TIDMNRR
RNS Number : 7259B
NewRiver REIT PLC
06 June 2023
NewRiver REIT PLC
Preliminary unaudited results for the year ended 31 March
2023
6 June 2023
Clear focus on resilient retail, a strong balance sheet with
financial flexibility
Allan Lockhart, Chief Executive commented: "We ended our
financial year in a strong position having delivered a resilient
set of operating and financial results reflecting the active
occupational demand for space in our portfolio that has led to
another good year of leasing performance.
We have consistently expressed our confidence in our portfolio
positioning which is predominately focused on essential goods and
services. Our operating and financial results last year, and indeed
the prior year, demonstrate the underlying resilience that we have
in our portfolio and our platform, further evidenced by our
valuation outperformance relative to the wider market.
We are in an excellent position with a strong balance sheet that
is not exposed to refinancing and rising interest rates until 2028.
With over GBP110 million of cash available, we have a range of
deployment options to deliver future earnings growth as well as
opportunities to further expand our Capital Partnerships as
evidenced by our recent appointment by M&G Real Estate. As such
we remain confident of achieving our objective of a consistent 10%
total accounting return in the medium term."
Improved Financial Performance
-- Retail UFFO increased 26% to GBP25.8m from GBP20.5m in FY22
-- Retail UFFO per share 8.3 pence vs 6.7 pence in FY22
-- FY23 Dividend per share of 6.7 pence including final dividend of 3.2 pence, 125% covered (FY22
Dividend per share of 7.4 pence including contribution from Hawthorn prior to its disposal
of 2.1 pence)
-- Portfolio valued at GBP594m, delivering a total return of +2.3% vs MSCI All Retail of -7.9%
-- IFRS loss after tax of GBP16.8m due to -5.9% portfolio valuation decline (FY22: loss of GBP26.6m)
-- EPRA NTA per share 121 pence vs 134 pence at 31 March 22 due to market impacted valuation
movement
-- FY23 Total Accounting Return -4.6% improved vs -6.6% in FY22
Resilient Operational Performance
-- Rent collection improved to 98% vs 96% in FY22
-- 979,200 sq ft of leasing with long-term transactions +9.7% ahead vs previous rent and +1.1%
vs ERV
-- Retention rate improved to 92% on lease expiry or break
-- Occupancy increased to 96.7% vs 95.6% at 31 March 22 and is the highest rate for five years
-- Business rate reductions of -16% for portfolio tenants, effective from 1 April 2023
-- Completed GBP23m of disposals resulting in reduction of Work Out portfolio weighting to 11%
-- Significantly expanded Capital Partnerships with new mandate from M&G Real Estate
-- GRESB score improved to 70 and maintained Gold Level for EPRA Sustainability Best Practice
-- Ranked #1 by GRESB in the Management Module out of 901 European participants
Strong Financial Position
-- LTV of 33.9% vs 34.1% at 31 March 22
-- Cash increased to GBP111.3m vs GBP88.2m at 31 March 22
-- Interest cover improved to 4.3x vs 3.9x in September 22 and 3.5x
in March 22
-- Net debt to EBITDA of 4.9x vs 5.1x in September 22 and 4.6x in March
22
-- Fully unsecured balance sheet with interest rate fixed at 3.5% on
drawn debt and no maturity on drawn debt until 2028
Results summary
Performance Note FY23 FY22
Unaudited Audited
Retail Underlying Funds From Operations ('UFFO') (1) (2) GBP25.8m GBP20.5m
-------- ----------- -----------
Retail UFFO per share (1) (2) 8.3p 6.7p
-------- ----------- -----------
Retail Net Property Income GBP50.5m GBP51.8m
-------- ----------- -----------
UFFO (2) GBP25.8m GBP28.3m
-------- ----------- -----------
UFFO per share (2) 8.3p 9.2p
-------- ----------- -----------
Ordinary dividend 6.7p 7.4p
-------- ----------- -----------
Ordinary dividend cover (3) 125% 125%
-------- ----------- -----------
IFRS Loss after taxation GBP(16.8)m GBP(26.6)m
-------- ----------- -----------
IFRS Basic EPS (5.4)p (8.6)p
-------- ----------- -----------
Interest cover (4) 4.3x 3.5x
-------- ----------- -----------
Total Accounting Return (5) -4.6% -6.6%
-------- ----------- -----------
GRESB Score (6) 70 68
-------- ----------- -----------
Balance Sheet Note March 2023 March 2022
IFRS Net Assets GBP378.6m GBP414.1m
----- ------------ -----------
EPRA NTA per share (7) 121p 134p
----- ------------ -----------
Balance Sheet (proportionally consolidated) (8) March 2023 March 2022
----- ------------ -----------
Properties at valuation GBP593.6m GBP649.4m
----- ------------ -----------
Net debt GBP201.3m GBP221.5m
----- ------------ -----------
Principal value of gross debt (9) GBP316.0m GBP314.0m
----- ------------ -----------
Cash GBP111.3m GBP88.2m
----- ------------ -----------
Net debt: EBITDA 4.9x 4.6x
----- ------------ -----------
Weighted average cost of debt - drawn only (10) 3.5% 3.4%
----- ------------ -----------
Weighted average debt maturity - drawn only (10) 4.7 years 5.7 years
----- ------------ -----------
Loan to value (11) 33.9% 34.1%
----- ------------ -----------
(1) Retail UFFO is UFFO from continuing operations and excludes contribution
from Hawthorn in FY22 prior to its disposal on 20 August 2021, see
Note 12 to the Financial Statements
(2) Underlying Funds From Operations ('UFFO') is a Company measure of
operational profits, which includes other income and excludes one
off or non-cash adjustments, such as portfolio valuation movements,
profits or losses on the disposal of investment properties, fair
value movements on derivatives and share-based payment expense as
set out in Note 12 to the Financial Statements and in the Finance
Review. UFFO, which includes the contribution from Hawthorn in the
prior year up to its disposal on 20 August 2021, is used by the Company
as the basis for ordinary dividend policy and cover
(3) Ordinary dividend cover is calculated with reference to UFFO
(4) 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
(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 year
(6) GRESB is the leading sustainability benchmark for the global real
estate sector, and its annual assessment scores participating companies
out of 100
(7) EPRA Net Tangible Assets ('NTA') is based on IFRS net assets excluding
the mark to market on derivatives and debt instruments, deferred
taxation on revaluations, goodwill, and diluting for the effect of
those shares potentially issuable under employee share schemes, see
Note 12 to the Financial Statements
(8) Proportionally consolidated means Group and share of JVs & associates
(9) Principal value of gross debt being GBP300.0 million of Group and
GBP16.0 million share of JVs & associates (March 2022: GBP300.0 million
of Group and GBP14.0 million share of JVs & associates)
(10) Weighted average cost of debt and weighted average debt maturity
on drawn down only (including share of JV & associate drawn debt)
(11) Is the ratio of gross debt less cash, short-term deposits and liquid
investments to the aggregate value of properties and investments
For further information
NewRiver REIT plc +44 (0)20 3328 5800
Allan Lockhart (Chief Executive)
Will Hobman (Chief Financial Officer)
Lucy Mitchell (Communications
& Investor Relations)
+44 (0)20 7251
FGS Global 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
The results presentation will be held at 10.30am today, 6 June
2023, at DL/78, 78 Charlotte Street, London, W1T 4QS.
A live audio webcast of the presentation will be available at:
https://secure.emincote.com/client/newriver/fullyearresults2023
A recording of this webcast will be available on the same link
after the presentation, and on the Company's website (www.nrr.co.uk
) later in the day.
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 environment, 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
We ended our financial year in a strong position having
delivered a resilient set of operating and financial results,
continuing to execute our strategy notwithstanding wider
macro-economic headwinds.
Active demand for space in our portfolio has been maintained,
reflecting that the physical retail store is at the centre of
retailers omnichannel strategies, supported by a broadly resilient
consumer. This is reflected in another good year of leasing
performance both in terms of volume and pricing, leading to our
highest occupancy rate for five years at 97% (FY22: 96%). It is
through the positioning of our portfolio and the quality of our
asset management platform that our Retail Underlying Funds From
Operations (UFFO) increased 26% to GBP25.8 million from GBP20.5
million in the prior year and that is despite the impact of loss of
income from prior year disposals and limited capital deployment of
only GBP4.0 million.
Our strong operational performance, including disposals within
our Work Out portfolio, resulted in excellent cash generation as we
ended the financial year with GBP111.3 million of cash up from
GBP88.2 million at the end of FY22.
Whilst the MSCI All Property and All Retail indices experienced
capital returns of -16% and -13% respectively for the year 1 April
2022 to 31 March 2023, our portfolio outperformed with a
like-for-like valuation movement of -5.9%. The majority of our
reported decline was contained within our Regeneration portfolio,
predominantly driven by higher estimated development costs, a
direct consequence of persistent high inflation. As a result, our
EPRA Net Tangible Assets (NTA) per share at the full year was 121
pence (FY22: 134 pence).
At our FY22 results, we said that we would seek to maintain
headroom to our Loan To Value (LTV) guidance of <40% given the
macro-economic uncertainty at that time. That was the right
decision given the significant disruption in the real estate
capital markets especially in the final quarter of 2022. Our LTV at
the full year was 33.9% (FY22: 34.1%), well within our guidance.
Importantly, we have no refinancing or exposure to higher interest
rates on drawn debt until 2028 and we view this, together with the
significant spread between our portfolio net initial yield of 8.0%
and our cost of borrowing of 3.5%, as key strengths.
A key highlight of the full year was successfully expanding our
Capital Partnerships strategy by securing a high-quality mandate
from M&G Real Estate to asset manage a large retail portfolio
comprising 16 retail parks and one shopping centre, further
extended to include a second shopping centre post year end. This is
a great endorsement of the quality of our asset management platform
and also demonstrates the potential to grow our recurring earnings
in a capital light way.
Our operating and financial results demonstrate the underlying
resilience of our business in what has been a challenging year for
the real estate sector. That, together with our strong financial
position and the strategic options available to us, means we remain
confident in delivering our objective of a consistent 10% total
accounting return for our shareholders.
Strong Financial Performance & Fully Covered Dividend
Our Retail UFFO increased by 26% in FY23 to GBP25.8 million
(FY22: GBP20.5 million). This performance has been driven by an
increase in our Net Property Income, up 5.0%, adjusted for
disposals, but also included the collection of Covid related rent
arrears from FY21 and FY22, a reduction in Administration and
Finance Expenses and the settlement of our insurance claim for loss
of income in our car parks as a result of the Covid-19 lockdowns of
GBP1.4 million.
In line with our dividend policy, we have declared a final
dividend of 3.2 pence per share bringing the total dividend for
FY23 to 6.7 pence per share, which is 125% covered by UFFO.
As a result of an improving Retail UFFO, a tight control on
capital expenditure and completed Work Out disposals, our cash
position increased from GBP88.2 million in March 2022 to GBP111.3
million in March 2023. One of the benefits of rising interest
rates, is that we are now receiving a return on our excess cash
which is accretive to our UFFO.
Valuation Outperformance
Our portfolio valuation has been far more insulated from the
impact of rising interest rates compared to the wider real estate
sector, partly due to our already high portfolio yield, and
recorded a like-for-like valuation movement of -5.9%. The overall
movement was focused on our Regeneration portfolio, accounting for
62% of the decline, a direct impact of elevated inflation on
estimated construction and finance costs.
Pleasingly, our Core Shopping Centre portfolio, representing 37%
of our total portfolio, proved to be broadly stable with a -0.7%
capital return for FY23. Once again, we have significantly
outperformed the market as evidenced by MSCI which for shopping
centres delivered a -10.8% capital return over the last twelve
months.
Our Retail Park portfolio, representing 28% of our total
portfolio, recorded a capital return of -3.2% entirely due to yield
expansion offset by ERV growth of 2.7%. Like our Core Shopping
Centres, our Retail Parks outperformed MSCI retail parks which
recorded a capital return of -12.1% over the same period.
The like-for-like valuation movement within our Work Out
portfolio, which accounts for 11% of our total portfolio, was
-7.8%, outperforming the MSCI Shopping Centre Index. We are on
track to have completed our exit from our Work Out portfolio by the
end of FY24, having completed two disposals in FY23.
Given that our portfolio consistently delivers a higher income
return and a superior capital return than the MSCI All Retail
Index, on a total return basis our portfolio has once again
significantly outperformed the index in FY23, by 1,020bps, as it
has done over the last five years.
Our Balance Sheet is in great shape with an LTV of 33.9% at the
year end, in line with the prior year. Equally important is Balance
Sheet gearing which for us is less than 50%, Net debt to EBITDA is
only 4.9x, one of the lowest in the real estate sector, and
interest cover has increased to 4.3x, one of the highest in the
real estate sector. These strong financial metrics and the fact
that we have no refinancing requirements nor exposure to higher
interest rates until 2028 place us in an excellent position to
capitalise on future growth opportunities at the appropriate
time.
Resilient Operational Performance
Operationally, we had a good performance in terms of leasing
volume and pricing. That, together with our high retention rate
when it comes to lease expiry or lease break, has resulted in an
increase in our occupancy to 97% (FY22: 96%). Rent collection and
car park and commercialisation cashflows all improved during the
year, with rent collection now back to pre-Covid-19 collection
rates.
In total we completed 979,200 sq ft of leasing transactions
during the year, securing GBP7.9 million of annualised income. Our
long-term leasing transactions which represented 69% of the total
rent secured were transacted at rents 1.1% above valuer ERVs.
Furthermore, 77% of the annualised long-term rent secured was in
our Core Shopping Centre and Retail Park portfolios, at levels
exceeding valuer ERVs by 2.3% and 0.8% respectively.
Whilst rent secured within our Regeneration Portfolio was down
-3.9% versus valuer ERV, it was +9.0% ahead of the previous passing
rent and therefore accretive to rental cashflows. It is also
reflective of our ongoing strategy to ensure greater lease
flexibility to support our vacant possession strategy. The Work Out
portfolio leasing activity was on terms -2.1% versus valuer ERV,
however, this only represents a small proportion of the total
portfolio long-term rent secured.
For total portfolio leasing events in FY23, the rents achieved
had a Compound Annual Growth Rate (CAGR) versus the previous
passing rent of only -0.5% over the average previous lease period
of 10.3 years. Over the past three years, which totals GBP15.4m of
annualised rent, this is only -0.4% based on an average previous
lease period of 10.0 years. Taking into account the significant
disruption the retail sector has faced over the last 10 years from
the growth of online retailing and Covid-19, this clearly
demonstrates the underlying resilience in our rental cashflows.
Overall, our long-term leasing transactions had a weighted
average lease expiry (WALE) of 8.2 years, up from 6.4 years in
FY22, with Retail Parks at 12.0 years and Core Shopping Centres at
6.9 years. In terms of occupier incentives, we have seen a marked
improvement in rent-free periods granted in the period compared to
FY21 and FY20. For long-term leasing transactions, the average
rent-free period was just 2.8 months with many occupiers receiving
no rent-free period.
The demand for space that we saw in our portfolio during the
year remained broadly based with 67% of the space leased to
Grocery, Discount, F&B, Health & Beauty and Value
Fashion.
Well Positioned Portfolio
As at 31 March 2023, Retail Parks accounted for 28% of our
portfolio, totalling 14 assets. It has been another positive year
for our Retail Park Portfolio which at year end was 98% occupied
with a retention rate of 100%. We have continued to see strong
occupational and investor demand for our Retail Parks which are
predominately located adjacent to major supermarkets, benefit from
free surface car parking and are supportive of retailers'
omnichannel strategies. As such we had a good year of leasing with
transactions completed 0.8% ahead of valuer ERV. Over the last
three financial years, we have completed long-term leasing
transactions totalling GBP4.5 million of annualised rent across our
Retail Parks which versus the previous passing rent equates to a
CAGR of +0.6% per annum over the average previous lease period of
12.3 years. Our Retail Parks delivered a total return of 4.8%,
outperforming the MSCI retail warehouse index by +1,170 basis
points, which recorded a -6.8% total return.
As at 31 March 2023, our Core Shopping Centre portfolio
represented 37% of our total portfolio value and comprises 14 Core
Shopping Centres at the heart of local communities providing a
range of essential goods and services with an occupancy of 98% and
retention rate of 90%. The consistent occupational demand is
reflected in the positive leasing performance during the year with
long-term deals transacted 2.3% ahead of valuer ERV, underpinned by
an average affordable rent of just GBP13.18 per square foot and
GBP39,000 per annum. Over the last three financial years, we have
completed long-term leasing transactions totalling GBP5.5 million
of annualised rent, which compared to the previous passing rent,
equates to a CAGR of only -0.8% per annum over the average previous
lease period of 9.9 years. Our Core Shopping Centres delivered a
total return of 10.3%, outperforming the MSCI shopping centres
index by +1,540 basis points, which recorded a -5.1% total
return.
We have three Regeneration assets, representing 23% of the total
portfolio value, for which we have planning consent for: 187
residential units, over 850 residential units at the pre-planning
application stage and a further 350 residential units in the
masterplan stage for phase one. None of these projects will be
built-out by NewRiver as our intention is to deliver value either
through sale or by partnering with residential developers, once
planning consents are secured. Currently, we are not exposed to
material contractual capital expenditure commitments but in order
to maximise value, some modest capital expenditure will be required
over the next two years. Whilst we advance our regeneration
proposals, we have maintained a high occupancy at 97% whilst at the
same time building flexibility into the leases to deliver future
vacant possession. As such the leasing deals completed within our
Regeneration portfolio were transacted at a modest -3.9% below
valuer ERVs.
Our Work Out portfolio represents 11% of our portfolio and
comprises nine assets which we intend to dispose of or complete
turnaround strategies on. Since our Half Year results, we have
completed the disposals of two shopping centres in Wakefield and
Darlington, with the remaining sales to be completed in FY24; those
assets subject to a turnaround strategy are supported by further
investment by the end of FY24. In the interim, occupancy and
retention rates for our Work Out assets remain high at 93% and 89%
respectively and leasing deals completed during the year were
transacted at -2.1% below valuer ERV. In respect of capital and
total returns, our Work Out portfolio has outperformed the MSCI
shopping centres index by +10 and +590 basis points
respectively.
Growing Capital Partnerships
Capital Partnerships are an important component of our strategy
to deliver earnings growth in a capital light way. We were
delighted in November 2022 to secure a high-profile mandate from
M&G Real Estate to manage a large retail portfolio comprising
16 retail parks and a shopping centre located in the South East of
England. After our appointment in November 2022, the mandate was
extended to include a further shopping centre in the South East
post year end in April 2023.
Currently, we have three key Capital Partnerships: in the public
sector with Canterbury City Council; in the private equity sector
with BRAVO; and now in the institutional sector with M&G Real
Estate. Currently, we asset manage 19 retail parks and five
shopping centres with a total value in excess of GBP500 million and
annualised rent of over GBP50 million.
The expansion and breadth of our Capital Partnerships is a clear
recognition of the need for a best-in-class platform to extract
performance in the highly operational retail sector. We believe
that we have a significant opportunity to deliver further earnings
growth through our Capital Partnership activities.
Prudent Capital Allocation
Capital allocation during the year has been focused on investing
in our portfolio with tightly controlled discipline given the
macro-economic uncertainty. Total investment in FY23 was GBP4.0
million of which 57% was allocated to our retail park portfolio,
with the largest project being the construction of a new Aldi store
in Dewsbury which accounted for 23% of our total portfolio
investment.
We invested GBP0.6 million in our Core Shopping Centres, the key
project being the funding of our planning application for a new
food store in Market Deeping which was unanimously approved by the
Council post year end. Our Regeneration portfolio received GBP0.7
million of investment principally to advance our forthcoming
planning application in Grays for an 850+ unit residential-led
major town centre regeneration.
Committed progress to ESG
We take our role as the custodians of assets within the
community very seriously and part of that responsibility is helping
to protect the long-term sustainability of the environment that
they sit within, and we are pleased to report great progress in the
delivery of our committed ESG Strategy.
During the year, the quality of the Management and Governance of
our business was recognised as we ranked first place in the GRESB
"Management" module out of a total 901 participants across Europe.
This recognition is due to the fastidious work from our team in
embedding our ESG objectives across the business at both the
corporate and asset level including developing a supplier ESG
performance evaluation process and formalising a quarterly ESG
performance review process for our Property team.
Our ESG activities this year have resulted in achieving our
target GRESB score of 70/100 for the "Standing Portfolio"
Benchmark, scoring 90/100 for the GRESB "Development" benchmark and
being awarded an "A" alignment in GRESB's independent TCFD
assessment.
We also retained our 'B' Rating from CDP for our management of
climate-related issues as well as retaining our Gold Award in EPRA
Sustainability Best Practice Recommendations Awards, recognising
the excellence in the transparency and comparability of our
environmental, social and governance disclosures.
