== ========= ======= =======
172.9 101.0
=================================== ========= ======= =======
Financial liabilities
Fair value through profit or loss
Interest rate swaps 2 (2.6) (2.7)
At amortised cost
Borrowings (629.7) (628.6)
Lease liabilities (85.6) (86.3)
Payables and accruals (29.4) (24.8)
=================================== ========= ======= =======
(747.3) (742.4)
=================================== ========= ======= =======
(574.4) (641.4)
=================================== ========= ======= =======
The fair value of the financial assets and liabilities at
amortised cost are considered to be the same as their carrying
value, with the exception of certain fixed rate borrowings, see
note 22 for further details.
Market risk
Currency risk
The Group is not subject to any foreign currency risk as nearly
all transactions are in Pounds Sterling.
Interest rate risk
The Group's interest rate risk arises from borrowings issued at
floating interest rates (see note 23). The Group's interest rate
risk is reviewed quarterly by the Board. The Group manages its
exposure to interest rate risk on borrowings through the use of
interest rate derivatives (see note 20). Interest rate caps and
interest rate swaps are used to both mitigate the risk of an
increase in interest rates but also to allow the Group to benefit
from a fall in interest rates. The Group has employed an external
adviser when contracting hedging to advise on the structure of the
hedging.
Sensitivity analysis is carried out to assess the impact of an
increase in interest rates on finance costs to the Group.
Management consider that a significant movement in interest rates
would be 200 bps and have therefore carried out sensitivity
analysis of the impact of such a movement. The impact of a 200 bps
increase in interest rates for the year would increase net interest
payable in the consolidated statement of comprehensive income by
GBP4.0 million (2020: GBP4.0 million). The impact of a 200 bps
decrease in interest rates for the year would reduce the net
interest payable in the consolidated statement of comprehensive
income by GBP4.0 million (2020: GBP3.7 million). The directors
consider this to be a reasonable sensitivity given historic
interest rates and the possibility for short term swings in
rates.
Credit risk
The Group's principal financial assets are cash, trade
receivables and other receivables.
The Group manages its credit risk through policies to ensure
that rental contracts are made with tenants meeting appropriate
balance sheet covenants, supplemented by rental deposits or bank
guarantees from international banks. The Group may suffer a void
period where no rents are received. The quality of the tenant is
assessed based on an extensive tenant covenant review scorecard
prior to acquisition of the property. The assessment of the tenant
credit worthiness is also monitored on an ongoing basis. Credit
risk is assisted by the vast majority of occupational leases
requiring that tenants pay rentals in advance. The Group monitors
rent collection in order to anticipate and minimise the impact of
default by tenants, which may be impacted by covid-19. All
outstanding rent receivables are regularly monitored. In order to
measure the expected credit losses, trade receivables from tenants
have been grouped on a basis on shared credit risk characteristics
and an assumption around the tenants ability to pay their
receivable, based on conversations held and our knowledge of their
credit history. The expected loss rates are based on historical
payment profiles of tenant debtors and corresponding historical
credit losses. These historical loss rates are then adjusted to
reflect the current pandemic and likelihood that tenants will
pay.
Ageing of past due gross trade receivables and the carrying
amount net of loss allowances is set out below:
2021 2021 2021 2021 2020 2020 2020 2020
Gross Loss Carrying Gross Loss Carrying
amount allowance % applied amount amount allowance % applied amount
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
============== ======== =========== =========== ========== ======== =========== =========== ==========
0-30 days 5.0 1.0 20% 4.0 6.8 0.8 12% 6.0
30-60 days 0.9 0.2 22% 0.7 0.7 0.5 71% 0.2
60-90 days 0.5 0.2 40% 0.3 0.5 0.5 100% -
90-120 days 1.6 0.5 31% 1.1 0.3 0.3 100% -
Over 120 days 10.9 7.4 68% 3.5 2.1 2.1 100% -
============== ======== =========== =========== ========== ======== =========== =========== ==========
18.9 9.3 9.6 10.4 4.2 6.2
============== ======== =========== =========== ========== ======== =========== =========== ==========
The Group recognises an expected credit loss allowance on trade
debtors, as noted in the above table. The Group also recognises an
expected credit loss allowance of GBP1.4 million on service charge
debtors and GBP0.1 million on insurance debtors.