Our assets are typically easily accessible with short travel
times, supporting the wider climate and well-being agenda. We set
our pathway to Net Zero in 2019 and we continue to make great
inroads in implementing this. Achieving net-zero within the retail
sector relies upon mutual action by real estate owners and
occupiers. The energy consumed by our occupiers in our assets
accounts for almost 90% of our total carbon emissions. These are
emissions over which we have limited control, but we continue to
develop our engagement activities to support alignment between our
climate ambitions and those of our occupiers and so we are pleased
to report that 57% of our lettable floorspace is occupied by
retailers that have already set emissions reduction targets, with
approximately 70% of that 57% part of the BRC Climate Commitment to
reduce carbon emissions to net zero by 2040.
As we reported last year, all of the energy supplied into our
common areas (malls and car parks) is already carbon neutral but
this year we also generated over 250,000 kWh of renewable
electricity on-site at our assets, maintained our "zero waste to
landfill" policy and delivered or secured contracts for EV charging
infrastructure at 88% of our surface-level car parks. Given cost
inflation headwinds, it is also notable that the energy supplied
into our malls is hedged until Spring 2024, so we are not facing
into price increases.
Finally, during the year we relocated our Head Office to a
BREEAM Excellent, Net-Zero building in London. We are committed to
continuing this great work and playing our part in helping protect
our planet and stakeholders for the long-term.
Outlook
Despite ongoing geopolitical tensions, elevated inflation and
higher interest rates, we are reassured with the improving
occupational demand for space in our resiliently positioned
portfolio. Given our current high occupancy rates for Retail Parks
and Core Shopping Centres at 98% and the benefit of the reduction
of business rates for our occupiers, we believe that the prospects
for future rental growth are now encouraging which should be
supportive of future valuations.
For some time now, we have consistently expressed our confidence
in our portfolio positioning which is predominately focused on
essential goods and services. Our operating and financial results
over the last two years demonstrate the underlying resilience that
we have in our portfolio and in our platform, and we expect that to
continue into our new financial year.
We are in an excellent position with a strong balance sheet that
is not exposed in the medium term to rising interest rates, we have
capital available to deploy and opportunities to expand our Capital
Partnerships. We are therefore confident of our ability to deliver
our medium term objective of a consistent 10% total accounting
return.
Allan Lockhart
Chief Executive Officer
Portfolio Review
Highlights
Portfolio Metrics as at 31 March 2023
-- Occupancy: 96.7% (FY22: 95.6%)
-- Retention Rate: 92% (FY22: 90%)
-- Rent Collection: 98% (FY22: 96%)
-- Affordable Average Rent: GBP11.98 per sq ft (FY22: GBP11.74 per sq
ft)
-- Gross to Net Rent Ratio: 88% (FY22: 84%)
-- Leasing Volume: 979,200 sq ft (FY22: 1,039,800 sq ft)
-- Leasing Activity: +1.1% ahead of valuer ERV (FY22: +7.4%)
-- Average CAGR FY21-FY23: -0.4% on 10.0yr average previous lease period
-- Total Return of 2.3% outperforming the MSCI All Retail by 1.020bps
over 12 months
-- Portfolio NIY of 8.0%, +220bps versus the MSCI All Retail at 5.9%
-- Expanding Capital Partnerships across public, private equity and institutional
sectors
Robust and consistent operational metrics continue to
demonstrate the underlying resilience and active demand for space
in our portfolio, supported by the strong performance of the
physical retail store channel and resilient consumer. Net property
income adjusted for disposals increased by +5.0% in the 12 months
to March 2023, occupancy increased to 96.7% (FY22: 95.6%) and rent
collection remains at normalised levels of 98% (FY22: 96%).
As a 31 Occupancy Retention Rent Affordable Gross Leasing Average
March Rate Collection Average Rent to Volume Leasing CAGR FY21-FY23
2023 Net Activity
Rent
Ratio
(%) (%) (%) (GBP (Ave. (%) (sq % vs (%) (Average
psf) pa) ft) valuer Lease
ERV Length)
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
Retail
Parks 97.5% 100% 99% GBP12.49 GBP116,000 97% 163,400 0.8% 0.6% 12.3
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
Shopping
Centres
- Core 97.7% 90% 98% GBP13.18 GBP39,000 94% 309,700 2.3% -0.8% 9.9
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
Shopping
Centres
- Regen 97.4% 97% 100% GBP13.00 GBP69,000 86% 138,700 -3.9% -0.7% 9.4
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
Shopping
Centres
- Work
Out 92.8% 89% 97% GBP9.13 GBP23,000 65% 338,800 -2.1% -0.4% 6.7
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
Total (1) 96.7% 92% 98% GBP11.98 GBP45,000 88% 979,200 1.1% -0.4% 10.0
---------- ---------- ----------- --------- ----------- ------ -------- ---------- ------ ---------
1. Total includes Other representing 1% of total portfolio by value
In total, we completed 979,200 sq ft of leasing transactions
during the year, securing GBP7.9 million of annualised income. Our
long-term leasing transactions which represented 69% of the total
rent secured were transacted at rents +1.1% above valuer ERVs.
Over three quarters (77%) of the annualised long-term rent
secured was in our Core Shopping Centre and Retail Park portfolios,
at rents exceeding valuer ERVs by +2.3% and +0.8% respectively.
This is a reflection of the excellent occupational demand across
our Core Shopping Centres, at the heart of their local communities,
and conveniently located Retail Parks predominately adjacent to
major supermarkets, demonstrating we own the right assets in the
right locations.
Whilst rent secured within our regeneration portfolio was down
-3.9% versus valuer ERV, it was 9.0% ahead of the previous passing
rent and therefore accretive to rental cashflows. It is also
reflective of our ongoing strategy to ensure greater lease
flexibility to support our vacant possession strategy. We have been
making good progress across our three regeneration assets which are
predominantly focused on reducing surplus retail and delivering new
residential units to these locations within commuting distance of
London. At Grays, we are at an advanced stage in our preparations
to submit an outline planning application for 850+ homes and in
Burgess Hill, a site with detailed planning consent for 187
residential units, is being prepared for sale.
The Work Out portfolio leasing activity was on terms -2.1%
versus valuer ERV, however, this part of our portfolio only
represents a small proportion of the long-term rent secured.
Disposals this year totalled GBP23 million at -10% discount to book
value, principally from the Work Out portfolio. Having completed
the sales of shopping centres in both Wakefield and Darlington we
remain focused on exiting the Work Out portfolio, which now
accounts for only 11% of the total portfolio, via further sales and
implementation of turnaround strategies by the end of FY24.
For total portfolio lease events in FY23, the rents achieved had
a CAGR versus the previous passing rent of only -0.5% over the
average previous lease period of 10.3 years. Over the past three
years, this is only -0.4% based on an average previous lease period
of 10.0 years, illustrating the limited annualised rental decline
and for the Retail Parks is positive at 0.6%. Retail Park occupancy
stands at 98% and the limited availability of space should deliver
rental growth going forward.
Overall, our long-term leasing transactions had a weighted
average lease expiry (WALE) of 8.2 years, up from 6.4 years in
FY22, with Retail Parks at 12.0 years and Core Shopping Centres at
6.9 years. In terms of tenant incentives, due to the continued
competitive tension in the occupational market, for long-term
leasing transactions the average rent free period was broadly
aligned to FY22 at just 2.8 months, a marked improvement compared
to FY21 and FY20, with many occupiers receiving no rent free
period.
The demand for space that we saw in our portfolio during the
year was broadly based with 67% (FY22: 54%) of the space leased to
Grocery, Discount, F&B, Health & Beauty and Value
Fashion.
Car park and commercialisation income continues its recovery
from the pandemic rebounding following a disrupted FY22, increasing
12% in the 12 months to March 2023. Overall, income is now back up
to 78% against pre-pandemic levels.
Our portfolio valuation at GBP593.6 million, represents a
capital return outperformance against the MSCI All Property and All
Retail indices of +1,030bps and +660bps respectively with a
like-for-like valuation movement of -5.9% for the year. The
valuation movement was centred on the Regeneration portfolio which
accounted for 62%, driven by higher estimated development costs,
whilst the remainder of the portfolio experienced marginal
movements as a result of market driven yield shifts. Out of the 45
assets within the portfolio, 10 assets experienced capital growth
or a stable valuation, 18 less than a GBP0.5 million decline and 10
between a GBP0.5-GBP1 million decline. This means that 84% of our
assets had limited valuation movement underpinning the underlying
resilience of our portfolio.
Our Capital Partnerships continue to grow having secured a
high-quality mandate from M&G Real Estate in November 2022 to
asset manage a large retail portfolio, with a further south-east
shopping centre added to this mandate subsequent to our
appointment. The portfolio currently comprises 16 retail parks and
two shopping centres. Our key partnerships are across the public,
private equity and institutional sectors illustrate the importance
of specialist retail partners in a highly operational sector and
endorsement of the quality of our asset management platform.
Valuation
As at 31 March 2023, our portfolio was valued at GBP593.6
million (31 March 2022: GBP649.4 million). Movements from the
previous year were the disposal of two Work Out assets and a solus
retail warehouse unit (GBP22.4 million) and a like-for-like
valuation movement of -5.9% for the year. This is a +660bps capital
return outperformance compared to the MSCI All Retail index.
Valuations were broadly stable in the first half of the year at
-1.3%, followed by a -4.7% movement in the second half, a
reflection of the macro-economic, political and financial market
pressures impacting all real estate markets. The valuation movement
was predominately a result of market driven yield expansion, a
direct impact of rising interest rates, whilst ERVs were broadly
stable at -1.7% for the total portfolio and +0.4% excluding our
Work Out portfolio and Regeneration assets.
Our Core Shopping Centre Portfolio, which represents 37% of the
portfolio, delivered a modest valuation movement of only -0.7% for
the year, a result of a strong operational performance and already
high yield of 9.6%. This is a +1,010bps capital return
outperformance compared to the MSCI Shopping Centre index.
Retail Parks, representing 28% of the portfolio, saw a movement
of -3.2% driven by some modest yield expansion offset by a +2.7%
increase in LFL ERVs. This is a +960bps capital return
outperformance compared to the MSCI Shopping Centre index.
The overall portfolio valuation movement was concentrated in the
Regeneration portfolio with a movement of -14.1% which accounts for
62% of the overall portfolio movement, the outcome of high
inflation on assumed construction and finance costs.
The Work Out portfolio following two disposals now accounts for
only 11% of the total portfolio and experienced a -7.8% valuation
movement due to negative NOI and ERV movements. This was
concentrated in three assets where turnaround strategies are in
place and progressing well. Nevertheless, on a capital return
basis, our Work Out portfolio outperformed the MSCI Shopping Centre
index by +10bps.
As a 31 Portfolio Valuation Valuation Valuation Topped-up NEY LFL LFL
March 2023 Weighting Movement Movement Movement NIY EY Movement ERV
H1 H2 FY Movement
(GBPm) (%) (%) (%) (%) (%) (%) (%) (%)
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Shopping
Centres -
Core 219.9 37% 0.2% -0.9% -0.7% 9.6% 9.3% 0.0% -1.1%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Retail Parks 165.5 28% 0.5% -3.5% -3.2% 7.0% 7.0% 0.3% 2.7%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Shopping
Centres -
Regen 140.0 23% -4.2% -10.5% -14.1% 5.9% 6.8% 0.6% 1.2%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Total excl.
Work Out
/ Other 525.4 88% -1.0% -4.4% -5.4% 7.9% 7.9% 0.3% 0.4%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Shopping
Centres -
Work Out 63.4 11% -2.5% -5.8% -7.8% 9.4% 14.0% -0.3% -8.7%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Other 4.8 1% -5.7% -13.5% -22.6% 10.0% 9.5% 0.6% -11.3%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
Total 593.6 100% -1.3% -4.7% -5.9% 8.0% 8.6% 0.2% -1.7%
------- ----------- ---------- ---------- ---------- ---------- ------ ------------ -----------
The portfolio Net Initial Yield now stands at 8.0%, and has a
Net Equivalent Yield of 8.6%, c.200bps higher than the MSCI All
Retail Benchmark at 5.9% and 6.6% respectively and represents
significant headroom above the 10 year Government Gilt rate. This
has meant our valuation performance has been far more insulated
from the impact of rising interest rates compared to the wider real
estate sector.
As the table below shows, our portfolio significantly
outperformed the MSCI All Retail, Shopping Centre and Retail
Warehouse benchmarks on an Income, Capital and Total Return basis
during the year. Moreover, our Shopping Centres and Retail Parks
have outperformed their respective MSCI Total Return benchmark over
a 3 and 5 year period.
12 months to 31 Total Return Capital Growth Income Return
March 2023
NRR Portfolio 2.3% -6.2% 9.0%
------------- --------------- --------------
MSCI All Retail Benchmark -7.9% -12.7% 5.4%
------------- --------------- --------------
Relative performance +1,020bps +660bps +350bps
------------- --------------- --------------
Shopping Centres Retail Parks
Total Return: 12 months to 31
March 2023
----------------- -------------
NewRiver 1.6% 4.8%
----------------- -------------
MSCI Benchmark -5.1% -6.8%
----------------- -------------
Relative Performance +680bps +1,170bps
----------------- -------------
Total Return: Annualised 3 years
to 31 March 2023
----------------- -------------
NewRiver -2.1% 8.7%
----------------- -------------
MSCI Benchmark -9.7% 5.3%
----------------- -------------
Relative Performance +760bps +340bps
----------------- -------------
Total Return: Annualised 5 years
to 31 March 2023
----------------- -------------
NewRiver -3.5% 5.1%
----------------- -------------
MSCI Benchmark -11.0% -0.3%
----------------- -------------
Relative Performance +750bps +550bps
----------------- -------------
Retail Parks
-- Portfolio weighting: 28%
-- No. assets: 14
-- NIY %: 7.0% versus MSCI Retail Warehouse NIY of 6.2%
-- Average lot value: GBP17.2 million
-- Key occupiers: B&M, TK Maxx, Halfords, Aldi
-- Occupancy: 97.5%
-- Retention rate: 100%
-- Rent collection: 99%
-- Affordable average rent: GBP12.49 per sq ft / GBP116,000 per annum
-- Gross to Net Rent Ratio: 97%
-- Leasing volume: 163,400 sq ft
-- Leasing activity: 0.8% ahead of valuer ERV
-- Average CAGR FY21-FY23: 0.6% on 12.3yr average previous lease period
-- Total Return 4.8% outperforming the MSCI Retail Warehouses by 1,170
basis points
As at 31 March 2023, Retail Parks accounted for 28% of our
portfolio, totalling 14 assets. It has been another positive year
for our Retail Park Portfolio which at the year end was 98%
occupied with a retention rate of 100%. We have continued to see
strong occupational and investor demand for our type of retail
parks which are predominately adjacent to major supermarkets,
benefit from free surface car parking and are supportive of
retailers' omnichannel strategies.
Selected highlights Include:
Barrow-in-Furness, Hollywood Retail & Leisure Park: This
retail park provides the key retail and leisure to the town with
the only Vue cinema in the catchment and benefits from an occupier
line up of Aldi, TK Maxx, Curry's, Dunelm, McDonalds and KFC. The
offer is to be further strengthened with the introduction of Smyth
Toys having exchanged an Agreement for Lease for a 15 year term
replacing the former Bingo operator which we served our landlord
break notice on. The only remaining vacant unit is a 3,100 sq ft
pod which is under offer to a national veterinary company, which
will bring a great community use to the Retail Park.
Cardiff, Valegate Retail Park : We completed an Agreement for
Lease with Poundland for a 27,000 sq ft store at a rent of
GBP270,000 pa and a 10,000 sq ft letting to Boulders, an indoor
climbing centre, at a rent of GBP100,000 per annum on a 15 year
lease and both transactions were in line with the valuer's ERV.
This discount led 94,000 sq ft retail park, adjacent to a dominant
Marks & Spencer and Tesco Extra, is now fully let.
Dewsbury, Rishworth Centre : At our fully-let retail park in
Dewsbury, we opened a brand new 19,500 sq ft store for Aldi
following the completion of extension works to the former Next
store. Aldi took a 20 year lease at an annual rent of GBP299,000
per annum and have reported strong trading from the store. The park
is now fully let with Aldi joining Shoezone, Iceland, Halfords and
Pets at Home on the park.
Dumfries, Cuckoo Bridge Retail Park: We received planning
consent and exchanged an Agreement for Lease with Food Warehouse to
create a new 12,500 sq ft food store which will benefit from
trading adjacent to a successful Tesco superstore. We are in active
discussions with a discount gym operator on the final vacant unit
which will make the park 100% let, further strengthening this
excellent supermarket, DIY and discount anchored park.
Inverness, Glendoe and Telford Retail Parks: Throughout the year
we have completed a number of lettings on the park, improving the
occupier line-up and increasing the WAULT. We negotiated a
surrender on the former PC World unit and simultaneously completed
leasing transactions with Bensons for Beds and Food Warehouse on 10
year terms at a total rent of GBP278,000, 8% ahead of the valuer's
ERV. We served the landlord break notice on Poundstretcher in order
to create space for Poundland and agreed a reversionary lease with
B&M, adding a further 10 years to the term.
Kendal, South Lakeland Retail Park: Having secured planning for
change of use, we have completed the lease to Food Warehouse on an
11,600 sq ft store (previously let to Poundstretcher) at a rent of
GBP15.50 per sq ft on a 10 year lease. Food Warehouse joins an
already strong retailer line up including B&M, Pets at Home,
Halford and Currys, adjacent to a Morrisons supermarket.
Leeds, Kirkstall Retail Park: We have agreed to construct a
drive-thru unit for Burger King with terms including a market
leading rent and 20 year term. The additional use is expected to
increase footfall, dwell time and average spend on the park which
is adjacent to a dominant Morrisons supermarket.
Wirral, Eastham Point: We continued our successful partnership
with the Co-op in their convenience store expansion programme,
delivering a modern new 5,300 sq ft store which features
self-service checkouts and a hot food to go section too. Co-op took
a 15 year lease at a rent of GBP70,000 per annum. Kutchenhaus also
took a new 10 year lease for a new store and together these
lettings bring the park to 100% occupancy.
Core Shopping Centres
-- Portfolio weighting: 37%
-- No. assets: 14
-- NIY 9.6% versus MSCI Shopping Centre NIY of 7.5%
-- Average lot value: GBP19.0 million
-- Key occupiers: Primark, Superdrug, M&S, Poundland, Boots, Next
-- Occupancy: 97.7%
-- Retention rate: 90%
-- Rent collection: 98%
-- Affordable average rent: GBP13.18 per sq ft / GBP39,000 per annum
-- Gross to Net Rent Ratio: 94%
-- Leasing volume: 309,700 sq ft
-- Leasing activity: 2.3% ahead of valuer ERV
-- Average CAGR FY21-FY23: -0.8% on 9.9yr average previous lease period
-- Total Return 10.3% outperforming the MSCI Shopping Centres by +1,540
basis points
Our Core Shopping Centres are located in the heart of their
local communities, playing a key role to the local social and
economic prosperity of their conurbations by providing a range of
essential goods and services to local people. Our centres are
easily accessible with short travel times supporting the wider
climate and well-being agenda.
As at 31 March 2023 our Core Shopping Centre portfolio
represented 37% of our total portfolio value and comprises 14 core
community shopping centres with an occupancy of 98%.
Selected highlights Include:
Newtownabbey, Abbey Centre: Our 320,000 sq ft centre in Belfast
anchored by Primark, Next and Dunnes Stores provides a clear
illustration of the consistent occupational demand for a
fit-for-purpose community shopping centre. Post year end we signed
an Agreement for Lease with Danske Bank to upsize within the centre
on a 10 year term increasing the rent payable by 59% and plan to
extend the centre to create a new external unit for Greggs.
Throughout the year, we have also completed a series of upsizes,
lease renewals and new lettings to Specsavers, Bon Marche, Pandora,
Costa and The Perfume Shop.
Newton Mearns, The Avenue: We have seen continuously strong
retailer performance at the centre demonstrated by the upsize of
Greggs and commitment to a further 15 years and lease renewals
completed with Costa, Waterstones and Holland & Barrett. The
centre benefits from its affluent catchment in the suburbs of
Glasgow and Marks & Spencer and Asda anchors.
Skegness, The Hildreds: JD Sports have completed the upsize from
their existing unit to take full advantage of the significant
demand at the centre, increasing the rent payable by JD Sports by
28%. Shoe Zone have also upsized from 2,700 sq ft to 4,300 sq ft
paying a rent of GBP65,000 per annum on a lease term of five years.
Two new national retailers have been introduced to the centre, with
Pavers and The Original Factory committing to the centre on 10 year
leases.
Hastings, Priory Meadow: We completed a lease with Black Sheep
Coffee post year end on a 20 year lease term at GBP60,000 per annum
on one of the last remaining vacancies and a new 12,000 sq ft unit
for The Gym which is open 24 hours a day and is helping contribute
to enhanced footfall and supplementary spend at the centre. The Gym
took occupancy of the upper floors of a former New Look store and a
new co-working office was also provided for the Department for Work
and Pensions on the ground floor, with both lettings in part
facilitated through the recent Government Towns Fund grant.
Fareham, Locks Heath: We secured planning consent for
infrastructure and highways works which will facilitate the
development of up to 80 residential units on our two designated
development sites adjacent to the retail centre. Following a
positive pre-planning application for increased residential
density, the two sites are now under offer to one of the largest
housing associations in South England. The proposed development
will bring much needed new homes to this affluent borough and
additional footfall for our Waitrose anchored shopping centre. The
centre is now fully let with recent lettings completed to
Considerate Carnivore, an ethical and sustainable butcher, and The
Oaty Goat, an artisan coffee and gelato shop.
Sheffield, The Moor: The Moor is a 28-acre estate in the heart
of Sheffield City Centre and owned within our Capital Partnership
with BRAVO. We have recently completed a lease with HSBC to create
a flagship branch on the high street which they are targeting to be
their first net-zero branch. This lease transaction was secured on
a 10 year lease 12.5% ahead of the valuer's ERV at a rent of
GBP225,000 per annum.
Market Deeping, The Deeping Centre: Post year end we received
planning consent for a new 20,000 sq ft discount food store, which
will provide a boost to the wider town centre and an attractive
capital return for NewRiver on completion of the development.
Work Out
-- Portfolio weighting: 11%
-- No. assets: 9
-- NIY %: 9.4% versus MSCI Shopping Centre NIY of 7.5%
-- Average lot value: GBP7.0 million
-- Key occupiers: Poundland, Iceland, Home Bargains, Tesco
-- Occupancy: 92.8%
-- Retention rate: 89%
-- Rent collection: 97%
-- Affordable average rent: GBP9.13 per sq ft / GBP23,000 per annum
-- Gross to Net Rent Ratio: 65%
-- Leasing volume: 338,800 sq ft
-- Leasing activity: -2.1% below valuer ERV
-- Average CAGR FY21-FY23: -0.4% on 6.7yr average previous lease period
-- Total Return 0.7% outperforming the MSCI Shopping Centres by 590 basis
points
Our Work Out portfolio represents 11% of our portfolio and
comprises assets which we intend to dispose of or complete
turnaround strategies for. Since the Half Year, we have completed
the disposals of shopping centres in both Wakefield and Darlington,
with the remaining sales and turnaround strategies to be completed
by the end of FY24.
The key turnaround strategies include:
Cardiff, Capitol Shopping Centre: We are planning the wholesale
repositioning of the asset to competitive and social leisure with
an enhanced F&B provision. The Capitol Shopping Centre sits
alongside the Council's major upgrade to the wider area which will
improve the infrastructure and public realm, including reinstating
a stretch of canal next to the Centre's entrance, and is due to
complete in the Autumn 2023. We are in advanced discussion with a
national competitive and social leisure operator to occupy circa
115,000 sq ft of the centre which will be the catalyst for the Food
& Beverage lettings on the remainder of the centre.
Kilmarnock, Burns Mall: We are working collaboratively with the
Council on plans to demolish the former BHS to create a surface car
park to be let to the Council on a long-term lease and upsize key
occupiers within the centre. We are confident that the removal of
surplus retail, improvement in public realm and accessibility will
revitalise the centre. The works are to be part funded by the
Council.
Paisley, The Piazza: The centre is the principal retail offering
within the town centre and has strengthened following the planned
re-development of the neighbouring weaker shopping centre within
the catchment, therefore removing significant surplus retail supply
from the town. The strategy has been focused on renewed letting
activity and deals have now completed with JD Sports on a 10 year
lease at GBP65,000 per annum which is line with the valuer's ERV,
previously let on a temporary basis; and we are in legals with
Poundland to upsize into a currently vacant unit. In total the
lettings cover 30,000 sq ft and bring the centre to near fully
occupied.
Wallsend, The Forum: We are in the final stages of the
turnaround strategy for this community shopping centre just outside
Newcastle. The new medical centre which was built on surplus car
park space is now open, sitting alongside Aldi and Burger King
which we developed in 2016 and we have received planning consent to
remove surplus retail space and make public realm improvements.
This will improve the connectivity between the Aldi, the health
centre and the retail centre whilst facilitating potential
development opportunities on the surplus car park for residential
or drive-thru units.
Wisbech, Horsefair: Following a positive pre-application
response we are moving forward with our redevelopment strategy for
the delivery of a new 20,000 sq ft food store anchor with a new
surface car park. Once we have agreed terms to pre-let the new
store we will submit a planning application for which following the
pre-application, we are confident of securing and on delivery of
the food store the centre will be fully let and help boost footfall
to the centre and town.
Regeneration
-- Portfolio weighting: 23%
-- No. assets: 3
-- NIY %: 5.9% versus MSCI Shopping Centre NIY of 7.5%:
-- Average lot value: GBP46.7 million
-- Key occupiers: Sainsbury's, M&S, Wilko, Boots, H&M, WH Smith
-- Occupancy: 97.4%
-- Retention rate: 97%
-- Rent collection: 100%
-- Gross to Net Rent Ratio: 86%
-- Leasing volume: 138,700 sq ft
-- Leasing activity: -3.9% ahead of valuer ERV
-- Average CAGR FY21-FY23: -0.7% on 9.4yr average previous lease period
-- Total Return -9.4% underperforming the MSCI Shopping Centres by -420
basis points
We have three regeneration assets, representing 23% of the total
portfolio value where the strategy is to deliver capital growth
through redeveloping surplus retail space predominantly for
residential.
Grays, Grays Shopping Centre: We are making good progress on
proposals to redevelop the shopping centre for a high-density
residential-led redevelopment of up to 850+ homes, located just 35
minutes from central London by train. Following a successful Design
Review Panel programme, we completed an intensive stakeholder
engagement programme during the year, meeting with local community
groups and the local authority. Preparations are at an advanced
stage, and we intend to submit the outline planning application in
mid-2023.
Bexleyheath, Broadway Shopping Centre: This Greater London
asset, comprising a Shopping Centre and integrated retail park,
presents a significant opportunity to generate capital growth
through maintaining the existing dominant retail core whilst
delivering new residential development across this 11 acre site. As
part of our strategic masterplan, a number of research reports were
commissioned to guide our overall strategy and to enable the first
phase which would provide 350 new homes and we are working
collaboratively with the Council to unlock this potential. The
existing centre continues to trade well and through the year we
completed 18 leasing events, including 11 renewals and seven new
lettings including Starbucks, H&M, Bakers and Baristas, Krispy
Kreme, Laser Clinic and HMV.
Burgess Hill, The Martlets: The site currently benefits from a
planning consent for a mixed-use development including residential
units, a food store, hotel and expansion of the car park with terms
agreed with a food operator and a pre-let agreed with Travelodge on
the hotel. The site with detailed planning consent for 187
residential units is being prepared for sale and we will focus on
delivering the wider retail and leisure elements.
Capital Partnerships
As well as managing assets on our own balance sheet , we also
actively manage assets on behalf of our capital partners by
leveraging our market leading asset management platform across
three sectors: private equity, institutional investors and local
authorities.
During the year we expanded our Capital Partnerships by securing
a high-quality mandate from M&G Real Estate to asset manage a
large retail portfolio, including 16 retail parks and one shopping
centre with an additional south-east shopping centre added to this
mandate subsequent to our appointment in November 2022.
Capital Partnerships are an important part of our business,
delivering earnings growth in a capital light way through asset
management fees, a share of rent and the potential to received
financial promotes. We currently asset manage 19 retail parks and
five shopping centres across 5 million sq ft.
Our three Capital Partnerships are:
Local Authorities: with Canterbury City Council across two
shopping centres in Canterbury. Key highlights:
-- We have completed 18 long-term leasing transactions across 65,600
sq ft, securing GBP1.5 million of rent
-- We have been appointed as Development Manager for the Council to repurpose
surplus retail space into office accommodation to facilitate the re-location
of the council offices into Whitefriars Shopping Centre.
Private Equity Sector: with BRAVO for three retail parks and one
shopping centre in Sheffield. Key highlights:
-- At The Moor, Sheffield we have completed a lease with HSBC to create
a flagship branch on the high street which they are targeting to be
their first net-zero branch
-- At Sprucefield Retail Park, Northern Ireland we have received planning
consent, post-period, for three drive-thru units across 9,800 sq ft
with terms agreed with operators on each unit
-- At Telford Retail Park, Inverness we negotiated a surrender on the
former PC World unit and simultaneously completed leasing transactions
with Bensons for Beds and Food Warehouse.
Institutional Sector: with M&G Real Estate across two
shopping centres and 16 retail parks. Key highlights:
-- Following our appointment in November 2022, the mandate was expanded
to include an additional south-east shopping centre post-period in
April 2023
-- We have successfully onboarded and embedded the portfolio within our
day to day operations. In the first full quarter, we have completed
120,000 sq ft of leasing transactions securing GBP2 million of rent.
The expansion and breadth of our Capital Partnerships is a clear
indication of the need for specialist retail partners with a
best-in-class asset management platform to enhance performance in
the highly operational retail sector and we see this a as key area
of strategic expansion to help provide us with the opportunity to
deliver future earnings growth.
Finance review
Despite the macro-economic headwinds faced, particularly in the
second half of the year, by continuing to deliver our strategic
objectives and due to the strength of our asset management
platform, we have managed to maintain and even enhance the strength
of our financial position while sustaining the operational momentum
that has built over the last two years.
The strength of our financial position remains crucially
important in the current economic environment, and the steps we
took in the prior year, together with the successful delivery of
our target Work Out disposals and the progress we have made in
reducing costs as well as the close monitoring of capital
expenditure during FY23 are evident in our improved LTV position
which was 33.9% at 31 March 2023, reduced from 34.1% in March 2022
and 50.6% in March 2021. This has been achieved by reducing
absolute levels of net debt (from GBP493.3 million in March 2021 to
GBP201.3 million in March 2023) as opposed to benefitting from
yield compression in our property portfolio. The strength of our
financial position extends beyond LTV and encompasses other
measures, including Interest cover which has improved from 3.5x in
FY22, to 4.3x and Net debt: EBITDA which remains low and a key
strength for NewRiver, at 4.9x.
Underlying Funds From Operations ('UFFO'), now on a retail only
basis following the disposal of the Hawthorn pub business in August
2021, increased to GBP25.8 million from GBP20.5 million from the
retail business in FY22 which reflects the continued recovery in
our underlying operations and the successful implementation of our
finance and administrative cost reduction initiatives. Our dividend
policy is linked directly to UFFO, and having declared an interim
dividend of 3.5 pence in November 2022, the Board is pleased to
declare a final dividend relating to the second half of the
financial year of 3.2 pence per share. This brings the total FY23
dividend to 6.7 pence, representing 80% of UFFO per share of 8.3
pence. IFRS loss after tax for FY23 was GBP16.8 million including a
non-cash reduction in portfolio valuation of GBP37.4 million,
improved from the prior year (FY22: loss of GBP26.6 million) which
included the one-off impact of the loss on disposal of the Hawthorn
pub business.
Our property portfolio was valued on a proportionally
consolidated basis at GBP593.6 million as at 31 March 2023,
compared to GBP649.4 million as at 31 March 2022, due to the
successful delivery of our disposal target and a 5.9% portfolio
valuation decline. The majority of the valuation decline, 4.7% of
the total 5.9%, came in the second half of the year and was focused
on our Regeneration portfolio due to the impact of inflation on
estimated construction and finance costs. Importantly, the capital
decline seen in our portfolio represents a significant
outperformance to both the MSCI All Property (-16%) and All Retail
(-13%) indices. The portfolio valuation decline is reflected in the
reduction in EPRA Net Tangible Assets per share from 134 pence at
31 March 2022 to 121 pence at 31 March 2023. We delivered a total
accounting return of -4.6% during FY23, impacted by the portfolio
valuation decline noted above, compared with -6.6% in the prior
year.
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 income returns, is UFFO. UFFO
measures the Company's operational profits, which includes other
income and excludes one off or non-cash adjustments, such as
portfolio valuation movements, profits or losses on the disposal of
investment properties, fair value movements on derivatives and
share-based payment expense. 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 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 (loss) / profit after
taxation to UFFO, which is the Company's measure of underlying
operational profits.
Reconciliation of (loss) / profit after taxation to UFFO
31 March 2023 31 March 2022
Retail Hawthorn Total Retail Hawthorn(1) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------ -------- ------ ------ ----------- ------
(Loss) / profit for the year
after taxation (16.8) - (16.8) 7.0 (33.6) (26.6)
------ -------- ------ ------ ----------- ------
Adjustments
Revaluation of property 38.2 - 38.2 12.3 - 12.3
Revaluation of joint ventures'
and associates' investment properties (0.8) - (0.8) (5.8) - (5.8)
Loss / (profit) on disposal of
investment properties 3.8 - 3.8 5.4 (0.8) 4.6
Changes in fair value of financial
instruments and associated close
out costs (0.2) - (0.2) (0.6) - (0.6)
Loss on disposal of subsidiary - - - - 39.7 39.7
Deferred tax 0.2 - 0.2 0.6 1.9 2.5
EPRA earnings 24.4 24.4 18.9 7.2 26.1
------ -------- ------ -----------
Depreciation of property - - - - 0.4 0.4
Forward looking element of IFRS
9 (0.2) - (0.2) (0.2) - (0.2)
Abortive fees - - - - 0.2 0.2
Restructuring costs(2) - - - 0.9 - 0.9
Head office relocation costs 0.5 - 0.5 - - -
Share-based payment charge 1.1 - 1.1 0.9 - 0.9
Underlying Funds From Operations 25.8 - 25.8 20.5 7.8 28.3
------ -------- ------ -----------
1. Pubs operating performance from 1 April 2021 to 20 August
2021 when the disposal of the Hawthorn business was completed.
Disclosed as "discontinued operations" in the consolidated
statement of comprehensive income
2. During the prior year the Group incurred restructuring costs
in relation to employee related matters following the sale of
Hawthorn
Underlying Funds From Operations is represented on a
proportionally consolidated basis in the following table. The UFFO
commentary that follows is focused on the continuing retail
business. The GBP7.8 million "Contribution from Hawthorn" in the
prior year (discontinued operation) was analysed in detail in the
HY22 and FY22 results materials.
UNDERLYING FUNDS FROM 31 March 2023 31 March
OPERATIONS 2022
Group JVs & Adjustments(1) Proportionally Proportionally
GBPm Associates GBPm consolidated consolidated
GBPm GBPm GBPm
------------------------------- ------- ------------ --------------- --------------- ---------------
Revenue 72.2 4.0 - 76.2 77.7
------------------------------- ------- ------------ --------------- --------------- ---------------
Property operating expenses (25.1) (0.4) (0.2) (25.7) (25.9)
------- ------------ --------------- --------------- ---------------
Net property income 47.1 3.6 (0.2) 50.5 51.8
Administrative expenses (12.6) (0.1) 1.6 (11.1) (11.7)
------------------------------- ------- ------------ --------------- --------------- ---------------
Other income 1.4 - - 1.4 -
------------------------------- ------- ------------ --------------- --------------- ---------------
Operating profit 35.9 3.5 1.4 40.8 40.1
------------------------------- ------- ------------ --------------- --------------- ---------------
Net finance costs (14.0) (0.7) (0.2) (14.9) (19.5)
------------------------------- ------- ------------ --------------- --------------- ---------------
Taxation - (0.3) 0.2 (0.1) (0.1)
------- ------------ --------------- --------------- ---------------
Retail UFFO 21.9 2.5 1.4 25.8 20.5
------- ------------ --------------- --------------- ---------------
Contribution from Hawthorn(2) - 7.8
------- ------------ --------------- --------------- ---------------
Underlying Funds From
Operations 25.8 28.3
------- ------------ --------------- --------------- ---------------
UFFO per share (pence) 8.3 9.2
------- ------------ --------------- --------------- ---------------
Ordinary dividend per
share (pence) 6.7 7.4
------- ------------ --------------- --------------- ---------------
Ordinary dividend cover 125% 125%
------- ------------ --------------- --------------- ---------------
Admin cost ratio(3) 15.2% 16.9%
------- ------------ --------------- --------------- ---------------
Weighted average # shares
(m) 309.7 307.2
------- ------------ --------------- --------------- ---------------
1. Adjustments to Group and JV & Associates figures to
remove non-cash and non-recurring items, principally forward
looking element of IFRS 9 GBP0.2 million, share-based payment
charge GBP(1.1) million, head office relocation costs GBP(0.5)
million, revaluation of derivatives GBP0.2 million and deferred tax
of GBP(0.2) million
2. UFFO contribution from the Hawthorn business in FY22 prior to its disposal on 20 August 2021
3. Includes Hawthorn in FY22
Net property income
Analysis of retail net property income (GBPm)
--------------------------------------------------------------- ------
Retail net property income for the year ended 31 March 2022 51.8
--------------------------------------------------------------- ------
Like-for-like rental income 1.2
Rent and service charge provisions 0.2
Car park and commercialisation income 1.3
Other (0.3)
----------------------------------------------------- -------- ------
Retail NRI recovery 2.4
Net disposals (3.7)
Retail net property income for the year ended 31 March 2023 50.5
On a proportionally consolidated basis, retail net property
income was GBP50.5 million during the year, compared to GBP51.8
million in the year ended 31 March 2022. Net disposal activity
during FY22 and FY23 reduced net property income by GBP3.7 million
such that on an underlying basis there has been an increase of
GBP2.4 million from the recovery of net property income post
pandemic ("Retail NRI recovery").
One of the key contributory factors to this recovery is the
increase in like-for-like net property income of GBP1.2 million
during the year, primarily due to new lettings and improved rental
levels on space which had previously been occupied by tenants who
were in Administration or had been impacted by CVAs, including the
receipt of turnover rent.
Rent and service charge provisions have also continued to
improve year-on-year, by GBP0.2 million, over and above the strong
performance in this regard seen in FY22, when we reported an
improvement of GBP4.9 million for the year. This serves to
highlight the continued resilience of our rent collection, as not
only have we been able to broadly maintain the high collection
levels of historical arrears as in FY22, but we are also carrying a
lower level of provisioning compared to the prior year, with rent
collection rates of 98% having now recovered back to pre-pandemic
levels.
Car park and commercialisation income has also continued its
recovery over the year, increasing net property income by GBP1.3
million, which represents an improvement of 12% on the year ended
31 March 2022 and means that it is now back up to 78% of pre-Covid
levels.
We completed GBP23.0 million of disposals during FY23, primarily
relating to the strategic disposal of two of our Work Out assets in
Q4 FY23, on top of the GBP77.1 million completed in FY22, the
majority of which were completed during the second half of the year
and which were therefore the main cause of the GBP3.7 million
decrease in net property income from net disposal activity.
Administrative expenses
Administrative expenses were GBP11.1 million in the year ended
31 March 2023, decreasing by 5% when compared to GBP11.7 million
for the previous year and 8% when compared to GBP12.0 million in
the year ended 31 March 2021. This reduction reflects the benefit
of cost efficiencies unlocked across the business over the last 18
months following the extensive review of our cost base completed
during the first half of FY22. During the first half of this year
we completed our head office relocation, which has resulted in
GBP0.5 million of administrative cost savings per annum. Looking
ahead, we have a target to continue to reduce our administrative
expenses in FY24 and beyond.
Other income
Other income recognised during the year ended 31 March 2023 of
GBP1.4 million compared to GBPnil in the prior year. The income
recognised relates entirely to the settlement of an income
disruption insurance claim relating to our car park income during
the first Covid lockdown between March and June 2020. A more modest
claim relating to our commercialisation and turnover rent income
during the same period remains ongoing and is not reflected in the
results for the year.
Net finance costs
Net finance costs were GBP14.9 million in the year to 31 March
2023, compared to GBP19.5 million in the year to 31 March 2022. The
principal reason for the reduction was the repayment of GBP170
million of RCF and cancellation of GBP165 million of term loan and
associated swaps during the first six months of the prior year
following the disposal of the Hawthorn pub business. These actions
unlocked a finance cost saving of GBP7 million per annum, with
GBP3.5 million of benefit recognised in the second half of FY22,
and the remaining GBP3.5 million in the first half of FY23. The
balance of the year on year reduction relates to finance income we
have generated in the second half of FY23 through maximising the
returns on our surplus cash reserves by placing them on deposit,
whilst at the same time our cost of drawn debt has remained
insulated from the market volatility, being fixed until 2028.
Taxation
As a REIT we are exempt from UK corporation tax in respect of
our qualifying UK property rental income and gains arising from
direct and indirect disposals of exempt property assets. The
majority of the Group's income is therefore tax free as a result of
its REIT status, albeit this exemption does not extend to other
sources of income such as interest or asset management fees.