The Group categorises trade debtors in varying degrees of risk,
as detailed below:
2021 2020
GBPm GBPm
============================================ ===== =====
Risk level
Very high 3.9 -
High 2.4 2.4
Medium 4.4 5.4
Low 8.2 2.6
============================================ ===== =====
Gross carrying amount before loss allowance 18.9 10.4
============================================ ===== =====
Loss allowance (9.3) (4.2)
============================================ ===== =====
Carrying amount 9.6 6.2
============================================ ===== =====
2021 2020
GBPm GBPm
======================================================== ===== =====
Opening loss allowance at 31 March 4.2 1.7
Increase in loss allowance recognised in profit or loss
during the year 5.6 2.5
Loss allowance write off (0.5) -
======================================================== ===== =====
Closing loss allowance at 31 March 9.3 4.2
======================================================== ===== =====
The Group monitors its counterparty exposures on cash and
short-term deposits weekly. The Group monitors the counterparty
credit rating of the institutions that hold its cash and deposits
and spread the exposure across several banks.
The Group's maximum exposure to credit risk as at 31 March 2021
was GBP26.0 million (31 March 2020: GBP26.7 million).
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash balances and committed credit facilities. The Board reviews
the credit facilities in place on a project-by-project basis. Cash
flow reports are issued weekly to management and are reviewed
quarterly by the Board. As a result of the Covid-19 pandemic, the
Directors took the decision to utilise a further GBP50 million of
undrawn revolving credit facility in the year to 31 March 2020,
meaning the Group has over GBP154 million of cash in the bank
(including share of joint ventures and associates) and a further
GBP45 million of undrawn RCF as at the 31 March 2021. To preserve
cash, the Group suspended dividends through the year and suspended
all non-essential capital expenditure projects, suspended business
rates and marketing in the shopping centres and public houses. A
summary table with maturity of financial liabilities is presented
below:
One to Two to More than
Less than two five five
2021 GBPm one year years years years Total
======================= ========= ====== ====== ========= =======
Borrowings - - 335.0 300.0 635.0
Interest on borrowings 19.1 19.1 34.4 20.2 92.8
Interest rate swaps 0.7 1.3 0.6 - 2.6
Lease liabilities 3.3 3.3 10.0 253.9 270.5
Payables and accruals 29.4 - - - 29.4
======================= ========= ====== ====== ========= =======
52.5 23.7 380.0 574.1 1,030.3
======================= ========= ====== ====== ========= =======
2020 GBPm
======================= ========= ====== ====== ========= =======
Borrowings - - 335.0 300.0 635.0
Interest on borrowings 18.8 18.8 46.7 30.7 115.0
Interest rate swaps 0.9 0.7 1.3 - 2.9
Lease liabilities 3.4 3.4 10.2 256.7 273.7
Payables and accruals 24.8 - - - 24.8
======================= ========= ====== ====== ========= =======
47.9 22.9 393.2 587.4 1,051.4
======================= ========= ====== ====== ========= =======
Reconciliation of movement in the Group's share of net 2021 2020
debt in the year GBPm GBPm
======================================================= ======= ======
Group's share of net debt at beginning of year 563.6 475.1
Cash flow
Net increase in cash and cash equivalents (69.7) (53.7)
New bank loans (net of expenses) - 162.0
Bank loans acquired in business combinations - 11.7
Bank loans repaid - (48.7)
Amortisation of bank loan fees 1.1 1.0
Group's share of joint ventures' and associates' cash
flow
Net increase in cash and cash equivalents (2.5) (0.9)
Bank loans repaid (1.2) -
New bank loans 2.0 17.1
======================================================= ======= ======
Group's share of net debt 493.3 563.6
======================================================= ======= ======
Being:
Group borrowings 629.7 628.6
Joint ventures' and associates' borrowings 17.9 17.1
Group cash (150.5) (80.8)
Joint venture and associate cash (3.8) (1.3)
======================================================= ======= ======
Group's share of net debt 493.3 563.6
======================================================= ======= ======
Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern, to provide
returns to shareholders and to maintain an optimal capital
structure to reduce the cost of capital. The Group is not subject
to any external capital requirements. As detailed in note 11, the
Group is a REIT and to qualify as a REIT the Group must distribute
90% of its taxable income from its property business.
To maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital
on the basis of its gearing ratio. This ratio is calculated as net
debt divided by equity. Net debt is calculated as total borrowings,
less cash and cash equivalents.
During the year, the Group's LTV increased by 4% from 47% to 51%
and the gearing ratio from 90% to 104% as at the 31 March 2021
mainly due to the valuation decline caused by the Covid-19
pandemic. The Group continually monitors LTV and will continue to
monitor LTV closely, factoring in disposal activity and further
valuation declines as mentioned in Note 1. The Group has remained
compliant with all of its banking covenants during and since the
year end as discussed in Note 1.