Dividends
Under our dividend policy, we declare dividends equivalent to
80% of UFFO 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, and
therefore the policy allows the final dividend to be "topped-up",
including where required to ensure REIT compliance, such that the
blended payout in any financial year may be higher than 80%.
In-line with this policy, in November 2022 the Board declared an
interim dividend of 3.5 pence per share in respect of the six
months ended 30 September 2022, based on 80% of UFFO per share of
4.4 pence. The Board has today declared a final dividend of 3.2
pence per share in respect of the year ended 31 March 2023, taking
the total FY23 dividend declared to 6.7 pence, equivalent to 80% of
UFFO per share of 8.3 pence. The final dividend of 3.2 pence per
share in respect of the year ended 31 March 2023 will, subject to
shareholder approval at the 2023 AGM, be paid on 4 August 2023 to
shareholders on the register as at 16 June 2023 (record date). The
dividend will be payable as a REIT Property Income Distribution
(PID).
Balance sheet
EPRA net tangible assets ('EPRA NTA') 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 2023 As at
31 March
2022
JVs & Associates Proportionally Proportionally
Group GBPm consolidated consolidated
GBPm GBPm GBPm
-------- ----------------- --------------- ---------------
Properties at valuation(1) 551.5 42.1 593.6 649.4
Right of use asset 76.7 - 76.7 75.7
Investment in JVs & associates 29.3 (29.3) - -
Other non-current assets 0.4 1.5 1.9 2.2
Cash 108.6 2.7 111.3 88.2
Other current assets 15.0 0.9 15.9 19.6
-------- ----------------- --------------- ---------------
Total assets 781.5 17.9 799.4 835.1
-------- ----------------- --------------- ---------------
Other current liabilities (29.5) (1.1) (30.6) (34.9)
Lease liability (76.7) - (76.7) (75.7)
Borrowings (2) (296.7) (15.9) (312.6) (309.7)
Other non-current liabilities - (0.9) (0.9) (0.7)
-------- ----------------- --------------- ---------------
Total liabilities (402.9) (17.9) (420.8) (421.0)
-------- ----------------- --------------- ---------------
IFRS net assets 378.6 - 378.6 414.1
-------- ----------------- --------------- ---------------
EPRA adjustments:
Deferred tax 0.9 0.6
Fair value financial
instruments (0.6) (0.3)
-------- ----------------- --------------- ---------------
EPRA NTA 378.9 414.4
-------- ----------------- --------------- ---------------
EPRA NTA per share 121p 134p
-------- ----------------- --------------- ---------------
IFRS net assets per
share 122p 135p
-------- ----------------- --------------- ---------------
LTV 33.9% 34.1%
-------- ----------------- --------------- ---------------
1. See Note 14 for a reconciliation between Properties at
valuation and categorisation per Consolidated balance sheet
2. Principal value of gross debt, less unamortised fees
Net assets
As at 31 March 2023, IFRS net assets were GBP378.6 million,
reducing from GBP414.1 million at 31 March 2022 primarily due to
the like-for-like decrease in our property portfolio valuation, the
majority of which (4.7% of the total 5.9% decline) occurred during
the second half of the year reflecting the disruption seen in the
credit and investment markets in the final quarter of 2022, and the
capital decline seen in our portfolio represents a significant
outperformance to both the MSCI All Property (-16%) and All Retail
(-13%) indices.
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, deferred tax 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 8.6% to GBP378.9 million, from GBP414.4
million at 31 March 2022 due to the -5.9% like-for-like decrease in
portfolio valuation noted above. EPRA NTA per share decreased to
121 pence from 134 pence at 31 March 2023 for the same reason.
Properties at valuation
Properties at valuation decreased by GBP55.7 million during the
year, due to the GBP23.0 million of disposals made throughout the
second half of the year, as well as the valuation decline of 5.9%
explained above.
Of the GBP23.0 million of disposals made in the year, GBP17.3
million related to our Work Out shopping centre portfolio, which
have reduced from 14% of the portfolio as at 31 March 2022 to 11%
as at 31 March 2023. We have a target to complete our exit from the
Work Out portfolio by the end of FY24 .
Debt & financing
Proportionally consolidated
31 March 2023 30 September 31 March 2022
2022
-------------------------------- -------------- ------------- --------------
Weighted average cost of debt
- drawn only(1) 3.5% 3.5% 3.4%
Weighted average debt maturity 4.7 yrs 5.2 yrs 5.7 yrs
- drawn only(1)
Weighted average debt maturity 3.8 yrs 4.3 yrs 4.8 yrs
- total(2)
-------------------------------- -------------- ------------- --------------
1. Weighted average cost of debt and weighted average debt maturity on drawn debt only
2. Weighted average debt maturity on total debt, including GBP125 million undrawn RCF
Our weighted average cost of debt has remained stable throughout
the financial year, increasing by 0.1% from 3.4% at 31 March 2022
to 3.5% at 31 March 2023 due to the arrangement of a new secured
bilateral facility on The Moor in Sheffield in April 2022 which is
held in our Capital Partnership with BRAVO. On a drawn basis,
weighted average debt maturity decreased from 5.7 to 4.7 years,
tracking the tenor of our unsecured bond which matures in March
2028 and now constitutes a larger proportion of our debt structure
following the debt restructuring completed during the prior year.
Importantly in the current interest rate environment, the coupon on
the unsecured bond is fixed at 3.5%.
Proportionally consolidated 31 March 30 September 31 March 2022
2023 2022
GBPm GBPm GBPm
--------- -------------- ---------------
Cash 111.3 95.1 88.2
--------- -------------- ---------------
Principal value of gross debt (316.0) (316.0) (314.0)
--------- -------------- ---------------
Net debt(1) (201.3) (217.1) (221.5)
--------- -------------- ---------------
Drawn RCF - - -
--------- -------------- ---------------
Total liquidity(2) 236.3 220.1 213.2
--------- -------------- ---------------
Gross debt (drawn) / repaid
in the year (2.0) (2.0) 339.1
--------- -------------- ---------------
Loan to Value 33.9% 33.8% 34.1%
--------- -------------- ---------------
1. Including unamortised arrangement fees
2. Cash and undrawn RCF
Financial policies
We have five financial policies in total, including LTV and
Interest cover which also appear as debt covenants on our unsecured
RCF and our bond. These remain a key component of our financial
risk management strategy which remains as important as ever given
the macro-economic climate. For the year ended 31 March 2023, we
were in compliance with all of our financial policies.
Measure Financial Proportionally consolidated
policy
31 March 2023 30 September 31 March 2022
2022
--------------- -------------- ------------- --------------
Guidance <40%
Loan to value Policy <50% 33.9% 33.8% 34.1%
Group
31 March 2023 30 September 31 March 2022
2022
--------------- -------------- ------------- --------------
Balance sheet gearing <100% 49.7% 49.8% 51.5%
--------------- -------------- ------------- --------------
Proportionally consolidated
FY23 HY23 FY22
--------------- -------------- ------------- --------------
Net debt: EBITDA <10x 4.9x 5.1x 4.6x
Interest cover(1) >2.0x 4.3x 3.9x 3.5x
Ordinary dividend
cover(2) >100% 125% 125% 125%
--------------- -------------- ------------- --------------
1. 12 month look-back calculation, consistent with debt covenant
2. Calculated with reference to UFFO
LTV has remained stable at 33.9% as at 31 March 2023, reducing
from 34.1% as at 31 March 2022 and comfortably within our guidance
of <40%. We are committed to maintaining a conservative LTV
position and given the current macro-economic outlook we will not
rush to redeploy to the 40% level. Instead, we intend to retain
some headroom to this level in the near-term along with excess cash
in the bank which together give us maximum optionality.
Balance sheet gearing has reduced by 1.8% from 51.5% at 31 March
2022 to 49.7% at 31 March 2023, comfortably within our policy. Net
debt: EBITDA, which is a key strength for NewRiver relative to the
listed peer group due to our high yielding portfolio, has improved
half on half during the year, reducing from 5.1x at the half year
to 4.9x at 31 March 2023. This is a slight increase from the 4.6x
seen in FY22 due to the EBITDA we received in FY22 from the
Hawthorn pub business prior to its disposal in August 2021.
Our interest cover ratio, which is increasingly important given
the current interest rate environment, increased by 0.8x from 3.5x
at 31 March 2022 to 4.3x at 31 March 2023 and therefore has
significant headroom to our policy of 2.0x. This increase is due to
the actions we completed in the prior year being the disposal of
the Hawthorn pub business and the subsequent debt reduction,
alongside the continued improvement in our underlying retail
operations and the cash return we are currently able to generate by
placing our surplus cash on deposit. Importantly, because our cost
of drawn debt is fixed at 3.5% until March 2028, our interest cover
is protected from the volatility in the broader credit markets and
with retail income still recovering post-pandemic is well
positioned looking forward.
The Board has declared a final dividend of 3.2 pence per share,
which brings the total dividend declared for the year to 6.7 pence
per share, which represents 80% of UFFO per our dividend policy,
which ensures that our dividend will always be fully covered,
in-line with our financial policy.
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 2023
Single retailer concentration <5% of gross income 3.4% (Poundland)
------------------------- ---------------------
Development expenditure <10% of GAV <1%
------------------------- ---------------------
Risk-controlled development >70% pre-let or pre-sold N/A, no developments
on committed on site
------------------------- ---------------------
Conclusion
Against a challenging backdrop, what is pleasing is that
operationally the business continued to perform well throughout the
year and we believe we have ended the year in a stronger financial
position than at the start. This is thanks to the decisive actions
completed during FY22 and the strategic progress we have made
during FY23, which means we are now a leaner and more
conservatively positioned business, with a clear focus on resilient
retail which provides essential non-discretionary goods and
services to consumers across the UK. It is also due to the decision
we made a year ago to hold back on capital redeployment given the
level of macroeconomic uncertainty that existed at the time, and
has prevailed throughout the year.
Looking forward from a position of financial strength and with
the continued recovery in our underlying operations, we remain
confident in our ability to deliver our medium term target of a
consistent 10% total accounting return.
Will Hobman
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
resilient retail assets throughout the UK.
Our GBP0.6 billion UK wide portfolio covers 7 million sq ft and
comprises 26 community shopping centres and 14 conveniently located
retail parks occupied by tenants predominately focused on essential
goods and services. Our objective is to own and manage the most
resilient retail portfolio in the UK, focused on retail parks, core
shopping centres, and regeneration opportunities in order to
deliver long-term attractive recurring income returns and capital
growth for our shareholders.
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
Managing our risks and opportunities
Risk is inherent in all businesses and effective risk management
enables us to manage both the threats and the opportunities
associated with our strategy and the operation of our business
model.
Our small workforce encourages flexibility and collaboration
across the business in all areas including risk management. The
accessibility and flexibility of the Board and senior staff are
particularly pertinent when adapting to evolving risks, emerging
risks and external risks such as the aftereffects of a global
pandemic and geopolitical instability. This flexibility enables the
business to adjust and respond to fast-changing situations and
prove its resilience and adaptability.
The Board has ultimate responsibility for the risk management
and internal controls framework of the Company and regularly
evaluates 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 monitoring and assessment including emerging risks
The identification of risks and their management is a continual
and evolving process. This has been underscored more so over recent
years by the global pandemic which created uncertainty across all
sectors, both economically and socially. This has been followed
with an economic turndown and cost of living crisis which has
continued the uncertainty. Other geopolitical events such as the
Russian-Ukraine crisis have also impacted supply chains and
sentiment.
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 allows us to
assess how risks are evolving, assists in identifying emerging
risks as they develop and ensures that the impact of each
identified risk is continually monitored as it emerges and
progresses. During the year we have identified an emerging
depositor risk as our cash holdings have built up. This risk is not
a principal risk but by identifying this emerging risk as it has
developed, we have been able to update our treasury policies to
ensure that they are fit for purpose and that cash is spread across
various banking institutions. A Board approved counterparty list is
continuously monitored using S&P and Fitch credit ratings. The
Treasury policy dictates the maximum exposure to a counterparty
based on their rating. The operation of the treasury policy is
reported to the Board on a quarterly basis. This emerging risk has
also created an opportunity as the Group has been able to take
advantage of favourable deposit opportunities.
Risk appetite and mitigation
The Board has a low-risk appetite for compliance (legal and
regulation) related risk. The Board however 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 in some of the following ways:
-- 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
-- A 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 4%
-- An experienced Board and senior management
All risks on the register are 'scored' in terms of impact and
probability.
The Principal risks are:
External risks Operational risks
1. Macroeconomic 7. People
--------------------
2. Political and regulatory 8. Financing
--------------------
3. Catastrophic external event 9. Asset management
--------------------
4a. Climate change strategy 10. Development
--------------------
4b. Climate change impacts on 11. Acquisition
our assets
--------------------
5. Changes in technology and consumer 12. Disposal
habits and demographics
--------------------
6. Cyber Security
--------------------
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 year and is considered a medium to high impact risk
conditions environment. This continued review of strategy with a high probability.
in the UK and focuses on positioning our portfolio for the evolving
changes to economic situation.
fiscal * Sentiment has been impacted by the cost of living
and monetary crisis, energy cost worries and inflation.
policy may * The Board and management team consider updates from
impact external advisers, reviewing key indicators such as
market forecast GDP growth, employment rates, interest rates * Overall valuations slightly decreased in the second
activity, and Bank of England guidance and consumer confidence half of the year however due to a fully covered
demand for indices. dividend our covenant and policy headroom remains
investment high.
assets, the
operations of * Our portfolio is focused on resilient market
our occupiers sub-sectors such as essential retailers. * Higher inflation could fuel wage growth and costs
or the leading to rate increases above current forecasts.
spending
habits of the * Through regular stress testing of our portfolio we
UK ensure our financial position is sufficiently * The Bank of England is expecting inflation to fall
population. resilient. during 2023 and is working with interest rate
adjustments to reduce inflation to fall to its 2%
target in around two years' time.
* Closely monitoring rent collection and cash flow.
---------------------------------------------------------------- ----------------------------------------------------------------
2. Political
and * The Board regularly considers political and * Political and regulatory risk has remained the same
regulatory regulatory developments and the impact they could during the year. This is considered a medium to high
Changes in UK have on the Company's strategy and operating impact risk with a high probability.
Government environment.
policy,
the adverse * There has been political uncertainty within the UK
effects of * External advisers, including legal advisers, provide due to changes in leadership and a decline in market
Brexit updates on emerging regulatory changes to ensure the confidence. This is likely to continue with a general
on our business is prepared and is compliant. election within the next 18 months. There have also
tenants, been political failures at a local authority level.
or the impact
of political * We regularly assess market research to gauge the
uncertainty impact of regulatory change on consumer habits. * There still remains some uncertainties around the
on consumers' longer-term impacts of Brexit and also uncertainties
retail and relating to the possibility of Scottish devolution.
leisure * We carry out stress testing on our portfolio in
spend. relation to regulatory changes which may impact our
operations or financial position. * The Coronavirus Act imposed a moratorium on
landlords' ability to forfeit leases of commercial
property for non-payment of rent in England and Wales
* Where appropriate, we participate in industry and and Northern Ireland. This moratorium expired on 31
other representative bodies to contribute to policy March 2022 and we will continue to monitor the
and regulatory debate. Individual ExCo members are potential impact of this. There are further
also members of the British Property Federation and uncertainties around the outcome of the Government
the High Street Task Force. review of the Landlord and Tenant Act 1954.
* There are also uncertainties around the impact of the
Levelling Up and Regeneration Bill.
* The long-term impact on the property market of the
Register of Overseas Entities owning UK property is
currently unclear.
---------------------------------------------------------------- ----------------------------------------------------------------
3.
Catastrophic * The Board has developed a comprehensive crisis * Catastrophic external event risk has remained the
external response plan which details actions to be taken at a same during the year and is considered a high impact
event head office and asset-level. risk with a medium to high probability.
An external
event such as
civil unrest * The Board regularly monitors the Home Office * The aftereffects of a global pandemic caused
or a civil terrorism threat level and other security guidance. unprecedented economic and operational disruption and
emergency the continuing global developments create
including a uncertainty. We however were able to mitigate the
large-scale * The Board regularly monitors advice from the UK impact through our portfolio positioning focusing on
terrorist Government regarding pandemic responses and emergency essential goods and services, our cash position and
attack procedures. liquidity and our active approach to asset
or pandemic, management.
could
severely * Our assets are regularly tested and enhanced in-line
disrupt with the latest UK Government guidance. * The relaxing of restrictions was positive but the
global cost-of-living crisis has impacted UK households. Our
markets and operational performance has however demonstrated the
cause damage * We have robust IT security systems which cover data resilience of our portfolio.
and security, disaster recovery and business continuity
disruption plans.
to our * The National Terrorism Threat Level is substantial
assets. and the full long-term impact from the war in Ukraine
* The business has comprehensive insurance in place to is unclear.
minimise the cost of damage and disruption to assets.
---------------------------------------------------------------- ----------------------------------------------------------------
4a. Climate
change * We have a comprehensive ESG programme which is * The climate change risk was separated last year into
strategy regularly reviewed by the Board and Executive two risks to focus on its constituent parts (Climate
A failure to Committee. A detailed overview of the programme can change strategy and Climate change impacts on our
implement be found in the ESG section of this report. assets).
appropriate
climate risk
management * One of the key objectives of the programme is to * Climate change strategy risk remained the same during
measures, minimise our impact on the environment through the period and is considered a medium to high impact
comply with reducing energy consumption, sourcing from renewable risk with a medium to high probability.
evolving sources and increased recycling.
regulations
or meet our * ESG has risen up the agenda of many stakeholders and
ESG targets * We have developed our Pathway to Net Zero and set new expectations of compliance with best practice have
could impact medium and long-term targets in line with the latest increased.
the operation science-based targets.
and value of
our assets, * Regulatory requirements have also increased during
leading to a * ESG performance is independently reviewed by our the period, in addition to the scoring criteria for
risk of asset external environmental consultants and is measured certain ESG benchmarks such as GRESB.
obsolescence, against applicable targets and benchmarks.
reputational
damage and * Our ESG Committee pre-empted these changes and our
erosion * We continue to report in line with TCFD requirements. initiatives and disclosure continue to evolve in-line
of investor with best practice.
value.
* ESG is embedded into capital allocations and is
considered for all future acquisitions.
---------------------------------------------------------------- ----------------------------------------------------------------
4b. Climate
change * We regularly assess assets for environmental risk and * The climate change risk was separated into two risks
impacts ensure sufficient insurance is in place to minimise last year to focus on its constituent parts (Climate
on our assets the impact of environmental incidents. change strategy and Climate change impacts on our
Adverse assets).
impacts
from * In conjunction with insurers flood risk assessments
environmental have been carried out at all of our assets and the * Climate change impacts on our assets risk remained
incidents risk is considered low. the same during the period and is considered a medium
such to high impact risk with a medium to low probability.
as extreme
weather
or flooding * Although exposure to extreme weather events is a
could impact near-term risk, other climate impacts such as heat
the operation stress and sea level rises are medium term or
of our long-term time horizons. Whilst their impact is high,
assets. their probability is low in the short to medium term.
A failure to
implement
appropriate * Climate impacts are embedded into capital allocation
climate risk decisions and considered for all future acquisitions
management of both equipment installed at our assets and for the
measures assets themselves.
at our assets
could lead to
erosion of
investor
value and
increases
in insurance
premiums.
---------------------------------------------------------------- ----------------------------------------------------------------
5. Changes
in technology * The Board and Executive Committee regularly assess * Changes in technology and consumer habits risk has
and consumer our overall corporate strategy and acquisition, asset remained the same during the year and is considered a
habits and management and disposal decisions in the context of low-medium impact risk with a high probability.
demographics current and future consumer demand. Our strategy is
Changes in designed to focus on resilient assets that take into
the account these future changes. * Although the global pandemic lockdown restrictions
way consumers significantly increased home working and online
live, work, shopping in recent years, we have seen evidence that
shop and use * We closely assess the latest trends reported by CACI, this is unwinding. Our portfolio is focused on
technology our research provider, to ensure we are aligned with providing essential retail to local communities,
could evolving consumer trends. which continues to mitigate the impact of online
have an retail on our portfolio.
adverse
impact on * Our retail portfolio is focused on essential spending
demand on goods and services which are resilient to the * While the global pandemic may have accelerated the
for our growth of online retail. trend to online shopping this provides opportunities
assets. for our portfolio, particularly retail parks and
local community shopping centres.
* Our retail parks are ideally positioned to help
retailers with their multi-channel retail strategies.
* Our strategy is to reshape our portfolio to ensure
over the longer term we have the most resilient
retail portfolio in the UK.
---------------------------------------------------------------- ----------------------------------------------------------------
6. Cyber
security * There are limited IT servers on sites. Multiple * Cyber security has remained unchanged during the year
A cyber third-party supplier programmes are used which have and is considered a medium to high impact risk with a
attack their own security systems and are independently medium to high probability. Whilst global
could result audited by Deloitte and ISO2000 accredited. developments have increased cyber security risks we
in the Group have carried out further enhancements and audits to
being unable our IT systems and procedures during the year.
to use its IT * ExCo receives quarterly reporting on IT matters.
systems
and/or * This risk was considered to be increased due to
losing data. * Security protocols are in place to ensure swift employees working from home during the pandemic.
This could changes to data access following staff changes and to Staff may now continue to work from home on a
delay limit authority and access. flexible basis.
reporting and
divert
management * We have reviewed our IT systems and have enhanced a
time. This number of areas during the year.
risk
could be
increased due * Cyber insurance cover is in place.
to many
employees
working from * We have recently carried out an external
home during
the pandemic.
review of the Group's IT
security and systems as
part of our internal audit
process.
---------------------------------------------------------------- ----------------------------------------------------------------
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 * The probability of the People risk has reduced during
to attract, to our HR strategy, which is regularly reviewed by the year and is considered a medium impact risk with
retain and the Board and Executive Committee. a medium probability.
develop
our people and
ensure we have * We undertake an employee survey once a year to gauge * Inflation has put pressure on salary costs and
the right employee views on leadership, company culture, health demands. This impact is mitigated by an active
skills and wellbeing, personal growth and benefits and employee engagement programme and the alignment of
in place could recognition. This informs any changes to HR policy. reward with both individual and Company-level
prevent us performance.
from
implementing * We regularly benchmark our pay and benefits against
our strategy. those of peers and the wider market. * We continue to focus on staff wellbeing and actively
seek regular feedback from staff. The recent Sunday
Times Best Places to Work 2023 survey was strongly
* Succession planning is in place for all key positions positive and showed a low staff flight risk.
and is reviewed regularly by the Nomination
Committee.
* We also offer many forms of flexible working
including job share, annualised hours, variation of
* Longer notice periods are in place for key employees. hours and working from home. Since the pandemic we
have implemented a policy of working enabling staff
to work from home a number of days a week should they
* Our recruitment policies consider the needs of the choose to do so.
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 has increased during the year and is
levels performance and scenario testing, covering levels of considered a medium impact risk with a medium
become higher gearing and headroom to financial covenants and probability.
than our risk assessments by external rating agencies.
appetite or
lead to * Macroeconomic developments, particularly the increase
breaches * The Company has a programme of active engagement with in inflation, have impacted financial markets. The
in bank key lenders and shareholders. strength of the Company's unsecured balance sheet
covenants means we have significantly mitigated the risk of not
this would being able to secure sufficient financing. Increased
impact * The Company has a wholly unsecured balance sheet, cash levels also mitigated these risks and provide
our ability which mitigates the risk of a covenant breach caused deposit opportunities.
to implement by fluctuations in individual property valuations.
our strategy.
The business * The Company extended the maturity on its undrawn
could also * The Company has long-dated maturity on its debt, Revolving Credit Facility to August 2024 in the prior
struggle providing sufficient flexibility for refinancing. year.
to obtain
funding
or face * Working capital and cashflow analysis and detailed * There is no exposure to interest rate rises on drawn
increased forward assessments of cashflows are regularly debt.
interest rates reviewed by the Executive Committee.
as a result
of
macroeconomic * Our credit rating is independently assessed by Fitch
factors. Ratings at least annually.
---------------------------------------------------------------- ----------------------------------------------------------------
9. Asset
management * Asset-level business plans are regularly reviewed by * Asset management risk has remained the same during
The the asset management team and the Executive Committee the year and is considered a medium to high impact
performance and detailed forecasts are updated frequently. risk with a medium probability.
of our assets
may not meet
with the * The Executive Committee reviews whole portfolio * The global pandemic 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. These have
their business improved greatly and are now close to pre-pandemic
plans, levels.
impacting * Our asset managers are in contact with centre
financial managers and occupiers on a daily basis to identify
performance potential risks and improvement areas. * Our diverse tenant portfolio focuses on essential
and the retail which reduces the impact of individual
ability defaults on income.
to implement * Revenue collection is reviewed regularly by the
our Executive Committee.
strategies. * Although we have a low probability of default, the
continued cost of living crisis may impact the
* Retailer concentration risk is monitored, with a financial health of our occupiers.
guideline that no retailer will account for more than
5% of gross income (currently our largest retailer is
B&M accounting for 2.9% of gross income). * Our operational performance continues to prove the
resilience of our assets.
---------------------------------------------------------------- ----------------------------------------------------------------
10.
Development * We apply a risk-controlled development strategy * Development risk probability has increased through
Delays, through negotiating long-dated pre-lets for the the period and is considered a medium impact risk
increased majority of assets. with a medium to high probability.
costs and
other
challenges * All development is risk-controlled and forms only 3% * Supply issues and increases in the cost of building
could impact of the portfolio by value. supplies will impact our developments, as they remain
our ability a small part of portfolio the overall impact is low.
to pursue our
development * Capital deployed is actively monitored by the
pipeline and Executive Committee, following detailed due diligence * A number of our regeneration assets were sold during
therefore our modelling and research. in the prior year which decreased the proportion of
ability assets focused on development which inherently
to profitably reduces risk exposure.
recycle * An experienced development team monitors on-site
development development and cost controls.
sites and
achieve
returns * On large scale developments where construction is
on more than 12 months we look to carry out the project
development. in partnership and/or forward sell.
---------------------------------------------------------------- ----------------------------------------------------------------
11.
Acquisition * We carry out thorough due diligence on all new * Acquisition risk has remained the same through the
The acquisitions, using data from external advisers and year and is considered a medium impact risk with a
performance our own rigorous in-house modelling before committing medium probability.
of asset and to any transaction. Probability-weighted analysis
corporate takes account of these risks.
acquisitions * The lack of supply and relative price of some assets
might not meet may reduce opportunities for acquisition.
with our * Acquisitions are subject to approval by the Board and
expectations Executive Committee, who are highly experienced in
and the retail sector. * Having sold the Hawthorn pub business and completed
assumptions, planned retails disposals, we are now in a position
impacting our to deploy capital in line with our returns-focused
revenue and * We have the ability to acquire via joint ventures, approach to capital allocation and subject to our LTV
profitability. thereby sharing risk. guidance.
---------------------------------------------------------------- ----------------------------------------------------------------
12. Disposal
We may face * Our portfolio is focused on high-quality assets with * Disposal risk has increased during the year and is
difficulty in low lot sizes, making them attractive to a wide pool considered a medium impact risk with a medium to high
disposing of of buyers. probability.
assets or
realising
their fair * Assets are valued every six months by external * National and geopolitical uncertainty, interest rate
value, valuers, enabling informed disposal pricing rises, inflation and the cost-of-living crisis have
thereby decisions. increased market uncertainty and are causing some
impacting purchasers to reconsider or delay acquisition
profitability decisions.
and our * Disposals are subject to approval by the Board and
ability Executive Committee, who are highly experienced in
to reduce debt the retail sector. * We have an active and successful disposal programme
levels or make where we have executed disposals in the year, with
further the volume of transactions being completed increasing
acquisitions. * Our portfolio is large and our average asset lot size disposal risk. The average lot size however is lower
is small, meaning that each asset represents only a than most in the market so our assets tend to be more
small proportion of revenues and profits, thereby liquid.
mitigating the impact of a sale not proceeding.
---------------------------------------------------------------- ----------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
Year ended 31 March Year ended 31 March
2023 2022
Unaudited
================================= ===== ================================ ==================================
Operating Fair Operating Fair
and value and value
financing adjustments Total financing adjustments Total
2023 2023 2023 2022 2022 2022
Continuing Operations Notes GBPm GBPm GBPm GBPm GBPm GBPm
================================= ===== ========== ============ ====== ========== ============ ======
Revenue 4 72.2 - 72.2 73.7 - 73.7
Property operating expenses* 5 (25.1) - (25.1) (25.5) - (25.5)
================================= ===== ========== ============ ====== ========== ============ ======
Net property income 47.1 - 47.1 48.2 - 48.2
================================= ===== ========== ============ ====== ========== ============ ======
Administrative expenses 6 (12.6) - (12.6) (13.4) - (13.4)
Other income 7 1.4 - 1.4 - - -
Share of profit from joint
ventures 15 2.4 0.6 3.0 1.1 2.9 4.0
Share of profit from associates 16 0.1 0.2 0.3 0.2 2.9 3.1
Net property valuation movement 14 - (38.2) (38.2) - (12.3) (12.3)
Loss on disposal of investment
properties 9 (3.8) - (3.8) (4.2) - (4.2)
================================= ===== ========== ============ ====== ========== ============ ======
Operating (loss) / profit 34.6 (37.4) (2.8) 31.9 (6.5) 25.4
Finance income 10 1.4 - 1.4 1.4 - 1.4
Finance costs 10 (15.4) - (15.4) (19.8) - (19.8)
================================= ===== ========== ============ ====== ========== ============ ======
(Loss) / profit for the year
before taxation 20.6 (37.4) (16.8) 13.5 (6.5) 7.0
Taxation 11 - - - - - -
================================= ===== ========== ============ ====== ========== ============ ======
(Loss) / profit for the year
after taxation from continuing
operations 20.6 (37.4) (16.8) 13.5 (6.5) 7.0
================================= ===== ========== ============ ====== ========== ============ ======
Loss for the year after taxation
from discontinued operations 8 - - - (31.7) (1.9) (33.6)
================================= ===== ========== ============ ====== ========== ============ ======
Loss for the year 20.6 (37.4) (16.8) (18.2) (8.4) (26.6)
Total comprehensive loss for
the year (16.8) (26.6)
================================= ===== ========== ============ ====== ========== ============ ======
There are no items of other comprehensive income
for the current or prior year
================================================================== ====== ==================================
(Loss) / earnings per share
- continuing operations
Basic (pence) 12 (5.4) 2.3
Diluted (pence) 12 (5.4) 2.3
Loss per share
Basic (pence) 12 (5.4) (8.6)
Diluted (pence) 12 (5.4) (8.6)
================================= ===== ========== ============ ====== ========== ============ ======
*Included in property operating expenses is a loss allowance
charge of GBP0.1 million reversal (2022: GBP0.3 million reversal)
of expected credit loss relating to debtors for continuing
operations.
CONSOLIDATED BALANCE SHEET
As AT 31 March 2023
2023
GBPm 2022
Notes Unaudited GBPm
======================================== ===== ========== =====
Non-current assets
Investment properties 14 627.3 684.6
Right of use asset 22 0.9 0.2
Investments in joint ventures 15 23.8 24.0
Investments in associates 16 5.5 7.9
Property, plant and equipment 0.4 0.7
Total non-current assets 657.9 717.4
======================================== ===== ========== =====
Current assets
Trade and other receivables 17 15.0 18.9
Cash and cash equivalents 19 108.6 82.8
======================================== ===== ========== =====
Total current assets 123.6 101.7
Total assets 781.5 819.1
======================================== ===== ========== =====
Equity and liabilities
Current liabilities
Trade and other payables 20 29.5 33.5
Lease liability 22 0.4 0.7
Total current liabilities 29.9 34.2
======================================== ===== ========== =====
Non-current liabilities
Lease liability 22 76.3 75.0
Borrowings 21 296.7 295.8
======================================== ===== ========== =====
Total non-current liabilities 373.0 370.8
======================================== ===== ========== =====
Net assets 378.6 414.1
======================================== ===== ========== =====
Equity
Share capital 3.1 3.1
Share premium 2.4 1.1
Merger reserve (2.3) (2.3)
Retained earnings and other reserves 375.4 412.2
======================================== ===== ========== =====
Total equity 378.6 414.1
======================================== ===== ========== =====
Net Asset Value (NAV) per share (pence)
Basic 12 122p 135p
Diluted 12 121p 134p
EPRA NTA 12 121p 134p
======================================== ===== ========== =====
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2023
2023
GBPm 2022
Unaudited GBPm
============================================================ ========== =======
Cash flows from operating activities
(Loss) / profit for the year before taxation - continuing
operations (16.8) 7.0
Loss for the year before taxation - discontinued operations - (31.7)
============================================================ ========== =======
Loss for the year before taxation (16.8) (24.7)
Adjustments for:
Loss on disposal of investment property 3.8 3.4
Loss on disposal of Hawthorn - 39.7
Net valuation movement 38.2 12.3
Net valuation movement in joint ventures (0.6) (2.9)
Net valuation movement in associates (0.2) (2.9)
Share of profit from joint ventures (2.4) (1.1)
Share of profit from associates (0.1) (0.2)
Net interest expense 14.0 18.4
Rent free lease incentives 0.2 (1.4)
Movement in expected credit loss (0.1) (0.3)
(Capitalisation) / amortisation of legal and letting
fees (0.1) 0.1
Depreciation on property plant and equipment 0.8 1.2
Share-based payment expense 0.9 0.9
Cash generated from operations before changes in working
capital 37.6 42.5
Changes in working capital
Decrease in trade and other receivables 3.0 9.7
(Decrease) / increase in payables and other financial
liabilities (4.3) 7.6
============================================================ ========== =======
Cash generated from operations 36.3 59.8
Interest paid (14.1) (20.3)
Dividends received from joint ventures 3.2 5.6
Dividends received from associates 0.4 2.0
============================================================ ========== =======
Net cash generated from operating activities 25.8 47.1
============================================================ ========== =======
Cash flows from investing activities
Cash proceeds net of cash disposed and transaction costs
from disposal of subsidiaries - 196.0
Interest income 1.2 0.4
Investment in associate - (4.0)
Return of investment from associate 2.3 -
Disposal of associate investments - 2.5
Purchase of investment properties - (7.3)
Disposal of investment properties 19.5 65.2
Development and other capital expenditure (2.9) (9.6)
Purchase of plant and equipment (0.1) (3.0)
============================================================ ========== =======
Net cash generated from investing activities 20.0 240.2
============================================================ ========== =======
Cash flows from financing activities
Repayment of bank loans - (335.0)
Repayment of principal portion of lease liability (0.4) (0.7)
Dividends paid - ordinary (19.6) (19.3)
============================================================ ========== =======
Net cash used in financing activities (20.0) (355.0)
============================================================ ========== =======
Cash and cash equivalents at beginning of the year 82.8 150.5
Net increase in / (decrease) in cash and cash equivalents 25.8 (67.7)
============================================================ ========== =======
Cash and cash equivalents at 31 March 108.6 82.8
============================================================ ========== =======
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Retained
earnings
Merger and other
Share capital Share premium reserve reserves Total
Notes GBPm GBPm GBPm GBPm GBPm
===================================== ===== ============= ============= ======== =========== ======
As at 1 April 2021 (audited) 3.1 227.4 (2.3) 232.2 460.4
Loss for the year after
taxation
* continuing operations - - - 7.0 7.0
* discontinued operations - - - (33.6) (33.6)
===================================== ===== ============= ============= ======== =========== ======
Loss for the year after
taxation - - - (26.6) (26.6)
===================================== ===== ============= ============= ======== =========== ======
Total comprehensive loss
for the year after taxation - - - (26.6) (26.6)
===================================== ===== ============= ============= ======== =========== ======
Transactions with equity
holders
Transfer from share premium - (227.4) - 227.4 -
Issue of new shares - 1.1 - - 1.1
Share-based payments - - - 0.9 0.9
Dividends paid 13 - - - (21.7) (21.7)
===================================== ===== ============= ============= ======== =========== ======
As at 31 March 2022 (audited) 3.1 1.1 (2.3) 412.2 414.1
Loss for the year after
taxation - - - (16.8) (16.8)
Total comprehensive loss
for the year after taxation - - - (16.8) (16.8)
===================================== ----- ------------- ------------- ======== =========== ======
Transactions with equity
holders
Issue of new shares - 1.3 - - 1.3
Share-based payments - - - 0.9 0.9
Dividends paid 13 - - - (20.9) (20.9)
===================================== ===== ============= ============= ======== =========== ======
As at 31 March 2023 (unaudited) 3.1 2.4 (2.3) 375.4 378.6
===================================== ===== ============= ============= ======== =========== ======
NOTES TO THE CONSOLIDATED 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 89
Whitfield Street, London, W1T 4DE.
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.
Basis of preparation
These consolidated financial statements have been prepared on
the going concern basis, in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority, in
accordance with UK-adopted International Accounting Standards
('UK-adopted IFRS' or 'IFRS'), within the applicable legal
requirements of the Companies Act 2006 and in accordance with the
accounting policies set out in the 2022 Annual Report and Accounts,
except as noted below.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of IAS in conformity with the requirements
of the Companies Act 2006 and UK-adopted IFRS and complies with the
disclosure requirements of the Listing Rules of the UK Financial
Conduct Authority, this announcement does not itself contain
sufficient information to comply with IASs and IFRSs. Therefore,
this preliminary announcement does not constitute the Group's full
financial statements for the year ended 31 March 2023 and
accordingly, the financial information for 2023 is presented
unaudited in the preliminary announcement. The Group's full
financial statements that comply with IFRS will be approved by the
Board of Directors and reported on by the auditors in June 2023 and
are expected to be published in July 2023.
The financial information for the year ended 31 March 2022 does
not constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The independent
auditors' report on the full financial statements for the year
ended 31 March 2022 was unqualified and did not contain an emphasis
of matter paragraph or any statement under section 498 of the
Companies Act 2006.
Going concern
The Group and Company's going concern assessment considers the
Group and Company'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 and Company's unsecured debt structure within its financial
covenants. The Group and Company'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 the only debt currently drawn by the
Group is the GBP300 million unsecured corporate bond which matures
in March 2028. This bond has financial covenants that the Group is
required to comply with including an LTV covenant of less than 65%
and a 12 month historical interest cover ratio of more than
1.5x.
The going concern assessment is based on a 12 month outlook from
the date of the approval of these financial statements, using the
Group and Company's Board approved budget, flexed to create a
reasonable worst case scenario, which includes the key assumptions
listed below.
- Capital values to decrease a further 10% during FY24 and
remain flat throughout the remainder of the forecast horizon, in
contrast to the decline noted in FY23 of -5.9% across the portfolio
in FY23, 62% of which related to the impact of cost inflation on
valuations for the regeneration portfolio with more modest declines
noted in the Core Shopping Centres and Retail Parks.
- A 15% reduction in net income. This reflects a significant
downside to rental agreements re-geared or re-negotiated throughout
the pandemic given that 95% of rents relating to FY21 and FY22 has
been collected at the time of reporting despite the multiple
national lockdowns in place throughout those periods; FY23 rent
collection is 98% and 1Q24 rent collection is 91% at the time of
reporting demonstrating that rent collection rates have normalised
back to pre Covid levels;
- No disposal proceeds are assumed throughout the forecast
period which have not yet completed at the time of reporting,
despite the completion of GBP77 million of disposals during FY22,
GBP23 million during FY23 and GBP32 million of retail disposals now
under offer or exchanged and a further GBP30m in active discussions
or committed to be disposed at the date of approval of these
financial statements. Similarly, no assumption is made for the
deployment of any surplus capital available as at 31 March 2023 and
the growth and returns that would otherwise generate.
Under this scenario, the Group and Company is forecast to
maintain sufficient cash and liquidity resources and remain
compliant with its financial covenants over the going concern
period. Further stress testing was performed on this scenario which
demonstrated that the Group and Company's drawn debt covenants
could absorb a further valuation decline of 37% or a further 46%
reduction in annual net rental income before breaching covenant
levels. The Group and Company maintains sufficient cash and
liquidity reserves to continue in operation and pay its liabilities
as they fall due throughout the going concern assessment period and
as such the Directors conclude a going concern basis of preparation
is appropriate.
Cash flow statement
The Group has reported the cash flows from operating activities
using the indirect method. Interest received and the acquisition of
properties are presented within investing cash flows and interest
paid is presented within operating cash flows 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 2023 have been prepared on the historical
cost basis, except for the revaluation of investment
properties.
New accounting policies
The Group has adopted the following amendments for the first
time in 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)
Adopting these amendments has not impacted amounts recognised in
prior periods or are expected to have a material impact on the
current period or future periods based on the Group's current
strategy. 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 2022.
Standards and amendments issued but not yet effective
A number of new amendments have been issued but are not yet
effective for the current accounting period.
Effective for the year ended 31 March 2024
- Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
- Definition of Accounting Estimates (Amendments to IAS 8)
- Deferred Tax - Related to assets and liabilities arising from
a single transactions (Amendments to IAS 12)
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
- Insurance contracts - (Amendments to IFRS 17)
Effective for the year ended 31 March 2025:
- Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
- Non-current Liabilities with Covenants (Amendments to IAS 1)
No material impact is expected upon the adoption of these
standards.