2021 2020
Net debt to equity ratio GBPm GBPm
========================================================= ======= =======
Borrowings 629.7 628.6
Cash and cash equivalents (150.5) (80.8)
========================================================= ======= =======
Net debt 479.2 547.8
Equity attributable to equity holders of the parent 460.4 610.6
========================================================= ======= =======
Net debt to equity ratio ('Balance sheet gearing') 104% 90%
========================================================= ======= =======
Share of joint ventures' and associates' borrowings 17.9 17.1
Share of joint ventures' and associates' cash and cash
equivalents (3.8) (1.3)
========================================================= ======= =======
Group's share of net debt 493.3 563.6
Carrying value of investment property and public houses 851.9 1,102.3
Carrying value of managed houses 52.7 55.0
Carrying value of assets held for sale 25.5 -
Share of joint ventures' and associates carrying value
of investment properties 44.1 39.8
========================================================= ======= =======
Group's share of carrying value of investment properties 974.2 1,197.1
========================================================= ======= =======
Net debt to property value ratio ('Loan to value') 51% 47%
========================================================= ======= =======
Reconciliation of financial liabilities
Lease
liabilities Borrowings Derivatives Total
Reconciliation of financial liabilities GBPm GBPm GBPm GBPm
================================================== ============ ========== =========== =====
As at 1 April 2020 86.3 628.6 (2.7) 712.2
================================================== ============ ========== =========== =====
(Decrease)/Increase through financing cash
flows
Repayment of principal portion of lease liability (0.7) - - (0.7)
Decrease through changes in fair value
Change in fair value of derivative - - 0.1 0.1
Other changes
Loan amortisation - 1.1 - 1.1
================================================== ============ ========== =========== =====
As at 31 March 2021 85.6 629.7 (2.6) 712.7
================================================== ============ ========== =========== =====
Lease
liabilities Borrowings Derivatives Total
Reconciliation of financial liabilities GBPm GBPm GBPm GBPm
================================================== ============ ========== =========== ======
As at 1 April 2019 - 502.7 0.1 502.8
================================================== ============ ========== =========== ======
Adoption of IFRS 16 87.1 87.1
(Decrease)/Increase through financing cash
flows
Repayment of Bravo Inns loan - (11.7) - (11.7)
Repayment of bank loans and other costs - (37.0) - (37.0)
Repayment of principal portion of lease liability (0.8) - - (0.8)
New borrowings - 162.0 - 162.0
Decrease through changes in fair value
Change in fair value of derivative - - (2.8) (2.8)
Increase through business acquisitions
Acquisition of Bravo Inns - 11.7 - 11.7
Other changes
Loan amortisation - 0.9 - 0.9
================================================== ============ ========== =========== ======
As at 31 March 2020 86.3 628.6 (2.7) 712.2
================================================== ============ ========== =========== ======
28. Contingencies and commitments
The Group has no material contingent liabilities (2020: None).
The Group was contractually committed to GBP4.0 million of capital
expenditure to construct or develop investment property as at 31
March 2021 (31 March 2020: GBP1.0 million).
The Supreme Court has issued its judgement in respect of the FCA
Business Interruption Test case and the appeal upheld the
favourable decision for the FCA in the High Court. The issuer of
certain insurance policies held by the Group confirmed in March
2021 that in principal the policy should cover certain losses
incurred by the Group following earlier claims made. There is no
certainty of the amount or timing of any receipts under these
policies and no asset has been recognised in the consolidated
balance sheet at 31 March 2021.
29. Related party transactions
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
During the year the Company paid GBP1.9 million (2020: GBP1.0
million) in professional legal fees to CMS Cameron McKenna Nabarro
Olswang LLP for property services at commercial market rates. Allan
Lockhart, CEO of NewRiver, has a personal relationship with one of
the Partners at CMS who along with other Partners provides these
legal services.
The Group have loans with a joint ventures of GBP3.0 million
(note 15) (2020: GBP3.0 million) and loans with associates of
GBP3.7 million (note 16) (March 2020: GBPnil). On the 30 September
2020, the Group disposed of a subsidiary which owned Sprucefield
Retail Park. The Group then acquired a 10% interest, see note 8 and
16.
Management fees are charged to joint ventures for asset
management, investment advisory, project management and accounting
services. Total fees charged were:
2021 2020
GBPm GBPm
=================================== ===== =====
NewRiver Retail Investments LP - 0.1
NewRiver Retail (Nelson) Limited 0.1 0.1
NewRiver Retail (Napier) Limited 0.2 0.1
NewRiver Retail (Hamilton) Limited - -
NewRiver (Sprucefield) Limited 0.1 -
=================================== ===== =====
As at the 31 March 2021, an amount of GBP0.1 million was due to
the Group relating to management fees.
During the year, the Group has recognised GBP0.3 million of
interest from joint ventures and associates and as at the 31 March
2021 the amount owing to the Group was GBP0.2 million.
Key management personnel
The Executive Directors of the Company who served during the
year are considered to be key management personnel.