IFRIC Agenda Decision
In October 2022, the IFRS Interpretations Committee ('IFRIC')
released its decision on the application of IFRS 9 and IFRS 16 in
relation to how a lessor should account for the forgiveness of
amounts due under leases. This concluded that for any rent
receivables that are past their due dates and subsequently
forgiven, the lessor should apply the expected credit loss (ECL)
model in IFRS 9. Therefore, the forgiveness will be subject to the
derecognition and impairment requirements in IFRS 9, and the impact
of relevant receivable amounts written off reflected in the
statement of comprehensive income on the date that the legal rights
are conceded. Historically the Group has treated this as a lease
modification spread over the remaining lease term. The Group is not
materially impacted by this decision and therefore no restatement
of the prior year comparative is required.
In March 2022, IFRIC finalised its decision with respect to the
treatment of demand deposits with restriction on use, which
includes tenant rent deposits and service charge amounts collected
on behalf of tenants. It was concluded that such deposits which are
subject to contractual restrictions, meet the definition of 'cash
and cash equivalents' within the financial statements. In light of
this the Group performed a review of amounts disclosed as
'restricted monetary assets' and tenant deposits. The Group is not
subject to such contractual restrictions, and therefore no
restatement of the prior year comparative is required.
Revenue recognition
Property, rental and related income
Property, rental and related 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 which 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.
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.
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. In the case of insurance
other income, this is recognised upon agreement with the
insurer.
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 excluding fair value derivative
movements, are recognised using the effective interest rate method.
The effective interest rate 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
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 its 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.
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:
- Fixtures and fittings 20% on a straight line-basis depending on the useful life
- Office equipment 33% on a straight line-basis
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 a particular entity is controlled or has significant
influence, 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 associate so as to obtain benefits from
its activities.
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. 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 leases of land or property that
meets the definition of investment property under IAS 40 it has
been disclosed within the investment property balance. After
initial recognition, IAS 40 requires the amount of the recognised
lease liability, calculated in accordance with IFRS 16, to be added
back to the amount determined under the net valuation model, to
arrive at the carrying amount of the investment property under the
fair value model. Differences between the ROU asset and associated
lease liability 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.
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 at 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.
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, cash in transit,
deposits held on 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
The Group classifies its financial liabilities at amortised
cost. 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 financial instruments classified as financial liabilities 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 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 and judgements 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
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 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 performance
measures such as Net Tangible Assets per share.
Rents and ERVs 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.
3. Segmental reporting and discontinued operations
The Group operates as one segment, the retail business. The
retail investments comprise shopping centres, retail parks and high
street stores. The Group's Executive Committee examines the Group's
performance, and have identified retail as the only operating
segment. The performance and position of the retail business is set
out in the condensed consolidated statement of comprehensive income
and condensed consolidated balance sheet. All the Group's
operations are in the UK and therefore no geographical segments
have been identified.
4. Revenue
2023 2022
GBPm GBPm
==================================================== ===== =====
Property rental and related income* 58.2 57.7
Amortisation of tenant incentives and letting costs (1.5) (1.3)
Surrender premiums and commissions 0.6 0.8
==================================================== ===== =====
Rental related income 57.3 57.2
==================================================== ===== =====
Asset management fees 1.5 1.9
Service charge income 13.4 14.6
==================================================== ===== =====
Revenue 72.2 73.7
==================================================== ===== =====
*Included within property rental and related income is car park
income of GBP5.3 million (2022: GBP4.9 million) which falls under
the scope of IFRS 15. The remainder of the income is covered by
IFRS 16.
Asset management fees and service charge income which represents
the flow through costs of the day-to-day maintenance of shopping
centres fall under the scope of IFRS 15.Total revenue recognised
under IFRS 15 is GBP21.6 million (2022: GBP21.4 million). Refer to
accounting policies in note 1.
5. Property operating expenses
2023 2022
GBPm GBPm
================================== ===== =====
Service charge expense 19.0 20.3
Rates on vacant units 2.7 1.8
Expected credit loss reversal (0.1) (0.3)
Other property operating expenses 3.5 3.7
================================== ===== =====
Property operating expenses 25.1 25.5
================================== ===== =====
6. Administrative expenses
2023 2022
GBPm GBPm
============================== ===== =====
Wages and salaries 5.2 5.1
Social security costs 0.9 0.7
Other pension costs 0.1 0.1
============================== ===== =====
Staff costs 6.2 5.9
Depreciation** 0.8 0.1
Share-based payments 1.1 0.9
Other administrative expenses 4.0 5.6
Head office relocation costs* 0.5 -
Restructuring costs - 0.9
============================== ===== =====
Administrative expenses 12.6 13.4
============================== ===== =====
*Head office relocation costs mainly relate to an impairment
charge relating to property, plant and equipment.
**Depreciation is inclusive of GBP0.2 million right of use asset
depreciation and GBP0.2 million impairment of the right of use
asset.
Net administrative expenses ratio is calculated as follows:
2023 2022
GBPm GBPm
================================================================= ===== =====
Administrative expenses 12.6 13.4
Adjust for:
Asset management fees (1.5) (1.9)
Share of joint ventures' and associates administrative
expenses 0.1 0.2
Share based payments (1.1) (0.9)
Head office relocation costs (0.5) -
Restructuring costs - (0.9)
Group's share of net administrative expenses - continuing
operations 9.6 9.9
================================================================= ===== =====
Group's share of net administrative expenses - discontinued
operations - 4.2
Group's share of net administrative expenses - Reported
Group 9.6 14.1
Property rental and related income* 58.0 58.0
Other income - Covid-19 income disruption insurance 1.4 -
Share of joint ventures' and associates' property income 3.6 3.9
================================================================= ===== =====
Property rental, other income and related income - continuing
operations 63.0 61.9
Property rental, other income and related income - discontinued
operations - 21.4
================================================================= ===== =====
Property rental, other income and related income - Reported
Group 63.0 83.3
================================================================= ===== =====
Net administrative expenses as a % of property income
(including share of joint ventures and associates) -
continuing operations 15.2% 16.0%
Net administrative expenses as a % of property income
(including share of joint ventures and associates) -
Reported Group 15.2% 16.9%
================================================================= ===== =====
*This balance includes an expected credit loss reversal of
GBP0.1 million (2022: GBP0.3 million), which excludes the GBP0.2
million reversal (2022: GBP0.2 million) forward looking element of
the calculation and insurance expected credit loss of GBP0.1
million (2022: GBPnil) but includes the expected credit loss held
in joint ventures and associates of GBPnil (2022: GBP0.2
million).
Average monthly number of staff - continuing operations
2023 2022
============================== ==== ====
Directors 7 7
Operations and asset managers 17 17
Support functions 27 32
============================== ==== ====
Total 51 56
============================== ==== ====
On disposal of Hawthorn 101 employees were employed by
subsidiaries that were sold on 20 August 2021.
Auditors' remuneration
2023 2022
GBPm GBPm
=========================================================== ===== =====
Audit of the Company and consolidated financial statements 0.3 0.3
Audit of subsidiaries, pursuant to legislation 0.2 0.2
=========================================================== ===== =====
0.5 0.5
Non-audit fees - interim review 0.1 0.1
=========================================================== ===== =====
Total fees 0.6 0.6
=========================================================== ===== =====
In addition to this the joint ventures and associates paid
GBP0.1 million (2022: GBP0.1 million) in audit fees.
7. Other income
2023 2022
GBPm GBPm
================== ===== =====
Insurance proceeds 1.4 -
Other income 1.4 -
================== ===== =====
The Group has recognised GBP1.4m for Covid-19 income disruption
following agreement with the insurer.
8. Loss on disposal of subsidiary
Year ended 31 March 2023
There have been no disposals in the year ended 31 March
2023.
Year ended 31 March 2022
Hawthorn
On 20 August 2021 NewRiver REIT plc ('NRR') completed the sale
of the entire issued share capital of Hawthorn Leisure REIT Limited
('Hawthorn'), the entity that held, either directly or indirectly
through its wholly-owned subsidiaries, NewRiver's entire community
pub business to AT Brady Bidco Limited.
Subsidiaries disposed
Hawthorn Leisure REIT Limited Hawthorn Leisure Limited
Hawthorn Leisure (Bravo Inns) Limited Hawthorn Leisure Acquisitions Limited
Bravo Inns Limited Hawthorn Leisure Honey Limited
Bravo Inns II Limited Hawthorn Leisure Management Limited
Hawthorn Leisure Community Pubs Limited Hawthorn Leisure Scotco Limited
Hawthorn Leisure (Mantle) Limited NewRiver Retail Holdings No 4 Limited
Hawthorn Leisure Public Houses Limited NewRiver Retail Holdings No 7 Limited
Hawthorn Leisure Holdings Limited NewRiver Retail Property Unit Trust
No 4
Results from 1 April 2021 to 20 August 2021
GBPm
Revenue 18.1
Property operating expenses (10.9)
==================================== ======
Net property income 7.2
Other income 4.8
Administrative expenses (4.8)
Loss on disposal of subsidiary (39.7)
Other 0.8
==================================== ======
Loss for the period before taxation (31.7)
Deferred Tax (1.9)
==================================== ======
Loss for the period after taxation (33.6)
==================================== ======
Loss on disposal of subsidiary at 20 August 2021
2022
========================================================
GBPm
======================================================== =======
Gross disposal proceeds 224.0
Net assets disposed of:
Investment property (202.3)
Managed houses (53.8)
Property, plant and equipment (1.2)
Cash (16.6)
Other net liabilities 19.9
======================================================== =======
Carrying value (254.0)
======================================================== =======
Loss on disposal of subsidiary before transaction costs (30.0)
Transaction costs (9.7)
======================================================== =======
Loss on disposal of subsidiary (39.7)
======================================================== =======
Cash flows from 1 April 2021 to 20
August 2021
-------------------------------------
31 March 2022
GBPm
===================================== =============
Cash flows from operating activities 13.8
Cash flows from investing activities 187.9
====================================== =============
Total cash flows from discontinued
operations 201.7
-------------------------------------- -------------
9. Loss on disposal of investment properties
2023 2022
GBPm GBPm
========================================== ====== ======
Gross disposal proceeds 20.0 66.3
Carrying value (22.3) (68.9)
Cost of disposal (1.5) (1.6)
========================================== ====== ======
Loss on disposal of investment properties (3.8) (4.2)
========================================== ====== ======
10. Finance income and finance costs
2023 2022
GBPm GBPm
===================================================== ===== =====
Income from loans with joint ventures and associates (0.3) (0.4)
Income from treasury deposits (1.1) -
Write off of derivatives - (1.0)
===================================================== ===== =====
Finance income (1.4) (1.4)
===================================================== ===== =====
Interest on borrowings 12.7 17.1
Finance cost on lease liabilities 2.7 2.7
Finance costs 15.4 19.8
===================================================== ===== =====
11. Taxation
2023 2022
GBPm GBPm
============================================ ====== ======
Taxation charge / (credit) - continuing - -
Taxation charge / (credit) - discontinued - 1.9
Taxation charge / (credit) - Reported Group - 1.9
============================================ ====== ======
Loss before tax (16.8) (24.7)
Tax at the current rate of 19% (2022: 19%) (3.2) (4.7)
Revaluation of property 7.3 2.3
Movement in unrecognised deferred tax (0.2) 2.1
Non-taxable loss on disposal of subsidiary - 7.6
Non-taxable profit due to REIT regime (4.4) (5.4)
Non-taxable income (0.4) (0.8)
Transfer pricing adjustment 0.9 0.8
Taxation (credit) / charge - 1.9
============================================ ====== ======
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 and;
- 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 Charge Disposals 31 March
2022 GBPm GBPm 2023
GBPm GBPm
================ ======== ====== ========= ========
Net deferred tax - - - -
================ ======== ====== ========= ========
31 March Charge Disposals 31 March
2021 GBPm GBPm 2022
GBPm GBPm
================= ======== ====== ========= ========
Net deferred tax (0.7) (1.9) 2.6 -
================= ======== ====== ========= ========
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 not recognised a deferred tax liability
or deferred tax asset. As at 31 March 2023 the Group has
unrecognised tax losses of GBP13.1 million (2022: GBP12.5 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.
12. Performance measures
A reconciliation of the performance measures to the nearest IFRS
measure is below:
Year ended 31 March Year ended 31 March
2023 2022
================================= ======================== ========================================
Continuing Discontinued Total Continuing Discontinued Total
GBPm GBPm GBPm GBPm GBPm GBPm
================================= ========== ============ ====== ========== ============ ======
(Loss) / profit for the year
after taxation (16.8) - (16.8) 7.0 (33.6) (26.6)
Adjustments
Net valuation movement 38.2 - 38.2 12.3 - 12.3
Loss on disposal of investment
properties 3.8 - 3.8 4.2 (0.8) 3.4
Changes in fair value of
financial instruments and
associated close out costs - - - (0.1) - (0.1)
Deferred tax - - - - 1.9 1.9
Loss on disposal of subsidiary - - - - 39.7 39.7
Group's share of joint ventures'
and associates' adjustments
Revaluation of investment
properties (0.8) - (0.8) (5.8) - (5.8)
Revaluation of derivatives (0.2) - (0.2) (0.5) - (0.5)
Deferred tax 0.2 - 0.2 0.6 - 0.6
Loss on disposal of investment
properties - - - 1.2 - 1.2
================================= ========== ============ ====== ========== ============ ======
EPRA earnings 24.4 - 24.4 18.9 7.2 26.1
Share-based payment charge 1.1 - 1.1 0.9 - 0.9
Forward looking element of
IFRS 9* (0.2) - (0.2) (0.2) - (0.2)
Depreciation on public houses - - - - 0.4 0.4
Head office relocation costs 0.5 - 0.5 - - -
Abortive costs - - - - 0.2 0.2
Restructuring costs - - - 0.9 - 0.9
================================= ========== ============ ====== ========== ============ ======
Underlying Funds From Operations
(UFFO) 25.8 - 25.8 20.5 7.8 28.3
================================= ========== ============ ====== ========== ============ ======
* 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 been recognised in relation to
these debtors.
Number of shares
2023 2022
Number of shares No. m No. m
============================================================ ====== ======
Weighted average number of ordinary shares for the purposes
of Basic EPS, UFFO and EPRA 309.7 307.2
Effect of dilutive potential ordinary shares:
Performance share plan 1.2 1.1
Deferred bonus shares 0.8 0.7
============================================================ ====== ======
Weighted average number of ordinary shares for the purposes
of Diluted EPS 311.7 309.0
============================================================ ====== ======
2023 2022
=============================== ===============================
Continuing Discontinued Total Continuing Discontinued Total
================= ========== ============ ===== ========== ============ =====
IFRS Basic EPS (5.4) - (5.4) 2.3 (10.9) (8.6)
IFRS Diluted EPS (5.4) - (5.4) 2.3 (10.9) (8.6)
EPRA EPS 7.9 - 7.9 6.2 2.3 8.5
UFFO EPS 8.3 - 8.3 6.7 2.5 9.2
================= ========== ============ ===== ========== ============ =====
The below table reconciles the differences between the
calculation of basic and EPRA NTA.
EPRA NTA per share and basic NTA per share:
2023 2022
===================== =========================
Pence
Shares per Shares Pence
GBPm m share GBPm m per share
===================================== ===== ====== ====== ===== ====== ==========
Net assets 378.6 310.7 122p 414.1 307.2 135p
Unexercised employee awards - 2.0 - 1.8
===================================== ===== ====== ====== ===== ====== ==========
Diluted net assets 378.6 312.7 121p 414.1 309.0 134p
Group's share of associates deferred
tax liability 0.9 - 0.6 -
Group's share of joint venture /
associates fair value derivatives (0.6) - (0.3) -
===================================== ===== ====== ====== ===== ====== ==========
EPRA Net Tangible Assets 378.9 312.7 121p 414.4 309.0 134p
===================================== ===== ====== ====== ===== ====== ==========
13. Dividends
The dividends paid in the year are set out below:
Pence
Payment date PID Non-PID per share GBPm
=================== === ======= ========== ====
Year to March 2022
Ordinary dividends
3 September 2021 3.0 - 3.0 9.1
14 January 2022 4.1 - 4.1 12.6
21.7
=================== === ======= ========== ====
Year to March 2023
Ordinary dividends
3 September 2022 3.3 - 3.3 10.1
17 January 2023 3.5 - 3.5 10.8
=================== === ======= ========== ====
20.9
=================== === ======= ========== ====
The final dividend of 3.2 pence per share in respect of the year
ended 31 March 2023 will, subject to shareholder approval at the
2023 AGM, be paid on 4 August 2023 to shareholders on the register
as at 16 June 2023. 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
2023 2022
GBPm GBPm
============================================= ====== =======
Fair value brought forward 609.1 851.9
Acquisitions - 7.3
Capital expenditure 2.9 9.6
Lease incentives, letting and legal costs (0.1) 1.3
Transfer from assets held for sale (Note 18) - 25.5
Disposals (22.3) (72.9)
Disposal of subsidiaries - (202.3)
Net valuation movement (38.1) (11.3)
============================================= ====== =======
Fair value carried forward 551.5 609.1
============================================= ====== =======
Right of use asset (investment property) 75.8 75.5
============================================= ====== =======
Fair value carried forward 627.3 684.6
============================================= ====== =======
Capital expenditure of GBP2.9 million (2022: GBP9.6 million) is
comprised of GBP1.9 million (2022: GBP5.0 million) of expenditure
in the creation of incremental lettable space and GBP1.0 million
(2022: GBP4.6 million) of expenditure on non-incremental lettable
space.
The Group's investment properties have been valued at fair value
on 31 March 2023 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 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.
The fair value at 31 March 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.
As at 31 March 2023
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 214.8 8.8 30.1 14.0 8.0 30.8 12.9 9.3% 9.7%
Shopping Centres
- Regeneration 140.1 5.2 18.8 16.1 4.0 13.4 10.6 6.8% 5.9%
Shopping Centres
- Work Out 63.3 6.5 15.3 8.8 1.5 6.3 4.4 14.0% 9.4%
Retail parks 128.6 9.6 14.2 11.4 7.9 14.7 10.9 7.0% 7.0%
High street and other 4.7 4.2 8.6 6.6 3.7 8.7 4.1 9.5% 10.0%
====================== ======= ======= ======= ======= ======= ======= ======= =========== ========
551.5
====================== ======= ======= ======= ======= ======= ======= ======= =========== ========
As at 31 March 2022
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 216.2 8.5 30.1 14.2 8.2 30.7 12.8 9.3% 9.5%
Shopping Centres
- Regeneration 162.6 7.4 15.3 9.8 2.6 8.4 5.1 6.5% 5.8%
Shopping Centres
- Work Out 89.7 5.3 19.4 16.0 4.6 14.0 11.1 15.7% 11.1%
Retail parks 132.5 9.1 14.0 11.1 0.6 14.7 9.7 6.6% 6.0%
High street and other 8.1 5.4 15.0 8.0 3.8 8.6 3.0 8.4% 4.7%
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
609.1
====================== ======= ======= ======= ======= ======= ======= ======= =========== ===========
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.
We consider +/-10% for ERV and +/-100bps for NEY to capture the
increased uncertainty in these key valuation assumptions and deem
it to be a reasonably possible scenario.
The investments are a portfolio of retail 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 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
- Estimated development costs
There were no changes to valuation techniques during the year.
Valuation reports are based on both information provided by the
Group, e.g. current rents and lease terms which is derived from the
Group'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, which
includes a consideration of climate change and a range of other
external factors.
2023: 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
================================ ========== ====================== ======================
Retail
asset GBPm GBPm GBPm GBPm
valuation Increase Decrease Increase Decrease
Asset Type GBPm 10% 10% 1.0% 1.0%
================================ ========== ========== ========== ========== ==========
Shopping Centres - Core 214.8 18.2 (16.7) (21.7) 27.6
Shopping Centres - Regeneration 140.1 13.5 (13.0) (18.9) 26.0
Shopping Centres - Work Out 63.3 6.5 (5.8) (5.8) 7.4
Retail parks 128.6 9.7 (9.6) (14.2) 18.9
High street and other 4.7 0.6 (0.6) (0.6) 0.7
================================ ========== ========== ========== ========== ==========
551.5 48.5 (45.7) (61.2) 80.6
================================ ========== ========== ========== ========== ==========
2022: 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
================================ ========== ====================== ======================
Retail
asset GBPm GBPm GBPm GBPm
valuation Increase Decrease Increase Decrease
Asset Type GBPm 10% 10% 1.0% 1.0%
================================ ========== ========== ========== ========== ==========
Shopping Centres - Core 216.2 19.9 (18.7) (22.6) 28.5
Shopping Centres - Regeneration 162.6 14.3 (13.6) (21.1) 29.2
Shopping Centres - Work Out 89.7 7.5 (7.4) (7.2) 8.3
Retail parks 132.5 9.5 (11.2) (15.7) 19.4
High street and other 8.1 0.7 (1.1) (0.9) 0.7
================================ ========== ========== ========== ========== ==========
609.1 51.9 (52.0) (67.5) 86.1
================================ ========== ========== ========== ========== ==========
Reconciliation to net valuation movement in consolidated
statement of comprehensive income
2023 2022
Net valuation movement in investment properties GBPm GBPm
================================================================== ====== ======
Net valuation movement in investment properties (38.1) (11.3)
Net valuation movement in right of use asset (0.1) (1.0)
================================================================== ====== ======
Net valuation movement in consolidated statement of comprehensive
income (38.2) (12.3)
================================================================== ====== ======
Reconciliation to properties at valuation in the portfolio
2023 2022
Note GBPm GBPm
================================== ==== ===== =====
Investment property 14 551.5 609.1
Properties held in joint ventures 15 32.2 30.6
Properties held in associates 16 9.9 9.7
================================== ==== ===== =====
Properties at valuation 593.6 649.4
================================== ==== ===== =====
15. Investments in joint ventures
As at 31 March 2023 the Group has two joint ventures.