The total compensation of key management personnel was GBP1.4
million (2020: GBP1.5 million), which comprised short-term benefits
of GBP0.1 million (2020: GBP0.1 million)
The above is a complete list of the Company's related parties
other than its 100% owned subsidiaries. All transfer of resources,
services or obligations between the Company and these parties have
been disclosed, regardless of whether a price is charged. We are
unaware of any other related parties, or transactions between
disclosed related parties.
Related party relationships and transactions have been accounted
for and disclosed in accordance with the requirements of IFRSs or
other requirements, for example, the Companies Act 2006.
All members of key management have been identified, as defined
by IAS 24, and their remuneration is included in the disclosures of
key management compensation.
30. Post balance sheet events
On 1 April 2021, the Group completed an acquisition of a
shopping centre in Sheffield, in which the Group holds a 10%
interest. The gross asset value subject to the transaction was
GBP41.0 million and NewRiver will hold a 10% interest in the asset
(NewRiver share: GBP4.1 million). Seven pubs have been disposed of
post year end for GBP1.4 million, which in aggregate created a
profit on disposal of GBP0.3 million and on 28 May 2021 the Group
acquired 14 community pubs based in the East Midlands.
On the 14 April 2021 the Group announced its intention to divest
its community pub business which could be via a potential Initial
Public Offer ('IPO').
There were no other significant events occurring after the
reporting period, but before the financial statements were
authorised for issue.
EPRA PERFORMANCE MEASURES (unaudited)
The information in this section is unaudited and does not form
part of the consolidated primary statements of the Company or the
notes thereto.
Introduction
Below we disclose financial performance measures in accordance
with the European Public Real Estate Association ('EPRA') Best
Practice Recommendations which are aimed at improving the
transparency, consistency and relevance of reporting across
European Real Estate companies.
This section sets out the rationale for each performance measure
as well as how it is measured. A summary of the performance
measures is included in following table.
FY21 FY20
================================================= ===== =====
EPRA Earnings per Share (EPS) 2.9p 16.7p
EPRA Cost Ratio (including direct vacancy costs) 61.3% 44.0%
EPRA Cost Ratio (excluding direct vacancy costs) 58.6% 41.4%
================================================= ===== =====
March March
2021 2020
================================================= ===== =====
EPRA NRV per share 170p 225p
EPRA NTA per share 151p 201p
EPRA NDV per share 155p 204p
EPRA NIY 8.2% 8.1%
EPRA 'topped-up' NIY 8.8% 8.5%
EPRA Vacancy Rate 4.2% 5.2%
================================================= ===== =====
EPRA Earnings per Share: 2.9p
Definition
Earnings from operational activities
Purpose
A key measure of a company's underlying operating results and an
indication of the extent to which current dividend payments are
supported by earnings
FY21 FY20
(GBPm) (GBPm)
============================================================== ======== ========
Earnings per IFRS income statement (150.5) (121.1)
Adjustments to calculate EPRA Earnings, exclude:
Changes in value of investment properties, development
properties held for investment and other interests 154.7 162.6
Profits or losses on disposal of investment properties,
development properties held for investment and other
interests 7.7 1.5
Changes in fair value of financial instruments and associated
close-out costs (0.1) 2.8
Acquisition costs on share deals and non-controlling
joint venture interests 0.1 0.4
Deferred tax in respect of EPRA adjustments (1.4) 0.5
Adjustments to above in respect of joint ventures (unless
already included under proportional consolidation) (1.6) 4.6
============================================================== ======== ========
EPRA Earnings 8.9 51.3
============================================================== ======== ========
Basic number of shares 306.4m 305.9m
============================================================== ======== ========
EPRA Earnings per Share (EPS) 2.9p 16.7p
============================================================== ======== ========
Reconciliation of EPRA Earnings to Underlying Funds From
Operations (UFFO)
FY21 FY20
(GBPm) (GBPm)
======================================== ======= ========
EPRA Earnings 8.9 51.3
Share-based payment charge 0.6 -
Depreciation on public houses 1.1 0.8
Forward-looking element of IFRS 9 0.6 -
Integration costs and abortive fees 0.3 -
======================================== ======= ========
Underlying Funds From Operations (UFFO) 11.5 52.1
======================================== ======= ========
Basic number of shares 306.4m 305.9m
======================================== ======= ========
UFFO per share 3.8p 17.0p
======================================== ======= ========
EPRA NRV per share: 170p; EPRA NTA per share: 151p; EPRA NDV per
share: 155p
Definition
Net Asset Value adjusted to include properties and other
investment interests at fair value and to exclude certain items not
expected to crystallise in a long-term investment property business
model.
Purpose
Makes adjustments to IFRS NAV to provide stakeholders with the
most relevant information on the fair value of the assets and
liabilities within a true real estate investment company with a
long-term investment strategy.
EPRA NAV EPRA NNNAV EPRA NRV EPRA NTA EPRA NDV
31 March 2021 (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
========================================= ======== ========== ======== ======== ========
IFRS Equity attributable to shareholders 460.4 460.4 460.4 460.4 460.4
Fair value of financial instruments 2.6 - 2.6 2.6 -
Deferred tax in relation to fair value
gains of Investment Property/ PPE 0.7 - 0.7 0.7 -
Goodwill as per the IFRS balance sheet - - - (0.5) (0.5)
Fair value of debt - 16.3 - - 16.3
Purchasers' costs - - 60.1 - -
========================================= ======== ========== ======== ======== ========
EPRA NRV / NTA / NDV 463.7 476.7 523.8 463.2 476.2
========================================= ======== ========== ======== ======== ========
Fully diluted number of shares 307.3m 307.3m 307.3m 307.3m 307.3m
========================================= ======== ========== ======== ======== ========
EPRA NRV / NTA / NDV per share 151p 155p 170p 151p 155p
========================================= ======== ========== ======== ======== ========
EPRA NAV EPRA NNNAV EPRA NRV EPRA NTA EPRA NDV
31 March 2020 (GBPm) (GBPm) (GBPm) (GBPm) (GBPm)
========================================= ======== ========== ======== ========= ========
IFRS Equity attributable to shareholders 610.6 610.6 610.6 610.6 610.6
Fair value of financial instruments 2.7 - 2.7 2.7 -
Deferred tax in relation to fair value
gains of Investment Property/ PPE 2.1 - 2.1 2.1 -
Goodwill as per the IFRS balance sheet - - - (0.2) (0.2)
Fair value of debt - 15.0 - - 15.0
Purchasers' costs - - 75.3 - -
========================================= ======== ========== ======== ========= ========
EPRA NRV / NTA / NDV 615.4 625.6 690.7 615.2 625.4
========================================= ======== ========== ======== ========= ========
Fully diluted number of shares 306.5m 306.5m 306.5m 306.5m 306.5m
========================================= ======== ========== ======== ========= ========
EPRA NRV / NTA / NDV per share 201p 204p 225p 201p 204p
========================================= ======== ========== ======== ========= ========
EPRA NIY: 8.2%, EPRA 'topped-up' NIY: 8.8%
Definition
The basic EPRA NIY calculates the annualised rental income based
on the cash rents passing at the balance sheet date, less
non-recoverable property operating expenses, divided by the market
value of the property, increased with (estimated) purchasers'
costs.
In respect of the 'topped-up' NIY, an adjustment to the EPRA NIY
in respect of the expiration of rent-free periods (or other
unexpired lease incentives such as discounted rent periods and step
rents).
Purpose
A comparable measure for portfolio valuations to assist
investors in comparing portfolios.
March March
2021 2020
(GBPm) (GBPm)
============================================================================= ==== ======== ========
Properties at valuation - wholly owned 904.6 1,157.3
Properties at valuation - share of Joint Ventures
& Associates 44.1 39.8
Trading property (including share of Joint Ventures
& Associates) 25.5 0.3
Less : Developments (17.5) (65.9)
=================================================================================== ======== ========
Completed property portfolio 956.7 1,131.5
Allowance for estimated purchasers' costs and capital expenditure 47.3 74.8
=================================================================================== ======== ========
Grossed up completed property portfolio valuation B 1,004.0 1,206.3
============================================================================= ==== ======== ========
Annualised cash passing rental income 96.4 110.0
Property outgoings (13.7) (11.9)
=================================================================================== ======== ========
Annualised net rents A 82.7 98.1
Add: Notional rent expiration of rent free periods or other lease incentives 5.4 4.7
=================================================================================== ======== ========
Topped-up net annualised rent C 88.1 102.8
============================================================================= ==== ======== ========
EPRA NIY A/B 8.2% 8.1%
============================================================================= ==== ======== ========
EPRA 'topped-up' NIY C/B 8.8% 8.5%
============================================================================= ==== ======== ========
EPRA Vacancy rate: 4.2%
Definition
Estimated Market Rental Value (ERV) of vacant space divided by
ERV of the whole portfolio, excluding pub and development
assets.
Purpose
A 'pure' (%) measure of investment property space that is
vacant, based on ERV.
March March
2021 2020
(GBPm) (GBPm)
=============================================== ==== ======== ========
Calculation of EPRA Vacancy Rate GBPm GBPm
Estimated Rental Value of vacant retail space A 2.8 4.2
Estimated rental value of the retail portfolio B 66.0 81.4
=============================================== ==== ======== ========
EPRA Vacancy Rate A/B 4.2% 5.2%
=============================================== ==== ======== ========
EPRA Cost Ratio: 61.3%
Definition
Administrative & operating costs (including & excluding
costs of direct vacancy) divided by gross rental income.