2023 2022
GBPm GBPm
=========================================================== ===== =====
Opening balance 24.0 25.6
Group's share of profit after taxation excluding valuation
movement 2.4 1.1
Net valuation movement 0.6 2.9
Dividends (3.2) (5.6)
=========================================================== ===== =====
Investment in joint venture 23.8 24.0
=========================================================== ===== =====
2023 2022
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 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 at 31 March are as follows:
2023 2022
============================================== =============== ===============
Group's Group's
Total share Total share
Consolidated balance sheet GBPm GBPm GBPm GBPm
============================================== ====== ======= ====== =======
Non-current assets 64.4 32.2 61.2 30.6
Current assets 5.5 2.8 9.4 4.7
Current liabilities (1.4) (0.7) (1.8) (0.9)
Liabilities due in more than one year (26.9) (13.5) (26.8) (13.4)
============================================== ====== ======= ====== =======
Net assets 41.6 20.8 42.0 21.0
============================================== ====== ======= ====== =======
Loan to joint venture - 3.0 - 3.0
============================================== ====== ======= ====== =======
Net assets adjusted for loan to joint venture 41.6 23.8 42.0 24.0
============================================== ====== ======= ====== =======
The table above provides summarised financial information for
the joint ventures. The information disclosed reflects the amounts
presented in the financial statements of the joint ventures. To
arrive at the Group's share of these amounts under equity
accounting, certain minor adjustments are required to be made.
2023 2022
========================================== ============== ==============
Group's Group's
Consolidated statement of comprehensive Total share Total share
income GBPm GBPm GBPm GBPm
========================================== ===== ======= ===== =======
Revenue 5.9 3.0 5.7 2.8
Property operating expenses (0.4) (0.2) (0.1) -
========================================== ===== ======= ===== =======
Net property income 5.5 2.8 5.6 2.8
Administration expenses (0.2) (0.1) (0.3) (0.1)
Net finance costs (0.6) (0.3) (0.1) (0.1)
========================================== ===== ======= ===== =======
Group's share of joint ventures' profit
before valuation movements 4.7 2.4 5.2 2.6
Net valuation movement 1.2 0.6 5.8 2.9
Profit / (loss) on disposal of investment
property 0.1 - (3.0) (1.5)
========================================== ===== ======= ===== =======
Profit after taxation 6.0 3.0 8.0 4.0
Add back net valuation movement (1.2) (0.6) (5.8) (2.9)
========================================== ===== ======= ===== =======
Group's share of joint ventures' profit
before valuation movements 4.8 2.4 2.2 1.1
========================================== ===== ======= ===== =======
The Group's share of contingent liabilities in the joint
ventures is GBPnil (2022: GBPnil).
16. Investments in associates
The Group has one direct investment in an associate entity in
which it has a 10% stake, Sealand S.à.r.l, which owns 100% of
NewRiver Retail (Hamilton) Limited and NewRiver (Sprucefield)
Limited at 31 March 2023.
2023 2022
GBPm GBPm
Opening balance 7.9 5.3
Additions to Investment in associates - 4.0
Disposals from Investment in associates - (2.5)
Return of investment in associates* (2.3) -
Dividends (0.4) (2.0)
Group's share of profit after taxation excluding valuation
movement 0.1 0.2
Net valuation movement 0.2 2.9
=========================================================== ===== =====
Investment in associates 5.5 7.9
=========================================================== ===== =====
*During the year, the Group received GBP2.3 million (2022: nil)
back from associates in the form of shareholder loan repayments and
repayment of initial capital invested.
On 1 April 2021, Sealand S.à.r.l, completed the acquisition of
The Moor shopping centre in Sheffield, via NewRiver Retail
(Hamilton) Limited, in which the Group holds an indirect 10%
interest. The gross asset value at the date of the transaction was
GBP41.0 million.
On 20 December 2021 the Group sold its interest in NewRiver
Retail (Nelson) Limited.
2023 2022
Country
Name of incorporation % Holding % Holding
============================================== ================== =========== ===========
NewRiver Retail (Nelson) Limited (Nelson) UK - -
NewRiver Retail (Hamilton) Limited (Hamilton) UK 10 10
NewRiver (Sprucefield) Limited (Sprucefield) UK 10 10
============================================== ================== =========== ===========
The Group is the appointed asset manager on behalf of Sealand
S.à.r.l and receives asset management fees, development management
fees and performance-related bonuses.
The aggregate amounts recognised in the consolidated balance
sheet and consolidated statement of comprehensive income are as
follows:
31 March 2023 31 March 2022
============================================ =============== ===============
Group's Group's
Total share Total share
Consolidated balance sheet GBPm GBPm GBPm GBPm
============================================ ====== ======= ====== =======
Non-current assets 99.3 9.9 97.3 9.7
Current assets 8.2 0.8 14.7 1.5
Current liabilities (16.1) (1.6) (17.5) (1.8)
Liabilities due in more than one year (67.8) (6.8) (62.7) (6.3)
============================================ ====== ======= ====== =======
Net assets 23.6 2.3 31.8 3.1
============================================ ====== ======= ====== =======
Loans to associates - 3.2 - 4.8
============================================ ====== ======= ====== =======
Net assets adjusted for loans to associates 23.6 5.5 31.8 7.9
============================================ ====== ======= ====== =======
2023 2022
2023 Group's 2022 Group's
Consolidated statement of comprehensive Total share Total share
income GBPm GBPm GBPm GBPm
=========================================== ====== ======== ====== ========
Revenue 9.9 1.0 12.6 1.2
Property operating expenses (2.4) (0.2) (2.4) (0.2)
=========================================== ====== ======== ====== ========
Net property income 7.5 0.8 10.2 1.0
Administration expenses (0.1) - (0.7) -
Net finance costs (3.5) (0.4) (3.6) (0.4)
=========================================== ====== ======== ====== ========
3.9 0.4 5.9 0.6
Net valuation movement 1.7 0.2 29.1 2.9
Profit on disposal of investment property 0.6 - 2.7 0.3
Taxation (3.4) (0.3) (7.2) (0.7)
=========================================== ====== ======== ====== ========
Profit after taxation 2.8 0.3 30.5 3.1
=========================================== ====== ======== ====== ========
Add back net valuation movement (1.7) (0.2) (29.1) (2.9)
=========================================== ====== ======== ====== ========
Group's share of associates' profit before
valuation movements 1.1 0.1 1.4 0.2
=========================================== ====== ======== ====== ========
17. Trade and other receivables
2023 2022
GBPm GBPm
Trade receivables 2.6 3.7
Restricted monetary assets 4.8 5.6
Service charge receivables* 1.2 1.7
Other receivables 3.8 6.2
Prepayments 0.7 0.7
Accrued income 1.9 1.0
============================ ===== =====
15.0 18.9
============================ ===== =====
*Included in service charge receivables is GBPnil of Value Added
Taxation (2022: GBP1.4 million) and GBP1.2 million of service
charge debtors (2022: GBP0.3 million).
Trade receivables are shown after deducting a loss allowance of
GBP3.0 million (2022: GBP5.2 million), other receivables are shown
after deducting a loss allowance of GBP0.3 million (2022: GBPnil).
The provision for doubtful debts is calculated as an expected
credit loss on trade receivables in accordance with IFRS 9. The
release to the consolidated statement of comprehensive income in
relation to doubtful debts made against tenant debtors was GBP0.2
million (2022: GBP0.3 million charge). The Group has calculated the
expected credit loss by applying a forward-looking outlook to
historical default rates.
The Group monitors rent collection and the ability of tenants to
pay rent receivables in order to anticipate and minimise the impact
of default by tenants. 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 credit
loss rates are based on historical payment profiles of tenant
debtors and corresponding historical credit losses.
2023 2022
GBPm GBPm
=========================================================== ===== ======
Opening loss allowance at 1 April 5.2 9.3
(Decrease) / Increase in loss allowance recognised in
the consolidated statement of comprehensive income during
the year in relation to tenant debtors (0.2) 0.3
Disposal of subsidiary - (2.5)
Loss allowance utilisation (2.0) (1.9)
=========================================================== ===== ======
Closing loss allowance at 31 March 3.0 5.2
=========================================================== ===== ======
The restricted monetary assets relates to cash balances 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.
18. Assets held for sale
2023 2022
GBPm GBPm
================================== ====== ======
Assets held for sale at 1 April - 25.5
Transfer to investment properties - (25.5)
================================== ====== ======
Assets held for sale at 31 March - -
================================== ====== ======
In the year ended 31 March 2023 the Group made a number of
strategic disposals. As at 31 March 2023 no investment properties
meet the definition of assets held for sale under IFRS.
During the year ended 31 March 2022 the GBP25.5 million of
properties held for sale as at 31 March 2021 were not sold and are
no longer available for sale as the Group decided to retain them,
therefore they have been transferred back to investment
property.
19. Cash and cash equivalents
There are no restrictions on cash in place (2022: nil). As at 31
March 2023 and 31 March 2022 cash and cash equivalents comprised of
cash held in bank accounts and treasury deposits.
20. Trade and other payables
2023 2022
GBPm GBPm
============================ ===== =====
Trade payables 2.6 3.0
Service charge liabilities* 9.8 9.2
Other payables 1.8 3.5
Accruals 9.0 8.7
Value Added Taxation 0.3 3.4
Rent received in advance 6.0 5.7
============================ ===== =====
29.5 33.5
============================ ===== =====
* Service charge liabilities includes accruals of GBP1.9 million
(2022: GBP1.7 million), service charge creditors and other
creditors of GBP4.8 million (2022: GBP5.3 million), Value added
taxation of GBP1.0 million (2022: nil) and deferred income of
GBP2.1 million (2022: GBP2.2 million).
21. Borrowings
2023 2022
Maturity of drawn bank borrowings : GBPm GBPm
==================================== ===== =====
After five years 300.0 300.0
Less unamortised fees / discount (3.3) (4.2)
==================================== ===== =====
296.7 295.8
==================================== ===== =====
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. At
31 March 2023 the fair value was GBP256.8 million (31 March 2022:
GBP285.9 million).
Unamortised
facility
Facility fees /
Facility drawn discount
Unsecured borrowings: Maturity date GBPm GBPm GBPm GBPm
========================== ============== ======== ======== =========== =====
Revolving credit facility August 2024 125.0 - (0.6) (0.6)
Corporate bond March 2028 300.0 300.0 (2.7) 297.3
========================== ============== ======== ======== =========== =====
425.0 300.0 (3.3) 296.7
========================================= ======== ======== =========== =====
In the year the Group drew down GBPnil (31 March 2022: GBPnil)
of the revolving credit facility.
22. 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 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.
2023 2022
GBPm GBPm
==================================================== ====== ======
Right of use asset (Investment property) 75.8 75.5
Right of use asset (Property, plant and equipment) 0.9 0.2
Current lease liability 0.4 0.7
Non-current lease liability 76.3 75.0
==================================================== ====== ======
The expense relating to low value assets which have not been
recognised under IFRS 16 was GBPnil million (March 2022: GBPnil
million) and the expense relating to variable lease payments not
included in the measurement of lease liabilities was GBPnil million
(March 2022: GBPnil million). The total cash outflow in relation to
lease commitments for the year was GBP3.0 million (March 2022:
GBP2.7 million), GBP0.3 million (2022: GBP0.7 million) relates to
the repayment of principle lease liabilities and GBP2.7 million
(2022: GBP2.0 million) relates to the repayment of interest on
lease liabilities. Depreciation recognised on ROU assets during the
year was GBP0.2 million (2022: GBP0.4 million).
Lease liability maturity table
2023 2022
GBPm GBPm
====================================== ===== =====
Within one year 0.4 0.7
Between one and two years 0.8 0.7
In the second to fifth year inclusive 0.5 2.1
After five years 75.0 72.2
====================================== ===== =====
76.7 75.7
====================================== ===== =====
Lease commitments payable by the Group are as follows:
2023 2022
GBPm GBPm
====================== ======= =======
Within one year 3.0 3.2
One to two years 3.0 3.0
Two to five years 8.9 9.0
After five years 253.6 253.8
====================== ======= =======
268.5 269.0
Effect of discounting (191.8) (193.3)
====================== ======= =======
Lease liability 76.7 75.7
====================== ======= =======
At the balance sheet date the Group had contracted with tenants
for the following future minimum lease payments on its investment
properties:
2023 2022
GBPm GBPm
====================================== ===== =====
Within one year 45.6 50.0
Between one and two years 39.5 42.7
In the second to fifth year inclusive 79.7 89.4
After five years 123.3 133.7
====================================== ===== =====
288.1 315.8
====================================== ===== =====
The Group's weighted average lease length of lease commitments
at 31 March 2023 was 5.2 years (March 2022: 5.3 years).
Operating lease obligations exist over the Group's offices, head
leases on the Group's retail portfolio and ground rent leases.
Investment properties 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
GBP1.5 million (March 2022: GBP1.6 million).
23. Share capital and reserves
Share capital
Held by Shares
Number Total EBT in issue
of shares Price No of No of No of
issued per share shares shares shares
Ordinary shares GBPm's pence (m) (m) (m)
=================================== ========== ========== ======= ======= =========
1 April 2021 309.0 2.7 306.3
Scrip dividends issued 0.5 0.82 309.5 2.7 306.8
Shares issued under employee share
schemes 0.6 - 309.5 2.1 307.4
Scrip dividends issued 0.8 0.86 310.3 2.1 308.2
=================================== ========== ========== ======= ======= =========
31 March 2022 310.3 2.1 308.2
Scrip dividends issued 1.0 0.86 311.3 2.1 309.2
Shares issued under employee share
schemes 0.6 - 311.3 1.5 309.8
Scrip dividends issued 0.6 0.78 311.9 1.5 310.4
Shares issued under employee share
schemes 0.1 - 311.9 1.4 310.5
=================================== ========== ========== ======= ======= =========
31 March 2023 311.9 1.4 310.5
=================================== ========== ========== ======= ======= =========
All shares issued and authorised 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.
Share premium
Share premium represents amounts subscribed for a share in
excess of nominal value less directly attributable issue costs.
In the prior year, following the passing of the special
resolution at the Company's Annual General Meeting on 27 July 2021
relating to the cancellation of the Company's share premium account
and the order made by the Court on 24 August 2021 confirming the
cancellation of the Company's share premium account (the 'Order'),
the Order and the statement of capital in respect of the
cancellation have been registered by the Registrar of Companies.
The share premium account balance of GBP227.4 million has been
transferred to retained earnings, following the cancellation of the
share premium account effective from 31 August 2021.
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.
Scrip dividend shares
Shares issued in respect of elections to participate in the
Scrip Dividend scheme in respect of dividends declared in the year,
the value of these was GBP1.3 million (2022: GBP1.1 million). The
Scrip Dividend Scheme was approved on 14 August 2020. The scheme
provides shareholders of NewRiver Ordinary shares with the
opportunity, at the shareholders election and where offered by the
Company, to elect to receive dividends as New Ordinary shares in
the Company instead of their cash dividend, with no dealing charges
or stamp duty incurred.
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 5% 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 1,466,712 ordinary shares held by EBT (2022:
2,116,979).
24. Share-based payments
The Group has two share schemes for employees:
- Performance Share Scheme
- Deferred bonus scheme
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 are provided in the
Remuneration Report. The charge for the year recognised in the
consolidated statement of comprehensive income was GBP0.7 million
(March 2022: GBP0.5 million).
Average Outstanding Outstanding Average
Financial year exercise at start Number at end Number remaining
issued price of year Granted Exercised Lapsed of year exercisable life (years)
================ ========= =========== ========= ========== =========== =========== ============ =============
2020 - 1,914,471 - - (1,914,471) - - -
2021 - 2,815,270 196,539 (257,357) (40,588) 2,713,864 - 0.4
2022 - 2,940,580 231,352 - (89,370) 3,082,562 - 1.4
2023 - - 2,888,265 - (133,165) 2,755,100 - 2.3
================ ========= =========== ========= ========== =========== =========== ============ =============
7,670,321 3,316,156 (257,357) (2,177,594) 8,551,526 -
================ ========= =========== ========= ========== =========== =========== ============ =============
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 GBP0.4 million (March
2022: GBP0.4 million).
Average Outstanding Outstanding Average
Financial year exercise at start at end Number remaining
issued price of year Granted Exercised Cancelled of year exercisable life (years)
================ ========= =========== ======= ========= ========= =========== ============ ==================
2018 - 53,889 - (8,921) - 44,968 - -
2019 - 124,277 - (7,526) - 116,751 - -
2020 - 118,050 - (35,805) - 82,245 - -
2021 - 366,702 - (340,659) (10,152) 15,891 - -
2022 - 313,619 24,499 - - 338,118 - 0.5
2023 - - 666,333 - (25,870) 640,463 - 1.3
================ ========= =========== ======= ========= ========= =========== ============ ==================
976,537 690,832 (392,911) (36,022) 1,238,436 -
================ ========= =========== ======= ========= ========= =========== ============ ==================
Fair value
The fair value of the share options has been calculated based on
a Monte Carlo Pricing Model using the following inputs:
2023 2022
==================== ====== ======
Share price 0.87 0.78
Exercise price Nil Nil
Expected volatility 43% 25%
Risk free rate 1.675% 0.252%
Expected dividends* 0% 0%
==================== ====== ======
*based on quoted property sector average.
25. 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 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
2023 2022
GBPm GBPm
=============================================== ======= =======
Financial assets
Financial assets at amortised cost
Trade and other receivables 13.4 15.9
Cash and cash equivalents 108.6 82.8
================================================ ======= =======
Total financial assets and maximum exposure to
credit risk 122.0 98.7
================================================ ======= =======
Financial liabilities
At amortised cost
Borrowings (296.7) (295.8)
Lease liabilities (76.7) (75.7)
Payables and accruals (20.0) (22.2)
================================================ ======= =======
(393.4) (393.7)
=============================================== ======= =======
(271.4) (295.0)
=============================================== ======= =======
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 21 for further details. None of the financial instruments
above are held at fair value.
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 21). 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. 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. At
31 March 2023 the Group has no drawn debt that is subject to
variable interest rates and no open derivatives in controlled
entities.
There would be no impact on finance costs to the Group, in the
year or in the prior year, if interest rates increase or decrease
as we have no drawn variable rate debt.
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. All outstanding rent receivables are regularly
monitored. In order to measure the expected credit losses, trade
receivables from tenants have been grouped by 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 likelihood that tenants will pay.
Ageing of past due gross trade receivables and the carrying
amount net of loss allowances is set out below :
2023 2023 2023 2022 2022 2022
Gross Loss Carrying Gross Loss Carrying
amount allowance 2023 amount amount allowance 2022 amount
GBPm GBPm % applied GBPm GBPm GBPm % applied GBPm
============== ======== =========== =========== ========== ======== =========== =========== ==========
0-30 days 2.4 0.6 25% 1.8 3.3 0.8 24% 2.5
30-60 days 0.1 0.1 100% - 0.4 0.1 25% 0.3
60-90 days 0.3 0.1 33% 0.2 0.1 0.1 100% -
90-120 days 0.3 0.1 33% 0.2 0.5 0.2 40% 0.3
Over 120 days 2.5 2.1 84% 0.4 4.6 4.0 87% 0.6
============== ======== =========== =========== ========== ======== =========== =========== ==========
5.6 3.0 2.6 8.9 5.2 3.7
============== ======== =========== =========== ========== ======== =========== =========== ==========
The Group's total expected credit loss in relation to trade
receivables, other receivables and accrued income is GBP3.5 million
(2022: GBP5.2 million). The Group recognises an expected credit
loss allowance on trade receivables of GBP3.0 million (2022: GBP5.2
million) as noted in the above table.