Purpose
A key measure to enable meaningful measurement of the changes in
a company's operating costs.
FY21 FY20
(GBPm) (GBPm)
====================================================== ==== ======== ========
Administrative/operating expenses per IFRS 52.0 55.0
Net service charge costs/fees 5.9 4.2
Management fees less actual/estimated profit element (1.2) (0.9)
Other operating income/recharges intended to cover
overhead expenses less any related profits (7.2) (1.8)
Share of Joint Ventures and associates expenses
(net of other income) 1.3 0.4
Exclude (if part of the above):
Investment property depreciation - -
Ground rent costs 0.3 0.6
Service charge costs recovered through rents but - -
not separately invoiced
====================================================== ==== ======== ========
EPRA Costs (including direct vacancy costs) A 51.1 57.5
Direct vacancy costs (2.2) (3.4)
============================================================ ======== ========
EPRA Costs (excluding direct vacancy costs) B 48.9 54.1
====================================================== ==== ======== ========
Gross Rental Income less ground rents - per IFRS 79.5 127.3
Less: service fee and service charge costs components - -
of Gross Rental Income (if relevant)
Add: share of Joint Ventures and associates (Gross
Rental Income less ground rents) 3.9 3.4
============================================================ ======== ========
Gross Rental Income C 83.4 130.7
====================================================== ==== ======== ========
EPRA Cost Ratio (including direct vacancy costs) A/C 61.3% 44.0%
====================================================== ==== ======== ========
EPRA Cost Ratio (excluding direct vacancy costs) B/C 58.6% 41.4%
====================================================== ==== ======== ========
Reconciliation of EPRA Costs (including direct vacancy costs) to
Net Administrative expenses per IFRS
FY21 FY20
(GBPm) (GBPm)
========================================================= ==== ======== ========
EPRA Costs (including direct vacancy costs) A 51.1 57.5
Exclude
Ground rent costs (0.3) (0.6)
Share of Joint Ventures and associates property
expenses (net of other income) (1.1) (0.3)
Other operating income/recharges intended to cover
overhead expenses less any related profits 7.2 1.8
Net service charge costs/fees (5.9) (4.2)
Operating expenses (excluding service charge cost) (28.9) (33.8)
Tenant incentives (included within income) (0.2) (0.3)
Letting & legal costs (included within income) (1.6) (1.2)
=============================================================== ======== ========
Group's share of net administrative expenses as per IFRS D 20.3 18.9
========================================================= ==== ======== ========
EPRA Gross Rental Income C 83.4 130.7
Ground rent costs (0.3) (0.6)
Expected credit loss (5.3) (2.5)
Government grant money 3.7 -
=============================================================== ======== ========
Gross Rental Income E 81.5 127.6
========================================================= ==== ======== ========
Administrative cost ratio as per IFRS D/E 24.9% 14.9%
========================================================= ==== ======== ========
Alternative Performance Measures (APMs)
In addition to information contained in the Group financial
statements, Alternative Performance Measures ('APMs'), being
financial measures which are not specified under IFRS, are also
used by management to assess the Group's performance. These include
a number of measures contained in the 'Financial Statistics' table
at the beginning of this document. These APMs include a number of
European Public Real Estate Association ('EPRA') measures, prepared
in accordance with the EPRA Best Practice Recommendations reporting
framework. We report these because management considers them to
improve the transparency and relevance of our published results as
well as the comparability with other listed European real estate
companies.
The table below identifies the APMs used in this statement and
provides the nearest IFRS measure where applicable, and where in
this statement an explanation and reconciliation can be found.
APM Nearest IFRS measure Explanation and reconciliation
Underlying Funds From (Loss) / Profit for 'Underlying Funds From Operations'
Operations ('UFFO') and the period after section of the 'Finance Review'
UFFO per share taxation
--------------------- -----------------------------------
EPRA Net Tangible Assets Net Assets 'Balance sheet' section of
('NTA') and EPRA NTA per the 'Finance Review'
share
--------------------- -----------------------------------
Dividend cover N/A 'Financial Policies' section
of the 'Finance Review'
--------------------- -----------------------------------
Admin cost ratio N/A Note 6 of the Financial Statements
--------------------- -----------------------------------
Interest cover N/A Note 3 of the 'Financial
Statistics' table
--------------------- -----------------------------------
EPRA EPS IFRS Basic EPS Note 12 of the Financial
Statements
--------------------- -----------------------------------
EPRA NNNAV Net Assets 'EPRA performance measures'
section of this document
--------------------- -----------------------------------
EPRA NIY N/A 'EPRA performance measures'
section of this document
--------------------- -----------------------------------
EPRA 'topped-up' NIY N/A 'EPRA performance measures'
section of this document
--------------------- -----------------------------------
EPRA Vacancy Rate N/A 'EPRA performance measures'
section of this document
--------------------- -----------------------------------
Total Accounting Return N/A Note 5 of the 'Financial
Statistics' table
--------------------- -----------------------------------
Weighted average cost N/A Note 10 of the 'Financial
of debt Statistics' table
--------------------- -----------------------------------
Weighted average debt N/A Note 11 of the 'Financial
maturity Statistics' table
--------------------- -----------------------------------
Loan to Value N/A Note 12 of the 'Financial
Statistics' table
--------------------- -----------------------------------
Glossary
Admin cost ratio: Is the Group's share of net administrative
expenses (including its share of JV administrative expenses)
divided by the Group's share of property income (including its
share of JV property income).
Average debt maturity: Is measured in years, when each tranche
of Group debt is multiplied by the remaining period to its maturity
and the result is divided by total Group debt in issue at the
period end.
Affordable Rent to Sales ratio: Is an estimate of the maximum
Rent to Sales ratio that an occupier would deem affordable in
relation to a particular retail unit. It is calculated for NewRiver
by retail consultancy Harper Dennis Hobbs.
Balance sheet gearing: Is the balance sheet net debt divided by
IFRS net assets.
BRAVO: Is BRAVO Strategies III LLC, with which NewRiver formed a
capital partnership in May 2019 to acquire and manage a portfolio
of retail assets in the UK.
Book value: Is the amount at which assets and liabilities are
reported in the financial statements.
Cost of debt: Is the Group loan interest and derivative costs at
the period end, divided by total Group debt in issue at the period
end.
CVA: is a Company Voluntary Arrangement, a legally binding
agreement that allows a company to settle debts by paying only a
proportion of the amount that it owes to creditors (such as
contracted rent) or to come to some other arrangement with its
creditors over the payment of its debts.
Dividend cover: Underlying Funds From Operations per share
divided by dividend per share declared in the period.
EPRA: Is the European Public Real Estate Association.
EPRA earnings: Is the IFRS profit after taxation excluding
investment property revaluations, fair value adjustments on
derivatives, gains/losses on disposals and deferred tax.
EPRA Net Tangible Assets (EPRA NTA): Are the balance sheet net
assets excluding the mark to market on effective cash flow hedges
and related debt adjustments, deferred taxation on revaluations,
goodwill, and diluting for the effect of those shares potentially
issuable under employee share schemes.
EPRA NTA per share: Is EPRA NTA divided by the diluted number of
shares at the period end.
ERV growth: Is the change in ERV over a period on our investment
portfolio expressed as a percentage of the ERV at the start of the
period. ERV growth is calculated monthly and compounded for the
period subject to measurement, as calculated by MSCI Real Estate
(formerly named IPD).
Estimated rental value (ERV): Is the external valuers' opinion
as to the open market rent which, on the date of valuation, could
reasonably be expected to be obtained on a new letting or rent
review of a property.
Footfall: Is the annualised number of visitors entering our
shopping centre assets.
GAV: Is Gross Asset Value, the total value of all real estate
investments owned by the Company
Group: Is NewRiver REIT plc, the Company and its subsidiaries
and its share of joint ventures (accounted for on an equity
basis).
Head lease: Is a lease under which the Group holds an investment
property.
IFRS: International Financial Reporting Standards
Income return: Is the income derived from a property as a
percentage of the property value.
Interest cover: Interest cover is tested at corporate level and
is calculated by comparing actual net property income received
versus cash interest payable on a 12 month look-back basis.
Interest-rate swap: Is a financial instrument where two parties
agree to exchange an interest rate obligation for a predetermined
amount of time. These are used by the Group to convert
floating-rate debt obligation or investments to fixed rates.
Joint venture: Is an entity in which the Group holds an interest
on a long-term basis and is jointly controlled by the Group and one
or more parties under a contractual arrangement whereby decisions
on financial and operating policies essential to the operation,
performance and financial position of the venture require each
joint venture partner's consent.
Leasing events: Long-term and temporary new lettings, lease
renewals and lease variations within investment and joint venture
properties.
Like-for-like ERV growth: Is the change in ERV over a period on
the standing investment properties expressed as a percentage of the
ERV at the start of the period.
Like-for-like footfall: Is the movement in footfall against the
same period in the prior period, on properties owned throughout
both comparable periods, aggregated at 100% share.
Like-for-like net income: Is the change in net income on
properties owned throughout the current and previous periods under
review. This growth rate includes revenue recognition and lease
accounting adjustments but excludes properties held for development
in either period, properties with guaranteed rent reviews, asset
management determinations and surrender premiums.