The Group categorises trade debtors in varying degrees of risk,
as detailed below:
2023 2022
GBPm GBPm
============================================ ===== =====
Risk level
Very high 2.5 4.6
High 0.3 0.5
Medium 0.4 0.5
Low 2.4 3.3
============================================ ===== =====
Gross carrying amount before loss allowance 5.6 8.9
============================================ ===== =====
Loss allowance (3.0) (5.2)
============================================ ===== =====
Carrying amount 2.6 3.7
============================================ ===== =====
2023 2022
GBPm GBPm
=========================================================== ===== ======
Opening loss allowance at 1 April 5.2 9.3
(Release) / increase in loss allowance recognised in
the consolidated statement of comprehensive income during
the year in relation to tenant debtors (0.2) 0.3
Disposal of subsidiary - (2.5)
Loss allowance utilisation (2.0) (1.9)
=========================================================== ===== ======
Closing loss allowance at 31 March 3.0 5.2
=========================================================== ===== ======
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.
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 regular basis. Cash flow
reports are issued weekly to management and are reviewed quarterly
by the Board. A summary table with maturity of financial
liabilities is presented below:
More
Less One to Two to than
than two five five
2023 GBPm one year years years years Total
======================= ========= ====== ======= ======= =======
Borrowings - - (300.0) - (300.0)
Interest on borrowings (10.5) (10.5) (30.7) - (51.7)
Lease liabilities (3.0) (3.0) (8.9) (253.6) (268.5)
Payables and accruals (20.0) - - - (20.0)
======================= ========= ====== ======= ======= =======
(33.5) (13.5) (339.6) (253.6) (640.2)
======================= ========= ====== ======= ======= =======
2022 GBPm
======================= ========= ====== ======= ======= =======
Borrowings - - - (300.0) (300.0)
Interest on borrowings (10.5) (10.5) (31.5) (9.7) (62.2)
Lease liabilities (3.2) (3.0) (9.0) (253.8) (269.0)
Payables and accruals (22.2) - - - (22.2)
======================= ========= ====== ======= ======= =======
(35.9) (13.5) (40.5) (563.5) (653.4)
======================= ========= ====== ======= ======= =======
Reconciliation of movement in the Group's share of net 2023 2022
debt in the year GBPm GBPm
============================================================ ======= =======
Group's share of net debt at beginning of year 221.5 493.3
Cash flow
Net (increase) / decrease in cash and cash equivalents (25.8) 67.7
Bank loans repaid - (335.0)
Change in bank loan fees to be amortised 0.9 1.1
Group's share of joint ventures' and associates' cash
flow
Net decrease / (increase) in cash and cash equivalents 2.7 (1.6)
Bank loans repaid - (4.0)
New bank loans 1.9 -
Change in bank loan fees to be amortised 0.1 -
Group's share of net debt 201.3 221.5
============================================================ ======= =======
Being:
Group borrowings 296.7 295.8
Group's share of joint ventures' and associates' borrowings 15.9 13.9
Group cash (108.6) (82.8)
Group's share of joint venture and associate cash (2.7) (5.4)
============================================================ ======= =======
Group's share of net debt 201.3 221.5
============================================================ ======= =======
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. 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 on a proportionately consolidated basis.
Between 31 March 2022 and 31 March 2023, the Group's
proportionally consolidated LTV decreased by 0.2% from 34.1% to
33.9% and the gearing ratio from 51% to 50% mainly as a result of
retail disposals. The Group continually monitors LTV and will
continue to monitor LTV closely, factoring in disposal activity and
possible further valuation declines as disclosed in Note 1. The
Group has remained compliant with all of its banking covenants
during the year as discussed in Note 1.
2023 2022
Net debt to equity ratio GBPm GBPm
========================================================= ======= ======
Borrowings 296.7 295.8
Cash and cash equivalents (108.6) (82.8)
========================================================= ======= ======
Net debt 188.1 213.0
Equity attributable to equity holders of the parent 378.6 414.1
========================================================= ======= ======
Net debt to equity ratio ('Balance sheet gearing') 50% 51%
========================================================= ======= ======
Share of joint ventures' and associates' borrowings 15.9 13.9
Share of joint ventures' and associates' cash and cash
equivalents (2.7) (5.4)
========================================================= ======= ======
Group's share of net debt 201.3 221.5
Carrying value of investment property 551.5 609.1
Share of joint ventures' and associates carrying value
of investment properties 42.1 40.3
========================================================= ======= ======
Group's share of carrying value of investment properties 593.6 649.4
========================================================= ======= ======
Net debt to property value ratio ('Loan to value') 33.9% 34.1%
========================================================= ======= ======
Reconciliation of financial liabilities
Lease
liabilities Borrowings Derivatives Total
Reconciliation of financial liabilities GBPm GBPm GBPm GBPm
================================================== ============ ========== =========== =====
As at 1 April 2022 75.7 295.8 - 371.5
(Decrease)/Increase through financing cash
flows
Head office lease 1.1 - - 1.1
Repayment of principal portion of lease liability (0.4) - - (0.4)
Lease modification 0.3 - - 0.3
Loan amortisation - 0.9 - 0.9
As at 31 March 2023 76.7 296.7 - 373.4
================================================== ============ ========== =========== =====
Lease
liabilities Borrowings Derivatives Total
Reconciliation of financial liabilities GBPm GBPm GBPm GBPm
================================================== ============ ========== =========== =======
As at 1 April 2021 85.6 629.7 (2.6) 712.7
(Decrease)/Increase through financing cash
flows
Repayment of bank loans - (335.0) - (335.0)
Repayment of principal portion of lease liability (0.7) - - (0.7)
Other changes
Lease modification (5.2) - - (5.2)
Disposals (1.7) - - (1.7)
Disposal of subsidiary (2.3) - - (2.3)
Termination of derivative - - 2.6 2.6
Change in capitalised loan fees to be amortised - 1.1 - 1.1
================================================== ============ ========== =========== =======
As at 31 March 2022 75.7 295.8 - 371.5
================================================== ============ ========== =========== =======
26. Contingencies and commitments
The Group has no material contingent liabilities (2022: None).
The Group was contractually committed to GBP1.8 million of capital
expenditure to construct or develop investment property as at 31
March 2023 (31 March 2022: GBP1.3 million). The Group also
committed to a 5 year lease which has commenced on 1 April 2022
with rent per annum of GBP0.3 million
Under the terms of the sale agreement to dispose of Hawthorn
dated 20 August 2021, the Group gave certain warranties, including
tax, relating to Hawthorn. A breach of warranty will only give rise
to a successful claim in damages if the buyer can show that the
warranty was breached and that the effect of the breach is to
reduce the value of Hawthorn at the date of disposal. Claims must
be received, in the case of a Warranty Claim, within a year of
Completion and, in the case of a Tax Claim, within 6 years of
Completion. No such claims have been received.
27. 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 GBP1.1 million (2022: GBP2.8
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 has loans with a joint venture of GBP3.0 million
(2022: GBP3.0 million) and loans with associates of GBP3.2 million
(March 2022: GBP4.8 million) During the year, the Group received
GBP2.3 million (2022: nil) back from associates in the form of
shareholder loan repayments and repayment of initial capital
invested.
Management fees are charged to joint ventures and associates for
asset management, investment advisory, project management and
accounting services.
Total fees charged were:
2023 2022
GBPm GBPm
=================================== ===== =====
NewRiver Retail (Nelson) Limited - 0.1
NewRiver Retail (Napier) Limited 0.2 0.2
NewRiver Retail (Hamilton) Limited 0.2 0.2
NewRiver (Sprucefield) Limited 0.1 0.2
=================================== ===== =====
As at 31 March 2023, an amount of GBP0.3 million (2022: GBP0.2
million) was due to the Group relating to management fees.
During the year, the Group recognised GBP0.3 million of interest
from joint ventures and associates (2022: GBP0.4 million) and as at
31 March 2023 the amount owing to the Group was GBP0.2 million
(2022: GBP0.2 million).
Key management personnel
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
party transactions between 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.
28. Post balance sheet events
There were no significant events occurring after the reporting
period, but before the financial statements were authorised for
issue.
ALTERNATIVE PERFORMANCE MEASURES (APMs) (Unaudited)
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 Operations (Loss) / Profit for the year after 'Underlying Funds From Operations'
('UFFO') and UFFO per share taxation section of the 'Finance Review'
EPRA Net Tangible Assets ('NTA') and Net Assets 'Balance sheet' section of the
EPRA NTA per share 'Finance Review'
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 4 of the 'Financial Statistics'
table
EPRA EPS IFRS Basic EPS Note 12 of the Financial Statements
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 of debt N/A Note 10 of the 'Financial Statistics'
table
Weighted average debt maturity N/A Note 10 of the 'Financial Statistics'
table
Loan to Value N/A Note 11 of the 'Financial Statistics'
table
====================================== ====================================== ======================================
EPRA PERFORMANCE MEASURES
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 the following tables
FY23 FY22
================================================= ===== =====
EPRA Earnings Per Share (EPS) 7.9p 8.5p
EPRA Cost Ratio (including direct vacancy costs) 38.9% 41.1%
EPRA Cost Ratio (excluding direct vacancy costs) 34.6% 38.7%
================================================= ===== =====
March March
2023 2022
================================================= ===== =====
EPRA NRV per share 134p 148p
EPRA NTA per share 121p 134p
EPRA NDV per share 135p 139p
EPRA LTV 37.0% 37.2%
EPRA NIY 7.6% 7.5%
EPRA 'topped-up' NIY 8.0% 8.0%
EPRA Vacancy Rate 3.4% 4.4%
================================================= ===== =====
EPRA Earnings Per Share: 7.9p
Definition
Earnings from operational activities
P urpose
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
FY23 FY22
(GBPm) (GBPm)
============================================================== ======== ========
Earnings per IFRS income statement (16.8) (26.6)
Adjustments to calculate EPRA Earnings, exclude :
Changes in value of investment properties, development
properties held for investment and other interests 38.2 12.3
Profits or losses on disposal of investment properties,
development properties held for investment and other
interests 3.8 43.1
Changes in fair value of financial instruments and associated
close-out costs - (0.1)
Acquisition costs on share deals and non-controlling - -
joint venture interests
Deferred tax in respect of EPRA adjustments - 1.9
Adjustments to above in respect of joint ventures (unless
already included under proportional consolidation) (0.8) (4.5)
============================================================== ======== ========
EPRA Earnings 24.4 26.1
============================================================== ======== ========
Basic number of shares 309.7m 307.2m
============================================================== ======== ========
EPRA Earnings per Share (EPS) 7.9p 8.5p
============================================================== ======== ========
EPRA Earnings - continuing operations 24.4 18.9
============================================================== ======== ========
EPRA Earnings per Share (EPS) - continuing operations 7.9p 6.2p
============================================================== ======== ========
Reconciliation of EPRA Earnings to Underlying Funds From
Operations (UFFO)
FY23 FY22
(GBPm) (GBPm)
===================================================== ======= ========
EPRA Earnings 24.4 26.1
Share-based payment charge 1.1 0.9
Depreciation on property - 0.4
Forward-looking element of IFRS 9 (0.2) (0.2)
Head office relocation costs 0.5 -
Restructuring and abortive costs - 1.1
===================================================== ======= ========
Underlying Funds From Operations (UFFO) 25.8 28.3
===================================================== ======= ========
Basic number of shares 309.7m 307.2m
===================================================== ======= ========
UFFO per share 8.3p 9.2p
===================================================== ======= ========
Underlying Funds From Operations (UFFO) - continuing
operations 25.8 20.5
===================================================== ======= ========
UFFO per share - continuing operations 8.3p 6.7p
===================================================== ======= ========
EPRA NRV per share: 134p; EPRA NTA per share: 121p; EPRA NDV per
share: 135p
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 NRV EPRA NTA EPRA NDV
31 March 2023 (GBPm) (GBPm) (GBPm)
========================================= ======== ======== ========
IFRS Equity attributable to shareholders 378.6 378.6 378.6
Fair value of financial instruments (0.6) (0.6) -
Deferred tax in relation to fair value
gains of Investment Property 0.9 0.9 -
Fair value of debt - - 43.2
Purchasers' costs 40.2 - -
========================================= ======== ======== ========
EPRA NRV / NTA / NDV 419.1 378.9 421.8
========================================= ======== ======== ========
Fully diluted number of shares 312.7m 312.7m 312.7m
========================================= ======== ======== ========
EPRA NRV / NTA / NDV per share 134p 121p 135p
========================================= ======== ======== ========
EPRA NRV EPRA NTA EPRA NDV
31 March 2022 (GBPm) (GBPm) (GBPm)
========================================= ======== ======== ========
IFRS Equity attributable to shareholders 414.1 414.1 414.1
Fair value of financial instruments (0.3) (0.3) -
Deferred tax in relation to fair value
gains of Investment Property 0.6 0.6 -
Fair value of debt - - 14.1
Purchasers' costs 43.8 - -
EPRA NRV / NTA / NDV 458.2 414.4 428.2
========================================= ======== ======== ========
Fully diluted number of shares 309.0m 309.0m 309.0m
========================================= ======== ======== ========
EPRA NRV / NTA / NDV per share 148p 134p 139p
========================================= ======== ======== ========
EPRA LTV: 37.0%
Definition
EPRA LTV is the ratio of gross debt, net payables less cash and
cash equivalents to the aggregate value of properties. LTV is
expressed on a proportionally condensed consolidated basis.
Purpose
EPRA LTV introduces a consistent and comparable metric for the
real estate sector, with the aim to assess the gearing of the
shareholder equity within a real estate investment company.
Share of Share of
Group Joint Ventures Associates Total
31 March 2023 (GBPm) (GBPm) (GBPm) (GBPm)
======================================= ======= =============== =========== =======
Borrowings from financial institutions - (12.0) (4.0) (16.0)
Corporate bond (300.0) - - (300.0)
Net payables (14.5) (0.2) (0.3) (15.0)
Cash and cash equivalents 108.6 2.1 0.6 111.3
Net Debt (A) (205.9) (10.1) (3.7) (219.7)
======================================= ======= =============== =========== =======
Investment property at fair value 551.5 32.2 9.9 593.6
Total Property Value (B) 551.5 32.2 9.9 593.6
======================================= ======= =============== =========== =======
LTV (A/B) 37.3% 37.0%
======================================= ======= =============== =========== =======
Share of Share of
Group Joint Ventures Associates Total
31 March 2022 (GBPm) (GBPm) (GBPm) (GBPm)
======================================= ======= =============== =========== =======
Borrowings from financial institutions - (12.0) (2.0) (14.0)
Corporate bond (300.0) - - (300.0)
Net payables (14.6) (0.6) (0.4) (15.6)
Cash and cash equivalents 82.8 4.0 1.4 88.2
======================================= ======= =============== =========== =======
Net Debt (A) (231.8) (8.6) (1.0) (241.4)
======================================= ======= =============== =========== =======
Investment property at fair value 609.1 30.6 9.7 649.4
Total Property Value (B) 609.1 30.6 9.7 649.4
======================================= ======= =============== =========== =======
LTV (A/B) 38.1% 37.2%
======================================= ======= =============== =========== =======
EPRA NIY: 7.6%, EPRA 'topped-up' NIY: 8.0%
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
2023 2022
(GBPm) (GBPm)
====================================================== ==== ======== ========
Properties at valuation - wholly owned 551.5 609.1
Properties at valuation - share of Joint Ventures
& Associates 42.1 40.3
Trading property (including share of Joint Ventures - -
& Associates)
Less : Developments (10.2) (22.3)
============================================================ ======== ========
Completed property portfolio 583.4 627.1
Allowance for estimated purchasers' costs and capital
expenditure 44.9 40.4
============================================================ ======== ========
Grossed up completed property portfolio valuation B 628.3 667.5
====================================================== ==== ======== ========
Annualised cash passing rental income 59.6 62.9
Property outgoings (11.9) (13.1)
============================================================ ======== ========
Annualised net rents A 47.7 49.8
Add: Notional rent expiration of rent free periods
or other lease incentives 2.4 3.3
============================================================ ======== ========
Topped-up net annualised rent C 50.1 53.1
====================================================== ==== ======== ========
EPRA NIY A/B 7.6% 7.5%
====================================================== ==== ======== ========
EPRA 'topped-up' NIY C/B 8.0% 8.0%
====================================================== ==== ======== ========
EPRA Vacancy rate: 3.4%
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
2023 2022
(GBPm) (GBPm)
=============================================== ==== ======== ========
Estimated Rental Value of vacant retail space A 1.8 2.6
Estimated rental value of the retail portfolio B 53.0 58.6
=============================================== ==== ======== ========
EPRA Vacancy Rate A/B 3.4% 4.4%
=============================================== ==== ======== ========
EPRA Cost Ratio (including direct vacancy costs): 38.9%;
EPRA Cost Ratio (excluding direct vacancy costs): 34.6%
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.
FY23 FY22
(GBPm) (GBPm)
====================================================== ==== ======= ========
Administrative/operating expenses per IFRS 19.2 33.4
Net service charge costs/fees 5.6 5.6
Management fees less actual/estimated profit element (1.5) (1.9)
Other operating income/recharges intended to cover
overhead expenses less any related profits - (4.8)
Share of Joint Ventures and associates expenses
(net of other income) 0.4 0.4
Exclude (if part of the above):
Investment property depreciation - -
Ground rent costs 0.6 0.7
Service charge costs recovered through rents but - -
not separately invoiced
====================================================== ==== ======= ========
EPRA Costs (including direct vacancy costs) A 24.3 33.4
Direct vacancy costs (2.7) (2.0)
============================================================ ======= ========
EPRA Costs (excluding direct vacancy costs) B 21.6 31.4
Gross Rental Income less ground rents - per IFRS 58.8 77.3
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) 3.6 3.9
============================================================ ======= ========
Gross Rental Income C 62.4 81.2
====================================================== ==== ======= ========
EPRA Cost Ratio (including direct vacancy costs) A/C 38.9% 41.1%
====================================================== ==== ======= ========
EPRA Cost Ratio (excluding direct vacancy costs) B/C 34.6% 38.7%
====================================================== ==== ======= ========
EPRA Cost Ratio (including direct vacancy costs)
- continuing operations 38.9% 36.8%
============================================================ ======= ========
EPRA Cost Ratio (excluding direct vacancy costs)
- continuing operations 34.6% 33.8%
============================================================ ======= ========
Reconciliation of EPRA Costs (including direct vacancy costs) to
Net Administrative expenses per IFRS
FY23 FY22
(GBPm) (GBPm)
=================================================== ==== ======== ========
EPRA Costs (including direct vacancy costs) A 24.3 33.4
Exclude
Ground rent costs (0.6) (0.7)
Share of Joint Ventures and associates property
expenses (net of other income) (0.4) (0.2)
Other operating income/recharges intended to cover
overhead expenses less any related profits - 4.8
Net service charge costs/fees (5.6) (5.6)
Operating expenses (excluding service charge cost) (6.6) (16.2)
Tenant incentives (included within income) (0.2) (0.2)
Letting & legal costs (included within income) (1.3) (1.2)
========================================================= ======== ========
Group's share of net administrative expenses as
per IFRS D 9.6 14.1
=================================================== ==== ======== ========
EPRA Gross Rental Income C 62.4 81.2
Ground rent costs (0.6) (0.7)
Expected credit (loss) / reversal (0.2) 0.3
Other income 1.4 2.5
========================================================= ======== ========
Gross Rental Income E 63.0 83.3
=================================================== ==== ======== ========
Administrative cost ratio as per IFRS D/E 15.2% 16.9%
=================================================== ==== ======== ========
Administrative cost ratio as per IFRS - continuing
operations 15.2% 16.0%
========================================================= ======== ========
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).
Associates: is an entity in which the Group holds an interest
and is significantly influenced by the Group.
Average debt maturity: Is measured in years when each tranche of
gross debt is multiplied by the remaining period to its maturity
and the result is divided by total gross debt in issue at the
period end. Average debt maturity is expressed on a proportionally
consolidated basis.
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 loan interest and derivative costs at the
period end, divided by total debt in issue at the period end. Cost
of debt is expressed on a proportionally consolidated basis.
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 earnings per share: Is EPRA earnings divided by the
weighted average basic number of shares in issue during the
period.
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.
EPRA LTV: EPRA LTV is the ratio of gross debt, net payables less
cash and cash equivalents to the aggregate value of properties. LTV
is expressed on a proportionally consolidated basis.
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.
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.
Gross Asset Value (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: UK-adopted International Accounting 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.
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 ventures 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 and asset
management determinations.
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: MSCI Inc 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 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 payable under leases terms.
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.
Proportionately consolidated: The aggregation of the financial
results of the Reported Group and the Group's Share of net assets
within its joint venture and associates.
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.
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 the
Company's operational profits, which includes other income and
excludes one off or non-cash adjustments, such as portfolio
valuation movements, profits or losses on the disposal of
investment properties, fair value movements on derivatives and
share-based payment expense.
Weighted average lease expiry (WALE): Is the average lease term
remaining to first tenant break, or expiry, across the portfolio
weighted by rental income. This is also disclosed assuming all
tenant 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 SSIEFIEDSEIM
(END) Dow Jones Newswires
June 06, 2023 02:00 ET (06:00 GMT)
Newriver Reit (LSE:NRR)
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