Long-term leasing deals: Are leasing deals with a fixed term
certain of at least one year.
Loan to Value (LTV): Is the ratio of gross debt less cash,
short-term deposits and liquid investments to the aggregate value
of properties and investments. LTV is expressed on a proportionally
consolidated basis.
Mark to market: Is the difference between the book value of an
asset or liability and its market value.
MSCI-IPD: MSCI Real Estate Investment Property Databank Ltd or
'IPD' produces independent benchmarks of property returns and
NewRiver portfolio returns.
Net equivalent yield (NEY): Is the net weighted average income
return a property will produce based upon the timing of the income
received. In accordance with usual practice, the equivalent yields
(as determined by the external valuers) assume rent received
annually in arrears and on values before deducting prospective
purchaser's costs.
Net initial yield (NIY): Is the current annualised rent, net of
costs, expressed as a percentage of capital value, after adding
notional purchaser's costs.
Net rental income: Is the rental income receivable in the period
after payment of ground rents and net property outgoings. Net
rental income will differ from annualised net rents and passing
rent due to the effects of income from rent reviews, net property
outgoings and accounting adjustments for fixed and minimum
contracted rent reviews and lease incentives.
NewRiver share: Represents the Group's ownership on a
proportionally consolidated basis.
Passing rent: Is the gross rent, less any ground rent payable
under head leases.
Pre-let: A lease signed with an occupier prior to the completion
of a development.
Pre-sale: A sale exchanged with a purchaser prior to completion
of a development.
Property Income Distribution (PID): As a REIT the Group is
obliged to distribute 90% of the tax-exempt profits. These
dividends, which are referred to as PIDs, are subject to
withholding tax at the basic rate of income tax. Certain classes of
shareholders may qualify to receive the dividend gross. See our
website (www.nrr.co.uk) for details. The Group can also make other
normal (non-PID) dividend payments which are taxed in the usual
way.
Real Estate Investment Trust (REIT): Is a listed property
company which qualifies for and has elected into a tax regime,
which exempts qualifying UK property rental income and gains on
investment property disposals from corporation tax.
Rental value growth: Is the increase in the current rental
value, as determined by the Company's valuers, over the 12-month
period on a like-for-like basis.
Rent to Sales ratio: Is the turnover of an occupier relation to
a unit as a proportion of the headline rent of that unit. It is
calculated for NewRiver by retail consultancy Harper Dennis
Hobbs.
Retail occupancy rate: Is the estimated rental value of let
units expressed as a percentage of the total estimated rental value
of the portfolio, excluding development properties.
Risk-controlled development pipeline: Is the combination of all
development projects that the Company is currently pursuing or
assessing for feasibility. Our risk-controlled approach means that
we will not commit to a new development unless we have pre-let or
pre-sold at least 70% by area.
Tenant (or lease) incentives: Are any incentives offered to
occupiers to enter into a lease. Typically the incentive will be an
initial rent-free period, or a cash contribution to fit-out or
similar costs. Under accounting rules, the value of lease
incentives given to tenants is amortised through the Income
Statement on a straight-line basis to the lease expiry.
Total Accounting Return (TAR): Is the increase or decrease in
EPRA NTA per share plus dividends paid in the period, expressed as
a percentage of EPRA NTA per share at the beginning of the
period.
Total Property Return (TPR): Is calculated as the change in
capital value, less any capital expenditure incurred, plus net
income, expressed as a percentage of capital employed over the
period, as calculated by MSCI Real Estate (formerly IPD). Total
property returns are calculated monthly and indexed to provide a
return over the relevant period.
Topped-Up Net Initial Yield: Net initial yield adjusted to
include notional rent in respect of let properties which are
subject to a rent free period at the valuation date.
Underlying Funds From Operations (UFFO): is a measure of cash
profits which includes recurring cash profits and excludes other
one off or non-cash adjustments. UFFO is used by the Company as the
basis for ordinary dividend policy and cover.
Unsecured balance sheet: The Company's balance sheet is
unsecured, which means that none of its debt is secured against any
of its property assets.
Weighted average lease expiry (WALE): Is the average lease term
remaining to first break, or expiry, across the portfolio weighted
by rental income. This is also disclosed assuming all break clauses
are exercised at the earliest date, as stated. Excludes short-term
licences and residential leases.
Yield on cost: Passing rents expressed as a percentage of the
total development cost of a property.
Yield shift: Is a movement (usually expressed in basis points)
in the equivalent yield of a property asset.
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END
FR MZGGVKFKGMZG
(END) Dow Jones Newswires
June 03, 2021 02:00 ET (06:00 GMT)
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